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

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

The 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 comply with the OFC’s instrument of incorporation. SFC approval is sought after the full distribution of assets to shareholders.

Key Steps for Termination of an OFC

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

Submission of a Termination Proposal: The OFC must submit a termination proposal to the SFC, including a solvency statement approved by the board of directors, confirming the OFC’s ability to meet liabilities for the next 12 months.
Shareholder Notification: Shareholders must be formally notified, with SFC approval required for public OFCs. Marketing activities and acceptance of new subscriptions must cease.
Asset Realization and Liability Settlement: The OFC must realize its assets, settle liabilities, and distribute the proceeds to shareholders.
Application for Cancellation of Registration: Upon completing asset distribution, the OFC applies to the SFC for registration cancellation, submitting the required forms and documents.
Investor Notification: The OFC must notify investors about the termination and registration cancellation, both before and after completion.
Automatic Deregistration from Companies Registry (CR): Upon SFC registration cancellation, the OFC’s Companies Registry (CR) registration is automatically removed without requiring a separate application.
Lapse of Termination Application: If the SFC does not approve the termination within the designated timeframe, the application will lapse.

Cancellation of Registration by the SFC

The Securities and Futures Commission (SFC) has the authority to cancel an OFC’s registration under Section 112ZI of the Securities and Futures Ordinance (SFO) for the following reasons:

Failure to meet registration requirements.
Violation of SFO provisions, regulatory notices, conditions, or requirements.
Providing false or misleading information knowingly or recklessly to the SFC.
Determination that the OFC’s continued registration is not in the interest of the investing public.
Court-ordered winding-up of the company under OFC Rules.

Upon SFC registration cancellation, the OFC’s Companies Registry (CR) registration 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. Upon completion of the winding-up process, the OFC’s registration ceases automatically.

Throughout the winding-up process, the OFC is responsible for:

Providing updates to the Securities and Futures Commission (SFC) on significant progress.
Responding to SFC inquiries regarding the winding-up process.
Fulfilling all notification requirements specified in the OFC Rules.

Conclusion

The termination, cancellation, and winding-up of an Open-Ended Fund Company (OFC) require compliance with SFC regulations, shareholder transparency, and procedural diligence. Ensuring timely notification, regulatory approvals, and proper asset distribution is crucial for a smooth and compliant OFC closure process.