Limited Partnership Funds

The Premier Investment Vehicle for Hong Kong Asset Managers

Streamline your investment strategy with Hong Kong's cutting-edge Limited Partnership Fund regime—designed specifically for private equity, venture capital, and alternative investments with exceptional tax benefits and operational flexibility.

Modernizing Hong Kong's Fund Landscape

The Limited Partnership Fund Ordinance (Cap 637) marks a significant evolution in Hong Kong's financial infrastructure, coming into effect on August 31, 2020. This forward-thinking legislation replaces the outdated Limited Partnership Ordinance from 1912, providing a modern, efficient legal framework for establishing onshore funds in Hong Kong.

Previously, Hong Kong-based fund managers were forced to establish funds in offshore jurisdictions like the Cayman Islands, as the traditional unit trust or open-ended fund company structures were ill-suited for private equity, venture capital, and alternative investment strategies. The new LPFO addresses this gap by enabling the preferred limited partnership structure right in Hong Kong.

Why Hong Kong Now?

The LPF regime consolidates Hong Kong's position as the premier international asset management hub, creating a direct capital channel between Hong Kong and the Greater Bay Area while keeping fund structures onshore.

Key Structure: General Partners & Limited Partners

1

General Partner (GP)

The GP serves as the ultimate manager with control over the fund and assumes unlimited liability for all fund obligations. GPs can be individuals, private companies, limited partnerships, or another LPF.

GPs may simultaneously act as investment managers handling day-to-day operations or appoint a separate entity to fulfill this role.

2

Limited Partner (LP)

Every LPF requires at least one LP at registration. LPs enjoy limited liability to the extent of their agreed contributions while participating in income and profits.

LPs have no day-to-day management rights or control over fund assets. If an LP engages in management activities, they may become jointly liable with the GP for debts incurred during that period.

This structured partnership approach creates clear separation of duties, protecting investors while maintaining operational efficiency—a hallmark of Hong Kong's business-friendly regulatory environment.

The Limited Partnership Agreement: Foundation of Fund Governance

Every Limited Partnership Fund must operate under a comprehensive written Agreement that establishes the legal framework between all partners. This critical document serves as the governing constitution for the fund's entire lifecycle.

Partnership Dynamics

  • •Admission and withdrawal processes
  • •Transfer of LP interests
  • •Governance procedures
  • •Decision-making protocols

Investment Parameters

  • •Investment scope definition
  • •Strategy guidelines
  • •Powers, rights and obligations
  • •GP fiduciary duty scope

Financial Structure

  • •Capital contribution methods
  • •Withdrawal mechanisms
  • •Distribution of proceeds
  • •Clawback obligations
  • •Dissolution procedures

The Agreement provides flexibility to customize the fund's operation while maintaining regulatory compliance. Partners can establish terms suited to their specific investment strategy and investor requirements, making the LPF adaptable to various asset classes and investment approaches.

Operational Requirements & Transparency

Core Requirements

  • Fund name must end with "Limited Partnership Fund," "LPF," or "有限合夥基金"
  • Maintain a registered office in Hong Kong
  • GP must ensure proper custody of fund assets
  • Annual financial statement audits by independent auditor
  • Appointment of AML compliance professional
  • Hong Kong law firm or solicitor must submit registration

Information Disclosure

The LPF regime balances transparency with privacy through a two-tier information system:

✓ Publicly Available: Fund name, registered office address, principal business location, investment scope, and contact details for GP and investment manager.

✓ Private Register: Identity and background information of LPs remains confidential, maintained at the fund's Hong Kong office rather than in public records.

