For the record, PE funds should ensure they carry out proper filing

TheNotice on Promoting the Compliant Development of Equity Investment Enterprises, issued by the National Development and Reform Commission (NDRC) on 23 November 2011, specifies that equity investment enterprises (including funds of funds) that invest in the equity of enterprises that are not publicly traded are required to carry out filing procedures, either with the NDRC or the local government.

The notice specifies that an equity investment enterprise is required to apply for filing within one month after business registration, and enterprises established before the implementation of the notice are required to carry out filing within three months after the issuance of the notice, with the following exceptions: venture capital enterprises; and equity investment enterprises with a capital contribution that was entirely made, and that were established, by a single entity or natural person, or that were jointly invested in and established by a single entity together with its wholly owned subsidiaries, or jointly invested in and established by several wholly owned subsidiaries of one entity.

Subsequently, various regions have issued complementary policies, clarifying local filing requirements. For example, Tianjin subjects existing equity investment enterprises to differential filing procedures. Those that have paid-in capital of not less than RMB20 million (US$3.2 million) are required to demonstrate that their limited partner’s capital contribution is not less than RMB1 million. Those that have already completed investment in a project are not required to show proof of their paid-in capital, but they are nonetheless required to show that their limited partners’ capital contribution is not less than RMB1 million. Other existing equity investment enterprises, if their operations are non-compliant, are required to achieve compliance within a specified period of time.

Zhao Menghan is a partner at Zhonglun W&D Law Firm in Beijing and the associate director of the firm’s private equity investment fund practice; Liang Xiaoning is a lawyer at Zhonglun W&D in Beijing