Keswick Capital Planning Chinese LP Funds

March 7, 2011 - PRLog -- The Chinese government made a step towards allowing foreign private equity and venture capital firms to raise funds that are structured as limited partnerships.

China’s cabinet announced that it would allow foreign entities to invest in partnerships in China. Entitled “Administrative Measures on Partnership Enterprises Established by Foreign Enterprises or Ind
ividuals”, the rule allows foreign companies and individuals to form partnerships in China, either on their own or by teaming with Chinese entities.

There is no minimum amount of capital required for establishment of a limited partnership. Chinese yuan or foreign currencies can be used to finance limited partnerships.

This is already common practice in the West. This structure displaces tax obligations from private equity funds to individual partners’. The new rule will come into effect on March 1.

Also, where previously national approval was required for the establishment of foreign partnerships, registration is completed with local industrial and commercial authorities. This will alleviate the current long approval process usually associated with the National Development and Reform Commission and Ministry of Commerce.

Currently Private Equity firms can launch yuan funds that are structured as cooperative joint ventures under the Foreign-Invested Venture Capital Enterprise regulation.

Legal experts expect that it’s only a matter of time before the Chinese government fully allows setting up LP funds.

Keswick Capital is currently investigating investment opportunities in China and is on schedule to close its latest Keswick Capital Fund in September 2011.