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

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Abstract

The first core element of a standard corporate form is legal personality. An analysis is performed on whether the legal framework of the Foreign-Invested Limited Partnership Enterprise (FILPE) with a corporate general partner provides the three types of rules which are necessary to establish legal personality. Entity shielding describes rules which separate the assets of the FILPE from the assets of the owners of the FILPE, and protect the FILPE’s assets from the owner’s personal creditors. This includes an analysis of the legal nature and asset ownership of the FILPE as well as of the nature of a partner’s ownership interest in the FILPE. Delegated management requires rules clarifying to third parties which individuals have authority to buy and sell assets in the name of the FILPE and to enter into contracts bonded by those assets. The third type of rules necessary for a FILPE to serve effectively as a contracting party, must specify the procedures by which the FILPE and its counterparties can bring lawsuits on the contracts entered into in the name of the FILPE.

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Notes

  1. 1.

    Armour et al. (2017), p. 5.

  2. 2.

    ibid, p. 5.

  3. 3.

    ibid, p. 5.

  4. 4.

    ibid, p. 8.

  5. 5.

    ibid, p. 8.

  6. 6.

    ibid, p. 8.

  7. 7.

    ibid, p. 8. See also, Windbichler (2014), pp. 121–122.

  8. 8.

    Armour et al. (2017), p. 9.

  9. 9.

    The term ‘owner’ is used rather loosely in this book, referring to all of these persons: the partners in a general partnership, as well as the limited partners in a limited partnership, the shareholders of a business corporation, and the members of a cooperative, the beneficial owners of a private trust, the beneficiaries of a non-profit corporation, and the residents of a municipal corporation; Hansmann and Kraakman (2000), p. 392.

  10. 10.

    Armour et al. (2017), pp. 7–8; Skeel (2003–2004), p. 1528.

  11. 11.

    Armour et al. (2017), p. 7.

  12. 12.

    Skeel (2003–2004), p. 1526.

  13. 13.

    ibid, p. 1526.

  14. 14.

    Armour et al. (2017), pp. 5–6.

  15. 15.

    ibid, pp. 5–6.

  16. 16.

    ibid, p. 6.

  17. 17.

    ibid, p. 6.

  18. 18.

    ibid, p. 6.

  19. 19.

    ibid, p. 6.

  20. 20.

    ibid, p. 6.

  21. 21.

    ibid, p. 9.

  22. 22.

    ibid, p. 9.

  23. 23.

    Lin (2013), p. 219.

  24. 24.

    ibid, p. 219.

  25. 25.

    ibid, p. 244.

  26. 26.

    ibid, p. 244.

  27. 27.

    ibid, p. 249.

  28. 28.

    ibid, p. 249.

  29. 29.

    This term was used in Hansmann and Kraakman (2000), pp. 387–440, which explores the centrality of entity shielding to organisational law; Armour et al. (2017), p. 6 fn. 13.

  30. 30.

    Armour et al. (2017), p. 6.

  31. 31.

    ibid, p. 6.

  32. 32.

    Hansmann and Kraakman (2000), p. 392.

  33. 33.

    ibid, p. 393.

  34. 34.

    ibid, p. 393.

  35. 35.

    ibid, p. 394.

  36. 36.

    Hansmann et al. (2005), p. 11.

  37. 37.

    Skeel (2003–2004), p. 1528.

  38. 38.

    DeMott (2004), p. 404.

  39. 39.

    DeMott (2004), p. 404.

  40. 40.

    Taking the US partnership law as example, the death of the first drafter of the Uniform Partnership Act (see Sect. 4.2.2.2 fn. 663) lead to a change from the entity approach to the aggregate approach, initiated by his successor. See DeMott (2004), p. 278.

  41. 41.

    Haase (2014), pp. 3, 6. For a full account of the development of the Gesamthand in Germany, see Schmidt (2002), pp. 196–206.

  42. 42.

    Schmidt (2002), pp. 196–206.

  43. 43.

    Haase (2014), pp. 3, 6.

