Skip to main content
SpringerLink
Log in

The Use of FIPE as Business Organisation in China

  • Chapter
  • First Online:
China’s Foreign-Invested Limited Partnership Enterprise

Part of the book series: China-EU Law Series ((CELS,volume 7))

  • 233 Accesses

Abstract

This book also focuses on the practical use of the Foreign-Invested Partnership Enterprise (FIPE) as an investment vehicle. The role and practical relevance of partnership enterprises in China’s economy is examined. To understand the business conditions under which foreign investors operate, an analysis of the ownership structure of China’s economy is provided. A FIPE leaves a large degree of autonomy to investors in structuring an investment. Eight different options for structuring a FIPE as an investment vehicle for foreign investors are therefore outlined. The focus is laid on structuring options of the Foreign-Invested Limited Partnership Enterprise, including its use in the private equity and venture capital industry.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Haase (2014), p. 3.

  2. 2.

    Ibid, p. 5.

  3. 3.

    Ibid, p. 5.

  4. 4.

    Ibid, pp. 5–6.

  5. 5.

    Mueller-Thuns (2016), para. 1.9.

  6. 6.

    Fleischer and Wansleben (2017), p. 640.

  7. 7.

    Federal Statistical Office (2017).

  8. 8.

    Calculation by the author, based on data from Federal Statistical Office (2017).

  9. 9.

    Bromberg and Ribstein (1994b), pp. 1:11–1:12.

  10. 10.

    Bromberg and Ribstein (1994b), pp. 11:16–11:17.

  11. 11.

    Schaper (2013), p. 85.

  12. 12.

    Bromberg and Ribstein (1994b/2000), pp. 11:9–11:10.

  13. 13.

    Fleischer and Wansleben (2017), p. 641.

  14. 14.

    Schaper (2013), p. 89; Wu and Geu (2007–2008), p. 141.

  15. 15.

    Yu (1997), p. 52.

  16. 16.

    Shen (2015), p. 55.

  17. 17.

    Zhu (朱慈蕴) (2008), p. 80: Du (杜瑞孔) (2006), pp. 69, 70.

  18. 18.

    Kirby (1995), p. 58.

  19. 19.

    Ibid, p. 58.

  20. 20.

    Howson (2010), p. 361 fn. 195.

  21. 21.

    Zhu (朱慈蕴) (2008), p. 80.

  22. 22.

    Ibid, p. 80.

  23. 23.

    Lin (2011), p. 201.

  24. 24.

    Wang (王翔) (2006), item 3.

  25. 25.

    Lin (2013), p. 190.

  26. 26.

    Ibid, pp. 190–191.

  27. 27.

    Howson (2015), p. 397.

  28. 28.

    Ibid, pp. 397–398.

  29. 29.

    A World Bank Group Enterprise survey from 2012 differs strongly from these numbers, claiming that 30.3 per cent of all enterprises in China are organised in the form of an LPE, while only 3.4 per cent are formed as a limited liability company. In comparison, the percentage of LPEs for all countries is stated to be 7.1 per cent. This deviation is so significant that it obviously does not reflect the business reality in China. The deviation possibly relates to misinterpretations or translation errors of the underlying Chinese statistics. See World Bank Group (2012).

  30. 30.

    See Sect. 4.1.12.

  31. 31.

    Qiu (2014), p. 301.

  32. 32.

    National Bureau of Statistics of China (中华人民共和国国家统计局) (2019), Chapter 11–15.

  33. 33.

    National Bureau of Statistics of China (中华人民共和国国家统计局) (2019), Chapter 11–15.

  34. 34.

    Foreign Investment Department of the Ministry of Commerce (中华人民共和国商务部外国投资管理司) (2019). At the time of writing of this book, no statistic for the entire year 2019 has been published yet.

  35. 35.

    Calculation by the author, based on data from the National Bureau of Statistics of China (中华人民共和国国家统计局) (2019), Chapter 11–15.

  36. 36.

    See Sect. 5.3.3.

  37. 37.

