资讯
Feb-10-2010 The Significance of the Foreign-Invested Partnership Enterprises for Foreign Investors into China
Debby Davidson, AFP Group
Until recently, because of the lack of a legal framework, foreign investors have not been able to set up partnership enterprises in China, whilst domestic investors were able to set up joint ventures through the use of partnerships. As foreign investors were previously excluded from forming partnerships in China, they were limited in the types of structures they could set up for their investments and activities in China. All this changed on December 2, 2009, when the State Council issued The Administrative Measures (the “Measures”) for Establishment of Partnership Enterprises in China by Foreign Enterprises or Individuals (“FIPE”).
The Measures allow foreign investors to act directly as partners of partnerships in China by providing that a new foreign-invested partnership enterprise (“FIPE”) may be established in China (a) by two or more foreign enterprises or individuals or (b) by a foreign enterprise or individual and a Chinese legal person (including a foreign invested enterprise), natural person or organisation. Most importantly, under the Measures, approval from the Ministry of Commerce (“MOFCOM”) is not required for the establishment of a FIPE.
Compliance with Chinese Partnership Law and foreign investment policies
A FIPE must comply with the provisions under the People’s Republic of China Partnership Enterprises Law, enacted in 2007 (“Partnership Law”), and, like other foreign-invested business entities in China, a FIPE must comply with other relevant laws and regulations, as well as with foreign investment policies such as the Guidance Catalogue for Foreign Investment in Industries.
Simplified Procedures
Whilst the establishment of a FIPE will not require full approval from MOFCOM, the partners are required to unanimously appoint a representative or jointly authorise an agent, who shall co-ordinate with the local administration for industry and commerce (“AIC”) on the behalf of partners as to the registration procedures. We understand that the documents to be provided to AIC will include at least the following: registration application, partnership agreement, identity certificates of the partners and other documents requested by the competent authorities.
Upon completion of the registration procedures, an applicant is required to file with the local commerce department (i.e. the local MOFCOM) a report containing the information that has been provided to AIC.
Capitalisation
The Measures permit the partners of a FIPE to contribute capital in freely convertible currency (foreign legal persons and individuals) or in lawfully obtained RMB (Chinese legal and natural persons and organisations). The Measures do not call for a minimum capitalisation requirement and do not address in-kind contributions to capital. Questions have been raised as to how this will be interpreted in practice. Given the foreign-exchange controls currently in place, could it really be the case that a FIPE could receive money from overseas to pay its operating expenses before generating any revenue?
Is this a cause for celebration?
For decades, MOFCOM has been the main approval authority for foreign-invested enterprises. Whilst the Measures specifically provide that an application for the establishment of a FIPE shall only be subject to registration with AIC, with a subsequent notification to MOFCOM, we question whether the procedures provided by the Measures are significantly lighter in practice. A FIPE is still subject to foreign-investment industrial policies, including the Foreign Investment Industry Catalogue, and it is likely that AIC will require evidence of compliance with foreign-investment industrial policies as part of the application process. Furthermore, commentators have expressed concern about whether AIC and MOC will both operate the same way in applying industrial policies to FIPE, and have speculated that this could trigger, through the back door, the involvement of MOFCOM in approving FIPEs.
As such, it is the view of AFP that it is too early to tell whether the Measures will significantly ease the documentary burden in relation to foreign investment into China. However, we will be following this new development with interest and will keep you up to date with any news.