  44. 44.

    Schmidt (2002), pp. 181–182.

  45. 45.

    ibid, pp. 181–182.

  46. 46.

    ibid, p. 182.

  47. 47.

    ibid, p. 1363.

  48. 48.

    ibid, pp. 203–206.

  49. 49.

    Comment to Section 201 (a) RUPA; for a detailed overview with further references see: Bromberg and Ribstein (1994a), pp. 1:28–1:33; Bromberg and Ribstein (1994b/2001), pp. 11:31–11:41.

  50. 50.

    Uniform Partnership Act, promulgated by the National Conference of Commissioners on Uniform State Laws in 1914, subsequently revised and amended multiple times until it has been replaced in 1997 by the Revised Uniform Partnership Act.

  51. 51.

    Comment to Section 201 (a) RUPA; Wu and Geu (2007–2008), p. 145. An analysis of different topics is provided in Bromberg and Ribstein (1994a), pp. 1:33–1:61.

  52. 52.

    Bromberg and Ribstein (1994b/2001), pp. 11:31–11:32.

  53. 53.

    Section 110 (a) ULPA, and with similar wording for the general partnership, Section 201 (a) RUPA.

  54. 54.

    Comment to Section 201 (a) RUPA.

  55. 55.

    Section 203 RUPA.

  56. 56.

    Exemplary, see Section 406(b)(3) ULPA with a default unanimous consent requirement for the transfer of the limited partnership’s property outside the regular course of business.

  57. 57.

    Raaijmakers (2004), p. 404 fn. 3.

  58. 58.

    Art. 2 GPCL.

  59. 59.

    Arts. 30-35 GPCL. Regarding the nature of the Individual Partnership, see Sect. 4.2.1.2.

  60. 60.

    Art. 37 No 4 GPCL / Art. 60 GRCL.

  61. 61.

    Art. 2 EJV Implementing Regulations; Art. 14 CJV Implementing Regulations; Art. 8 WFOE Law; Art. 3 Company Law.

  62. 62.

    Art. 2 Para. 2 PEL. For a detailed analysis, see Sect. 8.2.

  63. 63.

    Howson (2015), p. 401; Chen (2014), pp. 25, 68; Lu (吕美昂) (2011), p. 81; Epstein and Shen (2009), p. I-6.1.38.

  64. 64.

    Li (李飞) (ed) (2006), p. 12.

  65. 65.

    An equivalent regulation is stipulated in Article 4 FIPE Provisions.

  66. 66.

    Lin and Yeo (2010), p. 104; Bu (2017), p. 192.

  67. 67.

    Art. 102 Para. 2 GRCL.

  68. 68.

    Art. 4 GRCL.

  69. 69.

    This is reiterated in Article 108 GRCL, which stipulates that the general provisions on legal persons (Arts. 57-75 GRCL) shall likewise apply as a reference to the non-legal-person organisations; the capacity for civil rights and capacity for civil conduct of legal persons in regulated in Article 57 GRCL.

  70. 70.

    Arts. 114, 118, 125-126 GRCL.

  71. 71.

    Ye (2002), p. 92.

  72. 72.

    Howson (2015), p. 403.

  73. 73.

    Article 41 PEL states that ‘[i]f a partner has debts unrelated to the partnership, the relevant creditor shall not use his creditor’s right against the said partner to offset the debts he owes to the partnership, nor may he exercise, in subrogation, the rights of the said partner in the partnership’.

  74. 74.

    Art. 41 PEL.

  75. 75.

    Li (李飞) (ed) (2006), pp. 61–62.

  76. 76.

    ibid, pp. 61–62.

  77. 77.

    Ye (2002), pp. 94–95.

  78. 78.

    ibid, pp. 94–95.

  79. 79.

    For a detailed analysis, see Sect. 7.1.2.2.

  80. 80.

    Ma (马强) (1998), p. 235.

  81. 81.

    For an analysis of the dissolution and liquidation of a partnership enterprise, see Sect. 9.2.2.

  82. 82.

