Authors: Yin GE丨Sherry SI丨Rachel ZHANG丨Krystal HE
On December 30, 2022, the Asset Management Association of China ("AMAC") issued a consultation draft of the Measures for Registration and Filing of Private Investment Funds (《私募投资基金登记备案办法 (征求意见稿)》) and the ancillary Guidelines No. 1-3 on private fund manager registration (collectively, the "Draft Rules").
On February 24, 2023, AMAC issued the updated Measures for Registration and Filing of Private Investment Funds (《私募投资基金登记备案办法》) (the "Measures") and the ancillary Guidelines No. 1-3 (i.e. Guideline on Basic Operational Requirements ("Guideline No. 1"), Guideline on Shareholders, Partners and Actual Controllers ("Guideline No. 2") and Guideline on Legal Representative, Senior Management Personnel, Executive Partner or Its Authorized Representative ("Guideline No. 3") (together with the Measures, the "New Rules")[1]. The New Rules will take effect as of May 1, 2023.
The New Rules are intended to update and clarify the registration and filing requirements for private fund managers and private funds by amending the Measures for the Registration of Private Investment Fund Managers and Filing of Funds (for Trial Implementation) (《私募投资基金管理人登记和基金备案办法 (试行)》) issued by AMAC in 2014, as well as consolidating relevant requirements provided under other self-regulatory rules. We summarize in this newsletter the key noteworthy aspects of the New Rules, in order to provide readers with a general understanding of the proposed amendments.
Private fund manager registration
I. Qualifications for registering as a private fund manager
1. Requirements on applicant's basic information
The main requirements in the New Rules for the basic information of applicants are generally consistent with the current AMAC rules, while the New Rules, especially Guideline No. 1, provide further specific requirements as listed below:
Item |
Content |
Industry name |
No words such as "finance (金融)", "financial management (理财)" or "wealth management (财富管理)" may be used in the manager's name, unless otherwise stipulated by laws, administrative regulations, or the China Securities Regulatory Commission ("CSRC"). Without approval, no words such as "financial holding (金融控股)", "financial group (金融集团)" or "China Securities (中证)" may be used in the manager's name, no words identical with or similar to major national development strategies, financial institutions or well-known private fund managers, or that may mislead investors may be used in the name, and no words contrary to public order and good customs or causing adverse social impact may be used in the name[2]. |
Business scope |
The business scope must not include any business that conflicts with or is unrelated to the private fund management business. The business scope of a private securities fund manager may not include "investment consulting (投资咨询)" or other consulting related words[3]. |
Business premises |
The manager must have an independent and stable business premises, and may not use as a business site a location that is not stable, such as shared space. The manager may not work at the same business premises as its shareholders, partners, actual controllers or related parties. If the business premises are held by lease, the remaining lease term must be no less than 12 months from the date of applying for the registration, except that reasonable cause can be provided[4]. |
Staffing |
The number of full-time employees must be no less than five. Full-time employees include the following: regular employees who have signed labor contracts with the private fund manager and paid social insurance, foreign employees who have signed labor contracts or service contracts, re-employed retired employees, and senior management personnel ("SMP") appointed by enterprises controlled by state organs, public institutions, government and their authorized institutions[5]. |
Internal controls |
Other than internal control policies provided by the current AMAC rules, the manager must also formulate policies relating to business isolation, fund security guarantees, investment business controls, fair trading, outsourcing controls, etc.[6] |
Emergency handling plan |
The manager must establish an emergency disposal plan to make clear arrangements for handling emergencies that seriously damage the interests of investors, affect normal operations or may cause systemic risks[7]. |
Registration time |
The entity that intends to register as a private fund manager must apply for registration with AMAC within 12 months from the date of industry and commerce registration, except for those whose registration needs to be suspended due to circumstances such as policy changes of relevant state departments[8]. |
2. Standardized requirements – private fund manager qualification
sArticle 8 of the Measures stipulates certain requirements that a fund manager must continuously meet, and Article 15 of the Measures specifies certain circumstances where an entity may not act as a private fund manager, among which note the following two:
The private fund manager's paid-in monetary capital is no less than RMB 10 million or its equivalent, except for any special requirement otherwise provided for venture capital fund managers.
