18 March 2015
Procedures for Establishment of FIEs
Procedures for the establishment of FIEs include all steps ranging from the application for official seal and enterprise code to the handling of formalities in connection with tax, finance, bank account opening and customs declaration with different departments responsible for project approval, contract and articles of association examination and approval, industry and commerce registration, foreign exchange registration, public security, technical supervision, taxation, customs, finance, banking, insurance, and commodity inspection. While not all the above mentioned procedures are necessary for the establishment of FIEs, generally four steps are indispensable (see figure below).
Application Procedures for Establishment of FIEs
Step 1: Approval of Project Application Report
After a letter of cooperation intent is reached by the parties to an equity or contractual JV upon negotiation or after a letter of investment intent has been drafted by the foreign investor, the Chinese party or foreign investor should submit the project approval or record filing application report to the local development and reform department. For projects under the encouraged category in the Catalogue for the Guidance of Foreign Investment Industries which require that the Chinese party must hold controlling shares (including relative control) and total investment (including capital increase) must reach US$1 billion or above, and projects under the restricted category (not including real estate projects) with a total investment (including capital increase) of US$100 million or above, they are to be approved by the provincial development and reform committee before reporting to NDRC. Of which, projects with a total investment (including capital increase) of US$2 billion or above are to be reported to the State Council for record filing, while projects with a total investment less than the above mentioned amount are to be approved by the development and reform department below provincial level. For projects requiring the opinions of the relevant industry department, the approval organ should request the relevant industry department to issue a letter of opinions.
To all other projects, the record filing system applies. For projects not granted record filing, the development and reform department below provincial level should, within seven working days, issue a letter of opinions stating the reasons.
Project approval application report and documents required should contain: Basic facts about the project and the investor, resource utilisation and ecological and environmental impact analysis, and economic and social impact analysis. The project application report of the M&A of a domestic enterprise by foreign investors should contain basic facts about the party making the M&A deal, the M&A arrangement, financing proposal, basic facts about the party to be merged or acquired, the operation mode and scope as well as shareholding structure after the M&A, and arrangement for use of income etc. For details on application documents required, please see provisions in Article 10 of the Administrative Measures for the Approval and Record Filing of Foreign-Funded Projects.
For application for project filing: The applicant should furnish information on basic facts about the project and the investor together with other relevant documents such as the enterprise registration certificates of the Chinese and foreign investors, letter of investment intent, and the resolution of the board of directors of the capital increase or M&A project.
Step 2: Approval of Contract and Articles of Association
The contract, articles of association and other relevant legal documents for establishing the FIE signed by the parties are to be submitted by the Chinese party or the investor to the local county (district), city or provincial commerce department for approval. (FIEs are not required to sign a contract.) Where all documents required are complete, approval procedure will take 20 working days.
Documents required: 1. Application letter; 2. application for establishment of FIE (to be completed by wholly foreign-owned enterprises; equity or contractual joint-venture enterprises are not required to do so); 3. enterprise name pre-registration certificate; 4. feasibility study report; 5. contract and articles of association of the enterprise (wholly foreign-owned enterprises are not required to submit contract but only submit articles of association); 6. registration certificate of the investor (notarised by a local lawyer or the local Chinese embassy), credit report; 7. board of directors name list; 8. other documents as required by relevant rules and regulations.
Step 3: Application for Approval Certificate
After the contract and articles of association are approved, the applicant shall apply to the local provincial, city or county commerce department for an approval certificate.
Documents required: The approval document issued by the commerce department; the organisation code pre-assigned by the quality supervision department.
Step 4: Registration
Upon collection of the approval certificate, an application for business licence should be filed with the provincial or municipal administration for industry and commerce within 30 days. Subsequently, the JV should complete such procedures as applying for official seal and enterprise code, opening bank account, and registering for tax payment and customs declaration with the local public security, technical supervision, taxation, Customs, finance, foreign exchange administration, banking, insurance and commodity inspection departments.
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