Foreign-invested partnerships: challenges and opportunities

Article 108 of the PRC Partnership Law laid the legal foundation for the creation of a new form of foreign-invested enterprise, the foreign-invested partnership. The State Council Establishment of Partnership Enterprises in China by Foreign Enterprises and Individuals Administrative Measures (Measures) and the State Council Administration of the Registration of Foreign-Invested Partnerships Regulations (Regulations), both of which entered into effect on 1 March 2010, have opened the way for the establishment of foreign-invested partnerships.

New features, new opportunities

The Measures and Regulations contain new provisions that differ from those of existing foreign investment laws and that are particular to partnerships.

Chinese natural persons can enter into partnerships with foreign businesses. Under current foreign investment laws, Chinese natural persons are forbidden from investing in Sino-foreign equity and cooperative joint ventures. In contrast, the Measures and the Regulations permit Chinese natural persons to establish partnerships jointly with foreign enterprises or individuals.

Approval of the Ministry of Commerce (MOFCOM) is not required. The Measures and the Regulations permit partners to apply directly to the relevant Administration for Industry and Commerce (AIC) for the registration of their partnership, following which the AIC will report this to the competent branch of MOFCOM at the same level. The prior approval of the competent MOFCOM authority is not required.

Kevin Xu is a partner at Martin Hu & Partners.