The Incorporation Of An Open-ended Fund Company

Overview
An open-ended fund company (“OFC”), first introduced in Hong Kong under the Securities and Futures Ordinance in 2018, is an investment fund in a corporate structure. An OFC typically has a board of directors which has a duty to ensure company’s compliance with Securities and Futures Commission (“SFC”) regulations, a custodian which manages its assets and an investment manager which oversees its day-to-day operations.

The OFC regime enhances Hong Kong’s appeal as an international financial and asset management hub to foreign investors by facilitating global fund distribution, providing for tax exemptions and enabling the establishment of sub-funds under the umbrella fund structure of an OFC, which allows for varying strategies to be implemented to different sub-funds and for the assets and liabilities of sub-funds to be statutorily segregated.

Governing laws and regulations

Securities and Futures Ordinance (Cap. 571) Part IVA;
Securities and Futures (Open-ended Fund Companies) Rules (Cap. 571AQ);
Securities and Futures (Open-ended Fund Companies) (Fees) Regulation (Cap. 571AR);
Code on Open-ended Fund Companies; and
SFC Products Handbook

Incorporation
According to the Companies Registry, an OFC will be formed by registering with the SFC and obtaining a certificate of incorporation issued by the Companies Registry. To seek registration, the OFC should have a board of directors, an investment manager, and a custodian.

Registration is done via a “one-stop” approach whereby the SFC will notify the Registrar of the OFC’s registration, and the SFC’s registration will take effect upon the issuance of a certificate of incorporation by the Registrar.

An applicant needs to deliver all documents and fees required for incorporation and business registration to the SFC. The Companies Registry will register the relevant documents and issue a “Certificate of Incorporation of Open-ended Fund Company” and a “Business Registration Certificate” after approval is given by the SFC to the OFC’s registration. This process usually takes less than 1 month.

Documents and fees required:

Open-ended Fund Company – Incorporation Form (OFCNC1(SFC))
- Main points of information required:
  - Name of the proposed company
  - Address of the Proposed Company’s Registered Office
  - Email address
  - Presentor’s reference
  - Details of First Directors
  - Details of Process Agent(s) of First Director(s) (only required for a director whose usual residential address is outside Hong Kong.)
A copy of the Instrument of Incorporation (signed by each of the proposed directors)
- Main points of information required:
  - the name and object of the OFC, and kinds of property to invest;
  - a statement that the registered office of the company is situated in Hong Kong;
  - a statement that the company is an open-ended fund company with variable share capital;
  - a statement that the amount of the paid-up share capital of the company is at all times equal to the net asset value of the company;
  - a statement that the company’s shareholders are not liable for the debts of the company;
  - a statement that the company’s scheme property is entrusted to a custodian of the company for safe keeping in compliance with the law;
  - (if the OFC has sub-funds) a statement that the assets of a sub-fund of the OFC belong exclusively to the sub-fund and are not to be used to discharge the liabilities of, or the claims against, any other person, including the OFC and any other sub-fund;
  - a statement that the object of the company is the operation of the company as a collective investment scheme;
  - circumstances and procedures for the removal and cessation of office of directors;
  - certain corporate administrative matters, including the quorum of general meeting (a minimum of 2 shareholders present in person or by proxy) and notice period of annual general meetings (at least 21 days)
  - procedures and requirements for appointment and removal of auditors; and
  - circumstances and procedures for termination of the OFC and distribution of assets
- template available on the SFC website
A Notice to Business Registration Office (IRBR3)
Incorporation Fee of HK$ 3,034 (including a non-refundable lodgement fee of $479)
Appropriate Business Registration fee and levy