Open-Ended Fund Company (OFC fund)

Services

Hong Kong is a mature, reputable fund hub with 2,000+ SFC-authorised public funds available to investors. Historically, most locally domiciled funds were set up as unit trusts (trust deed with a trustee), while many corporate funds (mutual fund style) seen in Hong Kong were overseas domiciles recognised by the SFC. HKEX has even launched a one-stop Fund Repository for all SFC-authorised funds to improve transparency for the public.

Within this landscape, Hong Kong now offers a home-grown corporate vehicle—the Open-Ended Fund Company (OFC)—which complements unit trusts and provides a familiar corporate option aligned with US/EU practice.

What is an open-ended fund company (OFC fund)?

An OFC is a corporate fund structure introduced on 30 July 2018 under Part IVA of the Securities and Futures Ordinance (SFO). It was designed to overcome Companies Ordinance constraints on share capital reduction and distributions out of capital which historically favoured unit trusts.

International familiarity: Corporate fund structures are common in Europe and the US; many recognised overseas funds in Hong Kong use corporate form. The OFC regime gives Hong Kong managers a globally familiar corporate option, while complying with local SFC rules.

Recent trajectory & scale: As the regime has matured, adoption has grown—579 OFCs were registered and remaining in the register as at 30 June 2025 (with monthly updates published by the Companies Registry).

Key Features of an OFC

Separate legal entity & board

An OFC is its own legal person with a board of at least two natural-person directors, and at least one independent director (not a director/employee of the custodian). Directors owe statutory and fiduciary duties to the OFC.

Professional investment manager (Type 9)

The OFC must delegate investment management to an SFC-licensed/registered Type 9 (asset management) manager who remains fit and proper and suitably experienced for the asset classes the OFC will invest in.

Custody & safekeeping

All scheme property is held by an independent custodian. Since September 2020 enhancements, SFC Type 1 (dealing in securities) intermediaries may also act as custodians for private OFCs (broader, more flexible options in practice).

Protected-cell (umbrella/sub-fund) regime

An OFC may be an umbrella with multiple sub-funds whose assets and liabilities are statutorily segregated. The OFC Rules even imply “no cross-recourse” terms into contracts to fortify segregation. (Note: recognition of segregation can vary overseas, so cross-border managers should assess enforceability in foreign courts.)

Transparency & public records

The SFC maintains a list of registered OFCs (by legal name and sub-funds).
The Companies Registry (CR) hosts the OFC forms/records; crucially, OFCs do not file annual returns with the CR (unlike ordinary companies) and no mandatory AGM is required unless the instrument provides otherwise. (OFCs must still prepare and publish an annual report—see “Operations” below.)

Operations (what to expect day-to-day)

Filings & approvals

The SFC runs a “one-stop” process (via its e-IP/WINGS portal) and prescribes the limited set of post-registration changes needing SFC approval (e.g., appointing a director/custodian/IM, name changes, establishing a new sub-fund, termination).

Reports

Annual report (audited): Directors must prepare it each financial year, publish it and file with the SFC within four months after year-end (exemptions are limited—typically only if not launched/no investors).
No CR annual return and no mandatory AGM (unless opted-in in the instrument).

Public vs private OFCs

Public OFCs must also meet the SFC UT Code (same as other public funds).
Private OFCs have no prescribed investment restrictions following the 2020 enhancements (the manager’s competence, disclosures and custody still apply)

Taxes & stamp duty (high-level)

Profits tax – Unified Funds Exemption (UFE)

Qualifying “funds” (including Hong Kong-domiciled OFCs) may enjoy profits tax exemption under the UFE regime (Inland Revenue Ordinance s.20AM & Sch.16C; see IRD DIPN 61 for scope/conditions).

Stamp duty (share dealings)

Transfers of OFC shares are treated like other Hong Kong “stock”: ad valorem duty 0.2% in total (0.1% per side) on contract notes, generally based on consideration/market value.
Primary dealings: allotments/issues of OFC shares are not dutiable; instruments of transfer relating to indirect allotments/redemptions of OFC shares are expressly exempt under the Stamp Office PN 07A.

