Hong Kong Limited Partnership Fund (LPF) and Private Open-ended Fund Company (OFC) Comparison Chart

In recent years, leveraging their advantages of preferential tax treatment and flexible fund structures, Hong Kong’s Limited Partnership Funds (LPF) and Open-ended Fund Companies (OFC) have increasingly become the preferred vehicles for private equity and retail funds. To help you better understand the core differences between the two, this table provides a comparative analysis across key dimensions, including legal nature, ongoing maintenance, approval processes, and compliance requirements:

Features	LPF	OFC
1.        Legal Status	No independent legal status. Operates as a limited liability partnership under the terms of the Limited Partnership Agreement.	Has independent legal status. Typically follows a share structure consisting of ordinary shares (held by the investment manager) and preferred shares (held by investors).
2.        Legal Liability	The general partner (GP) has unlimited liability for the debts of the LPF. The liability of a limited partner (LP) is limited to the amount of their investment.	The liability of OFC shareholders (including the investment manager) is limited to the amount of their investment.
3.        Management Structure	Must have at least 1 GP and 1 LP. The GP must meet eligibility criteria, including: (i)         A natural person aged 18 or older; or (ii)      A duly established or registered company, partnership or fund etc. LPs must ensure their involvement in LPF decision-making does not inadvertently classify them as GPs, which would expose them to unlimited liability.	Must have at least 2 directors.  A corporate body cannot be a director of an OFC. Directors must possess the requisite experience and expertise appropriate for the OFC.
4.        Asset Management	LPF assets and investment strategies are generally managed by the investment manager.	OFC can set up sub-funds to manage different assets and investment strategies separately.
5.        Fund custody	GP must arrange for the safekeeping of LPF assets properly. The law does not explicitly require an independent custodian.	OFC assets must be held by an independent custodian. The custodian must meet the qualifications required by the Securities and Futures Commission (SFC) (including holding relevant licenses), and possess the relevant experience and internal systems and controls.
6.        Investment Manager (IM)	An IM must be appointed. Depending on the investment scope of the LPF, if it is subject to the relevant securities laws and regulations in Hong Kong, the IM should have the relevant SFC license.	An IM must be appointed. IM must be an entity licensed by the SFC to carry out Type 9 regulated activity (asset management).
7.          Fund Structure	The terms of the Limited Partnership Agreement are generally flexible, covering: (i)     Partnership admission and redemption; (ii)  Profit distribution; (iii)            Management Fee, Advisory Fee, Performance Fee; and (iv) Dissolution procedures, etc.	The OFC structure is subject to relevant laws, regulations and SFC codes. The following OFC legal documents must also comply with applicable disclosure requirements: (i)     Instrument of Incorporation; (ii)  Private Placement Memorandum and Sub-Fund Supplements; and (iii)            Subscription Agreement and Redemption Notice.
8.        Registration Process	Submit application to the Companies Registry, usually processed in 5–7 working days.	Requires SFC pre-approval before submission to Companies Registry.  Takes around 1.5 months.
9.        Government Funding	There is no government funding scheme and all establishment expenses are borne by the LPF.	As of the date of this article, the Government has launched a scheme to subsidise the incorporation of OFCs since 10 May 2021. The subsidy scheme has been extended and will be open for application from May 10, 2024 to May 9, 2027. The maximum subsidy for each private OFC application is 70% of the OFC's eligible incorporation expenses, with a maximum total subsidy amount of HK$150,000 for each private OFC. In addition, each IM can only apply for government subsidy for one OFC at most.

Remark: The above content does not constitute any legal advice. If you require our professional advice or assistance, please feel free to contact us.

Contributors: Principal Partner Mr. Adrian Lau, Senior Partner Ms. Charmaine Yim and Partner Ms. Grace Law