Termination, Cancellation of SFC-Registration and Winding-up of an OFC

Termination, Cancellation of SFC-Registration and Winding-up of an OFC

Terminating an Open-Ended Fund Company (OFC) involves submitting an application to the Securities and Futures Commission (SFC) while ensuring fairness and shareholder interests.

OFC Rules mandate fair asset valuation and conflict resolution by directors and the investment manager. The termination process, outlined in Chapter 10 of the OFC Code, requires a proposal supported by justifications and a solvency statement.

Shareholders must be notified, and termination must adhere to the OFC's instrument of incorporation. SFC approval is sought after full asset distribution to shareholders.

Key steps for termination of an OFC

The termination process for an Open-Ended Fund Company (OFC) involves several key steps:

  1. Submission of a termination proposal by the OFC, including a solvency statement approved by the board of directors confirming the OFC's ability to meet liabilities for the next 12 months.
  2. Issuance of a termination notice to shareholders, with SFC approval needed for public OFCs, followed by cessation of marketing and acceptance of new subscriptions.
  3. After asset realization, liability settlement, and proceeds distribution to shareholders, the OFC applies to the SFC for cancellation of registration, submitting required forms and documents.
  4. Notification to investors regarding the termination and registration cancellation reasons, both before and after the process.
  5. Automatic cancellation of registration with the Companies Registry (CR) upon SFC registration cancellation, without requiring a separate application.
  6. A termination application will lapse if not approved within the indicated processing timeframe by the SFC.

Cancellation of registration by the SFC

The Securities and Futures Commission (SFC) holds authority to cancel registration of an Open-Ended Fund Company (OFC) under certain circumstances outlined in section 112ZI of the Securities and Futures Ordinance (SFO), including:

  1. Failure to meet registration requirements.
  2. Contravention of SFO provisions, notices, requirements, or registration conditions by the company or its key operators.
  3. Knowingly or recklessly providing false or misleading information to the SFC.
  4. Determination that the OFC's continued registration isn't in the interest of the investing public.
  5. Court order for the winding-up of the company under OFC Rules. Upon registration cancellation by the SFC, the OFC's registration with the Companies Registry (CR) is automatically removed.

Winding up an OFC

If an Open-Ended Fund Company (OFC) undergoes statutory winding-up, it must adhere to the OFC Rules. The OFC's registration will automatically cease once the winding-up process concludes. Throughout the winding-up, the OFC is responsible for updating the Securities and Futures Commission (SFC) on significant progress, responding to SFC inquiries regarding the winding-up, and fulfilling any notification requirements specified in the OFC Rules.

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