Partnership - New option for foreign investment in China

Zhiguo Li


　A new door to partnership is opened by the Chinese government to the foreign investors under this post-financial turmoil era in order to attract more foreign investment and provide more employment. On November 25, 2009, the State Council of the PRC promulgated the Measures for the Administration on the Establishment of Partnership Business by Foreign Enterprises or Individuals in China adopted at the 77th executive meeting of the State Council on August 19, 2009, which shall come into effect as of March 1, 2010 (“the Foreign Partnership Measures”). The Foreign Partnership Measures is regarded as supplementary to the Partnership Business Law of the People's Republic of China (“the Partnership Law”), article 108 of which provides that the measures for the administration on the establishment of partnership business by foreign enterprises or individuals shall be formulated by the State Council. Therefore the Partnership Law is the basic law for foreign enterprises or individuals (collectively “foreign partners”) to establish the partnership business in China (“foreign partnership”).

　The initial effort to formulate this kind of measures with the authorization of the Partnership Law can be tracked to January 2007 when the Ministry of Commerce of the People’s Republic of China (MOC), as requested by the Legislative Affair Office of the State Council, promulgated a draft of the Measures for the Administration on the Foreign Funded Partnership Business (“the Draft”) for public consultation. The Draft mostly reflect the intention of the MOC to remain the approval authority for the foreign partnerships as it does in the setup of the other three types of FIEs, such as equity joint venture, contractual joint venture and wholly foreign owned enterprise (i.e., EJV, CJV and WFOE, collectively FIEs). But the final Foreign Partnership Measures kick the MOC and its local branches (“the MOC local branches”) out from the charging authority with the replacement by the local authorized branch of the State Administration of Industry and Commerce (SAIC local branch), which is unexpected to but welcome by the professionals and entrepreneurs. This article will do analysis on the Foreign Partnership Measures from four perspectives: foreign partnership models, foreign partners’ qualification, thresholds and registration of the foreign partnership, in aiming to describe a clear foreign partnership roadmap for foreign partners.


Foreign Partnership Models

　Foreign partners can set up the foreign partnership in China in three models: a. with the other foreign partners; b. with the Chinese individuals, legal persons and the other organizations registered and located in Mainland China; c. through participating the existing domestic partnership.

　In the models above, the foreign partners have the option to take the form of general partnership, limited liability partnership or limited partnership stipulated by the Partnership Law, among which the limited liability partnership is only for the professional institutions such as law firms and accounting firms. Comparing with model a and b, model c seems more feasible and time-and-cost saving for the foreign partners. A complete due diligence will be conducted in order to minimize the risk from the operation of the domestic partnership before the participation date of the foreign partners. In consideration of the current administration and nature of the partnerships, lack of credibility and the other elements in China, it will be difficult to get a complete due diligence report satisfied with the foreign partners. Therefore, models a and b are highly recommended. Which model of a or b take needs the consideration and balance of the foreign partners based on their business plan, legal structuring, such as whether foreign partners themselves intend to do the business competing with the foreign partnership and how to exit by transferring the contribution in the partnership, ect., and the thresholds discussed below.

Foreign Partners’ Qualification

　The difference in the expression on the partners from overseas and China should be noted. Foreign partners only include foreign enterprises and individuals. The Chinese partners include Chinese individuals, legal persons and the other organizations. There is no unified legal interpretation on the “enterprise”, though mostly it refers to the profitable organizations. This uncertainty may come from the prudency of the legislator of China on the qualifications of foreign partners. Under article 184 of the Opinions of the Supreme People’s Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People’s Republic of China for Trial (“the Opinions”), this expression of “enterprise” on the foreign partners allow the SAIC local branch more discretion to judge whether the foreign partner is a qualified “enterprise” or not in accordance with the relevant Chinese laws. In this scenario, the foreign partners need to note that they should not fall into the types of entities prescribed in article 3 of the Partnership Law if they aim to be a general partner, which says that wholly state-funded company, state-owned company, listed company, public-welfare-oriented institution or social organization may not become a general partner.

