Legal Comparison of Private Equity funds in Mainland China, Macau and Hong Kong

Calvin Tinlop Chui, President of the Executive Committee of the Macau Financial Law Association, Partner at Rato, Ling, Lei & Cortes Law Firm

David Cheng, Partner at Winston & Strawn’s Hong Kong Office

James Yong Wang, Lawyer at Jingtian & Gongcheng Attorneys

The Monetary Authority of Macao (AMCM) issued the Guide for the Application of Establishment of Public Investment Funds and the Guide for the Establishment of Private Equity funds in 2021, followed by the Guideline on Management and Operation of Private Investment Fund in 2022. In Hong Kong, the Limited Partnership Fund Ordinance came into effect in 2020, enabling private equity funds to be registered in the form of limited partnerships. In China, the Securities Investment Fund Law of the People’s Republic of China was enacted in 2013 and amended in 2015. Since then, the China Securities Regulatory Commission (CSRC) and the Asset Management Association of China (AMAC) have successively issued a number of departmental rules and instructions, as well as industrial self-regulations, gradually forming the current supervision system of private equity funds with  “One Law, Three Regulations, plus ‘7+2+8’ Self-regulations” .

Definition and Structure

Private equity funds in Macau are established by legal persons or in the form of contracts. Parties include the management entity, the depository, the sales agency, or a discretionary manager entrusted by the management entity to participate in the process of establishment of a private equity fund. The management entities must be management entities with authorization to operate in Macau, including banks, finance companies, investment fund management companies, and asset management companies. In China, a private equity fund can be established in the form of partnership, corporate or contract. Private equity funds must be initiated and managed by entities that have obtained private equity fund manager qualifications after registration with AMAC.

As with private equity funds in Macau, limited partnership funds in Hong Kong are operated in a regular manner and are sold privately or only open to “professional investors” in accordance with relevant laws and guidelines. In Macau, a “professional investor” is defined as an individual with a portfolio of at least MOP 8 million; or a corporation or partnership that has either a portfolio of at least MOP 8 million or total assets of at least MOP 40 million. In addition, private equity funds are privately funded from no more than fifty professional investors. In Hong Kong, a “professional investor” refers to an individual who has a portfolio of not less than HKD 8 million; a corporation or partnerships that has a portfolio of over HKD 8 million or its total assets of not less than HKD 40 million; or a trust corporation that has been entrusted under one or more trusts of which it acts as a trustee with total assets of not less than HKD 40 million. Similar to Hong Kong and Macau, private equity funds in the Mainland can only be raised privately by qualified investors who meet relevant requirements. Either the private equity fund is found in the form of limited corporation or contract, the total number of investors shall not exceed 200; if it is found in the form of a limited liability company or limited partnerships, the total number of investors shall be less than 50. “Qualified investors” in Mainland include legal entities that capital investment to the fund is more than RMB 1 million, while whose month-end net asset value in the recent three exceeds (inclusive) RMB 10 million; or individuals that capital investment tot he fund is more than RMB 1 million, whose financial assets value in the past 20 trading days exceeds RMB 3 million or with an average annual personal income of not less than RMB 500,000 in the last three years.

The limited partnership fund regime in Hong Kong is administered by the Companies Registry, while a qualified fund under this regime has one “general” partner with unlimited liability along with at least one “limited” partner whose liability is limited.

Being responsible for the ultimate management and control of the limited partnership fund, the general partner must be: a private corporation that registered in Hong Kong; or a registered non-Hong Kong company; or a Hong Kong or non-Hong Kong limited partnership; or a natural person who is at least 18 years old. A limited partner is a company, a partnership of any kind, an unincorporated body or any other entity, or a natural person who is at least 18 years old. The limited partner is entitled to receive financial returns ofthe limited partnership fund but does not engage in the daily operation or control of the partnership.

In Mainland, most private equity and venture capital funds are established in the form of limited partnerships. According to relevant requirements, the partnership affairs of a limited partnership cooperation shall be executed by the general partner; in the case of a private equity fund, the fund manager, as the main responsible party, shall be responsible for the main tasks that are related to raising, investing, managing, and withdrawing from the fund. Putting into practice, when a private equity fund of partnership-type selects a non-manager entity to serve as the general partner due to factors such as taxation and risk isolation, the general partner must also appoint a qualified entity as the private equity fund manager, who should have a connected relationship with the general partner itself.

Management Entity/General Partner/Executive Partner

In Macau, the Guidelines on Management and Operation of Private Investment Fund clearly states that the management entity of a private equity fund must be responsible for the formulation of investment strategies of the fund’s, while the personnel who make investment decisions and asset allocation must have at least five years of relevant experience in investment management. In addition, the management entity must entrust the discretionary manager to perform investment management functions through a contract.

A limited partnership fund in Hong Kong, in the event that the general partner is a limited partnership fund, or a non-Hong Kong limited partnership fund without legal personality, an authorised representative must be appointed to manage and control the limited partnership fund. The authorized representative and the general partner are responsible for all debts and obligations of the limited partnership fund, while the both parties should also bear the ultimate responsibility for the management and control of the limited partnership fund. Generally speaking, the general partner is required to obtain a SFC Type 9 license. However, this requirement can be ignored, if the general partner fully authorizes a company that already has such a qualification to fulfill the responsibilities of managing and monitoring funds in Hong Kong.

In the light of the managers of private equity funds, the Mainland stipulates relatively detailed requirements in terms of equity structure, capital, main business, internal control system, team personnel and so on. Requirements and more specific audit standards in terms of the personnel’s professional experience and competence have also been put forward, in particular to the senior management of the fund’s management entity, namely the legal representative/ the appointed representative of the executive partner, the Chief Risk and Compliance Officer and so on.

