Feasibility analysis of SOE acting as GPs of PE funds

By Lu Guofei and Wang Tingting, Boss & Young

As private-equity-investment funds flourish, the business has gradually drawn the participation of state-owned capital. At present, a clear majority of PEI funds are organized as limited partnerships. However, Article 3 of the Partnership Law states that “solely state-owned companies, state-owned enterprises, listed companies, public welfare institutions and social organizations shall not act as general partners”. Therefore, it makes one wonder if a SOE can participate in a PEI fund as a limited partner.

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This article analyzes the concept of SOEs and makes operational recommendations to state-owned capital players to participate in PEI funds as general partners.


Article 3 of the Partnership Law juxtaposes solely state-owned companies with SOEs, stipulating that they shall not act as general partners. It is easy to understand the concept of solely state-owned companies, but further analysis is needed to understand SOEs in such a law. There is no uniform definition of the concept of SOEs. The main provisions are as follows:

About the Law on State-owned Assets of Enterprises. Before the Law on State-Owned Assets of Enterprises was implemented on 1 May 2009, the State-owned Assets Supervision and Administration Commission, the Ministry of Finance, the National Development and Reform Commission and the National Bureau of Statistics had sporadic and fragmented provisions on the concept of state-owned assets. After the law came into effect, the management of state-owned assets of enterprises was subject to systematic regulations.

王婷婷 WANG TINGTING 邦信阳中建中汇律师事务所实习律师 Trainee Boss & Young
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Article 5 of the said law provides that “the state-funded enterprises mentioned … refer to solely state-owned enterprises and solely state-owned companies that are funded by the state, as well as state-owned holding companies and state-owned joint-stock companies”. SOEs here should be understood to be solely SOEs and solely state-owned companies, which are also first-class enterprise legal persons funded by the government or state-owned assets supervision and administration institutions.

About classification of types of business registration. To establish a limited partnership, the first step is to register with the administration for industry and commerce. The SOE definition in relevant regulations relates to whether a limited partnership can be established.

The State Administration for Industry and Commerce and the NBS issued the Notice on Adjustment of the Regulations for Classifying the Types of Enterprise Registration on 30 September 2011. Article 3 of the notice provides that SOEs “refer to the non-corporate economic organizations with all assets owned by the state and registered according to the Administrative Regulations for Registration of Enterprise Legal Persons, excluding the solely state-owned companies within the scope of limited liability company”. The SOEs here should be understood as the first-class enterprise legal persons funded by the government or state-owned assets supervision and administration institutions. In addition, solely state-owned companies are clearly removed from the concept of SOEs.

Understanding transaction supervision. The Measures for Supervision and Administration on Transactions of State-Owned Assets of Enterprises issued by the SASAC and the MoF, effective 24 June 2016, defines SOEs as “state-owned holding enterprises and state-owned and state-controlled enterprises”. SOEs refer solely to companies funded by government departments and agencies or public institutions, and solely SOEs with 100% shares held by the aforementioned entities and enterprises directly or indirectly, including solely SOEs, solely state-owned companies and wholly SOEs. The solely SOEs and solely state-owned companies mentioned in this law are the first-class enterprise legal persons funded by government departments and agencies or public institutions, but wholly SOEs include first-class and multi-class enterprise legal persons.

The aforementioned interpretation of SOEs overlap and differ, but the concept of SOE in the partnership law can be clarified. Further interpretation will be made with the development of legislation and regulatory concepts of state-owned assets of enterprises.


In practice, it is common for state-owned capital-related enterprises to be general partners in limited partnerships, especially in the field of government-guided funds and government-funded parent funds. However, what kind of SOEs are allowed or prohibited to be general partners of PEI funds under Article 3 of the partnership law?

Article 3 states that its legislative purpose is to prevent solely state-owned companies and SOEs as general partners of partnerships from assuming unlimited liability. According to the search, some wholly SOEs and state-owned holding enterprises indeed serve as general partners in some PEI funds filed with the fund industry association, that is, wholly SOEs and state-controlled enterprises serving as general partners in limited partnerships can complete industrial and commercial registration and can also file with the fund industry association. However, we have not found that any solely state-owned company or solely SOE serving as a general partner in a limited partnership can complete industrial and commercial registration.

In practice, to avoid violation of the prohibitive provisions of the Partnership Law, it is recommended that SOE establishes a subsidiary (or a sub-subsidiary), by means of a whole ownership or a shareholding, to participate in a PEI fund and act as a general partner.

Lu Guofei is a partner and Wang Tingting is a trainee at Boss & Young

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