HONG KONG SAR, CHINA Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Ester Chow and Aditya Kurtakoti, Mayer Brown
primary regulator for the securities and futures markets in Hong Kong. Whilst there is currently no specific regulatory body or legislation specifically targeted at private credit funds in Hong Kong, whether the activities of a private credit fund fall within the purview of the HKMA or SFC will depend on the types of investment activities in which they engage. In 2024, the HKMA issued a research memo - randum exploring the financial stability implica - tions of the private credit market in Asia-Pacific, and noted that the systematic risks in the private credit sector “may have remained contained so far”. 2.3 Restrictions on Foreign Investments There are no specific restrictions on foreign investment in private credit funds in Hong Kong 2.4 Compliance and Reporting Requirements There are no compliance and reporting require - ments which apply specifically to private credit providers in Hong Kong (ignoring, for this pur - pose, requirements which may apply to private funds generally regardless of whether private credit, private equity, etc, and any applicable financial reporting and tax filings applicable to businesses generally). Should the nature and investment activities of a private credit lender fall to be regulated by the HKMA or SFC, certain ongoing reporting requirements will apply (eg, if it is the private credit arm within a bank, then it will generally be subject to requirements to submit periodic reports to the HKMA). Hong Kong imposes limits on usury activities. Under the Money Lenders Ordinance (Cap. 163),
it is illegal to lend or offer to lend money at any effective rate of interest which exceeds 48% per annum. 2.5 Club Lending and Antitrust The authors are not aware of any recent antitrust cases in Hong Kong where the principal antitrust regulator, the Hong Kong Competition Commis - sion, has expressed any particular concerns with respect to the private credit market. 3. Structuring and Documentation 3.1 Common Structures Given so many private credit investments in Asia are bespoke arrangements to suit a particular need and will need to be sensitised to local laws and regulations (such as cross-border foreign exchange controls and limitations on cross- border guarantees and security), it is difficult to generalise and comment on “common” struc - tures. Indeed, with so many deals being cross- border in nature, one of the principal external factors which drives changes to the structuring of private credit deals is the changing legal and regulatory landscape – eg, whether local laws permit cross-border property mortgages to be granted in favour of a foreign lender, revisions to foreign exchange rules which may be tightened or loosened according to the views of the current administration, etc. Looking at a purely domestic Hong Kong senior secured situation, the structure will be very simi - lar to that adopted by commercial bank lend - ers, albeit, for example, a private credit fund may offer higher LTVs than a commercial bank lender may be prepared or (in the real estate context) permitted to agree.
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