abstract:

The revised "Partnership Enterprise Law" established the legal status of limited partnership for the first time in China, and cleared the legal obstacles for the development of venture capital in China. However, there are still many problems to be solved in the actual operation of limited partnership. This paper discusses six issues of limited partnership, such as name registration, composition of general partners, number of partners, investment fields, securities investment and safe haven rules for limited partners.

Keywords: Limited Partnership Limited Partnership Enterprise Law

order

The charm of limited partnership comes from the relationship between its own business risk and interest mechanism. As a form of enterprise organization, limited partnership has a history of more than 1000 years from the perspective of historical research, but its economic value seems to be fully reflected from 1980. The most important thing is to apply it to the venture capital industry, that is, to combine it with the financial and economic behavior of venture capital. The innovative "limited partnership fund" is the enterprise system arrangement generally adopted by American venture capital institutions. In American venture capital, limited partnership has controlled more than 80% of venture capital. It is precisely because of the appeal of domestic venture capital enterprises to limited partnership that the provisions of limited partnership have been added to the revised Partnership Enterprise Law, which has truly established the legal status of limited partnership for the first time in China and cleared the legal obstacles for the development of venture capital in China. However, there are still many problems to be solved in the actual operation of limited partnership enterprises. This paper analyzes several problems existing in the operation of limited partnership enterprises that the author has come into contact with for reference.

Upper guide bearing

I. Name of Limited Partnership

As one of the main bodies of the market, limited partnership should have its own name. Only when you have your own name can you participate in civil and commercial legal relations, engage in business activities, enjoy civil rights and assume civil obligations in your own name. The State Administration for Industry and Commerce has not issued special regulations on the management of partnership name registration, so the management of limited partnership name registration must comply with the Regulations on the Management of Enterprise Name Registration, the Implementation Measures for the Management of Enterprise Name Registration and the Notice of the State Administration for Industry and Commerce on Doing a Good Job in the Management of Partnership Name Registration (Guo Gong Ye Zi [2007]No. 108). However, the above provisions do not make specific provisions on the management of partnership name registration. For example, the Notice of the State Administration for Industry and Commerce on Doing a Good Job in the Registration and Management of Partnership Enterprises only stipulates that "the registration authority shall, in accordance with the provisions of Article 7 of the Regulations on the Administration of Enterprise Name Registration, the Measures for the Implementation of the Administration of Enterprise Name Registration and the Measures for the Administration of Partnership Enterprise Registration, approve the name of the partnership enterprise according to law. The words "general partnership", "special general partnership" or "limited partnership" marked after the organization form in the name of the partnership enterprise shall be placed in brackets. " Therefore, local administrative departments for industry and commerce have different standards for the name approval of partnership enterprises.

In practice, some venture capital limited partnerships want to use the words "center" and "organization" in their names. Tianjin and other places allow the use of the word "center", but most areas still do not allow the use of the word "center". There is no clear legal basis for the administrative department for industry and commerce not to approve the name with the word "center" in advance, but the result is not to approve it. At the same time, when registering a partnership enterprise, the administrative department for industry and commerce generally requires that the word "company" should not be used in the name of a limited partnership enterprise, because the Provisions on Several Issues Concerning the Administration of Company Registration require that the establishment of a company should conform to the conditions and procedures stipulated in the Company Law and the Regulations on the Administration of Company Registration. Those who do not meet the conditions and procedures stipulated in the Company Law and the Regulations on the Administration of Company Registration shall not be registered as limited liability companies or joint stock limited companies, nor shall they be called "companies". However, the author believes that there is no sufficient legal basis for not allowing the use of the word "company" in the name of limited partnership enterprises, because the company law does not stipulate that non-corporate enterprises cannot use the word "company", and the use of the word "company" does not necessarily indicate the form of responsibility of enterprises, and in practice, there is a phenomenon that other enterprises except limited liability companies and joint stock limited companies adopt the word "company".

How to manage and register the name of a partnership enterprise (limited partnership enterprise) is different from place to place, and it is urgent to issue detailed rules to provide clear direction for investors and operational norms for the administrative department for industry and commerce.

Secondly, about the composition of general partners in limited partnership enterprises.