Government incentives

Grant Scheme for OFCs & REITs – updated terms (effective 11 April 2025)

Hong Kong re-upped and retuned the scheme to cover 70% of eligible local expenses, with new caps and a “one OFC per investment manager” limit:

Public OFC: cap HK$300,000
Private OFC: cap HK$150,000
REIT: cap HK$5,000,000
The scheme runs until May 2027 or funding exhaustion (first-come, first-served).

Global considerations

The protected-cell concept is robust in Hong Kong law, but overseas recognition can differ. Contracts typically include no cross-recourse terms by statute, yet managers should assess foreign law/venue risk if the fund or its counterparties operate globally.

Benefits of open-ended fund company (OFC fund)

Versatile structure

Suitable for public or private funds, across strategies (hedge, PE, credit, quant, multi-asset) and for single or umbrella setups with sub-fund ring-fencing. Private OFCs benefit from broad investment flexibility post-2020.

Operational efficiency

No CR annual returns; no mandatory AGM (unless opted-in).
Centralised SFC e-IP filings; only specific changes need prior approval.
Do note the annual report obligation (publish + file with SFC in 4 months).

Government incentives

The refreshed Grant Scheme meaningfully reduces setup or re-domiciliation costs under the new HK$300k/HK$150k caps (public/private).

Tax advantages

Qualification under the Unified Funds Exemption can deliver Hong Kong profits tax exemption on eligible transactions (subject to IRD criteria).

What CityLinkers can help for open-ended fund company (OFC fund)?

Regulatory compliance

Map your OFC’s governance against SFC’s OFC Code (e.g., independent director, custodian independence, auditor independence) and the Fund Manager Code of Conduct obligations for your Type 9 manager.
Build calendars for SFC post-registration filings (annual report timeline, offering document updates; pre-approval items like director/custodian/IM changes).

Operational support

Structure selection (single vs umbrella), drafting instrument of incorporation, custody operating flows, and e-IP/WINGS submission packs.
Standing procedures for NAV/valuation, dealing, liquidity, sub-fund launches, and board governance.

Investor relations & disclosure

Authoring plain-English offering docs/KFS-style summaries and investor letters; aligning with UT Code (for public OFCs) and maintaining website/reporting hygiene.

Re-domiciliation & incentives

Step-by-step re-domiciliation planning (documents, timing, deregistration back-end) and Grant Scheme applications under the 2025 terms.

Risk & cross-border

Contract safeguards and counterparty terms to reinforce protected-cell segregation; cross-jurisdiction reviews where foreign courts are involved.

How long does it take to incorporate an OFC?

Once all documentation is complete, SFC incorporation typically takes 1 to 2 months. The full process — including legal drafting, director appointment, and custodian engagement — takes approximately 2 to 4 months from start to finish.

What is the OFC government subsidy and how do I apply?

The Hong Kong government subsidises OFC setup costs, capped at HK$300,000 per public OFC and HK$150,000 per private OFC. The subsidy is limited to one OFC per investment manager, administered by the SFC, and covers legal fees, accounting fees, and other professional costs incurred within 3 years of incorporation.

Can a private OFC invest in private companies?

Yes. Since the 2021 amendments to the Securities and Futures (Open-ended Fund Companies) Rules, OFCs can invest in private companies. This makes the OFC structure attractive for private equity and venture capital funds previously limited to offshore structures.

Does an OFC need a custodian?

Yes. Every OFC must appoint an eligible custodian — either a Hong Kong authorised financial institution (bank) or an SFC-licensed corporation. The custodian holds fund assets independently and provides an additional layer of investor protection.

What is the difference between a private OFC and a public OFC?

A private OFC is incorporated by the SFC but does not require SFC authorisation for public offering — it can only be offered to professional investors or under private placement exemptions. A public OFC requires SFC authorisation and can be offered to the general public, subject to prospectus and ongoing disclosure requirements.

Can an existing offshore fund redomicile to Hong Kong as an OFC?

Yes. Since November 2021, the SFC allows existing funds from qualifying jurisdictions (including Cayman Islands) to redomicile to Hong Kong as OFCs. CityLinkers can manage the entire redomiciliation process, ensuring continuity of the fund's operations and tax positions.