A Foreign invested partnerships in China may be a general or a limited liability partnership, with at least one foreign partner.
CHARACTERISTICS (Foreign invested partnerships in China)
- A foreign invested partnership is established by two or more foreign entities or individuals with or without a Chinese partner;
- 2 kinds of partnerships: general (with joint and several liabilities) or limited liability partnership (a combination of at least one general partner with one or more partners with liability limited to the extent of their capital contributions);
- Limited liability partnerships may not have more than 50 partners, including at least one general partner;
- No minimum capital requirement except otherwise regulated by the PRC laws. Capital can be contributed to foreign currency or RMB.
- The profits and losses are distributed according to the partnership agreement;
- The income tax is assessable on each partner and not on the partnership;
- A foreign invested partnership does not issue shares, and therefore cannot be listed;
- Setting up process: registration with the SAIC.
WHY CHOOSING A PARTNERSHIP?
- A foreign invested partnership offers more flexibility than an FIE. Indeed, the partnership agreement sets out the partners’ governance arrangements;
- Allocation of profits is not required to be in proportion of partners’ capital contributions;
- The partnership interest’s transfer to a third party may not be subject to any consent if the partnership agreement provides so;
- Simplified setting up process: unless otherwise stipulated by laws and regulations, only registration with the SAIC, no MOFCOM approval is required.
-> This article may also be of interest to you : FICLS in China – Investment Options
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