NCE HK$27 Million and HK$3 Million: Investment Management

Introduction

Since the New Capital Investment Entrant Scheme (NCE) began accepting applications on 1 March 2024, applicants must have continuously held, throughout the entire six-month period preceding the submission of their net asset review application, net assets with a net value of no less than HK$30 million in which they have absolute beneficial ownership, and upon approval must deploy assets of equivalent value into permitted investment asset classes. The market commonly simplifies this threshold as “HK$27 million free portfolio + HK$3 million designated portfolio”. How to build a governance framework for that HK$27 million in assets that both complies with the Immigration Department (ImmD)‘s ongoing requirements and allows flexible allocation has become a focus for high-net-worth individuals. Establishing a Hong Kong-incorporated investment management company and using it as the vehicle to hold and operate permissible financial assets is becoming the structure chosen by many applicants. This article breaks down the operational pathway step by step, from the regulatory framework and licensing obligations to company incorporation and ongoing compliance.

The Layered Logic of HK$27 Million and HK$3 Million

The total NCE investment is HK$30 million, of which no less than HK$3 million must be mandatorily placed in the “Capital Investment Entrant Scheme Portfolio” managed by Hong Kong Investment Corporation Limited. This portfolio is a closed-ended fund that invests in Hong Kong-related enterprises and projects; applicants have no right to directly control it and may not treat this portion as a general liquid asset. The remaining HK$27 million may be allocated to permissible financial assets and real estate, as detailed in section 5 of the Rules of the New Capital Investment Entrant Scheme (source: ImmD website New Capital Investment Entrant Scheme, “Eligible Investment Assets” section). Precisely because this HK$27 million portion offers greater allocation flexibility, applicants must maintain the assets in compliance throughout the entire stay (the first grant of stay is generally not more than 24 months, and subsequent extensions generally do not exceed three years); any proactive sale or dividend withdrawal may trigger a requirement to meet the threshold again. Therefore, holding and deploying this batch of assets collectively in company form helps clearly record the flow of funds for each transaction.

Why Choose an Investment Management Company Over a Personal Account

Applicants may choose to hold permissible assets in their own name through private banks or brokerages, but this approach easily creates compliance blind spots in the following respects:

• Risk of asset commingling: if a personal bank account is also used for other private consumption or business cash flow, it is difficult for the auditor to draw a clear “permissible asset boundary”; once sampled for review by the ImmD, the cost of proof is extremely high.
• Dispersed investment authority: if the applicant appoints multiple fund managers and funds are spread across different custodians, it increases the difficulty of preparing quarterly statements and annual declarations.
• Estate and tax planning: holding in a personal name means a longer asset freeze period upon death or loss of capacity, affecting the residency stability of family members.

Conversely, incorporating a private limited company registered in Hong Kong as the investment management company (hereinafter the “management company”), with the applicant as its sole shareholder and director, and opening securities and bank accounts in the company’s name, achieves segregation between the “asset-holding entity” and the “natural person’s identity”. A company registered under the Companies Ordinance (Cap. 622) is a separate legal entity; assets in its name are not directly equivalent to personal bankruptcy estate and can provide stronger protection. At the same time, the management company may engage a professional investment manager or have decisions made by the director, provided the company’s principal business is holding and managing NCE permissible assets, which meets the ImmD’s characterisation of “a company wholly owned by the applicant and solely controlled by the applicant”. The relevant definition is found in ImmD FAQ No. 23 (FAQs – New Capital Investment Entrant Scheme Q23).

Licensing Requirements and Exemption Mechanisms for the Management Company

Holding assets in company form requires clarifying whether a licence from the Hong Kong Securities and Futures Commission (SFC) is needed. In principle, if the company only manages the applicant’s own assets and does not offer any collective investment scheme or asset management service to the public, it may rely on the “intra-group exemption” or “own assets exemption” under the Securities and Futures Ordinance (Cap. 571) and need not apply for a Type 9 (asset management) licence. Section 1.4 of the SFC’s Licensing Handbook clearly states that activities purely managing the company’s own assets, connected company assets, or the assets of a single family under a discretionary trust generally do not constitute “asset management business”, and therefore no licence is required.

However, if, in addition to holding NCE assets, the management company also provides asset management advice to other family members or third parties for a fee, it may trigger licensing obligations. There are then two options: first, segregate such activities into a separate licensed entity; second, apply to the SFC for a licence. Given that a licence application requires at least two responsible officers, adequate capital and ongoing compliance costs, most NCE applicants choose strictly to limit the management company’s activities to its own assets, avoiding licensing obligations. The Immigration Department’s compliance review of the management company focuses mainly on whether the assets continuously meet the definition of “permissible investment assets” and whether the company structure is genuinely beneficially and absolutely owned by the applicant, whereas SFC licensing is a matter of the company’s operational compliance; the two do not substitute for each other.

Practical Steps for Establishing the Management Company

Company Incorporation and Business Registration

The applicant may engage a Hong Kong professional services firm or law firm to handle the process. Generally, the Certificate of Incorporation and Business Registration Certificate can be issued within one to three working days, with share capital set at HK$1 or more, though it is advisable that the paid-up capital together with the asset injection amount at least corresponds to the scheme’s requirements. The company’s Memorandum of Association must expressly restrict the company’s objects to “holding and managing the permissible assets placed by the shareholder under the New Capital Investment Entrant Scheme, and carrying on the necessary activities incidental to maintaining those assets”, so as not to be regarded as carrying on an unlicensed business.

