Setting Up a Family Office in Hong Kong: Legal and Structural Considerations

Hong Kong as a Family Office Hub

Hong Kong has emerged as a premier destination for family offices serving ultra-high-net-worth (UHNW) families across Asia. Its combination of a mature common law legal system, low and predictable tax rates, sophisticated financial infrastructure, and proximity to Mainland China makes it an attractive base for managing multigenerational wealth.

The Hong Kong government has made attracting family offices a policy priority, introducing a dedicated tax concession regime in 2023 under the Inland Revenue Ordinance and actively streamlining regulatory processes for single family offices (SFOs).

Types of Family Office Structures

Single Family Office (SFO)

An SFO serves the investment and wealth management needs of a single family. It is owned and controlled by the family itself. Importantly, an SFO managing assets solely for family members is generally exempt from licensing by the Securities and Futures Commission (SFC), provided it does not manage assets for third parties.

Multi-Family Office (MFO)

An MFO provides services to multiple unrelated families. Because it manages assets on behalf of third parties, it typically requires SFC licensing under Type 9 (asset management) and potentially Type 1 (dealing in securities) regulated activities. MFOs must comply with the full suite of SFC regulatory requirements applicable to licensed corporations.

The SFC Licensing Exemption for SFOs

Under the Securities and Futures Ordinance (SFO Ordinance, Cap. 571), a person who manages assets solely for a family group may be exempt from licensing requirements. The SFC has issued guidance clarifying what constitutes a "family" for these purposes, generally including lineal descendants, spouses, and entities wholly owned by family members.

Key conditions for relying on the exemption include:

• The SFO manages assets exclusively for qualifying family members
• The SFO does not hold client assets as a licensed intermediary
• No fee is charged for asset management services on a commercial basis to third parties

Families should seek legal advice before relying on the exemption, as the boundaries can be nuanced, particularly in cases involving extended family structures or charitable foundations.

The 2023 Tax Concession Regime

The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 introduced a profits tax exemption for qualifying family-owned investment holding vehicles (FIHVs) managed by eligible SFOs in Hong Kong.

To qualify, the FIHV must:

• Be a private company, partnership, or trust
• Be beneficially owned by qualifying family members
• Have its assets managed by a specified SFO in Hong Kong
• Meet minimum substance requirements (including having at least two investment professionals in Hong Kong)
• Satisfy a minimum asset threshold (HK$240 million in qualifying assets)

Qualifying income includes dividends, interest, gains from disposal of securities, and certain other investment returns. The regime is designed to encourage families to base their investment vehicles in Hong Kong rather than offshore.

Governance and Succession Planning

A critical function of any family office is establishing governance structures that can manage the transition of wealth across generations. This typically involves:

• Family constitution or charter: A non-legally binding document articulating the family's values, investment philosophy, and governance principles
• Trustee arrangements: Trusts are widely used in Hong Kong to achieve succession, asset protection, and tax planning objectives
• Investment policy statements: Documenting the family's investment objectives, risk tolerance, and asset allocation guidelines
• Dispute resolution mechanisms: Processes for resolving disputes within the family or between family members and the SFO

Investment Platform and Custody

Family offices typically hold assets through a combination of structures: Hong Kong incorporated companies, offshore holding vehicles (BVI, Cayman, or Singapore entities), trusts, and direct holdings. The optimal structure depends on the family's tax position, residency, domicile, and estate planning objectives.

Custody arrangements need careful thought — particularly for families holding alternative assets such as private equity, real estate, digital assets, or art.

Regulatory and Compliance Obligations

Even where an SFO is exempt from SFC licensing, it remains subject to other regulatory requirements:

• Anti-money laundering (AML): SFOs must implement AML and KYC procedures consistent with Hong Kong's legal requirements
• Common Reporting Standard (CRS): Family entities may have CRS reporting obligations depending on the nature of assets and the residency of beneficiaries
• FATCA: US persons involved in the family structure may trigger FATCA obligations for Hong Kong financial institutions and entities

How Alan Wong LLP Can Assist

Alan Wong LLP advises UHNW families and their advisers on all aspects of establishing and operating family offices in Hong Kong. Our private wealth and trusts team works closely with clients on legal structure design, regulatory analysis, trust documentation, succession planning, and governance frameworks. We also assist with the application for the profits tax concession regime and ongoing compliance matters.