    Art. 89 PEL.

  83. 83.

    Li (李飞) (ed) (2006), p. 142. For a detailed analysis of secured transaction under Chinese law, see Tu (2010), pp. 183–219.

  84. 84.

    Art. 89 PEL.

  85. 85.

    Li (李飞) (ed) (2006), p. 142.

  86. 86.

    PRC Enterprise Bankruptcy Law (中华人民共和国企业破产法), promulgated by the Standing Committee of the National People's Congress on 27 August 2006 with effect as of 1 June 2007.

  87. 87.

    Art. 2 Enterprise Bankruptcy Law.

  88. 88.

    Hong (洪虎) (2006), pp. 354, 357.

  89. 89.

    Zheng (2010), p. 227; Li (李飞) (ed) (2006), pp. 145–146.

  90. 90.

    Zheng (2010), p. 227.

  91. 91.

    Arts. 31-34 Enterprise Bankruptcy Law. Instructive on the enterprise bankruptcy proceeding, see Zheng (2010), pp. 221–266.

  92. 92.

    Zheng (2010), p. 227.

  93. 93.

    Art. 110 Enterprise Bankruptcy Law.

  94. 94.

    Art. 113 Enterprise Bankruptcy Law.

  95. 95.

    Zheng (2010), p. 227.

  96. 96.

    Regarding the determination of the governing law of the corporate general partner, see Sect. 8.2.2.2.1.

  97. 97.

    In contrast, should the general partner be a natural person and Chinese law be applicable, the situation is more complicated as China does not yet have an individual bankruptcy regime (Zheng 2010, p. 227).

  98. 98.

    Hansmann et al. (2005), p. 11.

  99. 99.

    Armour et al. (2017), p. 6.

  100. 100.

    Huber (1970), p. 1.

  101. 101.

    The same principal applies to the WFOE and the limited liability company under the Company Law, Mahony (2015), p. 179.

  102. 102.

    Ting and Ge (2014), p. 670.

  103. 103.

    Shen (2015), pp. 35, 125; Mahony (2015), p. 179; Ting and Ge (2014), p. 670. Regarding the EJV, see also Sect. 3.2.1.

  104. 104.

    Art. 4 Para. 4 EJV Law in conjunction with Art. 20 EJV Implementing Regulations; Arts. 72-74 Company Law.

  105. 105.

    Regarding the discussion in German partnership enterprise law, see Schmidt (2002), pp. 547–565, 1309–1310. Regarding US partnership enterprise law, see Bromberg and Ribstein (1994a), pp. 3:57–3:62; Bromberg and Ribstein (1994c), pp. 13:15–13:17.

  106. 106.

    Arts. 23-25, 42 Para. 2, Art. 50 Para. 1, Arts. 57, 72-73 PEL.

  107. 107.

    Wu and Geu (2007–2008), pp. 150–151.

  108. 108.

    ibid, p. 146.

  109. 109.

    Ye (2002), pp. 107–108, 115–116; Wu and Geu (2007–2008), p. 151.

  110. 110.

    Li (李飞) (ed) (2006), p. 63.

  111. 111.

    Wu and Geu (2007–2008), p. 151.

  112. 112.

    For a detailed analysis of the transfer of a partner’s ownership interest in a FILPE, see Sect. 9.4.2.

  113. 113.

    Art. 22 Para. 1 PEL.

  114. 114.

    Art. 24 in conjunction with Art. 19 Para. 2 PEL.

  115. 115.

    Ye (2002), pp. 107–108, 115–116.

  116. 116.

    ibid, p. 108.

  117. 117.

    ibid, p. 108.

  118. 118.

    Instructive: Schmidt (2002), pp. 1321–1324.

  119. 119.

    Huber (1970).

  120. 120.

    ibid, pp. 2–3.

  121. 121.

    ibid, p. 7.

  122. 122.

    ibid, p. 7.

  123. 123.

    ibid, p. 7.

  124. 124.

    ibid, p. 5.

  125. 125.

    ibid, p. 5.