    Davies et al. (2009), pp. 305, 306.

  38. 38.

    Armour et al. (2017b), p. 27.

  39. 39.

    Ibid, p. 25.

  40. 40.

    Armour et al. (2017a), p. 267.

  41. 41.

    Armour et al. (2017b), pp. 25–26.

  42. 42.

    Ibid, pp. 25–26.

  43. 43.

    Ibid, p. 26.

  44. 44.

    Ibid, p. 26.

  45. 45.

    Ibid, p. 26.

  46. 46.

    Armour et al. (2017a), p. 270.

  47. 47.

    Goetzmann and Köll (2005), p. 149.

  48. 48.

    Zhang (2011), p. 866.

  49. 49.

    Shen (2015), p. 199; Zhang (2015), p. 63; Lin (2013–2014), p. 230.

  50. 50.

    Goetzmann and Köll (2005), p. 149.

  51. 51.

    The Economist (2017).

  52. 52.

    Shen (2015), p. 199; Lin (2013–2014), p. 230.

  53. 53.

    Reuters (2015).

  54. 54.

    Zhang (2015), p. 63.

  55. 55.

    The Economist (2017).

  56. 56.

    Zhang (2017), p. 235.

  57. 57.

    Armour et al. (2017a), p. 271.

  58. 58.

    Ibid, p. 271.

  59. 59.

    Shen (2015), p. 199.

  60. 60.

    South China Morning Post (2017).

  61. 61.

    Zhang (2017), p. 235.

  62. 62.

    Shen (2015), p. 199.

  63. 63.

    Ibid, p. 199.

  64. 64.

    Reuters (2017).

  65. 65.

    Shen (2015), p. 199; Perkins (2005), p. 183.

  66. 66.

    Yu et al. (2012), p. 9.

  67. 67.

    Ribstein (1988), p. 866.

  68. 68.

    Raaijmakers (2004), pp. 408–409.

  69. 69.

    Mahony (2015), pp. 188–189.

  70. 70.

    For US Law: Bromberg and Ribstein (1994a), p. 1:9; for German law: Schäfer (2017), pp. 20–22.

  71. 71.

    Schäfer (2017), p. 21.

  72. 72.

    Ibid, p. 21.

  73. 73.

    For a comparison with the role of the limited partners, see Sect. 8.3.2.1.

  74. 74.

    Regarding the risk of piercing the corporate veil of a corporate general partner, see Sect. 8.2.2.3.

  75. 75.

    Art. 3 PEL. For further analysis, see Sect. 8.2.2.1.

  76. 76.

    Mahony (2015), p. 200.

  77. 77.

    Ibid, pp. 183–184.

  78. 78.

    Yu et al. (2012), pp. 9–10.

  79. 79.

    See detailed analysis in Sect. 8.2.2.

  80. 80.

    Wiedemann (2004), p. 842.

  81. 81.

    Freudenberg (2014), p. 207.

  82. 82.

    Ibid, p. 207.

  83. 83.

    Ibid, p. 207.

  84. 84.

    Ratigan (1983), p. 950.

  85. 85.

    Freudenberg (2014), pp. 207–208.

  86. 86.

    Wenzel (2016), para. 5.106–5.121.

  87. 87.

    Ibid, para. 5.106–5.121.

  88. 88.

    Instructive on the discussion under US law, Ratigan (1983), pp. 949–985; for the FILPE, see Sect. 8.3.2.2.

  89. 89.

    Instructive on China’s outbound investment regime, Wolff (ed) (2011).

  90. 90.

    Circular on the Administration of Foreign Exchange Involved in Offshore Investment, Financing and Round-Trip Investment Conducted by Domestic Residents Through Special Purpose Vehicles (境内居民通过境外特殊目的公司融资及返程投资外汇管理有关问题的通知), promulgated by the State Administration of Foreign Exchange on 4 July 2014 with effect as of the same day.

  91. 91.

    Art. 1 Para. 2 SAFE Circular 37.

  92. 92.

