How To Play By The Rules

Sat Sep 1, 2001


Mark Shipman at Clifford Chance looks at the different regulations throughout the region and how the start-up can structure their company


Generally, the two most common structures for a hedge fund are the limited liability company and the limited partnership. The main factor in determining which of these vehicles is the most appropriate is likely to be tax (although investor preference might also be relevant).

Limited liability company

This is the most common vehicle for a hedge fund in Asia (ex-Japan). Aside from the advantage of investor familiarity, this type of vehicle is also of relatively low risk to the hedge fund manager and easy to operate.

The company will typically be incorporated in a jurisdiction that imposes minimal or no taxation, such as the Cayman Islands or the British Virgin Islands. The company will generally be regarded as an opaque structure for tax purposes, which enables investors to roll up income and gains tax-free in the fund and allows them to choose when to pay tax on the sale of...

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