Monday, September 22, 2008

Can a company serve as a general partner?

Article 15 of the PRC Company Law (CL) answers this question with a not-so-firm "no":

Article 15: A company may invest in other enterprises; however, unless stipulated otherwise by law, it may not become an investor that bears joint and several liability for the debts of the enterprise in which it invests.
[第十五条  公司可以向其他企业投资;但是,除法律另有规定外,不得成为对所投资企业的债务承担连带责任的出资人。]

If one compares Article 15 of CL with Articles 2 and 3 of the Partnership Enterprise Law, some interesting inquries might arise:

Article 2: A partnership enterprise referred to in this Law shall mean a general partnership enterprise or a limited partnership enterprise that is established by a natural person, legal person or any other organisation in China pursuant to this Law. 

A general partnership enterprise is formed by general partners where every partner shall be jointly and severally liable without limit for the debts of the partnership enterprise. Where the law herein provides specifically for how liability should be borne by general partners, such provisions shall then prevail. 

A limited partnership enterprise is formed by general partners and limited partners where every general partner shall be jointly and severally liable without limit for the debts of the partnership enterprise and limited partners shall be liable for the debts of the partnership enterprise up to their subscribed capital contribution. 

[第二条 本法所称合伙企业,是指自然人、法人和其他组织依照本法在中国境内设立的普通合伙企业和有限合伙企业。

普通合伙企业由普通合伙人组成,合伙人对合伙企业债务承担无限连带责任。本法对普通合伙人承担责任的形式有特别规定的,从其规定。 

有限合伙企业由普通合伙人和有限合伙人组成,普通合伙人对合伙企业债务承担无限连带责任,有限合伙人以其认缴的出资额为限对合伙企业债务承担责任。]

Article 3: Wholly State-owned and wholly State-funded companies, State-owned enterprises, listed companies and charitable institutions and social organisations shall not be general partners. 

[第三条 国有独资公司、国有企业、上市公司以及公益性的事业单位、社会团体不得成为普通合伙人。]

So, can a company become a general partner in either a limited or general partnership?

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