Shenzhen and Xiamen Further Encourage Equity Investment
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ocal governments of several Chinese coastal cities are offering further incentives to equity investment enterprises, as private equity (PE) investment has emerged as one of the most important capital-raising avenues for small and medium-sized enterprises in those areas. Shenzhen: PE Development Fund In order to offer various fiscal incentives to PE funds, Shenzhen established a PE Development Fund (PEDF) and recently clarified the operation procedures for PE funds that intend to apply for the financial support extracted from the PEDF.
According to the “Operation Procedures for PE Funds’ Application for the Use of the PEDF (shenfujinfa [2011] No.5)” and the “Regulations on Promoting PE Funds Development (shenfu [2010] No.103),” all types of Shenzhen-registered equity investment enterprises – regardless of whether they are Chinese-invested, foreign-invested or jointly-invested – will be able to apply for the use of the PEDF if they meet the following criteria corresponding to their own corporate nature: - A PE fund shall have a registered monetary capital of no less than RMB100 million and the initial funding in place shall not go under RMB50 million. Shareholders or partners shall all invest in their own names and the funding from each individual shareholder/partner shall be no less than RMB5 million. Where the PE fund is established in the form of a limited liability company or partnership, the number of its shareholders/partners shall be no more than 50; where the PE fund is established in the form of a limited corporation, the number of its shareholders shall not be more than 200. - A PE fund management enterprise shall have a registered capital of no less than RMB10 million if it is established in the form of a limited
64 - Expert Guide : Investment Funds
By Dezan Shira & Associates
corporation; it shall have an actual receipt capital of no less than RMB5 million if it is established in the form of a limited liability company or partnership. - A private securities investment fund management enterprise shall have a registered capital of over RMB10 million and manageable assets of over RMB100 million. Incentives offered to those PE funds include: - Reward for local financial contributions: A reward amounting to 100 percent of a PE fund’s local financial contributions – based on the enterprise’s business turnover and corporate income – will be offered during the first two years, and a reward amounting to 50 percent of the PE fund’s local financial contributions will be granted during the next three years. The application for the reward will only be accepted between May 20 and August 10 every year. - Office purchase subsidy: A one-time subsidy amounting to 1.5 percent of the office purchase price will be offered to either the PE fund or the PE fund’s management enterprise. The total amount of the subsidy shall not exceed RMB5 million and the subsidized office shall not be for sale within the next 10 years. - Office rent subsidy: A three-year subsidy amounting to 30 percent of the market office rent will be granted to either the PE fund or the PE fund’s management enterprise. The total amount of the subsidy shall not exceed RMB1 million and the application for the subsidy will only be accepted between January 1 and February 28 every year.