Beijing M88 app Pilot Program Sets Sail Again

Beijing, as one of the pioneers of the Qualified Foreign Limited Partnership (M88 app) pilot program, launched its M88 app pilot in 2011. The Beijing Financial Regulatory Bureau (BFRB) and the Beijing Administration for Market Regulation (BAMR) jointly issued the Interim Measures on the Pilot Program of Qualified Foreign Limited Partner (“Interim Measures”) and the corresponding policy interpretation on April 28, 2021, which updates and improves the pilot program.

Below we summarize M88 app key contents of M88 app Interim Measures.

IQualification Requirements

From its initial launch, the Beijing M88 app pilot program has allowed two M88 app fund management models: a domestic M88 app fund manager with foreign-invested M88 app funds or a foreign-invested M88 app fund manager with foreign-invested M88 app funds. The Interim Measures explicitly categorize M88 app fund managers into domestic M88 app fund managers and foreign-invested M88 app fund managers. That said, both qualified domestic private fund managers and foreign institutions may apply for M88 app pilot qualifications and investment quotas in Beijing.

According to the Interim Measures, a M88 app fund manager shall meet the following requirements:

(1) Qualification requirement: The controlling shareholder, de factor controller or executive partner of a M88 app fund manager shall either be (i) a financial institution; or (ii) a fund management institution whose assets under management are at least RMB 100 million or the equivalent amount in foreign currency.

(2) Compliance requirements: M88 app institution itself or its shareholder(s) shall operate normally, have sound governance structures and internal control systems, and have not been subject to any punishment by any judicial authority or relevant regulatory authority.

(3) Personnel requirement: A M88 app fund manager shall have at least 2 senior management personnel with (i) more than 3 years of experience in equity investment or equity investment management; and (ii) good personal credit records.

IIM88 app Funds

M88 appitial FundraisM88 appg Scale

A M88 app fund in Beijing can be established as a corporate-type, partnership-type or contractual-type fund. The Interim Measures require that the initial size of a single M88 app fund shall be, in principle, at least RMB 100 million or its equivalent in foreign currency, and the M88 app fund manager may subscribe to a certain proportion of the fund shares.

A M88 app fund manager may launch more than one M88 app fund and is allowed to allocate and adjust its M88 app investment quota among different M88 app funds.

M88 appvestment Scope

The Interim Measures expand the investment scope of the M88 app funds. Other than equities of unlisted companies, a M88 app Fund is explicitly allowed to invest in (i) ordinary shares privately issued and traded by listed companies (including acquiring listed shares through block trade, transferring by agreements and private placements, etc.), preferred shares convertible to ordinary shares, debt-to-equity swaps, convertible bonds, and participation as existing shareholders in private placements by listed companies; (ii) mezzanine debts, investments in private bond issuances, and non-performing assets; and (iii) domestic private investment funds.

The Interim Measures underscore the importance of domestic investments by M88 app funds complying with the requirements on special administrative measures on foreign investment access to China. If the China Securities Regulatory Commission and the Asset Management Association of China (AMAC) have special requirements on the domestic investments by M88 app funds, such requirements shall be followed as well. For example, the M88 app funds launched by a M88 app fund manager having registered with the AMAC as a private-equity type fund manager shall comply with the AMAC’s requirements on the investment scope of private equity-type funds.

Qualification Requirements on Limited Partners (LP)

According to the Interim Measures, an LP of a M88 app fund shall meet the following requirements:

(1) M88 appstitutions or M88 appdividuals that have correspondM88 appg capacity for risk identification and risk bearM88 appg capabilities, as well as relevant M88 appvestment experience.

(2) Institutional investors shall have sound governance structures and well-developed internal controls and not have been subject to any punishment by national, local judicial authorities or relevant regulatory institutions in the past three years. As for a foreign institutional investor, its net assets shall be no less than USD 5 million or its equivalent, and its single investment in a M88 app fund shall be no less than USD 1 million or its equivalent; as for a domestic institutional investor, its net assets shall be no less than RMB 10 million, and its single investment in a M88 app fund shall be no less than RMB 1 million.

(3) As for a domestic or foreign individual investor, their financial assets shall be no less than RMB 5 million or its equivalent or they shall have an average annual income of not less than RMB 500,000 over past three years, and their single investment in a M88 app fund shall be no less than RMB 1 million.

It is noteworthy that the qualification requirements for an investor of a M88 app fund (i.e., LP) are higher than the requirements for a qualified investor of a domestic private fund.

IIIWhether A M88 app Fund Manager Shall Be Registered As A Private Fund Manager

The Interim Measures do not require a M88 app fund manager to register with the AMAC as a private fund manager (PFM). Instead, the Interim Measures provide that a M88 app fund manager shall register with the AMAC as a PFM if the relevant laws and regulations require so. Hence, we understand that a M88 app fund manager incorporated in Beijing is not required to be registered as a PFM with the AMAC if it does not raise funds onshore. Notably, if a M88 app fund manager hopes to raise a RMB fund in China, it is mandatory to register itself with the AMAC as a PFM before conducting fundraising activities in accordance with the relevant regulations governing private funds, and file the RMB fund with the AMAC.

IVApplication Procedures

The application procedures of the Beijing M88 app pilot program are similar to those in Shanghai, i.e., submitting the application documents to competent authorities, obtaining the M88 app pilot qualification after being reviewed and approved by the competent authorities, setting-up the M88 app fund manager (if applicable), handling PFM registration (if applicable) and finally launching M88 app funds.

The updates in the Beijing M88 app pilot program further simplified the M88 app application procedures. Beijing adopts a “one-stop shop” model, providing direct one-on-one personal service from the M88 app qualification application to PFM registration. With respect to the application review, similar to other M88 app pilot cities like Shanghai, Beijing adopts the joint review mechanism, meaning regulatory authorities such as the BFRB, the BAMR and the State Administration of Foreign Exchange Beijing Branch will jointly review the M88 app application. The Joint Review Office will issue a written approval for the M88 app pilot and grant an investment quota to the applicant once approved.

We believe that the facilitation of the application procedures and the expansion of the investment scope may increase the functionality of Beijing’s M88 app pilot program, and help Beijing attract high-quality domestic and foreign asset management associations. Nonetheless, details such as tax policies remain to be clarified through future practice.

We will contM88 appue to pay close attention and keep our clients apprised of any important developments.