Best Investing Solution Winner: Shanghai InnoVen Private Equity Fund Management

Published: Feb 2023


Photo of Darren Chuah, InnoVen Capital and Glenn Tsou, UOB.

Zhang Xin

Marketing Head

InnoVen Capital is Asia’s leading venture lending platform providing debt capital to high growth, venture-backed technology companies.

in partnership with

Qualified Foreign Limited Partnership (QFLP) is right solution for InnoVen China

The challenge

The structure of a holistic investment vehicle to facilitate the entry and investment of overseas funds into the China market was a critical management decision for InnoVen China. Traditionally, foreign capital investment in China is through a foreign direct investment by establishing a wholly owned foreign enterprise (WOFE).

QFLP programme in 2010, the pilot system has been playing an essential role in attracting inflows of foreign capital and opening the China financial markets. As of July 2021, 16 cities have implemented the QFLP policy with varying thresholds and treatment. From the initial entry perspective, QFLP will be pre-approved with different investment quota as set by the city level finance management committee.

QFLP framework’s acceptable investment scope is wider than WOFE; debt-to-equity swaps and convertible bonds are also covered under the QFLP investment scope.

InnoVen China urgently needed an experienced partner to collaborate with and provide the necessary advisory in this niche market, entailing the selection of the appropriate QFLP pilot cities, a comparison of QFLP policies and documenting the end-to-end application process.

The solution

To meet InnoVen China’s unique investment requirements, the company engaged UOB China to provide the following:

  1. End-to-end advisory and engagement for QFLP application.
  2. Holistic investment structure and scheme under QFLP Framework.

With regards to InnoVen China’s QFLP funds raised from an overseas limited partnership (LP), a QFLP entity registered in Shanghai will need to open a capital account to receive overseas funds. If capital funds are in foreign currency, the funds will be converted and credited to a CNY special investment account for the equity acquisition of or debt investment into the target domestic companies. The overall investment process is highly monitored by the bank.

Additionally, if the QFLP entity is registered as a partnership, investment profits channeled overseas will only be subject to withholding tax without any additional corporate tax. This greatly enhances the profit returns for the overseas LP.

Best practice and innovation

It was critical to secure strong advice from an experienced partner to assess the varying QFLP programmes and conduct an analysis of the programme features and benefits of each. It was also critical that there was strong government sector engagement to ensure a seamless QFLP qualification application. InnoVen finally obtained its QFLP qualification in December 2021, for equity and debt investment.

Key benefits

  • Cost savings.
  • Process efficiencies.
  • Return on investment (ROI).
  • Future proof solution.
  • Quality accreditation achieved.

“It’s an attractive investment channel for entry and investment in China with tax benefits, investment convenience and wider investment scope. With UOBC as our primary partner bank we will anticipate more innovative investment solutions,” says Cao Ying Xue, Managing Partner.

The Adam Smith Awards Asia is the industry benchmark for best practice and innovation in corporate treasury. The 2022 awards attracted a record-breaking 416 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia

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