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PROVISIONS ON FOREIGN INVESTED INVESTMENT COMPANIES |
Date£º2006-4-18 |
Promulgated here is the combination of the following provisions: The Interim Provisions on the Establishment of Investment companies by Foreign Investors ([1995] Order No. 4 of the Ministry of Foreign Trade and Economic Cooperation), The Interpretation of Issues Concerning <The Interim Provisions on the Establishment of Investment companies by Foreign Investors> ([1996] WAI JING MAO FA FA No.124), The Supplementary Provisions on <The Interim Provisions on the Establishment of Investment companies by Foreign Investors> ([1999] Order No. 3 of the Ministry of Foreign Trade and Economic Cooperation), The Supplementary Provisions (2) on <The Interim Provisions on the Establishment of Investment companies by Foreign Investors> ([2001] Order No. 1 of the Ministry of Foreign Trade and Economic Cooperation), The Decision on the Amendment of <The Interim Provisions on the Establishment of Investment companies by Foreign Investors> and Supplementary Provisions Thereof ([2003] Order No.4 of the Ministry of Foreign Trade and Economic Cooperation), namely The Provisions on the Establishment of Investment companies by Foreign Investors (hereinafter referred to as ¡°these Provisions¡±). These Provisions were adopted at the Second Ministerial Affairs Meeting on 10 June 2003, and shall be effective 30 days after the date of promulgation.
Minister Lu Fuyuan
10 June 2003
Attachment:
PROVISIONS ON FOREIGN INVESTED INVESTMENT COMPANIES
Article 1 In order to promote foreign investment in China, introduce advanced overseas technology and managerial expertise, foreign businesses are allowed to establish investment companies in China in accordance with relevant Chinese laws and provisions governing foreign investment and these Provisions.
Article 2 For the purpose of these Provisions, the term ¡°Investment company¡± means a company that is engaged in direct investment and established solely by foreign fund or jointly by both foreign and Chinese funds. The investment company shall take the form of a limited liability company.
Article 3: The application for the establishment of an investment company shall comply with the following requirements:
(1) (i) the foreign investor enjoys sound capital credit; owns sufficient financial resources for establishing an investment company; registers a total assets of at least US$400 million in the previous year; has already established enterprises with foreign investment in China in which its actual contribution of the registered capital has already exceeded US$10 million; and has more than three approved proposed investment projects ; or,
(ii) the foreign investor enjoys sound capital credit; owns sufficient financial resources for setting up an investment company; has already established more than 10 foreign- funded enterprises in nature of production or infrastructure construction in China in which its actual contribution of the registered capital has already exceeded US$10 million;
(2) For an investment company in the form of Chinese-foreign equity joint venture, the Chinese investor must enjoy sound capital credit, owns the sufficient financial resources for establishing an investment company and has a total assets of no less than RMB100 million in the previous year of the application; and,
(3) The registered capital of an investment company shall not be less than US$30 million.
The foreign investor that applies to establish an investment company shall be a foreign company, enterprise or economic organization. If there are more than two foreign investors, at least one of which with the majority equity interests in the investment company must fulfil Item (i) of Clause (1) of this Article.
Article 4: A foreign investor that meets the requirements stipulated in Item (i) of Clause (1) of Article 3 hereof can establish an investment company in the name of a subsidiary wholly owned by the investor.
Article 5: A foreign investor that satisfies the conditions set forth in Item (i) of Clause (1) of Article 3 hereof applying for establishing investment company shall present a letter of guarantee to the examination and approval authority to ensure its placement of registered capital and transfer of technology in China.
For the investment company established by solely owned subsidiary, the parent company shall present a letter of guarantee to ensure that the subsidiary would place its part of registered capital of the investment company in accordance with the conditions permitted by the examination and approval authority and that the investment company would surely place investment as registered capital and transfer technology when it establishes enterprise(s) in China.
Article 6: When applying for the establishment of an investment company, the investor(s) shall present the following documents, which after examination and consented by the foreign trade and economic cooperation authorities of the related province, autonomous region, municipality directly under the Central Government or municipalities separately listed on the State plan where the proposed company shall be located shall be sent to the Ministry of Commerce for ratification:
(1) Project proposals on establishing a jointly funded investment company, feasibility study reports, contracts and articles of association signed by all sides of the investors; Project proposals on establishing a solely foreign invested investment company, application of the foreign enterprise concerned, feasibility study reports, and articles of association of the proposed company;
(2) Documents certifying the investors' capital credits, certificates of registration (duplicate) and legal representative of the enterprise (duplicate);
(3) Approval documents (duplicate), business license (duplicate) and financial reports (duplicate) signed by Chinese certified public accountants for the foreign enterprise already established;
(4) Balance sheet, audited in accordance with law, of the investment parties for the past three years;
(5) A letter of guarantee set forth in accordance with Article 5 hereof; and,
(6) Other documents deemed necessary by the Ministry of Commerce.