  126. 126.

    ibid, pp. 7–8.

  127. 127.

    ibid, p. 8.

  128. 128.

    ibid, p. 5.

  129. 129.

    ibid, p. 4.

  130. 130.

    ibid, p. 4.

  131. 131.

    ibid, p. 3.

  132. 132.

    Schmidt (2002), pp. 1309–1310, 1322–1323.

  133. 133.

    Li (李飞) (ed) (2006), p. 68.

  134. 134.

    Art. 42 Para. 1 and Art. 74 Para. 1 PEL.

  135. 135.

    Ye (2002), p. 108.

  136. 136.

    Art. 14 Para. 2 1997 PEL.

  137. 137.

    Art. 19 Para. 2 PEL.

  138. 138.

    Article 22, Paragraph 1 PEL, as well as Article 24 in conjunction with Article 19, Paragraph 2 PEL call for consent of all partners, unless otherwise specified in the partnership agreement.

  139. 139.

    Others effectively reach the same conclusion. See Lin (2017), pp. 201–202; Wolff (2015), p. 160; Werthwein (2010), p. 50; Weng and Xia (2007), p. 97.

  140. 140.

    Armour et al. (2017), p. 6; Hansmann and Kraakman (2000), p. 394.

  141. 141.

    Armour et al. (2017), p. 7.

  142. 142.

    Hansmann and Kraakman (2000), pp. 394–395.

  143. 143.

    ibid, p. 394.

  144. 144.

    ibid, p. 394.

  145. 145.

    ibid, p. 394.

  146. 146.

    ibid, p. 394.

  147. 147.

    Li (李飞) (ed) (2006), pp. 33–34.

  148. 148.

    For a detailed analysis of the withdrawal of a partner, see Sect. 9.3.2.

  149. 149.

    Art. 45 No 4 PEL.

  150. 150.

    Art. 45 No 1 PEL in conjunction with Art. 18 No 7 PEL.

  151. 151.

    Art. 46 PEL.

  152. 152.

    Art. 75 PEL.

  153. 153.

    Ye (2002), p. 123.

  154. 154.

    Art. 68 PEL. For a detailed analysis, see Sect. 8.3.2.1.

  155. 155.

    Reasons that cause dissolution of a partnership enterprise are listed in Article 85 PEL.

  156. 156.

    Art. 51 PEL.

  157. 157.

    Li (李飞) (ed) (2006), p. 84.

  158. 158.

    Arts. 51-52 PEL.

  159. 159.

    Wu and Geu (2007–2008), p. 149.

  160. 160.

    ibid, p. 152.

  161. 161.

    Li (李飞) (ed) (2006), p. 74.

  162. 162.

    Art. 47 PEL.

  163. 163.

    Li (李飞) (ed) (2006), pp. 63–64.

  164. 164.

    Art. 42 Para. 1 PEL, Art. 74 Para. 1 PEL.

  165. 165.

    Art. 42 Para. 1 PEL, Art. 74 Para. 1 PEL.

  166. 166.

    Art. 42 Para. 1 PEL, Art. 74 Para. 1 PEL.

  167. 167.

    Art. 42 Para. 2 PEL, Art. 74 Para. 2 PEL.

  168. 168.

    Art. 42 Para. 2 PEL.

  169. 169.

    Li (李飞) (ed) (2006), p. 65.

  170. 170.

    Art. 73 PEL.

  171. 171.

    Notably, the ownership interest of a limited partner can also be purchased by a general partner of the FILPE, see: Li (李飞) (ed) (2006), p. 121.

  172. 172.

    Art. 42 Para. 2 in conjunction with Art. 48 Para. 1 No 5 PEL; Art. 78 in conjunction with Art. 48 Para. 1 No 5 PEL.

  173. 173.

    Art. 42 Para. 2 in conjunction with Arts. 51-52 PEL.

  174. 174.

    Wu and Geu (2007–2008), pp. 156–157.

  175. 175.

    For a detailed analysis of the pledge, see Sect. 9.4.3.

  176. 176.

