Hainan Province's Interim Measures on Qualified Foreign Limited Partners (QFLP) Domestic Equity Investment

Chapter 1 General Provisions
Article 1 In order to actively promote the construction of Hainan Free Trade Port, promote the opening up of the financial industry, and standardize the domestic equity investment business of qualified foreign limited partners (QFLP), this interim measure is formulated in accordance with relevant laws and regulations.

Article 2 Strengthen market dominance. Taking the construction of Hainan Free Trade Port as an opportunity, we will coordinate the introduction of investment and talents, fully stimulate market vitality, respect market rules, and encourage foreign-invested equity investment enterprises to settle in Hainan.

Article 3 Strengthen government guidance. The financial work departments at all levels of provinces, cities (counties), together with the market supervision bureaus at the same level, the Hainan Supervision Bureau of the China Securities Regulatory Commission, the Haikou Central Branch of the People's Bank of China and other relevant units, will strengthen guidance on the establishment and operation of foreign-invested equity investment enterprises. All relevant units shall perform supervision according to their respective responsibilities, and the municipal (county) government shall earnestly perform its local management responsibilities, guide and urge enterprises to operate in a standardized manner and develop healthily.

Article 4 Effectively prevent risks. Improve the risk early warning monitoring, mitigation and disposal mechanism, use regulatory technology to do a good job in risk prevention and control of foreign-invested equity investment enterprises, achieve "early detection and severe crackdown", and effectively prevent illegal activities such as illegal fundraising in the name of equity investment.

Article 5 Foreign-invested equity investment enterprises referred to in these Measures include foreign-invested equity investment management enterprises and foreign-invested equity investment enterprises. Foreign-invested equity investment enterprises can adopt organizational forms such as corporate system and partnership system and be managed in accordance with general foreign-invested enterprises.

Foreign-invested equity investment management enterprises referred to in these Measures refer to enterprises that are invested, established and actually operated by foreign enterprises or natural persons in Hainan Province in accordance with the law, and whose main business is to initiate the establishment or entrusted management of foreign-invested equity investment enterprises.

Foreign-invested equity investment enterprises referred to in these Measures refer to enterprises that are invested, established and actually operated by foreign enterprises or natural persons in Hainan Province in accordance with the law, raise funds from domestic and foreign investors in a non-public manner, and invest in the equity of domestic non-publicly traded enterprises.

Article 6 Foreign-invested equity investment management enterprises (hereinafter referred to as "equity investment management enterprises") may raise funds from domestic investors that meet relevant regulations to establish RMB funds.

Domestic private equity and venture capital fund management companies may initiate the establishment or be entrusted with the management of foreign-invested equity investment enterprises (hereinafter referred to as "equity investment enterprises").

Chapter II Foreign-invested Equity Investment Enterprises
Article 7 The registered capital or subscribed capital of foreign-invested equity investment enterprises may be RMB or freely convertible foreign currencies. There is no minimum registered capital or subscribed capital limit for foreign-invested equity investment enterprises and domestic private equity and venture capital fund management companies that initiate the establishment or are entrusted with the management of equity investment enterprises, and there are no restrictions on the initial investment ratio, monetary investment ratio, investment period, etc.

Article 8 Relevant provincial functional departments, municipal (county) people's governments or key industrial park management committees may issue a recommendation letter to the Hainan Provincial Administration for Market Regulation and copy it to the Hainan Provincial Local Financial Supervision and Administration Bureau for foreign-invested equity investment enterprises that meet the economic development needs of the department, the region or the park, and the Hainan Provincial Administration for Market Regulation shall register them in accordance with the law. The municipal (county) people's government may authorize the financial management unit at the same level to issue a recommendation letter. When applying for a recommendation letter, a foreign-invested equity investment enterprise shall submit the following application materials:

(i) "Application Form for Establishing a Foreign-Invested Equity Investment Management Enterprise" (Appendix 1) or "Application Form for Establishing a Foreign-Invested Equity Investment Enterprise" (Appendix 2);

(ii) Articles of Association or Partnership Agreement;

(iii) List of legal representatives and board of directors, and copies of their ID cards;

(iv) List of at least 2 senior management personnel, resumes and related supporting materials;

(v) Registration certificate or identity document of the foreign investor notarized by the notary office of the country where the investor is located and certified by the Chinese embassy (consulate) in that country. Investors from Hong Kong, Macao or Taiwan shall provide registration or identity documents notarized by the local notary office in accordance with the law;

(vi) A letter of commitment issued by the applicant on the authenticity of all the above materials.

