We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Kicking off 2011 with a new regulatory breakthrough for RMB
funds, the Shanghai Municipal Financial Services Office released
the long-awaited Implementation Measures on Pilot Program of
Foreign-invested Equity Investment Enterprises in Shanghai
(the "Pilot Measures"), officially dated
December 30, 2010. The Pilot Measures is a product of long and
intensive coordination by the Shanghai Municipal Financial Services
Office with the Municipal Commission of Commerce, the Municipal
Administration of Industry and Commerce and other key authorities
such as the Shanghai State Administration of Foreign Exchange.
Shanghai is now the first city in the nation to create a unified
authority to specialize in and handle emerging operational issues
for RMB funds on this scale. This authority is called the Joint
Conference for Pilot Program of Equity-Investment Foreign Invested
Enterprises and includes all of the regulatory authorities
necessary to facilitate the operations of RMB fund GPs, Managers,
and Funds in Shanghai. It is expected that this "one-stop
shopping" Joint Conference for RMB funds will rival the level
of services and solution development available under all other RMB
fund regimes currently in existence.
The Pilot Measures introduce implementation provisions for three
types of RMB private equity fund entities: PE Manager FIEs,
Equity-Investment FIEs, and Pilot Equity-Investment FIEs. Each
entity may be established in the form of a partnership enterprise
and the PE Manager FIE may also be established in the form of a
company.
The PE Manager FIE represents a significant improvement over the
existing rules for fund management vehicles in Shanghai because of
an express ability to serve as the GP of a "pure" RMB
Fund and invest in such Fund without changing the Fund's nature
in regard to foreign-investment limitations. This means wholly
foreign owned GPs are allowed to invest up to 5% in an onshore fund
and that fund can invest in industries restricted from foreign
investment as well as invest without approvals. The
Equity-Investment FIE represents the first locally sanctioned RMB
Fund with foreign investment that sheds all of the restrictions
imposed on so-called FIVCIEs with respect to scope of investment
industry and approval procedures. The Pilot Equity-Investment FIEs
go even further beyond this step but are only available to certain
qualified sovereign wealth funds, pension funds, endowment funds,
charitable funds, funds of funds (FOFs), insurance companies,
banks, securities companies and other foreign institutional
investors approved by the Joint Conference. Foreign exchange issues
and deployment for investments by Pilot Equity-Investment FIEs are
addressed in the context of a newly introduced custodian bank
framework. The Pilot Measures set out a number of additional
operational details and will be effective by February 1, 2011.
The original Chinese version will be released early next
week.
O'Melveny & Myers LLP routinely provides
advice to clients on complex transactions in which these issues may
arise, including finance, mergers and acquisitions, and licensing
arrangements. If you have any questions about the operation of the
applicable statutory provisions or the case law interpreting these
provisions, please contact any of the attorneys listed on this
alert.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The "variable interest entity" structure (the "VIE Structure") has been the investment structure of choice for foreign investors to navigate through the grey areas of PRC law on foreign direct investment ("FDI") for over a decade.
In a typical case of nominee shareholder arrangements, in 2001, a foreigner provided capital for an investment in the name of a Chinese individual, but on behalf of the foreigner. The final purpose of this specific investment was to acquire a second domestic company in an industry restricted to foreign investment. When in 2009 the parties came into conflict on the company’s operations, the foreigner filed two litigations in court to confirm his rights as a shareholder of the first company, and f
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