    Art. 25 PEL.

  177. 177.

    Art. 72 PEL.

  178. 178.

    Hansmann et al. (2006), p. 1391.

  179. 179.

    Art. 131 Para. 3 Nos 3 and 4 HGB; Schmidt (2002), pp. 1448–1449.

  180. 180.

    Hansmann et al. (2006), p. 1392; Wu and Geu (2007–2008), pp. 157–158.

  181. 181.

    Armour et al. (2017), p. 7.

  182. 182.

    Schmidt (2002), p. 172.

  183. 183.

    Armour et al. (2017), p. 7.

  184. 184.

    ibid, p. 11 fn. 40.

  185. 185.

    ibid, p. 11 fn. 40.

  186. 186.

    Article 105 GRCL reads: ‘A non-legal-person organisation may determine one or several individuals to represent the organisation in carrying out civil activities.’

  187. 187.

    For example in the title of Section 3 of the PEL and in Article 26 PEL.

  188. 188.

    Li (李飞) (ed) (2006), p. 39.

  189. 189.

    Ye (2002), p. 83.

  190. 190.

    Li (李飞) (ed) (2006), p. 39.

  191. 191.

    Ye (2002), pp. 85–86.

  192. 192.

    Schmidt (2002), p. 250.

  193. 193.

    ibid, p. 250.

  194. 194.

    ibid, p. 250.

  195. 195.

    ibid, p. 251.

  196. 196.

    ibid, p. 251.

  197. 197.

    ibid, p. 252.

  198. 198.

    ibid, pp. 251–252.

  199. 199.

    ibid, pp. 253–254.

  200. 200.

    Gao (高富平) et al. (1997), p. 221.

  201. 201.

    ibid, p. 221.

  202. 202.

    ibid, pp. 221–222.

  203. 203.

    ibid, p. 222.

  204. 204.

    Ye (2002), p. 86.

  205. 205.

    See Sect. 7.1.1.1.

  206. 206.

    This follows directly from Article 28, Paragraph 2 PEL, and is re-emphasised in Article 170, Paragraph 1 GRCL.

  207. 207.

    Schmidt (2002), p. 249.

  208. 208.

    Art. 11 PRC Regulations on the Administration of Enterprise Legal Person Registration (中华人民共和国企业法人登记管理条例), promulgated by the State Council on 3 June 1988, amended on 19 February 2014, amended on 6 February 2016 and amended on 2 March 2019 (Administrative Regulations for Enterprise Legal Person Registration).

  209. 209.

    Art. 38 GPCL/ Art. 61 GRCL.

  210. 210.

    Werthwein (2010), pp. 34, 38.

  211. 211.

    Art. 11 Administrative Regulations for Enterprise Legal Person Registration.

  212. 212.

    Mahony (2015), pp. 272–273, 282.

  213. 213.

    Art. 13 Company Law.

  214. 214.

    Art. 34 EJV Implementing Regulations, which supersedes the provisions in the Company Law (see Sect. 3.1.3).

  215. 215.

    Mahony (2015), p. 270.

  216. 216.

    Li (李飞) (ed) (2006), p. 59.

  217. 217.

    Art. 28 Para. 1 PEL.

  218. 218.

    Art. 26 Para. 2 PEL.

  219. 219.

    Art. 27 Para. 1 PEL.

  220. 220.

    Art. 29 Para. 2 PEL.

  221. 221.

    Art. 26 Para. 3 PEL.

  222. 222.

    Schmidt (2002), p. 1648.

  223. 223.

    ibid, pp. 1648–1649.

  224. 224.

    The legal basis for the engagement of management personnel is provided in Article 31, Paragraph 6 PEL, and Article 170, Paragraph 1 GRCL.

  225. 225.

    Art. 35 Para. 1 PEL.

  226. 226.

    Arts. 63-70 GPCL / Arts. 161-175 GRCL.

  227. 227.

    Art. 35 Para. 1 PEL.

  228. 228.

    See Sect. 8.3.2.1.

  229. 229.

