Hong Kong Limited Partnership Fund (LPF) Registration: Fund Manager Licensing Requirements

Hong Kong’s Limited Partnership Fund (LPF) regime, enacted under the Limited Partnership Fund Ordinance (Cap. 637), has seen steady adoption since its 2020 launch. As of December 2024, the Companies Registry reported over 850 registered LPFs, a figure that underscores the vehicle’s utility for private equity, venture capital, and hedge fund managers. However, the regulatory landscape for fund managers operating an LPF is tightening. The Securities and Futures Commission (SFC) has increased its scrutiny of asset managers, particularly around licensing exemptions and the “close connection” test for responsible officers (ROs). A key 2025 development is the SFC’s heightened focus on the actual place of central management and control for LPFs, aligning with international tax transparency standards under the Inland Revenue Ordinance (Cap. 112). For a fund manager, registering an LPF is only the first step. The second, and often more complex, step is ensuring the manager’s own licensing status with the SFC is correct, or that a valid exemption applies. This article sets out the procedural requirements for LPF registration and the corresponding licensing obligations for fund managers under Hong Kong law.

Step 1: Registering the Limited Partnership Fund (LPF) under Cap. 637

The registration process for an LPF is administered by the Companies Registry (CR), not the SFC. The legislation provides that an LPF is not a separate legal entity but a contractual arrangement between a general partner (GP) and one or more limited partners (LPs). The procedure is largely administrative, but the compliance burden falls on the GP.

Step 1.1: Appoint the General Partner and the Investment Manager

The GP must be a natural person aged 18 or over, or a corporation incorporated in Hong Kong or elsewhere, or a registered non-Hong Kong company under Part 16 of the Companies Ordinance (Cap. 622). The GP is ultimately responsible for the LPF’s management and control. The LPF must also appoint an investment manager, who can be the GP itself or a separate entity. If the investment manager is a separate entity, it must be either (a) licensed or registered with the SFC for Type 9 (asset management) regulated activity, or (b) an exempt entity under the Securities and Futures Ordinance (Cap. 571). This is a critical point: the investment manager’s licensing status must be confirmed before the LPF application is filed.

Step 1.2: File the Application with the Companies Registry

The GP must submit the prescribed application form (Form LPF1) to the CR, along with the registration fee (currently HKD 3,055 as of 2025). The application must include:

• The proposed name of the LPF (must end with “Limited Partnership Fund” or “LPF”).
• The address of the registered office in Hong Kong.
• The name and address of the GP.
• The name and address of the proposed investment manager.
• A statement that the LPF is not a collective investment scheme (CIS) as defined under Cap. 571, or if it is, that it is an “excluded CIS” under the Securities and Futures (Professional Investor) Rules (Cap. 571D).

The CR issues a Certificate of Registration upon approval. The entire process typically takes 5 to 10 working days.

Step 1.3: Maintain the Register of Partners and the Annual Return

After registration, the GP must maintain a register of partners at the LPF’s registered office. The register must contain the name and address of each partner, the amount of capital contributed, and the date of admission. The LPF must also file an annual return (Form LPF2) with the CR within 42 days after each anniversary of registration. Failure to file the annual return for two consecutive years results in the LPF being struck off the register.

Step 2: Fund Manager Licensing – The Type 9 Requirement

The most common regulatory hurdle for LPF operators is the requirement for the investment manager to hold a Type 9 (asset management) licence from the SFC. The legislation provides that an investment manager of an LPF is deemed to be carrying on a business in a regulated activity if it manages a portfolio of securities or futures contracts for the LPF. This triggers the licensing requirement under section 114 of the Securities and Futures Ordinance (Cap. 571).

Step 2.1: The “Professional Investor” Exemption

The SFC’s Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission provides a carve-out for managers who only serve “professional investors” as defined in the Securities and Futures (Professional Investor) Rules (Cap. 571D). A professional investor includes an individual with a portfolio of not less than HKD 8 million, or a corporation with total assets of not less than HKD 40 million. If all LPs in the LPF are professional investors, the investment manager may argue that it is not required to be licensed. However, this exemption is narrow. The SFC takes the view that if the LPF itself is a “collective investment scheme” (CIS), the manager must be licensed regardless of the investor type. Most LPFs are structured as CISs, so the exemption rarely applies in practice.

Step 2.2: The “Close Connection” Test for Responsible Officers

If the investment manager is a corporation, it must appoint at least two responsible officers (ROs) who are executive directors of the corporation. One of the ROs must be a “close connection” person to the corporation, meaning they must be a director or employee who is actively involved in the day-to-day management of the corporation’s regulated activities. The SFC’s Guidelines on Competence (2023) require that an RO must have at least two years of relevant industry experience and pass the relevant local regulatory framework paper (e.g., Paper 1 of the Hong Kong Securities and Investment Institute examinations). The SFC has been increasingly strict on the “close connection” test, particularly for ROs who are also directors of the GP. The SFC expects the RO to have a genuine, substantive role in the investment manager, not a nominal one.

Step 2.3: Minimum Capital Requirements for the Investment Manager

The investment manager must maintain minimum paid-up capital and liquid capital requirements under the Securities and Futures (Financial Resources) Rules (Cap. 571N). For a Type 9 licensee that does not hold client assets, the minimum paid-up capital is HKD 1 million. The liquid capital must not fall below HKD 300,000 at any time. If the manager holds client assets (e.g., it has custody of LPF assets), the minimum paid-up capital rises to HKD 5 million. The SFC conducts regular inspections to verify compliance with these solvency requirements.

