China has issued new registration rules for foreign invested partnership enterprises (FIPEs), confirming that approval by the Ministry of Commerce will not be necessary for establishment of these entities. The rules will come into effect on 1 March.
In order to implement the Measures for the Administration of the Establishment of Partnership Enterprises inside China by Foreign Enterprises or Individuals (see our Alert on 4 December 2009), the State Administration for Industry and Commerce (SAIC) has promulgated the Measures for the Administration of Foreign Invested Partnership Enterprises Registration (the Measures).
The Measures try to follow the registration rules that apply to domestic partnership enterprises, while at the same time conforming to the rules applicable to foreign invested enterprises. They also detail what a FIPE may or may not be allowed to do and how a FIPE can be established, changed or cancelled.
Items subject to registration
The Measures require certain items to be registered, including (among others):
- The managing partner (zhixing shiwu hehuoren) who is equivalent to a legal representative in a company;
- The scope of business;
- The partners' names and addresses; and
- Manner in which liability is borne.
If there is an agreement as to the term of a partnership enterprise, the term must also be registered. The significance of the above items is that if any of them change, then the FIPE needs to apply for a change in registration to relevant SAIC.
In order to establish a FIPE, the applicant must submit the following documents to the registration authority:
- An explanation executed by all partners that foreign investment industry polices have been complied with. This is an unusual requirement, peculiar to FIPEs, and is intended to make up for the fact that the bureau of commerce will not have reviewed the application.
- The approval letter, if a business of a FIPE is subject to prior approvals or its business scope includes a business requiring approvals.
Differences with domestic partnership registrations
Unlike registration of a domestic partnership enterprise, there are some requirements specially imposed on FIPEs:
- In the first place, for any change of partners, address, the manner in which liability is borne, amount of capital, date of contribution, method of capital contribution and method of evaluation, the signatures of all partners must be notarized by a Chinese public notary.
- Secondly, a FIPE must apply for foreign exchange, tax, customs registration procedures which are required for foreign invested enterprises.
- Finally, a FIPE with investment focus must comply with rules applying to foreign invested enterprises regarding its domestic investment.
Restrictions that go beyond foreign invested companies
Under the Measures, a FIPE will be subject to stricter restrictions than other foreign invested enterprises. They are generally prohibited from investing in businesses which are listed in the Catalogue for the Guidance of Foreign Investment Industries as not open to WFOEs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.