3 Oct 2014
Online CBA: Will a China Company with a Company in Hong Kong be Allowed to Include Capital Raised in Hong Kong as Part of its Mainland Holdings?
Q: Will a China Company with a Company in Hong Kong be Allowed to Include Capital Raised in Hong Kong as Part of its Mainland Holdings?
A: 1. A China company with a company in Hong Kong is allowed to include capital raised in Hong Kong as part of its mainland holdings, in which case the China company will be converted into a foreign-invested enterprise by virtue of the Hong Kong company’s subscription to its capital increase. Such an investment requires the approval of the competent provincial department of commerce. The legislation for reference in this regard is the Provisions of the Ministry of Commerce for the Acquisition of Domestic Enterprises by Foreign Investors. (Order of Ministry of Commerce  No. 6)
2. If the China company is engaged in real estate development business, this acquisition still needs to be reported to the Ministry of Commerce for the record after being approved by the competent provincial department of commerce, and capital injection should only take place after record-filing has been completed. The legislation for reference in this regard is the Circular of the Ministry of Commerce on Properly Handling the Record Filing of Foreign Investment in Real Estate Sector. (Document of Ministry of Commerce  No. 23 )
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