Brief on Limited Partnership Fund Ordinance (Cap. 637)


The new Limited Partnership Fund Ordinance (the “New Ordinance”) came into force on 31 August 2020. The New Ordinance renewed the local statutory regulations over private equity and venture capital accounts. The private equity sector was previously governed by the Limited Partnership Ordinance, enacted in 1912, which was often criticised for being outdated to the industry’s needs. The New Ordinance provides a more flexibility structure and is more aligned to the international standard within the private fund industry.

Previously, a private equity fund may be established in the form of a unit trust or an open-ended fund company. The New Ordinance now introduces a new category – Limited Partnership Fund (the “LPF”). The LPF is constituted as a limited partnership by a limited partnership agreement and registered under the Hong Kong Registrar of Companies.

The key requirements for setting up an LPF are set out as follows: –

  1. A written Limited Partnership Agreement must be set out between the partners in the funds to define the nature of the LPF and the scope of authority and liability for all respective partners;
  2. The LPF must consist of one General Partner and at least one Limited Partner(s):
  • The General Partner has unlimited liability for all debts and obligation flowing from the LPF – he has the ultimate responsibility for the control and management of the LPF;
  • The Limited Partner(s) can participate in the income of the LPF and his liability will not exceed the agreed amount of contribution stipulated in the Agreement unless he participates in management activities;
  1. Partners cannot be corporations under the same group of companies unless they compile with certain conditions;
  2. A registered office in Hong Kong is required;
  3. Its English name must end with ‘Limited Partnership Fund’ or ‘LPF’ and its Chinese name must end with ‘有限合伙基金’;
  4. An independent auditor must be appointed to comply with statutory accounting and reporting requirements;
  5. An investment manager must be appointed;
  6. A responsible person must be appointed to carry out anti-money laundering measures for the LPF. Such person must either be (a) an authorised institution, (b) a licensed corporation, (c) an accounting profession, or (d) a legal profession.
  7. Applications for LPF registration must be submitted through a Hong Kong law firm or a solicitor.

The Registrar will maintain an index of all LPFs. The identity of Limited Partner(s) will not be made publicly available, but the relevant information, such as filing of financial statements and annual returns, must be maintained by the General Partner and made available to law enforcement agencies when required.

Advantages of investing through an LPF

Firstly, the New Ordinance warrants a great degree of freedom to the partners in setting up the internal operation of the LPF. The New Ordinance expressly allows Limited Partner(s) to contractually negotiate their scope of power and liability, also, the LPF’s investment scope and strategy. To add on, partners of the LPF have the right to voluntarily dissolve the fund at any time and subject to their own dissolution procedures agreed contractually.

Secondly, the New Ordinance sets out a clear distinction between Limited Partner(s) and General Partner so as to ease investors’ concern where their involvement might corrode their preferred liability status. A non-exhaustive list of activities that are not regarded as management activities is expressly stipulated for Limited Partner(s). The duties of General Partners are also listed expressly in the New Ordinance.

Finally, establishing an LPF in Hong Kong would bring tax benefits to investors. The transfer and redemption of LPF interests generally would not fall within the scope of stamp duties. The LPF could enjoy a profit tax exemption if it qualifies for the newly implemented “unified profit tax exemption” for private funds. To satisfy the exemption, the LPF would generally require an SFC-licensed manager or otherwise comply with statutory requirement that restricts the number of outside investors, restricts the proportion of capital contributed by each investor and limits the amount of returns that could be given to sponsors. The exemption also imposes restriction on the category of investment and dictates that a certain proportion of fund’s investors in the LPF must be Hong Kong residents.


The New Ordinance not only created a new structure for private equity accounts to be set up in Hong Kong, it also afforded new benefits and flexibility to investors.