    Art. 3 SAFE Circular 37.

  93. 93.

    Teichmann (2014), p. 240.

  94. 94.

    Art. 1 EJV Law.

  95. 95.

    See Sect. 9.2.1.2.2.

  96. 96.

    See discussion in Sect. 4.1.4.6 fn. 277.

  97. 97.

    Freudenberg (2014), p. 208.

  98. 98.

    Schaper (2013), p. 91.

  99. 99.

    Freudenberg (2014), p. 208.

  100. 100.

    See for detailed references on the legal history of his investment structure in Germany, Lüke (2016), para. 2.464.

  101. 101.

    Lüke (2016), para. 2.464.

  102. 102.

    Ibid, para. 2.465.

  103. 103.

    Ibid, para. 2.465.

  104. 104.

    Ibid, para. 2.472.

  105. 105.

    Ibid, para. 2.472.

  106. 106.

    Ibid, paras. 2.473–2.483.

  107. 107.

    Ibid, paras. 2.473–2.483.

  108. 108.

    Ibid, paras. 2.473–2.483.

  109. 109.

    See analysis in Sect. 8.3.2.1.

  110. 110.

    Art. 12 Para. 2 No 3 and Art. 18 FIPE Provisions.

  111. 111.

    Administrative Measures for Outbound Investment (境外投资管理办法), promulgated by the Ministry of Commerce on 6 September 2014 with effect as of 6 October 2014.

  112. 112.

    See Sect. 4.1.3.2.

  113. 113.

    See Sect. 5.3.2.2.1.

  114. 114.

    See Sect. 4.2.4.1.

  115. 115.

    Art. 8 FIE Reinvestment Provisions.

  116. 116.

    Shen (2015), p. 56; Wang and Yong (2010), p. 16; for an overview of the development of China’s domestic Private Equity and Venture Capital Industry, see: Zhang (2017), pp. 235–237.

  117. 117.

    Zhang (2011), p. 844.

  118. 118.

    Lin (2011), p. 201; Zhang (2011), p. 844.

  119. 119.

    Lin (2017), pp. 162–163.

  120. 120.

    Zhang (2011), p. 883.

  121. 121.

    Zhang (2017), p. 235; Zhang (2015), p. 20; Zhang (2011), p. 841.

  122. 122.

    See Sect. 3.2.3.2.

  123. 123.

    Zhang and Du (2014), p. II-5.1.5.

  124. 124.

    Ibid, p. II-5.1.5-6.

  125. 125.

    Ibid, p. II-5.1.6.

  126. 126.

    Zhang (2011), p. 858.

  127. 127.

    Ibid, p. 858.

  128. 128.

    Ibid, p. 858.

  129. 129.

    Ibid, p. 858.

  130. 130.

    Wang and Yong (2010), pp. 15–16.

  131. 131.

    Zhang and Du (2014), p. II-5.1.5; Zhang (2011), p. 869; Liu (2008), p. 83.

  132. 132.

    Lin (2017), p. 184.

  133. 133.

    Weng and Xia (2007), p. 97.

  134. 134.

    Lin (2011), p. 201.

  135. 135.

    Ibid, p. 201.

  136. 136.

    Zhang (2011), pp. 874–875; Wang and Yong (2010), p. 16.

  137. 137.

    See the analysis in Sect. 4.2.4.1.

  138. 138.

    Art. 61 Para. 1 PEL. For an analysis of this limitation, see discussion in Sect. 9.2.1.2.1.

  139. 139.

    Zhang (2011), p. 877.

  140. 140.

    Ibid, p. 877.

  141. 141.

    Mahony (2015), pp. 232–233; Zhang and Du (2014), p. II-5.1.3; Zhang (2011), pp. 875–876.

  142. 142.

    Lin (forthcoming); Lin (2018), pp. 43–91.

