More relaxation for renminbi funds
A recent circular relaxes approval authority for foreign-invested venture capital funds. It is the latest in a line of regulatory changes which may create a useful foreign exchange control niche for these enterprises. By Richard Guo, Stephanie Zhu and Flora Qian, Fangda Partners.
Issue: May 2009
Keywords (click to search):
FIVCIE
venture capital funds
foreign exchange control
approval authority
Mofcom
private equity
RMB Fund
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Ever since the introduction of the concept of a foreign-invested venture capital investment enterprise (FIVCIE) in 2001 (and again in 2003), this form of organisation has become the most popular way for foreign sponsors wishing to set up an onshore vehicle that is denominated in renminbi and make private equity investments in China. These vehicles are known as RMB Funds.
The 2003 regulation that endorses FIVCIEs is the Administration of Foreign-invested Venture Capital Investment Enterprises Provisions (外商投资创业投资企业管理规定) – the FIVCIE Rules – which were promulgated by five government agencies, including the Ministry of Commerce (Mofcom) and the Ministry of Science and Technology (Most).
As of press date, China still does not have a national law that allows foreign investors to form and invest in a domestic limited partnership. The FIVCIE, if properly structured and documented, is akin to a limited partnership (for more on this, see The...
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