Unless otherwise stated, the aforesaid documents shall all be originals.
When documents were signed by people other than the legal representative, a certificate empowering the signature shall be presented.
If the application formalities will be handled by a certified intermediary organization, a commission certificate signed by the investors' legal representatives shall be presented.
Article 7: The foreign investor(s) shall contribute to the registered capital of the investment company with cash in freely convertible currencies, or RMB profits obtained in China or legitimate RMB gains or proceeds from the transfer of equity or liquidation activities. The Chinese investor(s) may make contribution to the registered capital with RMB. In case the foreign investors contribute to the registered capital of the investment company with legitimate RMB gains or proceeds, they shall submit the relevant certification and vouchers for payment of taxes. The capital contribution shall be paid within two years upon the date of issuance of the business license.
Article 8: At least US$30 million of the registered capital of an investment company shall be used as capital contribution to invest in its newly established foreign-investment enterprises, or as contribution to the capital that have not been fully paid up, or increases in capital of foreign investment enterprises (which procedures for the transfer of equity have been completed in accordance with law) already invested in and established by their parent companies or associate companies or used to purchase the shareholder's equity interests of Chinese domestic company,.
Article 9: In case the registered capital of the investment company is no less than USD$30 million, its loan shall not exceed four times that of the paid-in registered capital and in case the registered capital of the investment company is no less than USD$100 million, its loan shall not exceed six times that of the paid-in registered capital. In case the loan of the investment company would exceed the above-mentioned quota as required by its operations, application should be made to the Ministry of Commerce for approval.
Article 10: Upon establishment with approval by the Ministry of Commerce, an investment company may undertake the following businesses according to the actual requirements by the operational activities engaged in China:
(1) Investment in the fields permitted for foreign investment by the state.
(2) With written authorization by the enterprises invested (through unanimous consent by the Board of Directors), providing the following services to the enterprise invested:
(i) assisting or acting as agency in purchasing for the enterprise invested machinery equipment, office equipment, raw materials, components, spare parts at home and abroad fro self use by the enterprises invested and selling the products produced by the enterprises invested at home and abroad, as well as providing after-sale services;
(ii) balancing foreign exchange among its invested enterprises with the consent and under the supervision of the department of exchange control;
(iii) providing enterprises invested with technical supports, personnel training, internal personnel management and other services during the production, sales and market development of products;
(iv) assisting the enterprises invested in seeking for loans and provision of guarantee;
(3) Setting up scientific research and development centre or department in China to engage in research and development of new products and high and new technology, transfer its achievements of research and development and provide the corresponding technical services.
(4) Providing its investors with consultancy service, and providing its associate companies with market information and investment policies and other consultancy services.
Article 11: For the purposes of these Provisions, "an enterprise invested by an investment company" shall refer to an enterprise that fulfils the following conditions:
(1) An enterprise wholly funded by an investment company or jointly funded by an investment company with other foreign and/or Chinese investors, and in the latter case, that part funded by the company concerned are other foreign investors shall be at least 25% of the enterprise's total registered capital,
(2) An enterprise already set up with investment from the investment company's investors or its related companies and other foreign investors with the shares owned by the investment company, and other foreign investors have already exceeded 25% of the enterprise's total registered capital through partial or whole purchase of stock by the latters,
(3) The capital contribution of an investment company may not be less that 10% of the registered capital of the enterprise invested in and established by it.
Article 12: Subject to the approval by the People's Bank of China, an investment company may provide financial support to enterprises invested and established by it.
Article 13: An investment company may as sponsor prepare and establish foreign-invested joint-stock companies or hold the corporate shares of foreign-invested joint-stock companies that have not been public listed. The investment company may also hold the corporate shares of other joint-stock companies in the territory of China that have not been public listed. The investment company shall be deemed as foreign sponsor or shareholders of the joint-stock companies.
Article 14: Upon the establishment of the investment company, if the operations are undertaken by force of law without records of legal violation, with registered capital paid in timely as specified by the articles of association and if the paid-in capital by the investors is no less than USD$ 30 million that has been used as investment in the enterprises invested, the investment company may with the examination and consent by the foreign trade and economic cooperation authorities of the related province, autonomous region, municipality directly under the Central Government or municipalities separately listed on the State plan where the proposed company shall be located apply to the Ministry of Commerce, and upon approval undertake the following businesses according to the actual requirements of its operations in China:
(1) With written authorization by the enterprises invested (through unanimous consent by the Board of Directors), undertaking the following businesses:
(i) selling he products produced by the enterprises invested by distribution in the market at home and abroad; and
(ii) providing the enterprises invested with transportation, warehousing and integrated services.
