By Peter Fuhrman

Ratcheting Up the Criticism of Performance Ratchets in China

In an interesting discussion a couple of weeks ago in Shenzhen with a very smart and capable lawyer (Ke Luo of Fangda Partners), I learned about a small, but growing backlash against the Top Tier private equity firms working China. Evidently there have been some articles in the Chinese press voicing criticisms of their approach and methods, and comparing them unfavorably with Chinese domestic investment companies.

Upfront disclosure: China First Capital, Ltd. chooses to work only with the 70 or so Top Tier private equity firms active in China, as we believe they are the best investors for companies with the greatest potential, adding more value, beyond just capital, than any other source of investment.

A main point of contention: the ratchet and performance provisions of most of the top private equity investment deals in China (and everywhere else in the world). These are the provisions, incorporated into the final closing share purchase agreement, through which the PE firm gains greater ownership in a company they’ve invested in if the company fails to meet previously agreed revenue, profit or margin targets. Read the rest of “Private Equity Firms in China in the Firing Line” or post a comment

By Stephen Lou

Introduction

In the wake of the economic crisis, there have been stories of foreigners in Dubai abandoning anything from their automobiles, newly purchased real estate, and other belongings while leaving the country for fear of facing criminal liability due to unpaid debts. China too has seen similar trends regarding foreign investors abandoning their manufacturing plants, liquidating existing bank accounts and leaving unpaid debts to creditors and employees. China’s relevant ministries have responded with the issuance of the Working Guidelines on Cross-border Pursuit of Liability and Initiation of Legal Action by Relevant Interested Parties in Connection with Abnormal Withdrawal from China of Foreign Investors, to assist Chinese parties to initiate legal action against such foreign investors.

The Guidelines can also affect foreign investors, who have not necessarily “abnormally withdrawn”, but who have not gone through the proper closure/de-registration procedures of a company. Read the rest of “New Guidelines For Legal Action Against Foreign Investors: More reason to Properly Closing Your Company” or post a comment

After your first study visit to China, you may realize that doing business in China requires a local presence of your firm to facilitate business communications, or you may wish to further assess a better understanding of the size and potential of the China market before investing committed resources.

The next step is to consider setting a representative office, which is the fastest and the most economical…

Read the rest of “Tips to Set Up a Representative Office in China” or post a comment >>

By Spencer Jan

There are plenty of things to consider when you invest in China. Are you a serious investor with money burning a hole in your pocket? Or perhaps you are just the average China business traveller curious to know a little more. Regardless of your situation, a little more knowledge won’t hurt. Here’s a few key points to consider when dealing with investments into China:

1. Opportunities to invest in China
FDI in China has grown steadily and significantly for over two decades. China is now the world’s leading recipient of foreign capital. China’s legal framework for FDI has also made substantial progress and there is a growing predictability for investments in China.

2. Guiding foreign investment in China
As an economy in the middle of transforming from a planned regime to a primarily market-oriented regime, the Chinese government still plays key roles in directing and regulating foreign investments. Read the rest of “Invest in China: 10 Points to Help You Make a Wiser Decision” or post a comment

One of the best VCs in the world is Gary Rieschel. He started Softbank and now is EMD at Qiming Venture Partners. When I visited him in China, he took me into a taxi where he showed me one of the businesses he was investing in. Cool conversation about China enterpreneurship too.

As to China, I’m still processing our trip. It was mind bending. Lots of photos are up on my Flickr feed. But…

Read the rest of “A taxi business in Shanghai, China?” or post a comment >>