In the 2021-22 budget speech, the financial secretary of the Government of the Hong Kong Special Administrative Region confirmed the intended timing for submission of a legislative proposal to allow foreign investment funds to re-domicile to Hong Kong for registration as an Open-ended Fund Company (OFC). The financial secretary also announced subsidies for the costs of setting up a new OFC or re-domiciling of foreign investment funds registering as an OFC in Hong Kong. The latest measures represent important steps in ongoing enhancements and incentives to promote the use of the OFC regime.
Hong Kong’s OFC regime started in 2018, reflecting the government’s aim to consolidate the city’s status as an international asset and wealth management centre. In September 2020, amendments to the Code on Open-ended Fund Companies announced by the Securities and Futures Commission (SFC) contained several welcome enhancements for private OFCs, including liberalisation of the types of entities that can act as custodian, removal of investment restrictions, and announcement of ongoing development of a re-domiciliation capability. Further enhancements announced by the SFC in December 2020 included confirmation of customer due diligence requirements and enhanced guidance in the form of updated frequently asked questions to clarify custodial requirements.
The budget speech also contained additional measures that continue efforts to make OFCs a compelling option, including:
(1) Confirmation of the planned submission of a legislative proposal in the second quarter of this year to allow foreign investment funds to re-domicile to Hong Kong for registration as an OFC
(2) An intention to provide subsidies to cover 70% of the expenses paid to local professional service providers for OFCs set up in, or re-domiciled to Hong Kong in the coming three years, subject to a cap of HK$1 million per OFC
The SFC is expected to announce relevant details of how the subsidies may be obtained in due course.
The proposed subsidies are a welcome benefit, with the potential to significantly reduce the costs of establishing an OFC in Hong Kong or re-domiciling a foreign fund for registration. They provide further compelling argument to consider Hong Kong as a domicile of first choice for asset and wealth management.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at firstname.lastname@example.org