Exceptional Tax Benefits for Hong Kong LPFs

0% Profits Tax Rate on Eligible Carried Interest

Profits Tax Rate

Eligible carried interest distributed by private equity funds qualifies for a 0% profits tax rate

Salaries Tax Exclusion

Tax Exclusion

100% of eligible carried interest is excluded from employment income calculations for salaries tax purposes

Capital & Stamp Duty

No Duties

No capital duty or stamp duty on profit distributions, contributions, transfers or withdrawals of partnership interests

Funds registered under the LPFO may qualify for complete exemption from profits tax under section 20AM of the Inland Revenue Ordinance if they meet the definition of a "fund" and satisfy conditions of the Unified Funds Exemption regime. These tax concessions apply retroactively to eligible carried interest received or accrued on or after April 1, 2020.

Fund Re-domiciliation: Bringing Offshore Funds Home

In response to market demand, Hong Kong has established a streamlined process for migrating offshore funds to Hong Kong, complementing the LPF regime and encouraging "onshorisation" of investment vehicles.

Eligibility

Offshore funds structured as limited partnerships or corporates that meet standard LPF requirements

Continuity

Fund maintains its legal identity—re-domiciliation doesn't affect the fund's existing structure or history

Contracts & Obligations

Pre-existing contracts, resolutions, legal proceedings, rights and obligations remain intact

Tax Implications

Same advantageous tax arrangements apply with no stamp duty arising from migration

Applications must be filed by a Hong Kong law firm or qualified solicitor on behalf of the overseas limited partnership, ensuring professional oversight of the transition process.

Market Response & Integration with Greater Bay Area

The investment community has responded with overwhelming enthusiasm to the LPFO, particularly among institutional investors, private equity firms, and family offices throughout the Greater China region.

Market participants regularly view the LPFO in conjunction with the Wealth Management Connect Scheme (WMC) as complementary government initiatives. These programs work in tandem to create powerful new investment opportunities across the Guangdong-Hong Kong-Macao Greater Bay Area.

The Memorandum of Understanding on the Launch of the Cross-Boundary Wealth Management Connect Pilot Scheme, signed February 5, 2021, establishes a strong foundation for WMC operations while ensuring robust investor protection.

The LPFO and Wealth Management Connect create unprecedented opportunities for channeling capital between Hong Kong and the Greater Bay Area, cementing Hong Kong's position as Asia's premier asset management hub.

Legal & Compliance: Your Strategic Partner

Legal & Compliance's mission is to ensure regulatory adherence and provide expert legal and compliance guidance, fostering a stable and trustworthy business environment that supports Hong Kong's position as a leading international financial hub.

Partnership Approach

We partner with clients long-term, offering free, customized, and confidential services at all business stages to ensure seamless navigation of legal frameworks and leverage Hong Kong's strengths as the ideal hub for accessing opportunities in Mainland China and across Asia.

Core Values

All our services embody our commitment to passion, integrity, professionalism, client focus, business acumen, and responsiveness—ensuring your legal and compliance journey is supported at every step.

Global Reach

Our teams around the world stand ready to support both existing and new investors in capturing the exceptional opportunities available through Hong Kong's advanced financial infrastructure.

"Our teams around the world are ready to support both existing and new investors to capture these opportunities."

Global Family Office Support

In alignment with the Chief Executive's 2020 Policy Address, Legal & Compliance has established a dedicated Global Family Office team to serve family offices worldwide interested in establishing a presence in Hong Kong.

Promotion Initiatives

Our team collaborates with key industry stakeholders to promote Hong Kong's unique advantages in local and major international markets, highlighting the benefits of the LPF regime for family office structures.

One-Stop Support

We offer comprehensive support services tailored specifically to family offices, simplifying the process of establishing and operating in Hong Kong's sophisticated financial ecosystem.

Strategic Guidance

Our experts provide strategic guidance on leveraging Hong Kong's position at the gateway to China and the Greater Bay Area, helping family offices maximize their investment potential and operational efficiency.

Ready to Transform Your Regulatory Approach?

Contact Us Today

Our team of regulatory experts is ready to discuss your specific challenges and opportunities. Schedule a confidential consultation to explore how Legal & Compliance can support your business objectives.

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