Opinions on Implementing Issues Related to Law Application in Examination and Approval, and Administration of Foreign-Invested Companies' Registration

To: administrations for industry and commerce, departments in charge of commerce and foreign exchange administrations of all provinces, autonomous regions, municipalities and cities directly under central planning, customs under direct administration, and all state-class economic and technology development zones

The Decision on Revising the "Company Law of the People's Republic of China" adopted on October 27, 2005 at the 18th meeting of the Standing Committee of the 10th National People's congress and the Decision on Revising the "Administrative Regulations on Company Registration of the People's Republic of China" promulgated by the State Council have taken effect as of January 1, 2006. In order to accurately apply laws, undertake the examination and approval and registration administration work concerning foreign investment in a standardised and efficient manner and to provide convenience, promote healthy development of foreign-invested enterprises, and raise the quality and level in using foreign investment, the Opinions on Implementing Issues Related to Law Application in Examination and Approval, and Administration of Foreign-Invested Companies' Registration is hereby issued to you for implementation. Please report without delay if there is any problem during the course of implementation.
State Administration for Industry and Commerce, Ministry of Commerce, General Administration of Customs and State Administration of Foreign Exchange
April 24, 2006


In order to accurately apply laws, undertake the examination and approval, and registration administration work concerning foreign investment in a standardised and efficient manner and to provide convenience, promote healthy development of foreign-invested enterprises, and raise the quality and level in using foreign investment, the Opinions on the Implementation of Examination and Approval, and the Administration of Foreign-Invested Companies' Registration with regard to application of the Company Law of the People's Republic of China ("Company Law"), the Administrative Regulations on Company Registration of the People's Republic of China ("Administrative Regulations on Company Registration") and other laws, administrative regulations and policies of the state concerning foreign investment are hereby put forward as follows:

1. The Company Law and the Administrative Regulations on Company Registration are applicable to the registration administration of foreign-invested companies; given the law has separate provisions on foreign-invested enterprises, the said provisions shall prevail; given the Company Law, the Administrative Regulations on Company Registration and laws governing foreign-invested enterprises have no specific provisions otherwise, the administrative regulations on foreign-invested enterprises, the decisions of the State Council and other stipulations of the State concerning foreign investment shall be applicable.

2. Foreign companies, enterprises and other economic organisations or natural persons (hereinafter referred to as "foreign investors") may establish according to law companies jointly with Chinese enterprises and other economic organisations in the form of Sino-foreign equity joint venture or Sino-foreign contractual joint venture, or in the form of foreign-foreign equity joint venture or solely foreign-owned venture.

Where a one-person limited liability company is established according to law in the form of solely foreign-owned venture, the minimum amount of its registered capital shall comply with the stipulations of the Company Law on one-person limited liability company; where a foreign natural person establishes a one-person limited liability company, it shall also comply with the stipulations of the Company Law on the limit for external investment of a one-person limited liability company. No change is necessary for solely foreign-owned ventures already established according to law prior to January 1, 2006, but the aforesaid stipulations shall apply when such a venture alters its registered capital or makes external investment.

3. The Board of Directors is the organ of power in a limited liability company established in the form of Sino-foreign equity or contractual joint venture. Its organisational setup shall be stipulated by the Articles of Association of the company pursuant to the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Contractual Joint Ventures and the Company Law.

The organisational setup of a limited liability company established in the form of foreign-foreign equity joint venture or solely foreign-owned venture and that of a foreign-invested stock limited company shall comply with the stipulations of the Company Law and the Articles of Association of the company.

4. The application term for registering the establishment of a foreign-invested company shall comply with the stipulations of the Administrative Regulations on Company Registration. However, if a company is established in the form of Sino-foreign contractual joint venture, foreign-foreign equity joint venture or solely foreign-owned venture, an application for establishment registration shall be made to the company registration organ within 30 days starting from the day when the document of approval is received pursuant to the stipulations of the Law on Sino-Foreign Contractual Joint Ventures and the Law on Foreign Capital Enterprises. If the application for establishment registration is overdue, the applicant shall make a report to the examining and approving organ to confirm the validity of the original document of approval or apply for new approval.

5. The certificate for entity qualification or identification of the foreign investor submitted to the approving and registering organs when an application for approval and establishment registration of a foreign-invested company is made shall be notarised by a notary organ of the applicant's home country and also be certified by the Chinese embassy or consulate stationed in the said country. The certificate for entity qualification or identification of an investor in Hong Kong, Macao or Taiwan region shall according to law be accompanied by a notary document provided by a local notary organ.

When approval and establishment registration are applied for a foreign-invested company, in addition to the submission of the related documents as stipulated by Article 20 or Article 21 of the Administrative Regulations on Company Registration, the submission to the approving and registering organs of the Letter of Authorisation for Legal Documents Service signed between the foreign investor ("the authoriser") and the receiver of legal documents service ("the authorised") in the territory is necessary. The said letter of authorisation shall make clear that the authorised in the territory is authorised to receive the legal documents service on behalf, as well as carrying the address and contacts of the authorised. The authorised may be a branch of the foreign investor, a company to be established (if so, the authorisation shall take effect after its establishment), or other related unit or individual in the territory.