References

  • Armour J, Enriques L, Pargendler M, Ringe W-G (2017a) Beyond the anatomy. In: Kraakman R et al (eds) The anatomy of corporate law, 3rd edn. Oxford University Press, Oxford, pp 267–272

    Chapter  Google Scholar 

  • Armour J, Hansmann H, Kraakman R, Pargendler M (2017b) What is corporate law? In: Kraakman R et al (eds) The anatomy of corporate law, 3rd edn. Oxford University Press, Oxford, pp 1–28

    Google Scholar 

  • Bromberg AR, Ribstein LE (1994a) Bromberg and Ribstein on partnership, vol 1 general partnership. Wolters Kluwer, Boston

    Google Scholar 

  • Bromberg AR, Ribstein LE (1994b) Bromberg and Ribstein on partnership, vol 3 limited partnership. Wolters Kluwer, Boston

    Google Scholar 

  • Davies P, Enriques L, Hertig G, Hopt K, Kraakman R (2009) Beyond the anatomy. In: Kraakman R et al (eds) The anatomy of corporate law, 2nd edn. Oxford University Press, Oxford, pp 305–315

    Google Scholar 

  • Du R (杜瑞孔) (2006) On the advantages of partnership enterprises over limited liability companies (论合伙企业相对有限责任公司的比较优势). Theoretical Observation (理论观察) 2006/6:69–70

    Google Scholar 

  • Federal Statistical Office (2017) Turnover Tax Statistic 2017 (Umsatzsteuerstatistik 2017). https://www.destatis.de/DE/Themen/Staat/Steuern/Umsatzsteuer/Tabellen/voranmeldungen-rechtsformen.html. Accessed 15 May 2020

  • Fleischer H, Wansleben T (2017) Die GmbH & Co. KG in den Auslandsrechten - Zirkulation eines gesellschaftsrechtlichen Regelungsmodells. GmbH-Rundschau 106:633–643

    Google Scholar 

  • Foreign Investment Department of the Ministry of Commerce (中华人民共和国商务部外国投资管理司) (2019) Statistics about utilisation of foreign investment in China from Jan to Nov 2019 (2019年1-11月利用外资统计简表). http://www.fdi.gov.cn/1800000121_49_5014_0_7.html. Accessed 15 May 2020

  • Freudenberg G (2014) Ausgewählte Rechtsfragen der GmbH & Co. KG. In: Dauner-Lieb B, Freudenberg G, Werner GW (eds) Festschrift für Mark K Binz, Familienunternehmen im Fokus von Wirtschaft und Wissenschaft. C. H. Beck, Munich, pp 207–214

    Google Scholar 

  • Goetzmann W, Köll E (2005) The history of corporate ownership in China: state patronage, company legislation, and the issue of control. In: Morck RK (ed) A history of corporate governance around the world. University of Chicago Press, Chicago, pp 149–181

    Google Scholar 

  • Haase F (2014) Introduction. In: Haase F (ed) Taxation of international partnerships – 15 years OECD partnership report: past, present and future. IBFD, Amsterdam, pp 3–11

    Google Scholar 

  • Howson NC (2010) Corporate law in the Shanghai People’s Courts, 1992-2008: judicial autonomy in a contemporary authoritarian state. East Asia Law Rev 5:303–442

    Google Scholar 

  • Howson NC (2015) Return of the prodigal form? Partnerships and partnership law in the People’s Republic of China. In: Hillman RW, Loewenstein MJ (eds) Research handbook on partnerships, LLCs and alternative forms of business organizations. Edward Elgar, Cheltenham, pp 390–411

    Chapter  Google Scholar 

  • Kirby WC (1995) China unincorporated: company law and business enterprise in twentieth-century China. J Asian Stud 54:43–63

    Article  Google Scholar 

  • Lin L (2011) The limited partner’s derivative action: problems and prospects in the private equity market of China. Hong Kong Law J 41:201–230

    Google Scholar 

  • Lin L (2013) The private equity limited partnership in China: a critical evaluation of active limited partners. J Corp Law Stud 13:185–217

    Article  Google Scholar 

  • Lin L (2013–2014) Regulating executive compensation in China: problems and solutions. J Law Commerce 32:207–254