　Regarding the foreign individuals, they must have full capacity for civil conduct in accordance with article 14 of the Partnership Law. The international private law problem will also be involved here. Pursuant to article 180 of the Opinions, the foreign individuals who conduct civil activities in the territory of China, shall be regarded as having full capacity for civil conduct if they have that in accordance with China laws, no matter what their national laws requires for their capacity for civil conduct. Foreign individuals at or above the age of 18 years old are qualified to be the foreign partners if they are not mentally ill.

Thresholds for Foreign Partnership

　Some thresholds, such as the approval by the MOC, imposed on the FIEs are lifted for foreign partnership. This means that the foreign partnership and the domestic partnership will be treated with unified threshold in the aspect of approval, which will definitely reduce the criticism from the international community, but may cause more from the domestic public (including those FIEs). But it does not mean that there will be no thresholds review on foreign partnership.

　Article 3 of the Foreign Partnership Measures lists the general thresholds for the foreign partnerships. The establishment of foreign partnership shall abide by the Partnership Law and the other relevant laws, regulations and rules, and comply with the industrial policies for foreign investment. These general thresholds need to be analyzed together with the reference to the other relevant laws, regulations, rules and policies.

　First, the threshold provided by the Partnership Law is the pre-approval on the business scope. Where the business cope of a foreign partnership contains any item, for example oil distribution, that is subject to approval prior to registration according to laws or regulations, such approval shall be sought in advance and submitted at the time of registration with SAIC local branch. These pre-approvals involve , but not limited to, the Ministry of Land, the Ministry of Transport, the China Securities Regulatory Commission, the China Banking Regulatory Commission and the China Insurance Regulatory Commission, etc., which depends on the business of the foreign partnership.

　Second, the Provisions on Guiding the Orientation of Foreign Investment (2002) and the Catalogue for the Guidance of Foreign Investment Industries (revised in 2007) (collectively “foreign investment industrial policies”) set up the industrial threshold for the foreign partnerships, which are the industrial policy basis for the SAIC local branch to review registration application to establish foreign partnership in China. This will obviously increase the working load of the SAIC local branches since they are lack of the experience in this kind of foreign investment industrial policies review. We may also anticipate that there might be different explanation and implementations on the above two documents, which will be the problem faced by those foreign partners who submit the application in the first half year after the Foreign Partnership Measures comes into force on March 1, 2010.

　The third threshold is that the verification is required if the project invested by the foreign partners falls into the scope described in the Provisional Measures Governing Verification of Foreign Invested Projects. The charging authority is the National Development and Reform Commission and its local branches, which depending on the amount of the total investment and the nature of the project.

　It is necessary to note the forth threshold hidden in the important expression in article 3 of the Foreign Partnership Measures, which put the “rules” as the legal basis for the establishment of foreign partnerships. In the legal system of China, it indicates that the State Council authorizes the ministries or departments under the State Council (“the Ministries”) to issue necessary “rules” applicable to foreign partnerships. It also reflects that the existing valid “rules” issued by the Ministries, including those applicable to the representative offices opened by foreign law firms in China, are still the barrier for the foreign partners to access the local market in China.

　The final threshold comes from the commitment of China in its WTO accession. Although the State Council encourages those foreign partners who have advanced technology and management experience to establish foreign partnership in China with the purpose to facilitate the development of the modern service industry, at this stage, the services industries may only limited to those listed in the Schedule of Specific Commitments on Services (Annex 9 of the Protocol on the Accession of the People’s Republic of China) and the openness will not be wider than the commitments therein.

Registration of the Foreign Partnership

　In the FIEs regime, all investments by foreign investors need the pre-approvals of the MOC or MOC local branches. In the approval process, the MOC or MOC local branches will review, but not limited to, the content of the application, the article of associations of FIEs and contracts signed by the parties if any. Generally, this approval procedure will take 5 working days to 90 working days depending on the nature and total investment of the project. In this regard, the cancel of this approval for the foreign partnership will significantly escalate the speed of the establishment in the procedural stage and to a great extent reduce the uncertainty from the MOC or MOC local branches.

