IP rights in relation to partnerships and bankruptcy law clarified

The Standing Committee of the 10th Session of the National People's Congress adopted the amended Partnership Enterprise Law of the People's Republic of China and the new Enterprise Bankruptcy Law of the People's Republic of China on August 27 2006. Both laws contain new provisions regarding IP rights.

The amended Partnership Enterprise Law of the People's Republic of China contains the following provisions on IP-related issues:

• establishment of partnership enterprises;
  
  
• conduct of partnership business; and
  
  
• capital contributions in limited partnership enterprises.

With regard to capital contributions, the new law stipulates that, when establishing a partnership enterprise, a partner may make capital contributions in cash, in kind, in the form of IP rights, land use rights or other property rights, or in the form of labour services. Where a partner makes a capital contribution in the form of IP rights or other property rights, the price is evaluated by all partners through consultation or appraised by a legal appraisal agency retained by all the partners.

Unless otherwise agreed in the partnership agreement, the transfer of the partnership enterprise or disposal of the IP rights and other property rights of the partnership enterprise shall be subject to the unanimous consent of all partners.

The Enterprise Bankruptcy Law of the People's Republic of China promulgated on the same day introduces a new administrator system. An administrator shall be a third party designated by the court, such as a law firm or an accountancy firm.

This law provides that when an administrator transfers IP rights, it shall make a timely report to the creditors' committee.

Horace Lam and Stacy Yuan, Lovells, Beijing