资源描述
CHINA LAW AND PRACTICE: p.2 Contributed by Han Kun Law Offices The Law it is an affiliate member of AMAC and is one of the law firms recommend- ed for private equity funds as published on the organisa- tions website. Author e van Zhang Ping is a partner at Han Kun Law Offices. He has more than ten years of working experience in the formation, operation and investment of domestic and offshore investment funds. He was one of the first batch of PRC lawyers who started to practice in this area. Evan Zhang Pings key practice areas are: domestic and offshore investment fund formation; and domestic and offshore VC/PE financing and investment. He is a member of the PRC Bar and has written many articles related to investment funds, published in the Wechat public account of Han Kun Law Offices. 1. Fund Formation 1.1 Formation of Investment Funds In the Peoples Republic of China (the PRC, which, for pur- poses of this chapter, excludes Hong Kong SAR, Macau SAR and Taiwan), investment fund managers and advisers are generally subject to strict regulatory registration require- ments. In addition, investment funds are subject to filing requirements and ongoing supervision. As a result, the PRC is not a popular destination for international advisers and managers to form investment funds, unless capital is to be raised within the PRC and/or invested in portfolios estab- lished in the PRC. In the PRC, investment funds are generally classified as pub- licly offered funds and private investment funds. Publicly offered funds may only invest in securities. Private invest- ment funds are further classified into private securities funds, private equity funds, private venture capital funds (together with private equity funds, PE/VC funds) and other types of private investment funds. According to publications of the Asset Management Asso- ciation of China (AMAC), which is the self-regulatory organisation for investment funds in the PRC, (i) as of 30 November 2018, there were 24,418 private fund managers registered with the AMAC and 75,220 private investment funds filed with the AMAC, including 36,053 private securi- ties funds, 27,115 private equity funds, 6,442 private venture capital funds and 5,610 private investment funds of other types (such as commodity sector funds); and (ii) as of 30 September 2018, there were 119 management companies of public offered funds and 5,459 publicly offered funds. 1.2 r aising Capital from Investors Most PRC investment fund managers raise capital from domestic investors because generally it is impracticable for investment funds formed in the PRC to accept foreign inves- tors, unless approved by the competent authorities under limited circumstances introduced below. For PE/VC funds, in a few pilot cities, such as Beijing, Shanghai, Shenzhen, Tianjin and Chongqing, registered fund managers may apply to the local financial supervision and administration authorities to set up foreign-invested equity investment partnerships under local qualified foreign limited partners (QFLP) pilot policies. QFLP funds are pri- vate equity funds permitted to accept foreign investors and their contributions in foreign currency. As these policies are intended to attract high-quality foreign investors, foreign investors are subject to many eligibility requirements. Sig- nificant regulatory requirements also exist for QFLP fund managers, including high registered capital and manage- ment personnel experience requirements and requirements CHINA LAw ANd Pr ACtICe 4 for the QFLP funds themselves, such as fund size and mini- mum investor commitments. Even if an applicant meets all of the requirements, the final decision on QFLP fund forma- tion is still subject to comprehensive consideration by the local authorities. Foreign investors may indirectly invest in publicly offered funds in the PRC through the Pilot Programme of Securi- ties Investment in China by Qualified Foreign Institutional Investors or the Pilot Programme of Securities Investment in China by RMB Qualified Foreign Institutional Investors, approved by both the China Securities Regulatory Com- mission (CSRC) and the State Administration of Foreign Exchange. 1.3 Common Process for Setting Up Investment Funds The common process for setting up a private investment fund is as follows. Establish a private fund manager. Before setting up any private investment fund in the PRC, a qualified private fund manager must first be set up and registered with the AMAC. Identify offering targets. In order to avoid being consid- ered a public offering, fund managers need to determine the ability of prospective subscribers to identify and tolerate risk through a questionnaire survey or other methods prior to promoting a specific fund. Suitable investors will need to confirm their qualified investor status in writing. Make risk assessments and match investors with suitable funds. The fund-raisers will estimate the risk level of the private investment funds and promote to subscribers only those funds that match their ability to identify and tolerate risk. Disclose risk factors of the funds to subscribers. Verify whether the subscribers are qualified investors. The fund-raisers will require subscribers to provide necessary proof of their qualified investor status, such as proof of assets or income. Execute fund subscription documents. Undergo a cooling-off period. The fund contract will provide for a cooling-off period of no fewer than 24 hours for investors (except for certain exempt persons). The cooling-off period for private securities funds com- mences after the fund contract has been signed and the subscriber has made payments for the subscribed funds. The cooling-off period for other private investment funds can begin as agreed upon by the fund participants. Dur- ing the cooling-off period, the subscriber may revoke the subscription and the fund-raisers are not permitted to contact the subscriber. Make call-back confirmations with the subscribers. Upon expiry of the cooling-off period, fund-raisers may follow up with the subscribers to confirm whether the subscrib- ers wish to revoke the subscription. This step is not cur- rently compulsory. The private fund manager submits a fund filing to the AMAC. Subscription documents for private investment funds usu- ally consist of investor information tables, a risk tolerance assessment questionnaire, risk disclosures, a qualified inves- tor status investigation questionnaire, capital subscription letters, tax residency statement documents, as well as a fund contract. The common process for setting up a publicly offered fund is relatively simpler, including: apply to establish a publicly offered fund manager; fund-raising registration with the CSRC; risk assessment and matching investors with suitable funds; execution of fund subscription documents; capital verification and fund record-filing; and public announcements made by the fund manager on the day subsequent to the receipt of the CSRCs confirmation documents. Subscription documents for publicly offered funds mainly consist of investor information tables, a risk tolerance assess- ment questionnaire, fund risk disclosure statements, a pro- spectus, tax residency statement documents, as well as a fund contract. 