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Limited Partnership Funds (LPFs) Offer Anonymity for Limited Partners

Updated: Nov 7


LPF 有限合夥基金 Structure Diagram

The Limited Partnership Fund Ordinance (Cap. 637) (the "Ordinance") came into effect on August 31, 2020. This Ordinance establishes a new limited partnership fund regime, allowing private funds to register in Hong Kong as limited partnerships. This initiative aims to bolster Hong Kong's status as a premier international asset and wealth management center, attracting private investment funds (including private equity and venture capital funds) to set up and register in Hong Kong, thereby channeling capital into real-sector companies.


Limited partnership funds do not have a legal personality, making their establishment and dissolution relatively straightforward. In practice, the investment management functions of an LPF are typically handled by the general partner (GP) or an appointed manager. The Hong Kong Securities and Futures Commission (SFC) primarily focuses on who holds the decision-making authority over the LPF's investments. If the GP manages the fund, the GP must obtain a license and become a licensed corporation; if all investment management functions are delegated to a manager, then the manager must obtain a license, and the GP does not need to be licensed.

The Companies Registry oversees the LPF regime, providing high levels of protection and anonymity for Limited Partners (LPs). According to the Limited Partnerships Ordinance (Cap. 37), funds established and registered as limited partnerships that meet the qualifying criteria of the Ordinance can be registered as LPFs. Limited partners enjoy the economic returns of the fund but do not have day-to-day management or control over the assets. They can be corporations, partnerships, unincorporated bodies or any other entities, or individuals (acting as trustees or in their own or any representative capacity). Unless they participate in the day-to-day management of the fund (subject to the non-exhaustive "safe harbor" provisions), their liability is limited to their agreed-upon capital contributions.


 

If an LPF establishes an investment decision committee, the committee will hold decision-making authority over the LPF's investments (rather than merely providing advice). Additionally, the LPF must appoint qualified Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) officers, including banks, licensed corporations, accounting professionals, and legal professionals. According to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, AML officers are primarily responsible for conducting due diligence and record-keeping to ensure the LPF is not engaged in money laundering or terrorist financing activities. This involves conducting Know Your Customer (KYC) checks on the LPF and its LPs.

Limited partners are entitled to the economic returns of the fund and can be:

  • Corporations;

  • Partnerships;

  • Unincorporated bodies or any other entities;

  • Individuals (acting as trustees or in their own or any representative capacity).

Particularly when LPFs are directed towards specific project targets, the identities of limited partners are protected. The Companies Registry only allows inspection of the general partners registered with them, maintaining anonymity similar to traditional offshore funds. This is beneficial for handling many identity-related investments overseas and political risks.


In summary, the implementation of the Limited Partnership Fund Ordinance not only enhances Hong Kong's status as an international asset and wealth management center but also attracts a significant number of private investment funds to establish and register in Hong Kong through high levels of protection and anonymity. This regime not only increases the competitiveness of Hong Kong's financial market but also provides robust legal safeguards for limited partners.


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