If a company is to add new overseas investor(s), it shall also submit the aforesaid documents to the approving and registration organs.

When applying to the company registration organ for handling establishment registration or registration alteration in equity transfer, a foreign-invested company is no longer required to present the contract for equity or contractual joint venture and the certificates for credit status of the investors.

6. The company registration organ shall pursuant to the application register the company type of a foreign-invested company as "limited liability company" or "stock limited company", and in line with the form of establishment add in the notes after "limited liability company" the words of "(Sino-foreign equity joint venture)", "(Sino-foreign contractual joint venture)", "(foreign-foreign joint venture)", "(solely invested by foreign legal person)", "(solely invested by foreign non-corporate economic organisation)", "(solely invested by foreign natural person)", "(equity joint venture between Taiwan, Hong Kong or Macao investor and foreign investor)", "(equity joint venture between Taiwan, Hong Kong or Macao investor and mainland investor)", "(contractual joint venture between Taiwan, Hong Kong, Macao and mainland investor)", "(equity joint venture between Taiwan, Hong Kong or Macao investors)", "(solely invested by Taiwan, Hong Kong or Macao legal person)"; "(solely invested by Taiwan, Hong Kong or Macao non-corporate economic organisation)"; or "(solely invested by Taiwan, Hong Kong or Macao natural person)", and after "stock limited company" the words of "(Sino-foreign equity joint venture, unlisted)", "(Sino-foreign equity joint venture, listed)", "(foreign-foreign joint venture, unlisted)", "(foreign-foreign joint venture, listed)" "(equity joint venture between Taiwan, Hong Kong or Macao investor and foreign investor, unlisted)", "(equity joint venture between Taiwan, Hong Kong or Macao investor and foreign investor, listed)", "(equity joint venture between Taiwan, Hong Kong or Macao investor and mainland investor, unlisted)", "(equity joint venture between Taiwan, Hong Kong, Macao and mainland investor, listed)", "(equity joint venture between Taiwan, Hong Kong or Macao investors, unlisted)", or "(equity joint venture between Taiwan, Hong Kong or Macao investors, listed)".

The company registration organ may in line with the state's industrial policies on utilisation of foreign investment and their related stipulations add in the notes related classification marks after the type of company for example, ( "the proportion of foreign equity is less than 25%", "A-share merger and acquisition", or "A-share merger and acquisition reach 25% or more).

With regard to a foreign-invested company already established before January 1, 2006, the company registration organ shall make adjustments accordingly pursuant to the aforesaid stipulations when the said company handles alteration registration.

7. After a foreign-invested company is established, it may according to law make investment in the territory. The company registration organ shall no longer issue the related qualification certificate for investment in the territory.

If the specific company type as stipulated in item 6 of the Opinions is not carried in the business license of a foreign-invested company, and the said company again applies for the establishment of a one-person limited liability company, the company registration organ shall issue the certificate for "solely invested by non-natural person".

8. The registered capital of a foreign-invested company may be expressed in RMB or in a freely convertible foreign currency. The transaction between a foreign currency and RMB or between two foreign currencies used as registered capital of the company shall be based on the central parity price of the exchange rate published by the People's Bank of China for the current day of occurrence (payment).

9. The amount of the first installment of capital contribution made by shareholders to a foreign-invested limited liability company (including one-person limited liability company) shall comply with the stipulations of laws and administrative regulations. If all capital contribution is payable by lump sum, full-amount payment shall be made within six months as of the date when the company is established. If capital contribution is payable by installment, the amount of first installment shall not be less than 15% of the amount of capital contribution committed, shall also not be less than the statutory minimum amount of registered capital, and shall be paid in full amount within three months as of the date when the company is established. The time for contribution of the remainder shall comply with the stipulations of the Company Law, the laws concerning foreign investment, and the Administrative Regulations on Company Registration. If other laws or administrative regulations require shareholders to pay all capital contributions at the time when a company is established, the said stipulations shall prevail.

The capital contribution to a foreign-invested stock limited company shall comply with stipulations of the Company Law.

10. The form of capital contribution by shareholders of a foreign-invested company shall comply with the stipulations of Article 27 of the Company Law, Article 14 of the Administrative Regulations on Company Registration and the Administrative Regulations on Registration of Registered Capital of Companies. Before the State Administration for Industry and Commerce and other competent departments make stipulations on capital contribution with properties other than currency, physical goods, intellectual property rights and land-use rights, if a shareholder contributes capital with properties other than those as listed in the second paragraph of Article 14 of the Administrative Regulations on Company Registration, the said properties shall be evaluated and verified by a rating agency lawfully established in the territory, with either over-estimation or under-estimation prohibited. When actual capital contribution is made, capital verification by a capital verification agency lawfully established in the territory is necessary, and the said agency shall also issue a certificate for capital verification.

If a shareholder of a limited liability company in the form of Sino-foreign equity joint venture makes capital contribution in physical goods (including equipment), industrial property rights or other non-currency properties (excluding land-use rights) as stipulated by the Law on Sino-Foreign Equity Joint Ventures, the prices may be negotiated by the joint venture parties.

