Shanghai: Piloting the Physical Distribution of Stocks for Equity Investment Funds

"Caifeng News, January 10th: The General Office of the People's Government of Shanghai Municipality has issued the 'Several Measures to Further Promote the High-Quality Development of the Shanghai Equity Investment Industry.'

Among them, it is mentioned to deepen the Qualified Foreign Limited Partner (QFLP) pilot. If one of the controlling shareholders, actual controllers, or general partners of the managers participating in the QFLP pilot meets the conditions of having 5 years of experience in operation, management, or engaging in asset management, investment, or related industries, they are supported to register with the Asset Management Association of China (AMAC). To promote innovation in the QFLP pilot, expand the investment fields and methods, optimize the application and modification processes, and facilitate sovereign wealth funds, pension funds, donation funds, university funds, and other institutional investors to invest in entities through the QFLP pilot.

Pilot the distribution of stocks for equity investment funds. Distribute the shares held by equity investment funds in eligible listed companies before their initial public offering to fund investors through non-trading transfer, orderly expanding the pilot coverage.

Notice from the General Office of the People's Government of Shanghai Municipality on Several Measures to Further Promote the High-Quality Development of the Shanghai Equity Investment Industry

People's Governments of all districts, Committees, Offices, and Bureaus of the Municipal Government:

The 'Several Measures to Further Promote the High-Quality Development of the Shanghai Equity Investment Industry' has been approved by the Municipal Government and is now issued to you. Please implement it carefully.

General Office of the People's Government of Shanghai Municipality

December 29, 2023

Several Measures to Further Promote the High-Quality Development of the Shanghai Equity Investment Industry

To implement the 'Regulations on the Supervision and Administration of Private Investment Funds' (hereinafter referred to as the 'Regulations'), give full play to the functional role of equity investment in serving the real economy, promoting technological innovation, and driving the coordinated development of Shanghai International Financial Center and the International Science and Technology Innovation Center, the following measures are proposed to further promote the high-quality development of the Shanghai equity investment industry:

1. Optimize the establishment services and industry management of equity investment institutions

(1) Promote the aggregation of equity investment elements. In accordance with the '14th Five-Year Plan' for the construction of the Shanghai International Financial Center, further optimize the spatial layout of local equity investment institutions in this city, and support the construction of equity investment aggregation areas in districts with strong professional service capabilities, significant policy support, and high industry management levels, as well as the Lingang New Area. Promote the aggregation of newly established (relocated) equity investment institutions in these areas.

(2) Encourage newly established (relocated) equity investment institutions in equity investment aggregation areas. The financial work department of the equity investment aggregation area serves as the one-stop service department for newly established (relocated) equity investment institutions. It announces the processing channels, designates specific personnel, and conducts docking guidance on preparation matters such as application materials for applicants. For new (relocated) applications that meet the requirements of the 'Regulations' and the Asset Management Association of China (AMAC) in terms of completeness of application materials, the financial work department of the equity investment aggregation area should complete the processing procedures within 7 working days after the applicant submits the complete materials. Relevant municipal departments provide cross-service, and simultaneously process with the financial work department of the equity investment aggregation area. For applications that have been confirmed without objections, after receiving the materials submitted by the equity investment aggregation area, promptly issue a letter to the municipal market supervision department.

(3) Establish a fast-track mechanism for the establishment of equity investment funds. For newly established equity investment funds by equity investment fund managers, the equity investment aggregation area directly issues a letter to the municipal market supervision department, without submitting materials to relevant municipal departments. For equity investment fund managers included in the fast-track mechanism, the following conditions must be met: registration filing is completed in AMAC, no negative records are found in the National Enterprise Credit Information Publicity System, and there are no prompt messages or negative credit information on the AMAC classification query publicity page.

(4) Improve industry management of the equity investment sector. Establish an information-sharing mechanism among local district governments, municipal local financial regulatory authorities, municipal market supervision authorities, Shanghai Securities Regulatory Bureau, Shanghai Banking and Insurance Regulatory Bureau, AMAC, and other departments and units. Solidify the main responsibilities of fund managers, custodians, intermediary institutions, etc., strengthen early risk notification and collaborative disposal, and promote the healthy development of industry norms.

(5) Pilot the registration of contract-based private equity funds. In accordance with the relevant provisions of the 'Regulations,' carry out a pilot registration of the market entities of contract-based private equity funds investing in enterprises. When using the property of contract-based equity investment funds for investment, the name of the contract-based equity investment fund should be indicated when opening an account in the name of the equity investment fund manager, entering the shareholder roster of the invested enterprise, or holding other property of the equity investment fund.

2. Guide early investment, small-scale investment, and technological investment

(6) Improve the government-guided fund system. Study the establishment of the Shanghai Science and Technology Innovation Guidance Fund, focusing on early investment in the field of scientific and technological innovation. Expand the scale of the municipal venture capital guidance fund and the municipal angel investment guidance fund in an orderly manner, give full play to the leverage effect of fiscal funds, improve the profit-sharing mechanism of government-guided funds, and gradually establish valuation, negotiation, pricing, and other work processes based on market principles. Strengthen the linkage between municipal and district-level government-guided funds, and enhance guidance and support for early investment, small-scale investment, and technological investment.

(7) Establish a professional service platform for angel investment. Support professional teams in establishing industry organizations for angel investment, build a professional service platform that aggregates angel investors, technology transfer projects, and seed and early-stage technology enterprises, and jointly conduct due diligence, valuation, and investment to strengthen the discovery and investment incubation of high-quality early-stage technology innovation projects. Establish an angel investment database to track statistics and screening assessments of angel investors and core teams, and strengthen the reference and application of evaluation results in government-guided fund investment and policy application.

(8) Formulate reward policies for early investment, small-scale investment, and technological investment. The equity investment aggregation area should formulate investment reward policies, rewarding equity investment fund managers and business teams with more than 2 years of investment in seed and early-stage technology enterprises in the area that have been recognized, guiding social capital to invest early and small in technology. Seed and early-stage technology enterprises refer to relevant regulations such as the 'Announcement of the Ministry of Finance and the State Administration of Taxation on Continuing to Implement the Relevant Policy Conditions for Individual Investment in Start-up Technology Enterprises by Venture Capital Enterprises and Angel Investors.'

3. Support the development of enterprise venture capital

(9) Support the main enterprises in the industrial chain to carry out Corporate Venture Capital (CVC). In accordance with the layout of the modern industrial system in this city, promote main enterprises in the chain to carry out equity investment around key links in their own industrial chain, participate in upstream and downstream collaborative innovation, and accelerate breakthroughs in core technology research and development and industrial transformation. For CVC institutions established by main enterprises, relevant special policies can be.