Hong Kong

Screenshot 2020-04-03 at 11.18.09 AMBy Piers Alexander, CONYERS



All Cayman entities which fall within the definition of “private fund” in the Private Funds Law, 2020 and which are carrying on business on or after February 7, 2020 have until August 7, 2020 (the “transitional period”) to register with the Cayman Islands Monetary Authority (CIMA).

The characteristics of a “private fund” are the pooling of investor funds with the aim of spreading of investment risk, where the investors do not have day-to-day control over investment decisions but instead the investments are managed by or on behalf of the operator of the fund (eg, directors or general partner) and where the “investment interests” subscribed for by investors carry an entitlement to participate in the profits and gains arising from the investments but, crucially, are not redeemable or repurchasable at the option of investors.

The Private Funds Law, 2020 therefore encompasses all Cayman Islands closed-ended fund structures, unless excluded as a “non-fund arrangement”.1

A Cayman entity structured as a private fund shall submit an application for registration to CIMA within 21 days after accepting capital commitments and must be registered as a private fund prior to receiving capital contributions from investors. Accordingly, any Cayman entity carrying on business during the transitional period and which has accepted capital contributions must ensure it is registered with CIMA by August 7, 2020.

Registration will be made electronically on CIMA’s Regulatory Enhanced Electronic Forms Submission (REEFS) platform and will require a private fund to file:

  • an application form and application fee (US$366)2;
  • a certificate of incorporation or registration;
  • constitutional documents, such as the memorandum and articles of association or partnership agreement;
  • an offering document, summary of terms or marketing materials which describe the terms of the offering;
  • an auditor’s and, where applicable, an administrator’s letter of consent; and
  • a structure chart showing the ownership of the private fund (excluding the investors), any subsidiaries and affiliates.

Screenshot 2020-04-03 at 11.33.38 AM

CIMA has advised that it will require a minimum of two directors for private funds structured as companies and a minimum of two natural persons in respect of a general partner of a limited partnership or corporate director. Directors appointed to “private funds” are not required to be registered under the Director Registration and Licensing Law of the Cayman Islands.

A “private fund” must have its accounts audited annually by a Cayman Islands based auditor approved by CIMA. The accounts, together with a Fund Annual Return, must be filed with CIMA within six months of the relevant financial year end and must be prepared in accordance with IFRS or GAAP of the US, Japan, Switzerland or a non-high risk jurisdiction. CIMA has confirmed that a “private fund” is required to submit an audit for its 2020 financial year. It is anticipated that CIMA will issue policies and procedures regarding waivers and extensions applicable to audits in due course.

Private funds are subject to valuation, safe-keeping and cash management requirements which will likely see appropriately qualified independent third parties undertaking such functions; although there is scope for them to be carried out in-house, by a private fund’s manager or operator or a control entity of such manager or operator, subject to certain criteria.

The valuation of the assets a “private fund” must be conducted in accordance with its valuation policy at a frequency that is appropriate to the assets held by the private fund and at least on an annual basis.

A private fund is required to appoint a custodian to hold in a separate custody account(s) in the private fund’s name, or for its account, those assets which are capable registration or of being physically delivered. The custodian must also verify that the private fund holds title to any other assets and maintain a record of such other assets.

A private fund may notify CIMA that it is neither practical nor proportionate to appoint a custodian having regard to the nature of the private fund and the type of assets held. In such circumstances, either an administrator, other independent third party or the manager, operator or control entity must be appointed to carry out title verification as described above.

A private fund must appoint either an administrator, custodian or another independent party or the manager, operator or control entity to monitor cash flows, ensure that all cash has been booked in the cash accounts and ensure that all payments made by investors have been received.


  1. “Non-fund arrangements” include, for example, joint ventures, proprietary vehicles, debt issues and debt issuing vehicles, structured finance vehicles, occupational and personal pension schemes, sovereign wealth funds, single family offices and funds whose investment interests are listed on stock exchanges specified by CIMA.
  2. The first-year annual registration fee of approximately US$4,270 will not be payable for Cayman entities which have registered as “private fund” by August 7, 2020.


Screenshot 2019-11-27 at 5.52.12 PM

W: www.conyers.com

E: Piers.Alexander@conyers.com

T: (852) 2842 9525

Related Articles by Firm
Electronic signatures and virtual meetings — the Bermuda, British Virgin Islands and Cayman Islands legal framework
The introduction globally of travel restrictions and containment measures arising from Covid-19 has significantly disrupted business, including creating logistical issues in closing corporate or financing transactions or holding board and shareholders’ meetings ...
There’s no place to wind-up like home
When entertaining a jurisdictional challenge to wind-up a foreign company with no place of business in Hong Kong, is it a material concern that alternative remedies for unfair prejudice are available at the company’s place of incorporation but not ...
Offshore Separate Portfolio Companies in the Family Office and Private Client World
SPCs and SACs are offshore limited liability companies with an added twist ... Could a SPC/SAC ever take the place of a trust?
Scheme away
Given current financial conditions in the equity markets, opportunities for privatisations abound and schemes of arrangement are all the rage again.
Shareholder rights to requisition a general meeting
Most articles of association of offshore companies listed in Hong Kong have provisions that empower shareholders to requisition a general meeting.
Offshore 2020 — themes and trends
With the first quarter of 2020 behind us, Richard Hall of Conyers Dill & Pearman’s Hong Kong office looks at the themes that are emerging for Bermuda, Cayman and British Virgin Islands entities, both in Hong Kong and globally ...
BVI court issues key decision on recoverability of costs
The decision is welcome guidance and clarification on the recoverability of costs incurred by non-qualified persons employed in BVI firms.
General meetings in the time of Covid-19
How the Hong Kong government’s regulations on group gatherings affect offshore incorporated companies.
The first red-chip listing on the SSE Star Market
On February 27, 2020, China Resources Microelectronics officially launched its initial public offering (IPO) on the SSE Star Market, becoming the first Cayman incorporated company to be listed in Mainland China ...
Private wealth and estate planning for People’s Republic of China citizens and residents
Driven by an exceptional period of Chinese entrepreneurship in the last decade, high-tech manufacturing, IT and fintech are now key components of the Chinese economy ...
Privy Council confirms that fair value in Cayman merger appraisal is different from fair value in Delaware appraisals
Fair value is to be determined by the Cayman Courts based on the overall scheme of the Companies Law.
What are the recent developments in offshore trusts?
Offshore trusts are used for a variety of different purposes relating to both private wealth and commercial transactions. They depend largely upon the existence of professional trustees able and willing to take on the business of being a trustee ...
Related Articles
Related Articles by Jurisdiction
Latest Articles