According to Article 6 1 of the Partnership Enterprise Law, a limited partnership enterprise shall have at least one general partner. Therefore, from the composition of limited partnership, an unavoidable question is: can a legal person become a general partner in limited partnership? Judging from the legislative situation of various countries in the world, there is no unified answer to this question, but it can be roughly divided into several modes, such as prohibiting, allowing or authorizing partner autonomy. In practice, some administrative departments for industry and commerce do not allow legal persons to become general partners of limited partnership enterprises, but only allow natural persons to become general partners of limited partnership enterprises, on the grounds that Article 15 of the Company Law stipulates that "companies may invest in other enterprises; However, unless otherwise provided by law, it shall not become an investor who is jointly and severally liable for the debts of the invested enterprise. " The provisions of the.

I think this understanding is wrong. Although Article 15 of the Company Law stipulates: "A company may invest in other enterprises; However, unless otherwise provided by law, it shall not become an investor who is jointly and severally liable for the debts of the invested enterprise. " However, Article 3 of the Partnership Enterprise Law stipulates that "wholly state-owned companies, state-owned enterprises, listed companies, public welfare institutions and social organizations shall not become general partners." It can be seen that the Partnership Enterprise Law does not explicitly prohibit ordinary legal persons from becoming general partners, and the provisions in Article 3 of the Partnership Enterprise Law are "except as otherwise provided by law" as stipulated in Article 15 of the Company Law, so both the Company Law and the Partnership Enterprise Law leave possible space for legal persons to become general partners of limited partnerships.

In practice, China has established a limited partnership enterprise with venture capital as its main business. These enterprises are registered in the form of limited partnership as stipulated in the Partnership Enterprise Law. Their limited partners include enterprise investors and natural person investors, and there are also limited liability companies in China among the general partners. It can be seen that the administrative departments for industry and commerce in some places also admit that legal persons are general partners of limited partnerships in practice.

Third, the number of partners in a limited partnership.

According to the provisions of Article 6 1 and Article 75 of the Partnership Enterprise Law, a limited partnership enterprise is established by more than two partners and less than fifty partners; However, unless otherwise provided by law. A limited partnership enterprise shall have at least one general partner. Where there are only limited partners, the limited partnership enterprise shall be dissolved. According to the explanation of the relevant legislators, the Partnership Law restricts the number of partners in limited partnerships to prevent large-scale illegal fund-raising in disguise, but this provision has brought operational difficulties to many venture capital limited partnerships. In fact, in many venture capital limited partnership enterprises, the number of partners in the legal sense is below 50, but in the practical sense, the number of partners has exceeded the limit of 50. Generally, anonymous partnerships are used to avoid the limit of 50, that is, it is clearly stated in the industrial and commercial registration that a small number of investors are limited partners and other investors are "sleeping partners", thus conducting large-scale private equity funds.

A dormant partnership refers to a contract in which both parties agree that one party will invest in the business operated by the other party in order to share its operating benefits and losses. Silent partnership is essentially a financing contract relationship, not a commercial subject, as long as both parties reach an agreement, there is no need to register. The similarity between dormant partnership and limited partnership lies in that both sleeping partner and limited partner are liable for the debts of the partnership only to the extent of their capital contribution, and neither of them enjoys the right of external representation and transaction execution. A dormant shareholder in a company can become a prominent shareholder by changing the industrial and commercial registration under certain conditions, but sleeping partner in a partnership cannot be required to become a prominent partner. The treatment mode of venture capital limited partnership makes the provision of Article 6 1 of the Partnership Enterprise Law on the limitation of the number of partners in limited partnership enterprises useless.

Four. Some problems in the field of equity investment in limited partnership enterprises

At present, venture capital enterprises mostly adopt the organization form of limited partnership. However, there will be some restrictions in the field of equity investment if limited partnership is adopted. According to the current laws and regulations, limited partnerships cannot invest in commercial banks, insurance companies, securities companies, trust companies and other financial institutions. For example, according to the Measures for the Implementation of Administrative Licensing Matters of Chinese-funded Commercial Banks implemented on February 1 2006, the establishment of joint-stock commercial banks should have qualified promoters, including domestic financial institutions, overseas financial institutions, domestic non-financial institutions and other promoters recognized by the CBRC. Domestic non-financial institutions, as promoters of legal institutions of joint-stock commercial banks, shall be registered in the administrative department for industry and commerce and have legal personality. Because limited partnership is an unincorporated organization, it does not have the qualification of promoters and has no opportunity to participate in the establishment of financial institutions such as commercial banks. Therefore, there are certain restrictions on the equity investment field of limited partnership enterprises.

