Name: Administrative Provisions on the Registration of Foreign-invested Partnership Enterprises (《外商投资合伙企业登记管理规定》, the “Administrative Provisions”)
Issuing authority: State Administration for Industry and Commerce (“SAIC”)
Effective date: 1 March 2010
Subject: Foreign-invested partnerships
Following the issue of the Administrative Regulations on the Establishment of Partnership Enterprise in the PRC by Foreign Enterprises or Individuals by the State Council at the end of 2009 (please refer to our Hot Topic dated 2 December 2009), SAIC issued the Administrative Provisions, which will come into effect on 1 March 2010, to further regulate the registration procedures with respect to foreign-invested partnership enterprises.
Whilst the Administrative Provisions provide more details on the registration process for foreign-invested partnership enterprises in the PRC, the regime applicable to foreign investors interested in establishing PRC private equity funds in the PRC remains fraught with uncertainty. It is still unclear whether foreign-invested partnerships engaging in private equity investments may directly register with the local administration for industry and commerce (“AIC”).
Highlights
- The Administrative Provisions provide that the registration of foreign-invested partnerships engaged in investment activities should be conducted by the AIC at the provincial or quasi-provincial level. This appears to expressly recognise the establishment of foreign-invested partnerships for investment purposes. However, the Administrative Provisions do not spell out the additional requirements (if any) applicable to foreign-invested partnerships established for investment purposes.
- The Administrative Provisions provide that where the establishment of the partnership is subject to approval requirements, the approval must first be obtained before registration of the foreign-invested partnership with the AIC. This is consistent with the Administrative Regulations issued by the State Council.
- On a related note, the Administrative Provisions provide that where the partnership falls into the restricted category under the foreign investment catalogue but without requiring additional approval or where the partnership is a project which involves regulators other than SAIC, then the AIC will need to obtain the opinion of the relevant regulator within five days of receiving the application. The AIC will communicate to the applicant as to whether registration will be permitted within five days after the opinion of the relevant regulator is obtained.
- The Administrative Provisions state that where a foreign-invested partnership established for investment purposes makes investments domestically, the laws applicable to foreign investment apply. The significance is that it does not state that the laws applicable to reinvestment by foreign-invested enterprises apply. It is not clear whether the regulators intend to regulate downstream investments by the funds as a foreign investment or whether they will be regulated as reinvestments by a foreign-invested enterprise but subject to foreign ownership restrictions, or whether this is merely a statement that for registration purposes the partnership will be treated like any other foreign-invested enterprises.
- The Administrative Provisions provide that a foreign-invested partnership must only have one primary business premises and the premises must be situated in the locality of establishment. The Administrative Provisions do, however, provide that a foreign-invested partnership may apply to establish a branch in a separate locality.
Please contact Fang Jian (jian.fang@linklaters.com tel: +86 21 2891 1858) if you would like further details.
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