This is the first time for AMAC rules to specify a paid-in capital requirement for private fund managers.
The private fund manager's legal representative, executive partner or its authorized representative, and SMP in charge of investment management must, directly or indirectly, hold a certain percentage of equity shares of the private fund manager separately; meanwhile, their total paid-in capital may not be less than 20% of the paid-in capital of the private fund manager or not less than 20% of the minimum paid-in monetary capital of the private fund manager as stipulated in item (i)[9].
The above equity holding restrictions do not apply to private fund managers controlled by commercial banks, securities companies, fund management companies, futures companies, trust companies, insurance companies and other financial institutions, private fund managers controlled by the government and its authorized institutions, private fund managers controlled by an institution which is regulated by a foreign financial regulatory authority, and other private fund managers in line with the relevant provisions. Compared with the Draft Rules, the New Rules expand the exemption scope to include foreign-owned private equity fund managers among others.
3. Reiteration of special requirements for foreign-funded managers
Article 14 of the Measures stipulates that any private securities fund manager that has a total foreign ownership of 25% or above must fulfill the following requirements:
the private securities fund manager is a company established in China;
the foreign shareholder is a financial institution approved or licensed by the financial regulatory authority of the country/region in which it is located, and the securities regulatory authority of the country/region in which it is located has signed a memorandum of understanding on securities regulatory cooperation with CSRC or other institutions recognized by CSRC;
the private securities fund manager and its foreign shareholder have not been subject to significant penalties by any regulator or judicial authority in the last three years;
the use of capital and RMB funds derived from foreign exchange settlement must comply with the relevant regulations of the State Administration of Foreign Exchange;
when engaging in securities and futures trading within China, it must make independent investment decisions and not place trade orders through foreign institutions or foreign systems, except as otherwise provided by CSRC; and
other requirements specified by laws, administrative regulations, CSRC and AMAC.
Where the private securities fund manager has a foreign actual controller, the foreign actual controller must also comply with the requirements set out in (ii) and (iii) above. While the above requirements are generally consistent with the current ones applicable to foreign-invested private securities fund managers, it is worth noting that AMAC has set the foreign ownership threshold at 25%.
4. Consolidation and addition of circumstances where a fund manager registration will be suspended or rejected
Articles 24 and 25 of the Measures provide detailed circumstances where a fund manager registration will be suspended or rejected. Compared to the current AMAC rules, the requirements are stricter - e.g., if the applicant, which has been rejected due to not meeting the registration requirements of Articles 8 to 21 of the Measures, is rejected again for not meeting such requirements, the applicant may not apply for the private fund manager registration again within six months from the date of the second rejection.
II. Qualifications for controlling shareholders, actual controllers and related parties
The New Rules, especially Guideline No. 2, provide further specifies requirements for the qualifications of a private fund manager's controlling shareholder, actual controller and related parties as listed below.