　The Foreign Partnership Measures stipulates that the representative or agent of all the partners shall submit the establishment application only to the SAIC local branch and not the SAIC. The submission shall include, besides the documents required by the Regulations on the Administration of Registration of Partnership Business (revised in 2007, “Partnership Registration Regulation”), the explanation on compliance of the foreign partnership with the foreign investment industrial policies, which will ease the review by the SAIC local branch. In this regard, the review may not be limited to the formality as provided in article 16 of Partnership Registration Regulation. It seems impossible for the SAIC local branch to issue the license to the foreign partnership on the spot. In this scenario, the SAIC local branch shall make a decision on whether to issue the license to the foreign partnership within 20 working days after the date it accepts the complete application.

　The Foreign Partnership Measures is the second case for MOC and MOC local branches to lose approval authority in the recent years. The first case is for the representative office opened by most of foreign enterprises in China since 2004. Although the loss of approval authority, the MOC local branches at the same level with the SAIC local branches accepting the application for establishment of foreign partnership shall be advised the registration information (including the establishment, alteration and cancel) of the foreign partnerships by the latter.

Conclusion

　For those foreign partners not interested in establishing professional foreign partnerships such as law firms in China, they are now can access the Chinese market with a presence in the option of partnership. The approval procedures involved with the MOC or its local branches as set up for FIEs has been removed. The minimum investment (registered capital) requirement for FIEs has been reduced to RMB30,000 (RMB100,000 for one-person limited liability company) by the Company Law of the People's Republic of China (revised in 2005), the Foreign Partnership Measures leave the minimum investment open to the partners. The foreign partners can contribute with the currency (freely exchanged foreign currency or legally earned RMB), in kind, IPR, land use right, the other properties or labor service (limited to general partners) to the foreign partnerships. All these will minimize the cost for foreign partners to achieve their goal of profit maximization in China. But those enterprises focusing on the investment business, such as the foreign-funded venture capital investment enterprises and foreign-funded investment companies, are excluded from the Foreign Partnership Measures due to lack of experience in administrating this kind of enterprises by the government.

四川省成都市人大常委会


成都市城市建设规划管理条例

1988年10月26日成都市第十届人民代表大会常务委员会第三十七次会议通过 1988年12月7日四川省第七届人民代表大会常务委员会第六次会议批准

　　根据1990年8月24日成都市第十一届人民代表大会常务委员会第十三次会议通过 1990年11月7日四川省第七届人民代表大会常务委员会第十九次会议批准的《成都市人民代表大会常务委员会关于修改<成都市城市建设规划管理条例>的决定》修正


第一章　总则

　　第一条　为了加强城市建设规划管理，保证国务院批准的《成都市城市总体规划》的实施，根据《中华人民共和国城市规划法》、《中华人民共和国土地管理法》和有关法律、法规，结合成都市实际情况，制定本条例。
　　第二条　任何单位和个人在成都市城市规划区内进行各项建设，都必须符合成都市城市总体规划的要求，服从城市规划管理，执行本条例。
　　第三条　成都市城市建设规划管理必须遵循“严格控制大城市规模”、“合理发展中等城市和小城市”、“合理发展经济、调整工业布局”、“加强城市基础设施建设”、“妥善保护名胜古迹和有价值的古建筑”、“合理用地、节约用地”、勤俭建国和实行统一规划、合理布局、因地制宜、综合开发、配套建设、基础设施先行的原则，不准“见缝插针”；严格控制建筑密度和人口密度，切实改善城市生态环境，提高城市建设的综合效益。
　　第四条　成都市城市规划行政主管部门负责全市的城市规划管理工作，并按照国务院批准的城市总体规划编制和完善分区规划及详细规划，报经市人民政府批准后执行，任何单位和个人不得擅自改变。
　　成都市城市规划区外各区（市）县的城乡建设主管部门负责该行政区的规划管理工作，受市规划行政主管部门的业务指导，按照批准的总体规划，参照本条例，实施规划管理。