The Depository

In Macau, the assets of a private equity fund must be in the custody of a depository, which should be a regulated financial institution licensed to operate relevant business in Macau or other places. For depositories outside of Macau, it must under the prudential regulation and supervision of foreign regulatory authorities that are approved by AMCM. In addition, there are specific requirements to the personnel of the depository, including persons who hold managerial, leadership or supervisory positions and the relationships between the depository, the management entity, and the discretionary manager entrusted by the management entity. In Hong Kong, a depository is not required for limited partnership funds, but it is the general partner’s responsibility to ensure that the assets of the limited partnership are separated from their own. In general, the depository in Hong Kong is independent from the fund management company, which can be a bank or a trust company. According to regulations in the Mainland, contractual private investment funds should be managed by a qualified custodian that is legally established and has obtained fund custody qualifications. For partnership or corporate funds, although there is no mandatory requirement on custody, it is still necessary to open a special account for fundraising and settlement under the supervision of the fundraising supervision agency, in order to handle the investors’ capital contributions and distributions. In addition, private equity funds that indirectly invest in underlying assets through special purpose vehicles such as companies and partnerships should also be within the scope of the depository.

Reporting and Supervision

The management entity of a private investment fund in Macau must be an entity authorised to operate in Macau and is required to report to AMCM about the private equity funds under its management. In Hong Kong, the Company Registry is in charge of the operation of limited partnership funds. In Mainland, the information disclosure obligation of a private equity fund is borne by the fund manager, while the obligation includes to disclose relevant information to investors, and to report and back up relevant information to AMAC as required.

Procedures and Required Documents

To register a fund as a limited partnership fund in Hong Kong, the applicant is required to submit: Form LPF1 (Application for Registration of Limited Partnership Fund), registration fee and lodgement fee. Necessary documents required for the registration of a specified limited partnership fund include Form LPF2 (Application for Registration of a Specified Fund as a Limited Partnership Fund), registration fee and lodgement fee. If approved, a certificate of registration is issued to the fund by the Registrar of Companies. The applicant will be notified by email to collect the certificate from the Companies Registry Enquiry Counter. The general partner must submit an application for business registration to the Business Registration Office, Inland Revenue Department, within 1 month after the registration date or, notify the Commissioner of Inland Revenue of the registration, depending on the actual situation.

In Macau, the management entity must submit to AMCM the following documents and supporting materials for the establishment of private equity fund: a communication letter, indicating the general aspects concerning the model of its constitution, target investors and areas of investment; a draft of the regulation for the management of the proposed fund; a draft prospectus of the proposed fund to be made available to potential investors, indicating the fact that the fund has not obtained any recognition or authorization granted by AMCM. The fund’s management entity is required to provide a declaration of commitment, stating the rights and obligations inherent to the management of the proposed fund, as well as to ensure full compliance with the management regulations. Depository should also make a declaration of commitment on the rights and obligations regarding the entrustment of the values comprising the applicant funds. Information regarding the background of the collaborating entities (if any), specifying their role, responsibilities, and obligations, and other documents and information that AMCM considers necessary, should also be provided

In Mainland, the relevant registration and filing procedures of private equity fund with the trade and industry department are followed by the filing of the establishment of the fund, which requires the fund manager to submit a related filing application to AMAC through its comprehensive reporting platform. Necessary documents for the filing application of a private equity fund include: fund prospectuses, fund contract, custody agreement, fund risk disclosure letter and risk tolerance questionnaire that filled and signed by investors,  first settlement of  fund capital contribution certificate, proofs of the establishment of the fund issued by relevant industrial and commercial departments, fund entrustment management agreement, fundraising supervision agreement signed with the fundraising supervision agency and so on. AMAC may also require the applicant institution to provide supplementary application materials such as the investor’s capital contribution ability certificate during the review process.


Following Macau and Hong Kong’s implementation of the above series of effective measures on private equity funds and limited partnership funds, the financial industries in both regions are enabled to design and provide more products to serve a wider range of customers, as well as to better protect the interests of investors, which will be beneficial to the construction of a hub of assets and wealth management in Asia, and to promote the trend of diversified development of the modern financial industry, including supporting and promoting the steady development of the private equity market and protecting the interests of investors. Since the implementation of the Securities Investment Fund Law of the People’s Republic of China in 2013 in China, CSRC and other government departments, as well as AMAC, have gradually built a relatively comprehensive regulatory system through the promulgation of various departmental regulations and industry self-regulations. Since 2020, market exit mechanisms to promote the survival of the fittest have been accelerated, while a trend of supporting the superior and limiting the inferior has been found in regulatory policies. With the continuous introduction of various policies, as well as the continuous practice and improvement of the aforementioned policies by regulatory authorities, industry self-regulatory organizations and private equity institutions in the market, the private equity fund market in the Mainland will be optimized continuously, which will move towards a more professional and mature direction.

 “One Law” indicates the Securities Investment Fund Law of the People’s Republic of China ; “Three Regulations” points to the Interim Measures for the Supervision and Administration of Privately-Raised Investment Funds, the Interim Provisions on the Administration of Operation of the Private Asset Management Business of Securities and Futures Business Institutions and the Several Provisions on Strengthening the Regulation of Private Investment Funds; “7+2+8” self-regulations refer to the Measures for the Registration of Private Investment Fund Managers and the Recordation of Funds (for Trial Implementation) and other industry self-regulations issued by the Asset Management Association of China.

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