The Home Return Permit for your Foreign Funds

LexisNexis Research & Whitepapers

Produced in partnership with Penelope Shen and Jet Tang of Stephenson Harwood

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11 May 2021 | PDF Version

Second quarter, 2021 – This is when the Hong Kong Legislative Council meets to hear the first and second readings of a landmark bill (the “Bill”) that will provide a mechanism for foreign funds to re-domicile in Hong Kong as Open-ended Fund Companies (“OFC”) or Limited Partnership Funds (“LPF”).

Under the Bill, foreign funds set up as corporates or limited partnerships will be able to, subject to meeting certain eligibility requirements, redomicile in Hong Kong as OFCs or LPFs, respectively.

This is a crucial development that boosts Hong Kong’s investment funds environment, and its prime advantages are substantial: (i) the process does not require a transfer of fund assets or a change of their beneficial ownership, which means there will be no stamp duty implications in Hong Kong, and (ii) investors will not need to be redeemed from the foreign fund and resubscribed into the Hong Kong vehicle.

In other words, the Bill will help managers save both time and cost if they plan to bring their funds home to a burgeoning market.

The proposed application mechanism is straightforward, as summarized below:

OFC	LPF
Application to be submitted to Securities and Futures Commission (“SFC”) with the applicable fee	Application to be submitted to the Registrar of Companies through a registered Hong Kong law firm or solicitor with the applicable fee
Accompany the application with: the original name of the fund and the place of incorporation; a copy of certificate of incorporation or registration issued with respect to the fund (and other fund documents that evidence the establishment of each of its sub-funds); the constitutive document of the fund; directors’ certification that confirms: the proposed re-domiciliation is not prohibited by and approved in accordance with the funds’ constitutive document or any contract or undertaking given by the fund; that the deregistration of the fund is not prohibited under the laws of the place of incorporation or registration; the solvency of the fund and each of its subfunds; the absence of any petition of winding-up, liquidation, receivership or arrangement or compromise arrangement in respect of the fund or any of its sub-funds; service of notice of proposed re-domiciliation to its creditors.	The application should: state the original name of the fund and the place of establishment in the application; include a statement and declaration confirming that: any consent or approval for the proposed registration as LPF and the de-registration of the fund in its place of establishment required by any contract or undertaking given by the fund has been obtained or waived; the de-registration of the fund in its place of establishment is not prohibited under the laws of the place of establishment; the fund will be de-registered in its place of establishment within 60 days after redomiciliation.
After the re-domiciliation, the fund will need to notify the SFC and provide evidence of deregistration in its place of incorporation within 60 days.	After the re-domiciliation, the fund will need to be re-registered in its place of establishment within 60 days.

OFC

LPF

Application to be submitted to Securities and Futures Commission (“SFC”) with the applicable fee

Application to be submitted to the Registrar of Companies through a registered Hong Kong law firm or solicitor with the applicable fee

Accompany the application with:

the original name of the fund and the place of incorporation;
a copy of certificate of incorporation or registration issued with respect to the fund (and other fund documents that evidence the establishment of each of its sub-funds);
the constitutive document of the fund;
directors’ certification that confirms:
- the proposed re-domiciliation is not prohibited by and approved in accordance with the funds’ constitutive document or any contract or undertaking given by the fund;
- that the deregistration of the fund is not prohibited under the laws of the place of incorporation or registration;
- the solvency of the fund and each of its subfunds;
- the absence of any petition of winding-up, liquidation, receivership or arrangement or compromise arrangement in respect of the fund
  or any of its sub-funds;
- service of notice of proposed re-domiciliation to its creditors.

The application should:

state the original name of the fund and the place of establishment in the application;
include a statement and declaration confirming that:
- any consent or approval for the proposed
  registration as LPF and the de-registration of
  the fund in its place of establishment required
  by any contract or undertaking given by the fund has been obtained or waived;
- the de-registration of the fund in its place of
  establishment is not prohibited under the laws
  of the place of establishment;
- the fund will be de-registered in its place of
  establishment within 60 days after redomiciliation.

After the re-domiciliation, the fund will need to notify the SFC and provide evidence of deregistration in its place of incorporation within 60 days.

After the re-domiciliation, the fund will need to be re-registered in its place of establishment within 60 days.

Disclaimer: This article is provided for reference purposes only and are not intended, nor should they be used, as a substitute for professional advice or judgment or to provide legal advice with respect to specific circumstances. If you require any legal advice or other expert assistance, please consult a competent professional adviser.

Lexis Advance^® Hong Kong Practical Guidance provides up-to-date practice notes, precedents and know-how from specialist solicitors and barristers so you can work efficiently and provide advice with confidence. It also contains exclusively written content by trusted experts in the field. Stephenson Harwood is one of our many expert contributors from a range of Hong Kong legal leaders.

Authors

Penelope Shen

Partner, Stephenson Harwood

Penny focuses on the establishment and structuring of private investment funds, with a particular emphasis on hedge funds and private equity funds.

Her years of providing legal leadership advice to such clients extends naturally to advising on fund restructuring, distribution and private placement, compliance and regulatory requirements, side letters and derivatives documentation (including ISDA and prime brokerage agreements). Her clients include some of the largest asset managers in Hong Kong, China and Singapore.

Penny’s substantial experience from working at top-tier law firms, both onshore and offshore, has equipped her with first class knowledge in her chosen field while exposing her to its biggest players.

Jet Tang

Associate, Stephenson Harwood

Jet specializes in the practice of funds and financial services. Prior to private practice, Jet worked at Value Partners and Vanguard for a number of years where he provided legal services related to SFC authorized funds, private funds, exchange traded funds, default investment schemes under the Hong Kong MPF and the companies’ business development in China. His time in private practice has been devoted mainly to private funds such as hedge funds, private equities funds, credit funds, real estate funds and alternative investment funds.