Item |
Content |
Identification of the actual controller |
Articles 11, 12, 15 and 16 of Guideline No. 2 specify the identification approach of the actual controller of the company and the partnership enterprise respectively, as well as the circumstances of joint actual controllers and absence of an actual controller, which are consistent with the current AMAC rules. Article 13 and Article 14 of the Guideline No. 2 stipulate the look-through to the actual controller, especially where the actual controller involves a foreign party:
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Qualification conditions |
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Contribution structure |
Without justified reasons, the capital contribution structure of a private fund manager may not establish more than two levels of a nested structure through special purpose vehicles and must not circumvent relevant requirements for finance, integrity and professional competence of shareholders, partners and actual controllers by setting up special purpose vehicles or other means[13]. |
Groupization |
According to the Articles 17 and 18 of the Measures, if the same controlling shareholder or actual controller controls more than two private fund managers, it must have reasonable and necessary reasons for doing so. The above controlling shareholder or actual controller must also establish a continuous compliance and risk management system that is commensurate with the management scale and business conditions of private fund managers under its control, and strengthen the supervision and inspection of private fund managers on the premise of guaranteeing the independent operation of such managers. |
Stability |
According to the Article 20 of the Measures, a private fund manager's controlling shareholder, actual controller or general partner may not transfer equity, property shares or effective control within three years from the date of registration/change of registration, unless the following:
The newly added cases may give more comfort to foreign-funded managers, as the restructuring of the shareholding structure within the group or the implementation of employee incentives would not trigger the stability requirement. |
Regarding the scope of related parties of private fund managers, the New Rules propose further amendments as below:
Current AMAC Rules[14] |
New Rules[15] |
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III. Qualifications of SMP and other personnel
AMAC has shown its consistent focuses on the qualifications of private fund manager personnel. The New Rules not only explicitly set out the qualification requirements for private fund manager SMP, executive partners or their authorized representatives by adopting the negative list approach[16], but also strengthen the requirements for SMP's work experience and personnel stability of private fund managers.
Item |
Content |
Scope of SMP |
Article 80 (1) of the Measures amends the scope of SMP recognized by AMAC, which includes a company's general manager, deputy general manager, compliance and risk control officer, other personnel who actually perform the above duties and other personnel stipulated in the company's articles of association, as well as the personnel in a partnership enterprise who perform the above duties of operation management and risk control and compliance, etc. Any other personnel who do not have the above title but actually perform such duties should be deemed as SMP. Compared with the current AMAC rules, the legal representative no longer falls under the scope of SMP. |
Negative list |
Article 16 of the Measures specifies the circumstances where the persons may not act as the director, supervisor, SMP, executive partner or its authorized representative of a private fund manager. This is the first time AMAC rules specify the requirements on the directors and supervisors of the private fund manager. Compared with the requirements on directors and supervisors set out in Article 146 of the Company Law of the People's Republic of China, the negative list is more concentrated on the administrative regulatory and qualification conditions of such personnel, such as the following:
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Work experience |
Private fund securities fund manager - the legal representative, executive partner or its authorized representative, principal persons in charge of operation and management, as well as SMP in charge of investment management should have more than five years of relevant work experience in securities, funds, futures investment management, etc.[17] The detailed contents of the required work experience and investment performance are specified under Article 4 of Guideline No. 3.
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Dual-hatting restrictions |
The legal representative, SMP, executive partner or its authorized representative may not dual hat in unaffiliated private fund managers or other institutions with conflicts of interest with the private fund manager they belong to, such as the institutions conducting business in conflict with the private fund management business, or become their controlling shareholders, actual controllers or general partners. Notably, the New Rules specify the exemptions of such dual-hatting restrictions, such as acting as directors or supervisors in other enterprises, serving in the private funds under management, etc.[20]
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Personnel stability |
After the departure of the original SMP, the private fund manager must appoint a new SMP within six months.
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Private fund filing
I. Fundraising threshold
In Article 33 of the Measures, AMAC specifies for the first time the initial minimum paid-in capital scale for each type of private funds as follows.
private securities fund – RMB 10 million
private equity fund – RMB 10 million
venture capital fund – RMB 5 million for the first installment; RMB 10 million within 6 months after the fund filing
The New Rules also add a fundraising threshold requirement for the private fund which invests in a single investment target, which must be no less than RMB 20 million.
II. Investment scope
Compared with the current AMAC rules, Article 31 of the Measures: (i) adds depositary receipt, asset-backed securities, swap contracts and forward contracts for the investment scope of private securities funds; and (ii) adds convertible bonds or exchangeable bonds issued or traded privately, shares of unlisted public companies to the investment scope of private equity funds.
III. Fund documentation
Article 28 of the Measures provides more detailed risk disclosure requirements such as information on private fund manager and the management team, investment scope, investment strategy, investment structure, fund structure, custody condition, relevant fees, dividends distribution principles, fund exit and other important information, as well as investment risks, operation risks, liquidity risks and other risks, which must be disclosed to investors in fundraising and promotion materials, risk disclosure letter.