第二章　建设规划管理

　　第五条　在城市规划区范围内，严格控制新建大、中型生产项目。必须建设的项目，在作可行性研究或初步设计时，由市规划行政主管部门审查和统筹安排，并会同有关部门选址、发给“选址意见书”，一并报市人民政府批准，不得建设具有污染和其他公害的企业和项目。
　　第六条　凡在城市规划区内从事新建、扩建和改建的一切建筑物、构筑物和公用设施的建设单位或个人，必须持有按国家规定程序批准的建设计划、设计任务书和其他批准文件，向市规划行政主管部门提出建设项目定点申请，市规划行政主管部门会同有关部门审查确定建设地点及范围，发给“定点通知书”。建设项目需要征用、划拨土地的，报市土地管理部门申请办理用地手续。
　　各项建设工程的前期准备工作完成后，应向市规划行政主管部门提出建设申请，在领得“建设工程规划许可证”并交纳保证金后，方可施工。
　　第七条　建设单位使用的地形图和规划设计图，必须采用城市规划行政主管部门统一的坐标和标高。
　　第八条　各项建设工程必须由持有设计证书的勘察设计单位按指定承担设计范围进行设计，严禁无证和越级勘察设计。
　　建设项目的总平面规划或设计方案必须经市规划主管部门审查批准后，才能作初步设计或施工图。
　　大型公共建筑、道路宽度在30米以上的临街建筑和其他重要建筑，还必须同时报送单体图、平面图、立面图、剖面图和建筑透视图或设计模型。
　　建设工程设计文件经市城乡建设主管部门批准后必须遵照执行，任何单位和个人，未经批准机关同意不得擅自更改。
　　地下、地上工程建成后，建设单位必须按市规划行政主管部门测定的坐标和标高编制竣工图，报市规划行政主管部门备查，并在竣工后6个月内，向市城建档案馆报送竣工图和资料。
　　第九条　城市规划区范围内的所有高层建筑设计方案，必须经市人民政府批准，各项建设规划设计的技术指标，由市人民政府根据国家有关规定，结合我市的实际情况制定。
　　第十条　临街建筑不得影响市容景观，其厕所、化粪池不得设在临街干道一面，地下地上设施最外突出部分均不得超越规划的道路红线修建。
　　在旧城沿规划道路新建临街建筑物，在道路尚未按规划宽度形成时，必须将新建的建筑物与现状道路之间的旧房全部拆除。
　　在旧城不临规划道路新建多层房屋，必须先拆迁后建设，其四周拆除旧房的范围、新建房屋与相邻的旧有建筑之间的间距，按市规划行政主管部门的有关规定执行。
　　第十一条　新建大型公共建筑应设置地下人防工程、公共厕所、停车场等配套设施，并同时定点、同时设计、同时施工、同时投入使用。
　　第十二条　建设住宅小区，必须统一规划，综合开发。市政基础设施、文化卫生设施、教育设施、生活服务设施，应当和住宅同步建设。
　　第十三条　建筑物一律不得紧贴规划道路红线修建，中、小型公共建筑应退离红线2米至10米，大型公共建筑应退离红线10米以外，高层公共建筑应退离规划道路对面红线相当于该建筑12倍至15倍高度以外的距离。
　　第十四条　修建临时建筑，必须经市规划行政主管部门批准，不得影响市容、交通、消防、绿化、管线、市政设施和临近建筑的采光、通风和卫生，在国家建设需要时必须无条件拆除，不予补偿，禁止以临时建筑为名修建永久性建筑物、构筑物或其他设施。
　　危房改建必须按规划管理程序经市规划行政主管部门批准，不得以危房改造为名任意增建楼层或扩大面积。
　　第十五条　在风景游览区、文物古建筑保护区周围新建建筑物，必须符合文物保护和园林等有关法律、法规的规定，其体量、造型、高度、色彩、风格都应与保护区的风貌景观协调。
　　第十六条　施工单位必须按批准的经营范围承接工程任务，禁止无证施工、越级施工和承接未经报批或虽经报批但擅自更改施工图纸的工程，并应验明建设单位和个人的“建设工程规划许可证”及经市规划行政主管部门批准的施工图纸方可施工。
　　第十七条　设计、建筑、施工单位应对工程临近的建筑物、构筑物以及道路、供排水和其他管道、电力、电信、电缆、防洪堤坝、水利设施、文物古迹、测量和水文标志、古树名木、环卫设施等进行安全检查，采取安全保护措施，不得损坏。因施工需移动的，必须经市规划行政主管部门批准，并到有关部门办理手续。
　　在施工过程中，发现地下各类构筑物、测量、水文标志、文物、古迹、古墓、矿藏、财宝等，必须停止施工，保护好现场，并立即向有关部门和规划行政主管部门报告，由规划行政主管部门牵头在7日内共同作出处理。
　　第十八条　建设项目的竣工验收，必须有市规划行政主管部门参加，有关部门和建设单位凭工程竣工验收“合格证”方可办理供水、供电、入户、产权登记、营业执照等手续，验收不合格者，经处理达到要求后，方可发给合格证。
　　建设项目竣工验收后，未经市规划行政主管部门批准，不得改变其主要使用性质；不得改变建筑外形立面。


