China Allows Private Equity Investment in Insurance Companies

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May 20 – With the view to encourage private investment in the insurance industry, China’s Insurance Regulatory Commission (CIRC) released the “Circular on Relevant Issues regarding the Investment and Shareholding of Limited Partnership Equity Investment Enterprises in Insurance Companies (Baojianfa [2013] No. 36, hereinafter referred to as the ‘Circular’)” on April 24, which allows limited partnership equity investment enterprises to invest in the country’s insurance companies.

The Circular sets out the requirements for a limited partnership equity investment enterprise to invest in an insurance company and outlines the application materials required by the CIRC. The Circular applies to all Chinese insurance companies in which the shareholding of all foreign investors is less than 25 percent, as well as domestic and foreign-invested limited partnership equity investment enterprises. Detailed information can be found below.

Eligibility Requirements

To make investment in an insurance company, a limited partnership equity investment enterprise (hereinafter referred to as ‘Equity Enterprise’) shall comply with the following requirements:

  • The insurance company invested by the Equity Enterprise shall have a controlling shareholder or an actual controller, a reasonable equity structure, as well as sound and stable corporate governance.
  • The Equity Enterprise shall truthfully disclose the funding sources and the background of its partners, including their names, nationalities, business scope or occupations and contribution amount.
  • The general partner responsible for executing the affairs of the Equity Enterprise shall have favorable credit and tax payment records, and bear corresponding liabilities for investment in the insurance company.
  • The capital contribution or shareholding of an Equity Enterprise in an insurance company shall not exceed 5 percent; and the total capital contribution or shareholding of all Equity Enterprises in an insurance company shall not exceed 15 percent.
  • The Equity Enterprise cannot be the largest shareholder, controlling shareholder or actual controller of the insurance company, and cannot participate in the operation and management of the insurance company
  • Where the Equity Enterprise has a limited operational period, it shall transfer its equity interests in the insurance company prior to the expiry of such operational period.
  • The Equity Enterprise shall satisfy other conditions prescribed by the CIRC.

Application Materials

To make an investment in an insurance company, an Equity Enterprise shall submit a written application to the CIRC and provide the following materials:

  • Basic information, including photocopy of business license and information on business scope, organizational and management structure, industry status, sources of investment funds and outward investment.
  • Previous year’s financial and accounting report audited by an accounting firm.
  • Tax payment records of the past three years and credit records issued by a credit reporting institution.
  • Description on the affiliation among the partners, the partnership enterprise and other investors of the insurance company. Where no such affiliation exists, a statement on nonexistence of such affiliation is required.
  • Relevant equity subscription or transfer agreements and documents certifying the Equity Enterprise has approved the investment.
  • A statement on no record of serious violations of laws and regulations in the past three years.
  • Other materials required by the CIRC.

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