(2) Exporting domestic commodities not involved in export quota or licensing administration by agency, distribution or establishing export and purchasing institutions;
(3) Purchasing the products produced by the enterprises invested and selling them at home and abroad after system integration, and in case the products produced by the enterprises invested may not fully satisfy the demands of system integration, the investment company is allowed for purchasing complementary products at home and abroad for system integration with the value of the purchase not exceeding 50% of total value of all the products required for the system integration;
(4) Providing relevant technical trainings for the domestic distributors and agent of the enterprises invested and domestic companies and enterprises that have reached agreements on technological transfer with the investment companies or their parent companies;
(5) For the aim of the development of the product market prior to the production or the production of new products of the enterprises invested, the investment companies are allowed for importing small amount of products from their parent companies identical or similar to the products to be produced by the enterprises invested for domestic sales on trial that are not under import quota administration;
(6) Providing the enterprises invested with operational leasing services of machine and office equipment ;
(7) Providing after-sale services for the products produced the parent companies; and
(8) Participating in project contracting outside China of Chinese enterprises qualified for operations of foreign contracting projects according to the relevant state provisions.
Article 15: The importation by the investment company of systematically complete set of products or trial-sale products should go through the formalities in compliance with the relevant stipulations, with the cash contribution, profits of foreign exchanges or loans outside China of foreign exchanges in the registered capital of the investment companies. The accumulated annual importation amount mentioned above should not exceed 35% of the cash foreign exchanges in the registered capital. Any balance of the accumulated annual importation amount that does not exceed 35% of the cash foreign exchanges in the registered capital of the year should not be passed for use by the next year.
Article 16: An investment company applying to engage in those businesses mentioned in Article 14 hereof shall provide the following documents to the Ministry of Commerce:
(1) Application signed by the legal representative of the investment company;
(2) Resolution of the Board of Directors of the investment company;
(3) Amended Articles of Association of the investment company;
(4) Certificate for approval of the investment company (duplicate) and business license (duplicate), as well as the report on asset appraisal issued by Chinese certified public accountants; and,
(5) Report on asset appraisal for the enterprises invested that is issued by Chinese certified public accountants.
Article 17: The term of operation of an investment company shall be decided upon the nature of the enterprises it owned in accordance with the State's relevant provisions on the terms of operation of enterprises with foreign investment.
Article 18: The formalities for application of establishing enterprises by investment company shall be handled separately in accordance with the examination and approval process for foreign invested enterprises.
Article 19: In case the investment companies invest in establishing enterprises, the investment made by the investment company or jointly with other foreign investors should not be less than 25% of the registered capital of the enterprises to be established, which enjoy the treatment granted to foreign-invested enterprises with issuance of certificate of approval of foreign-invested enterprises and business license of foreign-invested enterprises.
Article 20: The establishment of any branch by an investment company shall be submitted to the Ministry of Commerce for examination and approval. To apply for the establishment of a branch, an investment company must meet the following conditions:
(1) The registered capital of the investment company has been paid on schedule in accordance with the provisions of the contract or articles or association and the amount of capital contribution already paid is not less than US$30 million, or the investment company has already invested in and established or owns at least 10 foreign-investment enterprises; and
(2) The region in which the branch is to be established is a region in which the investment company has concentrated its investment or its product sales.
Article 21: The investment activities of an investment companies shall not be restricted to the site where the company is registered.
Article 22: An investment company shall pay taxes according to China's relevant laws and provisions.
Article 23: An investment company shall practically implement its project investment plans and shall report details of its investments and operation in each year to the Ministry of Commerce for the record within the first three months of the following year in accordance with the stipulated content and format. The above-mentioned material shall be one of the essential materials required for the application of joint annual inspection of investment companies.
Article 24: An investment company as well as the enterprise(s) established with its investments shall be legal persons or entities independent of each other, and their business activities shall be handled as that between independent enterprises.
Article 25: An investment company as well as the enterprise(s) established with its investments shall abide by China's laws and provisions and shall in no way evade administration and taxation.
Article 26: An investment company shall not directly engage in production activities.
Article 27: These Provisions also applies to investors from the Taiwan, Hong Kong and Macao area in establishing investment companies in the Mainland.
Article 28: These Provisions shall be interpreted by the Ministry of Commerce.
Article 29: These Provisions shall take effective 30 days after the date of promulgation. The Interim Provisions on the Establishment of Investment companies by Foreign Investors, The Interpretation of Issues Concerning <The Interim Provisions on the Establishment of Investment companies by Foreign Investors>, The Supplementary Provisions on <The Interim Provisions on the Establishment of Investment companies by Foreign Investors>, The Supplementary Provisions (2) on <The Interim Provisions on the Establishment of Investment companies by Foreign Investors>, The Decision on the Amendment of <The Interim Provisions on the Establishment of Investment companies by Foreign Investors> and Supplementary Provisions Thereof, shall be simultaneously repealed as of the effective date of these Provisions. |
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