Article 9 Foreign-invested equity investment enterprises shall handle the following registration change procedures in accordance with relevant laws and regulations:

(i) Enterprise name;

(ii) Business scope;

(iii) Change of shareholders or partners;

(iv) Increase or decrease of the amount of capital subscribed or actually paid, or the payment period;

(v) Change of company organizational form;

(vi) Change of senior management personnel;

(vii) Company division or merger;

(viii) Dissolution, liquidation or bankruptcy.

Article 10 Foreign-invested equity investment enterprises shall report the following major events in the investment operation process of the half-year to the Hainan Provincial Local Financial Supervision and Administration Bureau every six months:

(i) Operation of investment projects of equity investment management enterprises and equity investment enterprises;

(ii) Modification of important legal documents such as contracts, articles of association or partnership agreements;

(iii) Other matters required by the Hainan Provincial Local Financial Supervision and Administration Bureau.

Article 11 Foreign-invested equity investment enterprises may distribute profits or liquidate and withdraw capital in accordance with the provisions of the company's articles of association or partnership agreement. When foreign-invested equity investment enterprises remit profits, dividends and bonuses, they must submit relevant certification materials to the bank and can only remit them abroad after being reviewed and approved.

Article 12 Foreign-invested equity investment enterprises shall be dissolved, liquidated, cancelled and withdrawn in accordance with relevant laws and regulations.

Chapter III Foreign-invested Equity Investment Management Enterprises
Article 13 Equity investment management enterprises shall be registered in accordance with the following procedures:

(i) The relevant functional departments of the province, the municipal (county) people's government (or the authorized financial management unit at the same level), and the management committee of the key industrial park shall issue a recommendation letter to the Hainan Provincial Market Supervision Administration for equity investment management enterprises, and copy it to the Hainan Provincial Local Financial Supervision Administration;

(ii) The Hainan Provincial Market Supervision Administration shall register and register them in accordance with the law based on the recommendation letter;

(iii) Go through the foreign exchange registration procedures at the bank;

(iv) Register as a private equity fund manager with the China Securities Investment Fund Association.

Article 14 The name of an equity investment management enterprise shall be composed of the administrative division, name, industry and organizational form in sequence, and the industry description shall be marked with the words "equity investment management".

Article 15 Equity investment management enterprises shall have at least 2 senior managers who meet the following conditions:

(i) Have more than 5 years of experience in equity investment or equity investment management business;

(ii) Have more than 2 years of experience in senior management positions;

(iii) Have experience in equity investment in China or working in domestic financial institutions;

(iv) Have no record of violations or economic dispute litigation cases that are still being handled in the past 5 years, and have a good personal credit record.

The senior managers referred to in these Measures refer to the directors, supervisors, general managers, deputy general managers, financial managers, board secretaries and other personnel stipulated in the company's articles of association, as well as the general partners of partnerships and other personnel stipulated in the partnership agreement. If the general partner of a partnership is a legal person, the senior managers of the institution shall be deemed as senior managers.

Article 16 Equity investment management enterprises may entrust a banking institution approved by the banking regulatory authority of the State Council, with the ability and qualifications for fund custody, with branches in Hainan Province and at the level of a second-level branch or above (including second-level branches) as the main fund custody bank.

Article 17 The main business of an equity investment management enterprise is to initiate and establish and manage equity investment enterprises and related businesses. It may also initiate or entrust the management of domestic private equity and venture capital funds in accordance with relevant regulations.

Chapter IV Foreign-invested Equity Investment Enterprises
Article 18 Equity investment enterprises shall be registered in accordance with the following procedures:

(i) The relevant functional departments of the province, the municipal (county) people's government (or the authorized financial management unit at the same level), and the key industrial park management committee shall issue a recommendation letter to the Hainan Provincial Market Supervision Administration for equity investment enterprises, and copy it to the Hainan Provincial Local Financial Supervision Administration;

(ii) The Hainan Provincial Market Supervision Administration shall register in accordance with the law based on the recommendation letter;

(iii) Go through foreign exchange registration procedures at the bank;

(iv) File a private equity fund with the China Securities Investment Fund Association.

Article 19 The name of an enterprise shall consist of the administrative division, name, industry, and organizational form in sequence, and the industry description shall indicate the word "equity investment".

Article 20 Domestic RMB funds managed by equity investment enterprises or equity investment management enterprises shall entrust a bank institution approved by the banking regulatory authority of the State Council, with the ability and qualifications for fund custody, with branches in Hainan Province and at or above the second-level branch level (including second-level branches), or a securities firm with the ability and qualifications for fund custody as the project fund custodian.