Article 28 further provides a series of circumstances where the private fund manager must give special notice to investors in the risk disclosure letter, which add the following circumstances compared with the current AMAC rules: (i) risks of overseas investment of fund assets; (ii) risks of hierarchical arrangements or other complicated structures for the fund or the involvement in major unprecedented matters; (iii) risks of non-completion of filing with AMAC of change on private fund manager's controlling shareholder, actual controller or general partner during the fundraising period; and (iv) a catch-all clause of other material investment risks or interests conflict risks. Where the private fund invests in a single target rather than a portfolio, the private fund manager should give a special warning about such risks, disclose in writing the basic conditions of the investment target, investment structure, possible losses arising from the failure to make the portfolio investment, and the dispute resolution mechanism, and ask the investor to sign for confirmation.
Article 29 of the Measures consolidates the essential elements of the fund contracts. Compared to the current AMAC rules, the following elements are newly added or further detailed: (i) the disclosure of the related party transactions including the identification of the related party transactions and determination mechanism of the relevant transaction consideration; (ii) the decision-making mechanisms relating to change of the private fund manager and fund liquidation, the convening parties, voting methods, voting procedures and voting ratios in case the private fund manager is unable to perform or neglects to perform the management duties due to loss of contact, cancellation of the manager registration, bankruptcy and other reasons; (iii) the marketization exit regime as stipulated in the Article 58 of the Measures.
IV. Closed-ended funds
According to Article 35 of the Measures, private equity fund investors are required not to redeem or quit after fund filing is completed. Compared with the current Instructions for Private Investment Fund Filing (《私募投资基金备案须知》), this provision: (i) does not mention the closed-ended module for private asset allocation funds; (ii) does not limit investors' initial/subsequent subscription during closed-ended operations while the current AMAC rules only allow existing investors raise their capital or new investors to subscribe for private funds under certain circumstances; and (iii) adds the detailed exceptions such as reduction of investors' outstanding capital contribution, which would not be deemed as the violation of the closed-ended operation requirement.
V. Filing suspension and prudent filing
The Measures also provide specific circumstances for suspension of filing and prudent filing respectively, as summarized below:
Item |
Content |
Filing suspension |
Article 42 of the Measures provides that AMAC will suspend fund filing of private fund managers if certain instances of non-compliance occur. |
Prudent filing |
Article 44 of the Measures makes key amendments to the draft version, providing that in case there are great hidden risks in private fund managers, private funds involve in major unprecedented matters, or there are complicated structures, special types of investment target and other circumstances, AMAC may adopt certain measures such as enhancing investor requirements, enhancing scale requirements, requiring fund custody, requiring fund custodians to issue due diligence reports or cooperate with inquiries, enhancing information disclosure, notifying special risks, quota management, restricting related-party transactions, and requiring private fund managers to issue internal compliance opinions, submit legal opinions or relevant financial reports, etc. Prudent filing raised concern for the QDLP manager as the Draft Rules provided specific scenarios for prudent filing which include the case where fund assets are mainly invested overseas, according to which any QDLP fund intended to make overseas investment would automatically be subject to prudent filing. We note the New Rules have removed such specific scenarios, which means the QDLP fund will not directly fall into the scope of prudent filing, although the interpretation and implementation of this requirement would depend on further guidance from AMAC. |
Self-regulatory measures and grandfathering mechanism
I. Reporting of basic information and material registration information
In case of any change to the following information of the private fund manager, the private fund manager will be required to perform change procedures with AMAC within ten working days from the date of such change, which includes: (i) basic information such as name, business scope, capital, registered address, office address; (ii) shareholder(s), partners, related parties; (iii) legal representative, SMP, executive partner or its authorized representative; and (iv) other information stipulated by CSRC and AMAC.
If the material registration information such as the controlling shareholder, actual controller or general partner of the private fund manager changes, the private fund manager will undertake the change procedures with AMAC within 30 working days from the date of the change and submit a special legal opinion.