Step 3: Tax Treatment and the Economic Substance Requirement

The tax treatment of an LPF and its manager is governed by the Inland Revenue Ordinance (Cap. 112). The legislation provides that an LPF is treated as a “partnership” for tax purposes, meaning it is tax-transparent. Profits are attributed to the partners, not the LPF itself. However, the manager must be aware of the “economic substance” requirement under the Inland Revenue (Amendment) (No. 2) Ordinance 2022, which introduced the “foreign-sourced income exemption” (FSIE) regime.

Step 3.1: The FSIE Regime and Offshore Claims

Under the FSIE regime, a Hong Kong entity (including an LPF) that receives foreign-sourced income (e.g., dividends, interest, or disposal gains from overseas investments) is deemed to be taxable in Hong Kong unless it meets the “economic substance” test. The test requires that the entity has adequate staff, premises, and expenditure in Hong Kong to carry out the income-generating activities. For an LPF, the test is applied to the GP, not the LPF itself. The GP must demonstrate that it has sufficient substance in Hong Kong to manage the LPF’s investments. The Inland Revenue Department (IRD) has issued guidance (Departmental Interpretation and Practice Notes No. 60, 2023) stating that the GP must have at least one full-time employee with relevant experience and a physical office in Hong Kong.

Step 3.2: The “Carried Interest” Tax Concession

The Hong Kong government introduced a tax concession for “carried interest” received by fund managers of private equity funds, including LPFs, under the Inland Revenue (Amendment) (Tax Concession for Carried Interest) Ordinance 2021. The concession provides that eligible carried interest is taxed at 0% (i.e., exempt from profits tax) if the fund manager meets certain conditions:

• The fund must be a “qualifying fund” (i.e., at least 90% of its committed capital is used for investments in private companies).
• The fund manager must be licensed or registered with the SFC, or be an exempt entity.
• The carried interest must arise from investments in “qualifying private companies” (i.e., companies that are not listed on a stock exchange and are not in the business of property development or holding).

This concession is a significant incentive for fund managers to structure their LPFs in Hong Kong. However, the IRD has the power to claw back the concession if the fund manager fails to meet the economic substance requirements within three years of the carried interest being received.

Step 4: Compliance with Anti-Money Laundering (AML) Requirements

The GP and the investment manager of an LPF are subject to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). The legislation requires that the GP appoint a “compliance officer” and a “money laundering reporting officer” (MLRO) who are resident in Hong Kong. The MLRO must be a senior employee with direct access to the GP’s board.

Step 4.1: Customer Due Diligence (CDD) for Limited Partners

The GP must perform CDD on all limited partners at the time of admission. The CDD must include:

• Verifying the identity of the LP (including beneficial ownership if the LP is a legal person).
• Identifying the source of funds for the capital contribution.
• Screening the LP against sanctions lists (e.g., the United Nations Sanctions List and the Hong Kong Monetary Authority’s Sanctions List).

The GP must keep records of the CDD for at least five years after the LP’s withdrawal from the LPF. Failure to comply with Cap. 615 can result in a fine of up to HKD 1 million and imprisonment for up to seven years.

Step 4.2: Suspicious Transaction Reporting (STR)

If the GP or the investment manager has reasonable grounds to suspect that any property connected with the LPF is proceeds of crime or terrorist property, it must file a suspicious transaction report (STR) with the Joint Financial Intelligence Unit (JFIU) of the Hong Kong Police Force. The reporting obligation applies even if the transaction is not completed. The legislation provides a safe harbour from civil liability for reporting in good faith.

Step 5: Practical Considerations for Cross-Border Fund Managers

Fund managers based outside Hong Kong who wish to register an LPF must consider the “place of central management and control” issue. The SFC’s Licensing Handbook (2024) states that the investment manager must have its central management and control in Hong Kong if it is to be licensed by the SFC. If the manager is based in a jurisdiction that does not have a double taxation agreement with Hong Kong (e.g., the United Arab Emirates), the manager may face additional tax risks.

Step 5.1: The “Substance” Requirement for Foreign Managers

The IRD has indicated that it will apply the “economic substance” test to the investment manager, not just the GP. If the investment manager is a foreign entity with no physical presence in Hong Kong, the IRD may treat the LPF’s income as sourced in the manager’s home jurisdiction, potentially subjecting the LPF to double taxation. To avoid this, the manager should establish a Hong Kong subsidiary that employs at least one full-time RO and maintains a physical office.

Step 5.2: The SFC’s “Licensing Exemption” for Overseas Managers

The SFC provides a limited exemption for overseas managers under section 115 of the Securities and Futures Ordinance (Cap. 571). An overseas manager may manage an LPF without an SFC licence if it:

• Does not carry on any regulated activity in Hong Kong (i.e., all investment decisions are made outside Hong Kong).
• Does not solicit business from the Hong Kong public.
• Only serves professional investors.

This exemption is difficult to rely on in practice because the SFC takes a broad view of “carrying on business in Hong Kong.” If the manager sends any correspondence to the LPF’s registered office in Hong Kong, the SFC may argue that the manager is carrying on business in Hong Kong. The safe approach is to obtain an SFC licence or to appoint a licensed Hong Kong investment manager as a sub-manager.

Actionable Takeaways

1. Confirm the investment manager’s SFC licensing status before filing the LPF registration application – the CR will reject the application if the investment manager is not licensed or does not qualify for an exemption.
2. The “professional investor” exemption is rarely available for LPFs – most LPFs are structured as collective investment schemes, which require the manager to hold a Type 9 licence.
3. The GP must demonstrate economic substance in Hong Kong – at least one full-time employee and a physical office are required to satisfy the IRD’s FSIE regime.
4. File the annual return (Form LPF2) within 42 days of each anniversary – late filing for two consecutive years results in the LPF being struck off the register.
5. Appoint a Hong Kong-resident MLRO and compliance officer for AML purposes – failure to comply with Cap. 615 carries criminal penalties.

This does not constitute legal advice. Consult a solicitor for your specific case.