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China Amends the FIE Record-filing Laws Regulating Foreign Investments

July 11, 2017
In October 2016 came into effect revised Four Laws in China that were promulgated and amended by  National People’s Congress (NPC)  to attract and encourage inbound foreign investments.

Year by year, China keeps opening-up to the outside world and OFFSHORELICENSE keeps track of global trends observing the substantial moves of this important player on the international stage. This time to attract and encourage inbound foreign investments into China, the Standing Committee of the 12th National People’s Congress (NPC) promulgated the decision and amended Four Laws relating to foreign investments in China on September 3, 2016 and the Decision took effect on October 1,2016 : the Law of the People’s Republic of China (PRC) on Foreign-funded Enterprises; the Law of the PRC on Chinese-Foreign Equity Joint Ventures (EJV); the Law of the PRC on Chinese-Foreign Contractual Joint Ventures (CJV); the Law of the PRC on the Protection of Investments of Taiwan Compatriots.  

As a result of the amendments, the record-filing system replaces the former examination and approval procedures by the Ministry of Commerce (MOFCOM). The new system will be used for the establishment of Foreign-Invested Enterprises (FIE) which does not involve the special market entry management measures prescribed by the State. 

On October 8, 2016, to implement the amendments in the above legislations the MOFCOM issued the Interim Measures for Record-Filing Administration of the Establishment and Change of Foreign-Invested Enterprises alongside with the Circular (2016) No.22 (Circular 22) (issued jointly by the PRC National Development and Reform Commission and the MOFCOM). The purpose was to provide further clarifications and guidelines on the procedures for FIE establishment.

Circular 22 aims to delineate and further clarify that the scope of special market entry administrative measures for FIEs shall be defined in accordance with the restrictive or prohibited sectors and some industries in the encouraged sectors which have shareholding requirement or senior management requirement, as set forth in the Foreign Investment Industry Catalogue (latest version to be effective on July 28, 2017).

The usual examination and approval procedures would still apply to those FIEs with special market entry measures and the record filing system will apply to the establishment and changing of particulars of FIEs not falling under the above categories. It is suggested that this is the new “negative list system” for foreign investments in PRC.

In the Interim Measures are set out the new record-filing procedures, which are applicable to FIEs without the special market entry management measures. For the establishment of FIEs, after obtaining the enterprise name reservation approval, the investor’s representative or agent should complete the online FIE Establishment Filing Application Form and file the relevant documents with the local MOFCOM’s FIE General Management Data System (System) for the issuance of the business license. For changing of FIE’s particulars, the representative or agent should complete the FIE’s Change of Particulars Application Form online and file the relevant documents within 30 days of such change. The local MOFCOM should complete verification of the filing within 3 working days provided that the information and documents filed by the FIE are in order. Afterwards, FIE should attend the local MOFCOM to collect the filing receipt by providing a copy of the enterprise name reservation document (for new company establishment); or business license (for a company applying for change of particulars).  The local Administration of Industry and Commerce (AIC) will be the responsible authority for vetting the FIE’s application documents such as the Articles of Association.

Overall, MOFCOM welcomes the initiation of the Interim Measures considering that it substantially simplifies the procedures of FIEs establishment. Nevertheless, foreign investors are still advised to check with local MOFCOM and AIC before filing any application documents.  For more detailed information regarding the details provided above, feel free to contact us via our website OFFSHORELICENSE.COM as you are always assured to receive the best service thanks to our professional team with the worldwide expertise seeking to establish a stable long-term co-operation with the client.

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