Following announcements during the 2021-22 Budget by the Finance Secretary Paul Chan, the Securities and Futures Commission (SFC) issued on 10 May 2021 details of the grant scheme available for Hong Kong open-ended fund companies (OFCs) and real estate investment trusts (REITs).
The grant scheme will be applied on a first-come-first-served basis with an application period from 10 May 2021 up to 9 May 2024, subject to an earlier end date if the funding under the grant scheme is fully committed. The government has allocated HK$270 million to the scheme.
Incorporation and re-domiciliation of an OFC
In respect of private and public OFCs, going forward under the scheme issuers will only need to bear 30% of the set-up costs for new OFCs. The investment manager can apply for government subsidies of up to 70% of the set-up costs of an OFC successfully incorporated in, or a non-Hong Kong fund corporation successfully re-domiciled as an OFC to, Hong Kong on or after 10 May 2021. The grant amount will cover expenses paid to Hong Kong-based service providers in relation to the incorporation of the OFC or the re-domiciliation of the non-Hong Kong fund corporation in Hong Kong as an OFC, subject to a cap of HK$1 million per OFC and a maximum of three OFCs per investment manager. The grant will not be available to new sub-funds of an existing OFC platform.
Eligible expenses under the grant scheme will cover fees charged by law firms or legal advisers for legal work in relation to the incorporation or re-domiciliation of an OFC, including the drafting of legal documents and offering documents of an OFC and work in relation to the authorisation of an OFC with the SFC (in the context of a public OFC). In addition, fees charged by auditors, accountants, tax advisers, fund administrators, corporate service providers, company secretaries, regulatory consultants and listing agents (in the case of listed OFCs only) in respect of services in relation to the incorporation or re-domiciliation and the authorisation of an OFC with the SFC will be covered.
The application together with requisite supporting documents would need to be made to the SFC within three months from the date of certificate of incorporation or re-domiciliation for private OFCs or the authorisation date for public OFCs. In respect of public OFCs seeking SFC authorisation, a Confirmation of Intention to Apply for a Grant under the Grant Scheme should be submitted as part of the application package to be submitted to the SFC.
In terms of priority, applications will be accepted on a first-come-first-served basis with reference to the submission time of the grant application for private OFCs, and in the case of public OFCs, upon the time of take-up of the product application where the aforesaid confirmation of intention is submitted.
Listing of a REIT
In respect of REITs, the grant scheme will be available to SFC-authorised REITs listed on the Stock Exchange of Hong Kong (SEHK) on or after 10 May 2021 with a minimum market capitalisation of HK$1.5 billion (or equivalent) at the time of listing. For a REIT that is also listed outside Hong Kong, the market capitalisation of its units listed on the SEHK must be at least HK$ 1.5 billion (or its equivalent) at the time of listing. The grant amount will cover 70% of expenses paid to Hong Kong-based service providers in relation to the listing of the REIT, subject to a cap of HK$8 million per REIT. The application together with the requisite supporting documents would need to be made to the SFC within three months from the listing date of the REIT.
Eligible expenses under the grant scheme are similar to those outlined above for OFCs.
Exclusions from the grant scheme
The SFC has clarified that the grant scheme will not cover audit fees paid to accounting firms in relation to the OFC or REIT’s annual audit review. In addition, statutory fees such as registration or application fees to the SFC and expenses incurred in relation to an application for the licensing or registration of an investment manager will not be covered under the grant scheme.
The government will have the right to claw back the grant if the OFC commences winding-up or applies for termination of registration within two years of its incorporation or re-domiciliation, or the REIT is delisted or suspended from trading, within two years from its listing date.