On 25 November 2009, the State Council of the PRC promulgated
the Measures on Administration of Establishment of Partnerships by
Foreign Enterprises or Individuals in China ("Partnership
Measures"), which became effective on 1 March 2010. A
foreign-invested partnership ("FIP") as
described in the Administration Measures refers to a partnership
set up by at least two foreign enterprises or individuals, or one
set up by foreign enterprises or individuals together with Chinese
individuals, legal persons or other organisations. As explained by
an official at the State Council's Office of Legislative
Affairs, a foreign investor may also join an existing domestic
partnership, which would then be con¬verted into an FIP.
The Partnership Measures are relatively short - they only
con¬tain 16 articles. They require that an FIP complies with
the PRC Partnership Enterprise Law, other related laws and
regulations and industrial policies relating to foreign
Unlike an FIE in China, which needs approval from the Ministry
of Commerce or its local counterpart, setting up an FIP only
requires registration with the competent administration for
industry and commerce. This is a considerably simpler establishment
Since limited partnerships are the main form for private equity
funds outside China, the Partnership Measures have attracted much
attention from foreign investors interested in establishing local
venture capital funds. However, Article 14 of the Partner¬ship
Measures notes that other national provisions prevail when they
address partnerships established within China by foreign
enterprises or individuals for the primary purpose of investment.
Such provisions leave ample space for further legislation in this
respect. As explained by the official at the State Council's
Office of Legislative Affairs, there is a lack of relevant
practical expe¬rience in terms of private funds and venture
capital enterprises. Such explanation seems to indicate that this
area awaits further guidance.
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.
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