    Article  Google Scholar 

  • Lin L (2017) Engineering a venture capital market: lessons from China. Columbia J Asian Law 30:160–220

    Google Scholar 

  • Lin L (2018) Private equity investor protection: conceptualizing the duties of general partners in China. Berkeley Bus Law J 15:43–91

    Google Scholar 

  • Lin L (forthcoming) The limited partnership in China, legal perspectives on venture capital and private equity. Springer, Berlin

    Google Scholar 

  • Liu C (2008) Chinese company and securities law: investment vehicles, mergers and acquisitions and corporate finance in China. Kluwer Law, Alphen aan den Rijn

    Google Scholar 

  • Lüke O (2016) Besondere Erscheinungsformen der GmbH & Co. KG. In: Mueller-Thuns T (ed) Handbuch GmbH & Co. KG: Gesellschaftsrecht – Steuerrecht, vol 21. Schmidt, Cologne, para 2.461–2.558

    Google Scholar 

  • Mahony T (2015) Foreign investment law in China: regulation, practice and context. Tsinghua University Press, Beijing

    Google Scholar 

  • Mueller-Thuns T (2016) Einleitung. In: Mueller-Thuns T (ed) Handbuch GmbH & Co. KG: Gesellschaftsrecht – Steuerrecht, vol 21. Schmidt, Cologne, para 1.1–1.46

    Google Scholar 

  • National Bureau of Statistics of China (中华人民共和国国家统计局) (2019) China Statistical Yearbook 2019 (中国统计年鉴2019). China Statistics Publishing House (中国统计出版社), Beijing, Chapter 11–15

    Google Scholar 

  • Perkins DH (2005) Comment to the history of corporate ownership in China. In: Morck RK (ed) A history of corporate governance around the world. University of Chicago Press, Chicago, pp 181–184

    Google Scholar 

  • Qiu D (2014) Permanent establishment: an evolving concept under China’s tax treaties (1983-2013). Br Tax Rev 2014:274–306

    Google Scholar 

  • Raaijmakers T (2004) The reform agenda for partnerships and closely held companies in the Netherlands and the European Union. In: McCahery JA, Raaijmakers T, Vermeulen EPM (eds) The governance of close corporations and partnerships: US and European perspectives. Oxford University Press, Oxford, pp 399–413

    Chapter  Google Scholar 

  • Ratigan JJ (1983) Piercing the veil of the corporate general partner in the hybrid limited partnership: a suggested remedy for inequitable conduct by limited partners. Suffolk Univ Law Rev 17:949–985

    Google Scholar 

  • Reuters (2015) Made in China: Beijing plans new wave of state firm consolidation. http://uk.reuters.com/article/uk-china-parliament-reform-idUKKBN0M70LL20150311. Accessed 15 May 2020

  • Reuters (2017) Exclusive: in China, the Party’s push for influence inside foreign firms stirs fears. https://www.reuters.com/article/us-china-congress-companies/exclusive-in-china-the-partys-push-for-influence-inside-foreign-firms-stirs-fears-idUSKCN1B40JU. Accessed 15 May 2020

  • Ribstein LE (1988) An applied theory of limited partnership. Emory Law J 37:835–895

    Google Scholar 

  • Schäfer C (2017) Gesellschaft. In: Säcker FJ et al (eds) Münchener Kommentar zum Bürgerlichen Gesetzbuch, vol 6, 7th edn. C. H. Beck, Munich, pp 3–667

    Google Scholar 

  • Schaper M (2013) Hybrid legal forms at the gates – the transition from combined legal forms to hybrid corporations and its consequences for creditor protection. Eur Company Financ Law Rev 10:75–112

    Article  Google Scholar 

  • Shen W (2015) Corporate law in China – structure, governance and regulation. Sweet&Maxwell, Hong Kong

    Google Scholar 

  • South China Morning Post (2017) Why economic reforms in China mean a bigger role for the state. http://www.scmpcom/print/comment/insight-opinion/article/2111993/why-economic-reforms-china-mean-bigger-role-state. Accessed 15 May 2020

