New Open-Ended Fund Company Structure for Hong Kong Funds to be Introduced Under the Securities and Futures (Amendment) Bill 2016
New Open-Ended Fund Company Structure for Hong Kong Funds to be Introduced Under the Securities and Futures (Amendment) Bill 2016
Introduction
In March 2014, the Financial Services and Treasury Bureau (FSTB) conducted a public consultation on allowing open-ended fund companies (OFCs) to be established under the Securities and Futures Ordinance (SFO). Following the publication of the FSTB’s Consultation Conclusions (see archive) in January 2016, the Securities and Futures (Amendment) Bill 2016 (see archive) (Amendment Bill) was introduced into the Legislative Council on 27 January 2016.
Currently, a Hong Kong fund can be established as an open-ended investment fund in the form of a unit trust, but not in corporate form due to the restrictions on capital reduction under the Companies Ordinance (Cap. 622) (the CO). Internationally, however, corporate fund structures are more popular and are available in most international fund centres. The introduction of the new OFC structure is therefore aimed at encouraging more funds to domicile in Hong Kong and boost Hong Kong’s position as an international fund centre. One particular advantage of a Hong Kong domicile is that it renders certain SFC-authorised funds eligible for retail distribution in Mainland China under the Mainland-Hong Kong Mutual Recognition of Funds Initiative. For further information on that initiative, please see our June 2015 newsletter. Read more