On 1 March 2018, China’s National Development and Reform Commission (NDRC) released its Administrative Measures for Outbound Investments by Enterprises, which provided new rules for outbound direct investment (ODI) for the Belt and Road Initiative (BRI). Chinese-controlled offshore private equity funds have been brought within the purview of state control. It is worth considering what advantages onshore Chinese managers can attain with the structuring choices before them.
Managing Partner
Harneys
The initial decision is whether to proceed by using an onshore (i.e. domestic) company or an offshore company. There are several reasons to prefer the use of an offshore company to undertake ODI, including: (1) the ability to more easily partner with a foreign party, which is likely to be advisable or even necessary in many BRI jurisdictions; (2) the ease of financing through an offshore company; (3) tax advantages; and (4) flexibility in amending transaction terms, making tactical changes as the investment proceeds.
The follow-on decision is choosing the offshore jurisdiction. Some jurisdictions, such as Labuan, Samoa, Marshall Islands or Seychelles, promise a low cost of incorporation, but lack an entire ecosystem of advisers (such as accountants and lawyers) who ensure the day-to-day running of corporate matters, as have, for example, the BVI, Cayman Islands and Cyprus. Not all such jurisdictions are accepted for listing vehicles on stock exchanges, if that turns out to be the preferred choice for exiting an investment. And the companies law in many such jurisdictions is either not modern, or is not periodically updated to respond to the needs of investors and financiers. Choosing such an offshore jurisdiction on the basis of initial incorporation costs alone can be “penny wise and pound foolish”.
You must be a
subscribersubscribersubscribersubscriber
to read this content, please
subscribesubscribesubscribesubscribe
today.
For group subscribers, please click here to access.
Interested in group subscription? Please contact us.
你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章，欢迎成为我们的订阅会员成为我们的订阅会员。
Kristy Calvert is the managing partner of the Shanghai office of Harneys. She can be contacted on +86 21 6126 9850 or by email at kristy.calvert@harneys.com
David Meredith is a corporate partner in the Shanghai office of Harneys. He can be contacted on +86 21 6126 9850 or by email at david.meredith@harneys.com