第三章　建设用地规划管理

　　第十九条　城市规划区范围内的建设用地，必须按照城市总体规划的要求，由市规划行政主管部门统一规划并会同有关部门选址定点，在具体确定用地位置和界限，发给“建设用地规划许可证”后，向市土地管理部门申请用地，经市人民政府或转报省人民政府审查批准后，由市土地管理部门划拨土地。
　　第二十条　各项建设用地，不准征而不用，多征少用，早征晚用，造成经批准的建设用地荒芜的，按有关规定处理；未经原批准机关同意，连续2年未使用的，土地管理部门有权报请人民政府收回原批准使用的土地。
　　第二十一条　建设项目施工所需临时用地，经市规划行政主管部门核定用地位置和界限后，由市土地管理部门审批。禁止在临时用地上修建永久性建筑物、构筑物和其他设施。
　　第二十二条　城市国有土地依法实行划拨和出让两种方式，任何单位和个人只能依法取得使用权，土地使用权属的变更，按国家有关规定办理。
　　国家建设需征用集体所有土地，必须依法向土地管理部门办理征地手续，被征地单位必须服从国家建设需要，不得阻挠，任何单位和个人不得直接向土地所有单位购地、租地。
　　因迁移、解散、撤销、破产或其他原因而停止使用的土地，改线后的原铁路、公路路基和渠道等，原单位和其主管部门不得擅自占用或转让，由人民政府按国家规定收回。
　　第二十三条　禁止任何单位和个人侵占城市规划区内的风景名胜区、文物保护区、公共绿地、公共体育场、停车场，以及规划保留的蔬菜用地等土地，或擅自改变其使用性质。
　　禁止任何单位和个人在城市规划区内的国有山岭、荒丘、空地、水面、河渠、滩地以及城市建设保留用地上，挖取沙石土方或堆土、设置废碴垃圾堆场、围填水面、河道等改变地形、地貌的活动。确需进行上述活动的，必须经市规划行政主管部门同意，并报有关主管机关批准。

第四章　道路管线工程规划管理

　　第二十四条　市城乡建设管理部门安排新建、翻建道路计划时，应协调有关单位同时埋设、换修各类管线，在道路大修期间，各管线单位必须抓紧检修，不得影响工程进度。　
　　第二十五条　在城市道路内敷设管线的单位，必须在施工的上一年将拟建计划和有关资料报市规划行政主管部门综合安排，单位内或居住街坊内的道路管线工程，必须随主体工程一并报市规划行政主管部门审批。
　　第二十六条　任何单位和个人不得擅自挖掘、占用城市道路和绿化地带。因特殊情况确需挖掘占用者，必须向市规划行政主管部门申报，由市规划行政主管部门会同有关部门审核，并由建设单位按城市道路、园林管理办法的规定办理有关手续后方可进行，施工必须按规定的范围和时间进行，完工后必须及时恢复，不得影响交通安全畅通和城市绿化。
　　修建道路管线工程要动迁原有管线设施的，由市规划行政主管部门组织协调，由建设单位与原有管线设施的单位签订协议。


