Create a Closed-Ended Investment Fund in China
Create a Closed-Ended Investment Fund in ChinaUpdated on Thursday 27th October 2016
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The applicable legislation in China offers to foreign investors the possibility to open various types of investment vehicles. Amongst these, foreign businessmen can create a closed-ended investment fund with the purpose of investing its capital. Some of the main aspects defining a closed-ended structure in China are that the fund’s capital is fixed, as well as the total number of shares it can issue on the exchange market. Our team of lawyers in China can offer assistance on the registration procedure and can provide more details on the taxation system or the advantages of the investors.
Short history on the investment funds in China
Investors who want to start a business in China as an investment fund or an investment company should know that the Chinese market is relatively young, as the first investment fund was incorporated here in 1991. The market developed over the years and thus, investors could set up funds in the securities market, equity investment or real estate investments. Our lawyers in China can advise businessmen with more details on the current investment market.
In 1997, the Chinese authorities created the China Securities Regulatory Commission, an official institution regulating the investment market. The legislation referring to the ways in which the capital can be raised in China, as well as many other rules referring to the investment funds, were prescribed in the Interim Regulation on the Securities Investment Funds.
One year later, following the regulations of the above mentioned law, the businessmen were able to invest on the public Chinese market, thus creating the securities investment funds, also referred to as closed-ended funds.
Regulatory framework for Chinese closed-ended funds
The main rule of law which is applicable at the moment for the incorporation and activity of a closed-ended fund in China is the New Funds Law, which is also applicable for the open-ended funds registered here.
Businessmen who want to register an investment fund must receive approval from the China Insurance Regulatory Commission. In order to market a fund in China, it is necessary to register the vehicle in this country, as foreign funds can’t be traded on the local market.
The managers of a closed-ended fund are required to provide daily reports on the fund’s net value asset.
In terms of taxation, the Chinese legislation distinguishes between local and foreign investors and it is important to know that foreigners can invest here only in certain conditions.
Businessmen are invited to contact our law firm in China for more details on the incorporation of a closed-ended fund.