Of course, it should be taken into account that the Partnership Law, which came into effect in June 2007 1, recognized the limited partnership as a new organizational form for the first time. It has not yet become a typical organizational form of civil and commercial subjects in China, and it needs a development process to win its own legal status. If the organizational form of limited partnership develops to a state similar to that of the United States in China, then we believe that legislators will pay full attention to limited partnership when formulating relevant laws and regulations, and expand the investment field and participation field of limited partnership, but this is a gradual process.

Verb (abbreviation of verb) on securities investment of limited partnership enterprises

At present, domestic securities laws and regulations allow natural persons, legal persons and other organizations or institutions without legal personality to participate in securities investment and open securities accounts. Individuals, companies, securities investment funds, social organizations and foreign-invested enterprises can open securities accounts independently, and there are no laws and regulations restricting or prohibiting limited partnerships from participating in securities investment. However, it is a realistic problem that limited partnership enterprises cannot open securities investment accounts.

Article 166 of the Securities Law stipulates: "An investor who entrusts a securities company to conduct securities trading shall apply for opening a securities account. Securities registration and settlement institutions shall, in accordance with regulations, open securities accounts for investors in their own names. When applying for opening an account, investors must hold legal documents proving China citizenship or China legal person qualification. Unless otherwise stipulated by the state. " It is precisely because the Securities Law stipulates that investors should provide legal documents to prove China citizenship or China legal person qualification when applying for account opening, and at the same time, because the existing securities account opening system of China Securities Registration and Clearing Center does not set up a limited partnership with partnership as the main body, the limited partnership cannot participate in securities investment, which affects the basic operation of venture capital limited partnership and becomes the core issue that completely deviates from the purpose of setting up the limited partnership system. The author suggests that the relevant authorities should make full use of Article 166 of the Securities Law, "except as otherwise provided by the state", issue a special statement that a partnership can open a securities account as soon as possible, and modify or upgrade the system of China Securities Registration and Clearing Center to meet the actual needs.

Safe harbor rules for intransitive verbs limited partners

The Partnership Enterprise Law stipulates that a limited partner can exercise certain rights, such as participating in the general partner's decision to join or quit the partnership enterprise, making suggestions on the operation and management of the enterprise, participating in the selection of accounting firms to undertake the audit business of the limited partnership enterprise, obtaining the audited financial and accounting reports of the limited partnership enterprise, and consulting the financial and accounting books and other financial materials of the limited partnership enterprise for situations involving their own interests. When the interests of a limited partnership enterprise are infringed, it claims rights or brings a lawsuit to the responsible partner, and the executive partner delays urging it to exercise rights or bring a lawsuit in his own name for the benefit of the enterprise, and provides guarantee for the enterprise according to law. At the same time, the Partnership Enterprise Law makes it clear that when a limited partner exercises the aforementioned rights, it is not regarded as the execution of partnership affairs, and the debt liability of a limited partnership enterprise is still limited to the subscribed capital contribution, which is the so-called safe haven rule.

However, if the limited partner violates the safe haven rule and exercises the general partner's right to carry out partnership affairs, such as the limited partner requests to participate in investment voting within the investment scope and investment field agreed in the Limited Partnership Agreement, the limited partner wants to participate in the investment decision-making committee to influence the general partner's decision-making on investment matters, and the limited partner always requests to convene a meeting of the limited partner's representative committee to interfere with the general partner's partnership affairs. Such behavior will be regarded as violating the basic system of limited partnership in the Partnership Law, and the limited partner will lose the protection of limited liability and become a general partner. Where a limited partner engages in partnership affairs beyond the scope of Article 68 of the Partnership Enterprise Law, he shall bear unlimited joint liability to the third party involved in the transaction and internal liability for the losses of the partnership enterprise or other partners.

In some venture capital limited partnership enterprises, some limited partners have not really understood the purpose and significance of establishing the limited partnership system. They interpret the limited partnership with the concept of company, and imagine the rights of limited partners in the limited partnership with the rights of shareholders in the company, which is easy to violate the safe haven rule and make limited partners bear unlimited joint liability.

conclusion

As one of the best forms of enterprise organization in venture capital industry, limited partnership is expected to make full use of the relationship between its own business risk and interest mechanism and exert the greatest effect. At the same time, all competent departments should pay full attention to the organizational form of limited partnership, improve various supporting laws and regulations, and remove various legal obstacles for the development of limited partnership enterprises.