Hong Kong To Offer Open-Ended Fund Company Form

Hong Kong To Offer Open-Ended Fund Company Form

Hong Kong's Government has published three bills to establish a new open-ended fund company regime.

The new OFC regime is scheduled to start on July 30, 2018, and will give fund managers the option of setting up a fund in the form of a company, in addition to the existing unit trust form. A government spokesperson said this additional choice should help diversify Hong Kong's fund domiciliation platform and build up its fund manufacturing capabilities.

The new OFC regime complements a recently enacted 2017-18 Budget initiative, which stipulates that OFCs will be exempt from profits tax, like their onshore counterparts, but will remain subject to tax where they trade in Hong Kong. This new law, which also takes effect on July 30, 2018, is intended to encourage more OFCs to move their domicile to Hong Kong.

The new OFC regime will be administered by the Securities and Futures Commission. The Companies Registry will oversee the incorporation and statutory corporate filings of OFCs and the Official Receiver's Office the winding-up procedure.

The bills will be tabled before the Legislative Council on May 23, 2018.

An OFC is a collective investment scheme with variable capital set up in the form of a company, but with the flexibility to create and cancel shares for investors' subscription and redemption in the fund. An OFC is not bound by restrictions on distribution out of capital applicable to a conventional company, and instead may distribute out of capital subject to solvency and disclosure requirements.

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