Set up an Open-Ended Investment Fund in China
Set up an Open-Ended Investment Fund in ChinaUpdated on Sunday 02nd December 2018
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The Chinese legislation referring to the registration of investment funds is similar to the ones available in other regions of the world, such as Europe or the United States of America. Investors can set up here open-ended or closed-ended funds, which provide different regulations for the number of shares that can be issued through the respective fund. Open-ended funds were created under the Chinese law in order to align with the current international trends in terms of investments and our team of lawyers in China can offer their legal expertise for the incorporation of this vehicle.
Open-ended funds in China
An open-ended fund in China is incorporated for securities investment purposes. The investment vehicle can be registered in China following the regulations imposed under the Securities Investment Fund Law, on which our Chinese attorneys may offer more details. The main entities involved in the registration of an open-ended fund in China are the following:
- • the investor, who both invests in the fund and benefits directly from the respective investment;
- • the manager of the fund, generally represented by a management company that invests the funds of the vehicle;
- • the custodian, that is represented by a recognized bank in China.
As mentioned above, the total volume of the shares issued by the investors is not fixed, unlike the situation of a closed-ended fund. Moreover, the value of the shares can be modified if the investors request so. They can increase the volume of shares and redeem the current value and the procedure can be managed at any time, as there are no specific periods in which the procedure should be performed.
Here is a video presentation with information about how to register an open-ended investment fund in China:
Dividends in an open-ended fund in China
The shareholders of a company registered in China or those who are associated in an investment fund are entitled to receive dividends. In the case of an open-ended fund, the shareholders may receive dividends in two forms:
- • cash dividends;
- • fund share dividends.
As a general rule, most of the investors receive money under the first option.
We invite businessmen to contact our law firm in China for more details referring to the incorporation of an open-ended fund.