  • Teichmann C (2014) Die Auslandsgesellschaft & Co. Zeitschrift für Unternehmens- und Gesellschaftsrecht 43:220–251

    Article  Google Scholar 

  • The Economist (2017) Unnatural selection – China’s state enterprises are not retreating but advancing. https://www.economist.com/news/leaders/21725295-bad-china-and-world-chinas-state-enterprises-are-not-retreating-advancing. Accessed 15 May 2020

  • Wang X (王翔) (2006) Introduction to the circumstances of the revisions of the partnership enterprise law (合伙企业法修改情况介绍). http://www.npc.gov.cn/npc/xinwen/lfgz/lfdt/2006-08/28/content_352015.htm. Accessed 15 May 2020

  • Wang A, Yong C (2010) Radical reform or unmet expectations? China Law Pract 24:15–17

    Google Scholar 

  • Weng J, Xia T (2007) Limited liability partnership: the best structure for funds? China Law Pract 21:97

    Google Scholar 

  • Wenzel J (2016) Rechtsverhältnisse der Gesellschaft zu Dritten. In: Mueller-Thuns T (ed) Handbuch GmbH & Co. KG: Gesellschaftsrecht – Steuerrecht, vol 21. Schmidt, Cologne, para 5.1–5.39

    Google Scholar 

  • Wiedemann H (2004) Gesellschaftsrecht – Ein Lehrbuch des Unternehmens- und Verbandsrechts, Band II, Recht der Personengesellschaften. C. H. Beck, Munich

    Google Scholar 

  • Wolff L-C (ed) (2011) China outbound investments – a guide to law and practice. CCH, Hong Kong

    Google Scholar 

  • World Bank Group (2012) Enterprise Survey 2012. http://www.enterprisesurveys.org/data/exploreeconomies/2012/china#firm-characteristics. Accessed 15 May 2020

  • Wu Y, Geu TE (2007–2008) The new PRC limited partnership enterprise law and the limited partnership law of the United States: a selective analytical comparison. UCLA Pac Basin Law J 25:133–178

    Google Scholar 

  • Yu G (1997) The emerging framework of China’s business organizations law. Transnatl Lawyer 10:39–76

    Google Scholar 

  • Yu D, Feng S, Wei J (2012) FIPs as the new investment vehicle. In: Tring D, Mok S (eds) The legal guide to FDI in China. China Law & Practice, Hong Kong, pp 9–12

    Google Scholar 

  • Zhang LZ (2011) The legal environment for foreign private equity firms in China. Fordham J Corp Financ Law 16:839–889

    Google Scholar 

  • Zhang L (2015) China’s venture capital market: current legal problems and prospective reforms. Chandos Publishing, Amsterdam

    Google Scholar 

  • Zhang C (2017) The distorted governance model of venture capital limited partnerships in China: a political perspective. Bus Law Rev 38:234–240

    Google Scholar 

  • Zhang Y, Du A (2014) Private equity funds in China. In: Moser MJ, Yu F (eds) Doing business in China, vol 1. Juris Publishing, Huntington, p II-5.1.2

    Google Scholar 

  • Zhu C (朱慈蕴) (2008) The problem resulting from a corporation participating in a partnership as a general partner (公司作为普通合伙人投资合伙企业引发的法律思考). Mod Law Sci (现代法学) 30/5:77–85

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Hamburg, Germany

    Stephan Kuntner

Authors
  1. Stephan Kuntner
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 2021 The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Kuntner, S. (2021). The Use of FIPE as Business Organisation in China. In: China’s Foreign-Invested Limited Partnership Enterprise. China-EU Law Series, vol 7. Springer, Cham. https://doi.org/10.1007/978-3-030-54181-1_5

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-54181-1_5

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-54180-4

  • Online ISBN: 978-3-030-54181-1

  • eBook Packages: Law and CriminologyLaw and Criminology (R0)

Publish with us

Policies and ethics

Search

Navigation