1.4 r egulation of Fund Structures Investment funds formed in the PRC are, in practice, required to be managed within the PRC and have a place of business in the PRC. Investment fund managers must be established in the PRC and registered with the AMAC or the CSRC. During the investment fund manager registra- tion process, applicants need to confirm and certify that they have an actual place of business for daily operations. Although not explicitly stated in the relevant regulations, the actual place of business for investment fund managers needs to be situated within the PRC in practice. 1.5 Limited Liability Investors generally enjoy limited liability protection in funds organised in typical legal forms. In the PRC, investment funds are usually structured as limited partnerships, con- tractual funds, or as companies. Limited partners may avoid liability for the debts and obli- gations of the limited partnership in excess of their capital commitments. To enjoy this benefit, the limited partners may neither manage the partnership affairs nor represent the limited partnership with third parties. Where a third party believes a limited partner to be the general partner of the limited partnership and conducts business transac-LAw ANd Pr ACtICe CHINA 5 tions on that basis, the limited partner may be deemed to be a general partner and lose its limited liability status with respect to these transactions. In the case of contractual funds, the funds debts are to be repaid with fund assets only, and the owners of fund inter- ests are liable for the funds debts only to the extent of their respective capital contributions, unless otherwise agreed in the fund contract. With respect to company funds, under normal circumstanc- es, investor liability is limited to each investors subscription commitment to the company. Investors may not abuse their shareholder rights and limited liability protection in a man- ner which violates the Company Law of the PRC (2018); otherwise, an investor may be subject to extra damage com- pensation liabilities and/or joint liabilities for the company s debts. 1.6 Common t ax r egimes A private investment fund in the form of a limited partner- ship or contractual fund will be treated as fiscally transparent for income tax purposes. In other words, the investors are liable to pay taxes on income realised from a limited part- nership or contractual fund, not the fund itself. Where an investor is also fiscally transparent, the income tax obliga- tions will flow upwards. With respect to company funds, a 25% company income tax rate will apply to net income. Company fund investors are also generally subject to income taxes on their share of any distributions received from the fund. Certain excep- tions exist, for example equity investment income such as dividends, between qualified resident enterprises and are considered income tax exempt. Private investment funds and/or their managers are also liable for value-added tax, when a private investment fund recognises gains through financial product transactions, such as the sale of stock in a listed company. For contractual funds, value-added taxes are paid by the funds management company. It remains unclear for limited partnership funds and company funds whether the fund itself or its managers are liable for value-added taxes with respect to the funds gains from financial product transactions. 1.7 Investment Sponsors With respect to PE/VC fund establishment and investment, the PRC is not a popular jurisdiction for investment spon- sors from other jurisdictions or in other particular jurisdic- tions or regions because of the countrys foreign exchange controls and restrictions on both inbound and outbound investment. The PRC also does not present any particular tax advantages compared to other jurisdictions. 1.8 disclosure r equirements Under PRC regulations, private investment funds are all sub- ject to ongoing disclosure obligations to investors, including fund-raising information disclosures, fund operation infor- mation and interim disclosures. False records, misleading statements or material omissions are strictly prohibited at every disclosure stage. As for fund-raising information, a private placement memo- randum (PPM) is required to be provided to targeted inves- tors and submitted to the AMAC as a filing document. To protect investors rights to understand operation of the pri- vate investment fund and related risks, certain content must be included in the PPM, such as basic information of the fund and its manager, key terms of the fund contract and risk disclosures. In the terms of fund operation information, the AMAC has established disclosure guidelines to provide mandatory requirements for the content and frequency of information disclosures. The frequency of mandatory disclosure require- ments differs substantially for different private investment fund types. Private securities funds are required to at least provide investors with monthly reports containing the unit net value and basic fund information, quarterly reports to update more information associated with portfolio securi- ties, and annual reports which generally include detailed investment and fund financial information. However, PE/ VC funds are only mandatorily required to provide investors with semi-annual and annual reports to disclose the latest financial and/or investment information. When specified events occur which may have a significant impact on the rights and interests of investors, interim dis- closures are required to be timely provided to the investors in accordance with the fund contract. Publicly offered funds, which are more strictly regulated, must fulfil more disclosure obligations than private invest- ment funds. For instance, a draft prospectus is required to be submitted to the CSRC as one of the fund registration materials and a final prospectus is required to be published at least three days before the offering. 1.9 Legal Forms Private investment funds typically take the form of limited partnerships or contractual funds. PE/VC funds generally prefer limited partnerships, while contractual funds are typi- cally used to form a private securities fund. Both limited partnerships and contractual funds are fiscally transparent and are not themselves subject to income taxes. However, several key differences between these two forms cause there to be a distinct preference for different fund types. Private investment funds can also legally take the form of a com- pany, but, in practice, very few private equity funds take the
展开阅读全文