Charltons has significant experience in advising fund managers and promoters on the domicile, structuring, establishment and marketing of their investment funds in Hong Kong and overseas. Our lawyers provide an insightful and highly personalised service, delivering high impact, smart and practical advice.
We advise on all forms of fund vehicles, including limited liability companies, umbrella funds, protected cell or segregated portfolio companies, limited liability partnerships and unit trusts. We also advise on a variety of fund structures, including open-ended and closed-end funds, master / feeder structures, fund of funds, offshore funds and hedge funds.
Charltons has worked on funds across the full spectrum of asset classes, including listed stocks, fixed income and derivative securities, property, natural resources, private equity, venture capital, and distressed debt. We have also advised on a range of fund strategies including long / short, arbitrage and socially responsible investing.
We help both local and international fund managers to structure and launch investment funds in Hong Kong. We will advise on the applicable regulatory framework and suggest structures, selling restrictions and other solutions that will enable funds and fund managers to avoid SFO authorisation and prospectus registration. In the case of retail and other non-exempt funds, we will assist with the application for authorisation of the fund in Hong Kong under the SFO.
We have an in-depth understanding of the key legal and commercial points in the capital-raising process and have considerable experience in advising on development of fund terms and negotiations with anchor investors. We will prepare information memoranda and subscription agreements, draft and negotiate the investment management, custodian, administration and other service agreements, and prepare corporate resolutions and other launch documents.
We have extensive knowledge in creating and structuring offshore funds, with experience of setting up both simple and complex hedge fund structures in a variety of jurisdictions including the Cayman Islands, the British Virgin Islands and Bermuda.
Charltons also understands the complexities and challenges of cross border investment product offerings. Charltons works with a network of law firms worldwide and frequently instructs local counsel and coordinates multi-jurisdictional legal advice on international fund offerings, offering a single point of contact and integrated legal advice to the client. This network allow us to coordinate with experienced lawyers worldwide to deliver timely and cost-effective solutions, particularly regarding fund selling restrictions and tax issues in overseas jurisdictions.
Charltons has significant experience in advising fund managers on establishing funds, fund vehicles and capital raising, in Hong Kong and overseas.
Key regulations that govern investment funds in Hong Kong
The Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“SFO”) prohibits offers of collective investment schemes* (“CIS”) to the public of Hong Kong unless the offer is within an express exemption (for example, if it is limited to professional investors) or the CIS has been authorised by the SFC and the relevant offer document containing the offer has been approved by the SFC.
The rules relating to the authorisation of a CIS are incorporated in the non-statutory Code on Unit Trust and Mutual Funds (“UT Code”). In determining whether to authorise a fund which intends to offer its products to the Hong Kong public, the SFC considers the acceptability of:
- the fund’s legal form and structure;
- the fund’s key operating parties, including the fund manager and the trustee/custodian;
- the fund’s operational features, e.g. dealing frequency, valuation, etc.;
- the fund’s investment nature and compliance with the relevant requirements of the UT Code;
- the disclosure quality of the fund’s offering document; and
- the fund’s compliance with the UT Code’s post-authorisation obligations, e.g. notice period for fee increases, pricing errors, etc.
Depending on the structure of the fund and the level of compliance with the UT Code, the SFC may also consider other factors that are relevant to a specific fund application.
The SFC requires a CIS applying for authorisation to nominate a person resident in Hong Kong for the SFC’s approval of such person for the purpose of being served by the SFC with notices and decisions for the CIS and any related marketing documents.
As a general policy, a closed-ended fund is permitted by the SFC to be offered to the public under the UT Code, subject to additional conditions and requirements set out in the UT Code including, inter alia, that it will seek a listing, and remain listed, on The Stock Exchange of Hong Kong Limited (and will therefore be subject to Chapter 20 of the Listing Rules).
Charltons has significant experience in advising fund managers regarding establishing funds, fund vehicles and capital raising, in Hong Kong and overseas.
*“Collective investment scheme” is broadly defined in Schedule 1 to the Securities and Futures Ordinance (SFO) to mean investment products of a collective nature. Many investment products offered in Hong Kong are CIS. Common types of CIS familiar to investors include, for example, mutual funds and unit trusts, mandatory provident fund schemes and real estate investment trusts.