    Li (李飞) (ed) (2006), p. 108. For a further analysis, see Sect. 8.3.2.1.

  230. 230.

    Ye (2002), p. 87.

  231. 231.

    Art. 29 Para. 2 PEL.

  232. 232.

    Li (李飞) (ed) (2006), p. 56.

  233. 233.

    Kroymann (2009), pp. 135–136.

  234. 234.

    Regarding a FILPE’s business scope, see Sect. 4.1.7.

  235. 235.

    First Interpretation of Certain Issues Concerning the Application of the ‘PRC Contract Law’ (适用《中华人民共和国合同法》若干问题的解释(一)), promulgated by the Supreme People’s Court on 29 December 1999 and with effect as of the same date.

  236. 236.

    Art. 10 SPC Interpretation of the Contract Law.

  237. 237.

    Art. 10 SPC Interpretation of the Contract Law.

  238. 238.

    Li (李飞) (ed) (2006), p. 57.

  239. 239.

    ibid, p. 57.

  240. 240.

    ibid, p. 57.

  241. 241.

    ibid, p. 57.

  242. 242.

    ibid, pp. 56–57.

  243. 243.

    Ye (2002), p. 88.

  244. 244.

    Gao (高富平) et al. (1997), p. 225.

  245. 245.

    Art. 98 PEL.

  246. 246.

    Art. 171 Para. 4 GRCL. Interestingly, Article 66 Para. 4 GPCL stipulated joint liability of the third party and the partner, instead of the fault-based liability of the GRCL.

  247. 247.

    Li (李飞) (ed) (2006), p. 56.

  248. 248.

    Regarding the similar solution under German law, see: Schmidt (2002), p. 260.

  249. 249.

    Ye (2002), p. 87.

  250. 250.

    ibid, p. 87.

  251. 251.

    Art. 35 Para. 2 PEL.

  252. 252.

    Ye (2002), pp. 87–88.

  253. 253.

    Armour et al. (2017), p. 7.

  254. 254.

    ibid, p. 7.

  255. 255.

    PRC Civil Procedure Law (中华人民共和国民事诉讼法), adopted at the 4th Session of the 7th National People’s Congress on 9 April 1991, amended at the 30th Meeting of the Standing Committee of the 10th National People’s Congress on 28 October 2007, amended at the 28th Session of the Standing Committee of the 11th National People’s Congress on 31 August 2012, and amended at the 28th Meeting of the Standing Committee of the 12th National People’s Congress on 27 June 2017.

  256. 256.

    Interpretations of the Application of the PRC Civil Procedure Law (适用《中华人民共和国民事诉讼法》的解释), promulgated by the Supreme People’s Court on 30 January 2015 and with effect as of 4 February 2015.

  257. 257.

    Art. 48 Para. 1 Civil Procedure Law in conjunction with Art. 52 Para. 2 SPC Interpretation on the Civil Procedure Law.

  258. 258.

    Art. 161 Para. 2 in conjunction with Art. 124 Para. 1 HGB.

  259. 259.

    Art. 52 Para. 1 Civil Procedure Law.

  260. 260.

    Art. 48 Para. 2 Civil Procedure Law.

  261. 261.

    Ye (2002), p. 102.

  262. 262.

    Regarding the priority that is granted to mediation and arbitration for conflicts between the partners, see Sect. 4.1.9.5.

  263. 263.

    This follows from the wording of Article 103 Paragraph 2 PEL.

  264. 264.

    Instructive: Schmidt (2002), pp. 623–644.

  265. 265.

    Ye (2002), p. 102.

  266. 266.

    See Sect. 7.1.1.1.

  267. 267.

    See Sect. 7.1.1.2.

  268. 268.

    See Sect. 7.1.2.1.

  269. 269.

    See Sect. 7.1.2.2.

  270. 270.

    See Sect. 7.1.2.2.

  271. 271.

    See Sect. 7.2.

  272. 272.

    See Sect. 7.3.

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Kuntner, S. (2021). Legal Personality. 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_7

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