If the actual control right of a private fund manager changes, the manager must submit a legal opinion on whether it is in full compliance with the registration requirements as a private fund manager after the change. AMAC will conduct a comprehensive verification of the fund manager pursuant to the new registration requirement. The administrative transfer or change of equity shares in accordance with the provisions, or the transfer between different entities controlled by the same actual controller will not be deemed as a change of actual control.
In case of a change to actual control, the assets under management of the private fund manager for the 12 months prior to the date of change must be continuously no less than RMB 30 million.
II. AMAC self-regulatory management
According to the Articles 66 to 71 of the Measures, in the event a private fund manager has any irregularities, AMAC may impose self-regulatory measures on the manager, relevant practitioners and intermediaries due to their non-compliance with the Measures.
AMAC also intends to strengthen the administration of the time limit for the fund filing – according to the New Rules, unless otherwise stipulated, AMAC will deregister a private fund manager's qualification and announce the same if the manager does not launch its first private fund within 12 months upon registration or does not launch a new private fund within 12 months upon the liquidation of all its filed private funds.
III. Grandfathering mechanism
Compared with the Draft Rules, the New Rules have provided a proper "grandfathering clause" for implementation of the updated manager registration and fund filing requirements which will take effect as of May 1, 2023:
For the manager registration, fund filing, information change and other business submitted for handling: (i) before the effectiveness of the New Rules, AMAC will apply the current rules to handle the above matters; (ii) after the effectiveness of the New Rules, AMAC will handle the matters in accordance with the New Rules;
After the effectiveness of the New Rules, where a registered fund manager submits any change to its registered information, the relevant item shall comply with the New Rules after such change, except for a change of control where the fund manager shall comply with the New Rules in full after such change; and
From May 1, 2023, AMAC will handle the manager registration, fund filing, information change and other businesses that have been submitted but not completed before the effectiveness of the New Rules in accordance with the New Rules.
It is encouraging to note that the New Rules have reflected market players' certain comments on the Draft Rules. However, some pending points may still require further clarification from the regulators, such as for PFM/QDLP managers, whether there could be any reasonable leeway to apply certain requirements which may impact their existing business such as the holding structure and the dual-hatting arrangement permitted thereunder.
We have also prepared an English translation of the New Rules. Please contact us if you wish to receive a copy.
Important Announcement |
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This Legal Commentary has been prepared for clients and professional associates of Han Kun Law Offices. Whilst every effort has been made to ensure accuracy, no responsibility can be accepted for errors and omissions, however caused. The information contained in this publication should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. If you have any questions regarding this publication, please contact: |
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Yin GE Tel: +86 21 6080 0966 Email: yin.ge@hankunlaw.com Sherry SI Tel: +86 21 6080 0927 Email: sherry.si@hankunlaw.com |
[1] The Rules are available at:https://www.amac.org.cn/businessservices_2025/privatefundbusiness/gzdt/202212/t20221230_14355.html (Chinese only).
[2] Guideline No. 1, art. 3.
[3] Guideline No. 1, art. 4.
[4] Guideline No. 1, art. 8.
[5] Measures, art. 8 (4); Guideline No. 1, art. 9.
[6] Guideline No. 1, art 10.
[7] Guideline No. 1, art. 11.
[8] Guideline No. 1, art. 2.
[9] Guideline No. 1, art. 6.
[10] Guideline No. 2, art. 5.
[11] Measures, art. 9 (2).
[12] Guideline No. 2, art. 3.
[13] Guideline No. 2, art. 2.
[14] Registration Instructions of Private Fund Managers (《私募基金管理人登记须知》), art. 6(1).
[15] Guideline No. 2, art. 18.
[16] Measures, art. 16.
[17] Measures, art. 10 (2).
[18] Measures, art. 10 (3).
[19] Measures, art. 10 (4).
[20] Measures, art. 11; Guideline No. 3, art. 10.
[21] Measures, arts. 11, 12, 17.
[22] Guideline No. 2, art. 3.
[23] Measures, art. 21; Guideline No. 3, art 11.
