CHINA Law and Practice Contributed by: Zhen Chen, Candy Tang, Flora Qian and Yan Zhao, Fangda Partners
required to be close-ended, and primarily opt for the limited partnership mode, taking into account a full range of factors, including tax efficiency, flexible gov - ernance and operations, fewer challenges in portfolio companies’ A share IPO, etc. Corporate funds are less common and are usually seen in corporate venture capital (CVC), governmental investment platforms and funds sponsored by state-owned enterprises. 2.2 Regulatory Regime for Funds All types of private funds established in China must be filed with AMAC by their fund managers within 20 business days after completion of the initial closing. For private funds structured as partnerships or cor - porations, and subject to local pre-approval of their proposed name and business scope (which must include investment), registration with the AMR and subsequent tax registration are required. Depending on local practice which varies jurisdiction by jurisdic - tion, it may take several weeks or even months for a partnership/corporate fund entity to obtain its busi - ness licence. If a QFLP/QDLP/QDIE pilot quota is involved, addi - tional application procedures will be required, initially with the local competent joint committees led by local FSOs in accordance with local pilot rules which vary jurisdiction by jurisdiction. If the fund involves insurance investor(s) or other reg - ulated investors such as government-guided funds, further specific compliance oversight and regulatory approvals (or in the form of no-objection letters) may apply during the whole process from pre-investment due diligence to post-investment execution and capi - tal contribution. 2.3 Disclosure/Reporting Requirements During the fundraising phase, the preparation and execution of applicable fund subscription documents (including private placement memorandums or other prospectuses, investors’ information forms and suit - ability questionnaires, risk disclosure statements, etc) must comply with a series of regulatory require - ments. The specific disclosure content includes, but is not limited to, information on the fund manager and management team, investment scope, invest -
ment strategy, investment structure, fund structure, custody arrangements, related fees, distribution prin - ciples, fund exit mechanisms, and risk factors such as investment risks, operational risks, and liquidity risks. These fund subscription documents will be submitted to AMAC for review and record at the time of the fund filing application, but will not be publicly disclosed. Generally, upon a fund’s closing and filing with AMAC, its fund manager is obliged to do periodic and ad hoc disclosure and reporting to the investors and AMAC in accordance with relevant regulatory rules and fund contracts. While these periodic and interim reports are not publicly accessible to non-investors, AMAC will have them archived and red-flag any delayed disclo - sure or submission on its public disclosure platform. Funds accepting insurance capital should addition - ally submit initial investment reports, and subsequent quarterly and annual reports, reports on important matters and material changes, and investment liqui - dation reports via the Insurance Asset Management Association of China (IAMAC) system to NFRA. QFLP/QDLP/QDIE pilot funds should fulfil extra reporting obligations to local authorities depending on specific requirements as stipulated in local QFLP/ QDLP/QDIE rules and following local practices. Added to this, a fund in the form of a partnership or corporation will register its basic information, includ - ing its name, business scope, registered address, stakeholder(s) and senior management, etc, with the local AMR. In case of any update of such basic infor - mation, amendment registration with AMR should be made. Basic information of the fund and the fund manager registered with the AMR will be publicly available, while basic information of the fund and the fund manager as regulated entities will be published on AMAC’s website. 2.4 Tax Regime for Funds Generally speaking, private funds are subject to dif - ferent tax policies applicable to their different legal organisational structures, unless there exist any spe - cific tax rules because of the nature of particular funds – eg, venture capital funds.
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