Article 21 Equity investment enterprises shall not engage in the following businesses:

(i) Investing in areas where foreign investment is prohibited by the state;

(ii) Trading in secondary market stocks and corporate bonds, except for investment targets approved by the Hainan Provincial Local Financial Supervision and Administration Bureau, the Hainan Regulatory Bureau of the China Securities Regulatory Commission, the Haikou Central Branch of the People's Bank of China, the Hainan Provincial Market Supervision Administration and other management departments;

(iii) Trading in financial derivatives such as futures;

(iv) Investing in real estate not for self-use;

(v) Misappropriating non-self-owned funds for investment;

(vi) Providing loans or guarantees to non-invested enterprises;

(vii) Other matters prohibited by national laws and regulations.

Chapter V Support Policies
Article 22 Actively promote foreign-invested equity investment enterprises to be included in the Hainan Free Trade Port Encouraged Industry Catalogue and the Encouraged Foreign Investment Industry Catalogue, and enjoy corporate income tax preferences. Foreign-invested equity investment enterprises settled in key industrial parks can enjoy local preferential policies for key industrial parks. Relevant departments should guide and encourage foreign-invested equity investment enterprises to register in key industrial parks in our province and invest in industries in the Hainan Free Trade Port Encouraged Industry Catalogue.

Article 23 Equity investment management talents can apply for recognition as high-level talents in Hainan Province in accordance with relevant regulations, and those who meet the conditions can enjoy preferential policies such as talent settlement, car and house purchase, spouse employment, children's schooling, medical care and housing security.

Article 24 The people's governments of all cities (counties) and the management committees of key industrial parks should introduce relevant support policies such as settlement incentives for foreign-invested equity investment enterprises, office space subsidies, and economic contribution incentives.

Article 25 The Hainan Provincial Local Financial Supervision and Administration Bureau, the Hainan Regulatory Bureau of the China Securities Regulatory Commission and the Hainan Provincial Market Supervision Administration shall earnestly promote the transfer of private equity, give full play to the platform role of various trading venues, and provide services for the custody, trading and exit of foreign-invested equity investment enterprises in accordance with the law.

Chapter VI Risk Prevention and Control
Article 26 The Hainan Provincial Local Financial Supervision and Administration Bureau, the Hainan Provincial Market Supervision Administration, the Hainan Regulatory Bureau of the China Securities Regulatory Commission, the Hainan High People's Court of Hainan Province, the Hainan Provincial Public Security Department, the Hainan Provincial Department of Justice, the Hainan International Arbitration Court and the governments of various cities (counties) shall implement the responsibility of risk prevention and disposal, do a good job in financial risk prevention and control, and prevent and crack down on illegal and irregular financial activities such as illegal fundraising in the name of equity investment, venture capital, private equity funds, etc.

Article 27 The Hainan Provincial Local Financial Supervision and Administration Bureau, the Hainan Provincial Development and Reform Commission, the Hainan Provincial Department of Commerce, the Hainan Provincial Market Supervision Administration, the Haikou Central Branch of the People's Bank of China, the Hainan Regulatory Bureau of the China Securities Regulatory Commission and the Hainan Provincial Public Security Department shall strengthen the innovation of supervision during and after the event, establish a supervision mechanism based on credit for pre-credit verification, in-process classification supervision and post-event joint rewards and punishments, and carry out joint supervision and dynamic supervision. If a foreign-invested equity investment enterprise violates the provisions of these Measures, the relevant departments shall conduct an investigation according to their duties. If the situation is true, they shall be ordered to rectify within 30 working days; if they fail to rectify within the time limit, they may be announced to the public and investigated and dealt with according to law; if they constitute a crime, they shall be transferred to the judicial department for criminal prosecution according to law.

Article 28 The Hainan Securities and Futures Association shall improve the operation mechanism of the industry association, carry out member services, give full play to the industry self-discipline management function, and urge and guide members to operate in a standardized and legal manner.

Chapter VII Supplementary Provisions
Article 29 Investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and Taiwan, as well as Chinese citizens residing abroad, shall refer to these Measures when investing in and establishing foreign-invested equity investment enterprises in this province.

Article 30 For foreign-invested equity investment enterprises with good operating conditions, more convenient foreign exchange receipts and payments management measures may be explored in the future.

Article 31 The Hainan Provincial Local Financial Supervision and Administration Bureau shall be responsible for interpreting these Measures.

Article 32 These Measures shall come into force on the date of promulgation.