The governmental approval procedure of foreign investment enterprise (“FIE”) in China changed into registration procedure which will greatly facilitate the FIEs in China.
On October 8, 2016, MofCom has published Interim Measures for Record-filing Administration for the Incorporation and Alteration of Foreign-invested Enterprises (“Measure”) and the Measures became effective on that day. According to this Measure, FIEs does not need to obtain the approval from local MofCom but just need to register on line in the system.
Section 1. Application Scope
Generally speaking, the scope of aforesaid enterprises excludes the items listed in Catalogue of Restricted and Prohibited in Foreign Investment Industries Catalogue for the Guidance of Foreign Investment Industries (2015 Edition) and the foreign enterprises of which the shareholding ratio and senior management have specific requirements in the Encouraged Catalogue.
In the meantime, therefore, the following points shall be noticed:
- the enterprises of equity investments shall be excluded from the enterprises mentioned in the “Measure”;
- Deleting the “Share Pledge” from the altering items list of registration implies the altering items of equity pledge of FIE still need to be approved according to the “Provision for the Alteration of Investors’ Equities in Foreign-funded Enterprises”.
- It excludes explicitly the foreign M&A from the scope of registration. In details, the merger between foreign investors and Chinese investment enterprises shall be in compliance with the “Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors”. With respect to public companies, “Administrative Measures for Strategic Investment by Foreign Investors in Public Companies” shall be applied. However, where the altering items of FIE after merging Chinese investment enterprises, which is irrelevant to the “Negative List”, will also be applied to the registration system.
Section 2. Registration Method
In accordance with the Article 3 of the “Measure”, both the establishment and alteration of the FIE can be applied for and conducted via the Foreign Investment Online Integrated Management Information System. For instance, in Shanghai, the website is http://wz.investment.gov.cn/SFI/.
Section 3. Filing procedure
Procedure of establishment:
- Conduct name pre-approval in the Administration for Industry and Commerce (“AIC”).
- Perform online filing application (it may be done before issuance of business license or in 30 days after it is issued).
- Filing completed by the authority.
- Registration in the AIC.
Procedure of alteration:
- Supreme organ of the foreign-invested enterprise makes a decision for alteration.
- Perform online filing application (in 30 days after the decision is made).
- Filing completed by the authority.
Section 4. Registration procedure
- Foreign-invested enterprise or its investors file and submit application materials by means of the online filing system.
- Filing Authority takes charge of the verification of the integrity and correctness of information filed in the last step, determines whether the application matches filing conditions, and completes filing in 3 working days (in case of missing information, it shall be completed in 15 working days).
- Personnel in charge of filing are at their own discretion on collecting filing receipt.
Section 5. Negative list
Notice No.22 was released jointly by National Development and Reform Commission and Ministry of Commerce on the first day when Measure was put into force. In this notice, approved by the State Council, special management measures for foreign investment access shall be performed pursuant to the relevant regulations on higher requirement for equity and senior executives set forth in the restrained, prohibited and encouragement categories in Catalogue of Industries for Guidance of Foreign Investment (2015 Edition). In the event that enterprise establishment or alteration involves foreign capital merger and acquisition, current regulations shall be observed.
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