第五章　奖励与处罚

　　第二十七条　对认真执行本条例做出显著成绩，或积极检举揭发违反城市规划管理行为，使国家免受损失的单位和个人，各级人民政府给予表扬和奖励。
　　第二十八条有下列行为之一的，市规划行政主管部门、土地管理部门、城乡建设主管部门和城市管理部门有权及时制止，并视情节，按照法律、法规、规章和管理权限，分别给予警告、罚款、吊销“建设工程规划许可证”、“建设用地规划许可证”、“设计证书”、“施工执照”，责令停止建设、限期拆除或没收违法建筑物或其他设施，责令退回土地等；影响城市规划，尚可采取改正措施的，责令限期改正，并处罚款：
　　（一）违反国家、省、市颁布的建筑设计规范、标准和超越设计级别进行设计的；
　　（二）临时性建筑逾期不拆除的；
　　（三）擅自转让、交换、买卖、租赁或变相买卖、租赁临时建筑物的；
　　（四）未领取“建设工程规划许可证”施工的；
　　（五）违反国家、省、市颁布的建筑施工规范、标准和施工级别进行施工的；
　　（六）擅自改变或不按照经批准的设计施工图纸施工的；
　　（七）擅自改变建筑物或构筑物主要使用性质的；
　　（八）未取得建设用地规划许可证而取得建设用地批准文件、占用土地的；
　　（九）侵占、买卖或者以其他形式非法转让土地的；
　　（十）临时用地逾期不交还的；
　　（十一）擅自改变用地位置或扩大用地范围的；
　　（十二）擅自改变土地使用性质的；
　　（十三）违反城市总体规划要求和本条例规定的其他行为。
　　第二十九条　当事人对行政处罚决定不服的，可以在接到处罚通知之日起15日内，向作出处罚决定的机关的上一级机关申请复议；上一级机关应在收到复议申请之日起30日内作出复议决定；对复议决定不服的，可以在接到复议决定书之日起15日内，向人民法院起诉。当事人也可以在接到处罚通知之日起15日内直接向人民法院起诉。当事人逾期不申请复议、也不向人民法院起诉、又不履行处罚决定的，由作出处罚决定的机关申请人民法院强制执行。
　　对未取得“建设工程规划许可证”进行建设的建筑物、构筑物或者其他设施，在限期内不拆除的，可由市城市管理部门予以拆除。
　　第三十条　违反本条例造成的一切损失，由违反的单位和个人承担，情节恶劣、造成严重后果的，追究直接责任人和单位主管人员的行政、经济责任，构成犯罪的，由司法机关依法追究刑事责任。
　　第三十一条　市规划行政主管部门、土地管理部门、城乡建设主管部门和城市建设管理部门从事监督检查的人员，可凭证对全市各建设单位用地和建设活动进行监督检查。各用地、建设、施工单位应接受监督检查，并如实提供有关情况和资料，检查人员应遵守国家保密制度。
　　第三十二条　市规划行政主管部门、土地管理部门、城乡建设主管部门和城市建设管理部门的工作人员应忠于职守，秉公执法，对违反本条例、滥用职权、玩忽职守、索贿受贿、徇私舞弊者，视情节轻重，分别给予批评、行政处分、经济处罚，构成犯罪的，依法追究刑事责任。
　　第三十三条　任何单位和个人有权检举、揭发违反城市规划管理的行为，凡对检举、揭发者打击报复的，依照有关法律、法规予以惩处。

第六章　附则

　　第三十四条　本条例由成都市人民政府负责解释。
　　成都市人民政府根据本条例制定实施细则。
　　第三十五条　本条例报经四川省人民代表大会常务委员会批准后公布施行，成都市人民政府1981年颁发的《关于加强城市规划管理的暂行规定》和1983年颁发的《关于加强城市规划管理的暂行规定的补充规定》同时废止。