Opening Bank and Securities Accounts

Opening a bank account in the company’s name is the bottleneck. Hong Kong retail banks impose stringent account-opening requirements on newly incorporated investment holding companies and require detailed source of funds (SOF) and source of wealth (SOW) evidence, with the document trail traceable back to the applicant’s original accumulation stage. Since the net asset proof required under the NCE already covers this part of the review, the applicant may submit to the bank the same set of audit reports and lawyer’s certification accepted by the ImmD, which can shorten the due diligence time. For securities accounts, private banks or brokerages may be chosen, but it must be ensured that the intermediary clearly understands the account’s purpose is NCE-compliant holdings and is willing to assist with audit confirmation letters every six months or every year.

Asset Migration and Permissible Asset Records

After the management company’s account is opened, the assets equivalent to HK$27 million must be transferred from the applicant’s personal name into the company account, with the bank documents annotated “Capital injection pursuant to NCE”. The migration timing must be borne in mind: all investments (i.e. the HK$30 million) must be deployed within six months of approval; cash deposits during the transition period may be regarded as permissible assets, but once the period expires, cash must be converted into listed assets such as equities, bonds, qualifying collective investment schemes or real estate. The management company should establish an internal investment record system, marking the purchase date, cost, valuation and category of each asset, to facilitate audit and annual declaration.

Ongoing Compliance and Reporting Obligations to the ImmD

The NCE is not a one-off approval that can be left unattended. The applicant and their management company must observe the following three-tier reporting throughout the entire stay:

1. Annual declaration: Within 14 working days after each anniversary date, a practising accountant as defined under the Professional Accountants Ordinance must be engaged to conduct a special audit of the permissible assets held by the management company and submit a “Certificate of Assets” to the Director of Immigration. The audit scope includes whether the assets still belong to a permissible category, whether any disposal or reduction has caused the total value to fall below the threshold, and whether there has been any unauthorised withdrawal.
2. Notification of material changes: If the management company’s shareholding structure changes, it ceases to be wholly owned by the applicant, or the management company is wound up or changes its business scope, the Immigration Department must be notified in writing within seven days.
3. Extension application: When applying to extend stay, the latest Certificate of Assets signed by an accountant must be submitted again, proving that the assets have never fallen below the HK$30 million threshold.

The relevant requirements are set out in sections 12 to 15 of the Rules of the New Capital Investment Entrant Scheme and the notes to application form ID(E) 1003A. It is worth noting that if rental income is generated from real estate purchased by the management company, that rent may be deposited in the company’s bank account, but if used for reinvestment, it must be ensured that the new investment also falls within a permissible asset class, otherwise it will be treated as a withdrawal. The management company should establish a separate “NCE assets” accounting ledger, completely segregated from any other business activities of the company, to reduce the risk of error.

Treatment of the HK$3 Million Portfolio and the Management Company’s Role

This mandatory HK$3 million portion is not operated autonomously by the applicant or their management company. The applicant must entrust the funds to the portfolio arranged by Hong Kong Investment Corporation Limited (HKIC), with the specific subscription process conducted through a financial institution designated by the Immigration Department. The management company’s role in this part is merely as a funding channel: it transfers HK$3 million out of the company account, submits the subscription instruction, and retains the subscription confirmation as audit evidence for later use. Redemption of this portfolio is restricted; generally, the principal and potential returns can only be recovered after the applicant has successfully obtained unconditional stay or permanent resident status, and it should therefore not be regarded as liquid funds.

Since the management company’s balance sheet must also reflect this HK$3 million investment (as a non-current asset), the accountant will, during the annual audit, verify together that the portfolio still exists and has not been mortgaged or transferred. It is therefore recommended to plan a unified record-keeping framework at the time the management company is established, to avoid omitting this investment from the records in a personal account, which would lead to audit discrepancies.

Risk Map and Common Pitfalls

• Pitfall one: treating a shell company as equivalent to a management company. If the management company does not actually operate, has no bank account, no licence and no transaction records, the bank may freeze the account, and the Immigration Department may also question whether the applicant is genuinely maintaining the investment. Board meeting minutes, investment decision memoranda, email instructions to brokers and the like must be retained to prove the company “genuinely exists”.
• Pitfall two: ignoring valuation fluctuations. The market value of the HK$27 million assets fluctuates with the market; there is no daily top-up requirement, but if the total market value on the day of the annual audit is below HK$30 million, the applicant must make up the shortfall, otherwise it constitutes a breach. The management company should set up an internal early-warning mechanism and consider injecting additional capital or switching to lower-volatility assets when the portfolio value approaches the HK$30 million threshold.
• Pitfall three: over-complicating the holding structure. Some applicants wish to add a trust or an offshore holding company as a shareholder of the management company; this would depart from the definition of “absolutely beneficially owned by the applicant” and lead to non-compliance with the NCE rules. The structure must remain direct: applicant → Hong Kong private limited company → permissible assets; any intermediate layer must first obtain the Immigration Department’s written approval, and the approval criteria are extremely strict.

Conclusion

Operating the NCE’s HK$27 million + HK$3 million framework through an investment management company, the key lies not in incorporating the company itself but in building an auditable, reportable and segregatable compliance wall. From the company objects clause, bank account opening, licensing exemptions and asset records to the annual audit, every step must be checked against the Immigration Department’s latest guidance as well as the tax and companies ordinances. Precisely because there are multiple reporting milestones throughout the stay, applicants should treat the management company as a long-term compliance tool rather than a temporarily erected channel. If in doubt as to whether your circumstances can satisfy full ownership control, licensing exemptions or asset classification, be sure to consult Hong Kong lawyers and accountants familiar with the NCE rules.

This article is for informational reference only and does not constitute legal advice. Formal applications should be based on the ordinances and guidance published by the Immigration Department.