CHINA Law and Practice Contributed by: Alan Du and Yiwei Shi, King & Wood Mallesons
2.1.2 Common Process for Setting Up Investment Funds Establishing a Legal Entity and Registering It With the AMAC as a Private Fund Manager The form of a legal entity as a limited company or limited partnership must first be established. The name of such entity must include “private fund”, “private fund management” or “venture capital investment”, and the business scope of such entity must include “private funds man - agement”, “private securities investment funds management”, “private equity funds manage - ment” or “venture capital funds management” and other words reflecting the characteristics of the private equity fund it intends to manage. The timeline depends on the location where the entity is established, and may vary from one month to six months, or even longer. Some local governments set high standards for accepting the establishment of such entities, which makes it extremely difficult to complete such establish - ment. The entity should apply to the AMAC for registration as a private fund manager within 12 months from the date of establishment, except in cases where registration needs to be deferred due to changes in policies of the relevant state departments, etc. To register the legal entity with the AMAC as a fund manager, a legal opinion must be issued by a qualified PRC law firm on whether the applicant has fulfilled the AMAC’s requirements regarding the applicant’s: • name; • business scope; • number of employees; • capital contributions; and • relevant investment experience of its officers, etc. It usually takes three to four months to com - plete registration with the AMAC, but there is no
guarantee of this timeframe. The AMAC retains much discretion, and an applicant satisfying all the written requirements may still fail to com - plete registration due to inconsistency with the AMAC’s internal principles or otherwise. Establishing a Fund Vehicle For private equity funds, the fund vehicle, usually in the form of a limited partnership with a busi - ness scope containing equity investment, may be established before the first closing of the fund, so that the fund vehicle may admit investors upon first closing. Again, the timeline depends on the location where the entity is established, and may vary from one month to six months, or even longer. Some local governments set high standards for accepting the establishment of such fund vehicles, which makes it extremely difficult to complete such establishment. Fundraising The timeline for the fundraising process depends on various commercial factors, and is subject to various requirements regarding marketing of the fund, risk disclosure, verification of Qualified Investors, etc. Fund-Filing With the AMAC After the first closing and first instalment of the capital contribution, the fund is filed with the AMAC by the fund manager, and the process may take one to two months. 2.1.3 Limited Liability Regarding the debt of private funds, investors shall generally be protected by limited liability, as follows. Limited Partnership Funds Limited partners shall be liable for the debt of the limited partnership fund to the extent of
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