21 Sept 2017
Online CBA: How Does a Foreign-invested Enterprise Get Official Approval in China?
Q: How does a foreign-invested enterprise get official approval in China? Once established, how should such an enterprise report any substantive changes?
A: In order to establish a foreign-invested enterprise (FIE) in China or to make changes to information filed relating to an existing FIE, it is first necessary to file a record via the Integrated Management Information System for Foreign Investment in accordance with the Interim Measures for the Filing Administration of the Establishment and Changes of Foreign-Invested Enterprises (Revised) as promulgated by the Ministry of Commerce. Should the application relate to a business sector requiring special administrative measures, however, or to a merger and acquisition (M&A) within such a sector, then a separate procedure applies.
Once the required record has been filed and the proposed name of the enterprise has been officially approved, a designated representative or an agent collectively commissioned by all of the investors (or all of the initiators of a foreign-invested joint stock limited company) should complete the required establishment filing procedures. This entails filling in and electronically submitting the FIE Establishment Filing Declaration Form and any related documents via the Integrated Management Information System. This procedure should be completed before any business licence is issued or within 30 days of the initial issue date.
In the case of a domestic enterprise transiting to FIE status as a consequence of a M&A or as the result of merger by absorption, an FIE Establishment Filing Declaration Form record must be completed and submitted online, together with all of the relevant documents, in accordance with the above mentioned requirements.
Should any substantive changes occur to the status or standing of an FIE, an FIE Change Filing Declaration Form, together with any relevant documents, must be submitted via the Integrated Management Information System within 30 days of said changes taking place.
The substantive changes requiring formal notification include:
- Any changes in the basic information relating to the FIE, including changes of name, registered address, enterprise type, operating period, industries invested in, business type, business scope, the entitlement of imported equipment to tax exemptions or concession within China, registered capital, overall investment, organisational structure, legal representation, details relating to the most senior individual within any enterprise, and contact details
- Any changes related to the basic information previously supplied by the FIE’s investors, including changes in name, nationality/territory or address (place of registration or registered address), type and number of certificates and licences, subscribed capital contribution, form of capital contribution, deadline for capital contribution, source of funds and nature of investors
- Any changes to the basic information supplied regarding the transactions relating to the initial establishment of an FIE by way of M&A
- Any changes to rights and interests relating to equity and (terms of) co-operation
- Any mergers, spin-offs or closures
- Any changes to a mortgage taken out by a foreign enterprise or any transfer of property rights
- Any early recovery of investment by the foreign party in a Sino-foreign co-operative joint venture
- Any delegation of operational or management responsibilities on the part of a Sino-foreign co-operative joint venture
Furthermore, any domestic listed company in which a foreign investor has made a strategic investment must submit an FIE Establishment Filing Declaration Form. This must be completed before any securities have been registered with the Securities Registration and Settlement Agency or within 30 days of any such registration. In any instance where a registered FIE receives new strategic investment from a foreign investor, it must submit an FIE Change Filing Declaration Form before its securities have been registered with the Securities Registration and Settlement Agency or within 30 days of any such registration. Once a filing procedure has been completed, should any subsequent changes to the strategic investment occur, the filed details must be updated within five days of the disclosure of any such changes in line with the requirements of the Securities Law and any other prevailing regulations.
For further details on the Integrated Management Information System, please access the following website: http://wzzxbs.mofcom.gov.cn
For further details of the merger and acquisition administration procedures relating to foreign investment, please refer to the following:
Foreign Investment, Merger and Acquisition Administration Procedures Streamlined