11. The capital raised through borrowing and other forms by a shareholder of a foreign-invested company in his own name shall be regarded as his own capital, and may be regarded as the capital contribution of the said shareholder after being given a certificate for capital verification by a capital verification agency.

12. The term for a foreign-invested company to apply for alteration registration shall comply with the stipulations of the Administrative Regulations on Company Registration. Given approval of company and company registration matters is necessary prior to alteration registration pursuant to stipulations of laws and administrative regulations and decisions of the State Council, the alteration registration shall be applied for and handled within 30 days starting from the day when approval is given by the examining and approving organ. In cases where the application is made not in due time, the applicant shall submit a report to the original examining and approving organ to confirm the validity of the documents or apply for new examination and approval.

13. When applying for alteration registration, a foreign-invested company shall submit related documents as stipulated by articles 27, 29, 31, 32, 33, 34 and 35 of the Administrative Regulations on Company Registration. If alteration registration is handled for related registration matters in any of the following circumstances, the submission of the documents of approval issued by the original approving organ and the certificate of approval after alteration is also necessary:

(1) Registered capital;

(2) Type of company;

(3) Scope of business;

(4) Term of operation;

(5) Amount of capital committed for contribution by the shareholders or initiators, and the form of capital contribution;

(6) Merger and separation of a foreign-invested company;

(7) Alteration of address going beyond the jurisdiction of a single approving organ;

(8) Equity transfer of a limited liability company or equity transfer of a stock limited company (except for those not involving matters stated in the business license and the certificate of approval).

In addition to the circumstances as stipulated in the preceding paragraph, if alteration of the registration matters of a foreign-invested company involves revision of the company's articles of association, the company shall according to law handle the alteration procedures with the approving organ within 30 days after the alteration registration procedures are handled.

14. If a foreign-invested company is to relocate (going beyond the jurisdiction of the original company registration organ), it shall apply to the original company registration organ for handling the relocation procedures. In the case of going beyond the jurisdiction of one approving organ, the application shall be made to the local approving organ at the relocated place. After receiving the application, the approving organ at the relocated place shall solicit the opinion of the approving organ at the place from which the company is relocated within five working days. The approving organ at the place from which the company is relocated shall give a reply within five working days after receiving the letter for soliciting opinion. The approving organ at the relocated place shall make a decision of approval or not within three working days after receiving the opinion. After receiving the application, the original company registration organ shall solicit the opinion of the company registration organ at the relocated place within five working days. The company registration organ at the relocated place shall make a reply within five working days. The original company registration organ shall in line with the opinion of the company registration organ and the approving organ at the relocated place that agrees to the relocation take over the business license and issue a certificate for the relocation, and also transfer the application materials and the company registration files to the company registration organ at the relocated place within ten working days. The company applying for relocation shall hand over the certificate of approval to the approving organ at the place from which it is relocated, take a certificate of approval from the approving organ at the relocated place and apply to handle alteration registration and take the business license from the company registration organ at the relocated place by presenting the relocation certificates and the documen of approval of the approving organ.

15. If a foreign-invested company is to increase its registered capital, the shareholders of a limited liability company (including one-person limited liability company) or a stock limited company established in the form of initiation shall at the time of applying for alteration of registered capital pay no less than 20% of the newly added registered capital, and the time for paying the remainder shall comply with the stipulations of the Company Law, laws related to foreign investment and the Administrative Regulations for Company Registration. If other laws and administrative regulations have separate stipulations, the said stipulations shall prevail.

When a stock limited company issues new shares for the purpose of increasing registered capital, subscription of the new shares by shareholders shall follow related stipulations on payment of capital for shares in stock limited companies.

16. When an applicant applies for alteration of registered capital in any of the following circumstances, if imported goods used as capital contribution with physical goods are exempted from duty according to regulations, the applicant shall make a written statement to the customs and handle the guaranteed customs pass procedures first by presenting the "letter of confirmation for domestic and foreign capital projects encouraged by the state for development". The related duty exemption and reduction procedures shall be handled after receiving the company business license after alteration:

(1) At the time of increasing registered capital, the foreign-invested company applies for capital contribution with imported physical goods that has been approved by the approving organ;

(2) At the time of merging or acquiring a domestic enterprise and at the same time increasing the registered capital, the foreign investor or the foreign-invested company applies for capital contribution with imported physical goods that has been approved by the approving organ;

(3) For other change of the registered capital, the foreign-invested company applies for import of physical goods that has been approved by the approving organ.

17. The foreign exchange administration shall no longer require the applicant to present the altered company business license when handling the following business:

(1) At the time of increasing registered capital, the foreign-invested company applies for altering foreign exchange registration or opening or altering capital account;

(2) At the time of merging or acquiring a domestic enterprise and at the same time increasing the registered capital, the foreign investor or the foreign-invested company applies for altering foreign exchange registration or opening capital account;

(3) For the reduction of registered capital, the foreign-invested company applies to the foreign exchange administration for handling the certificate of approval for capital reduction;
(4) For the change of capital, the foreign-invested company handles other alteration of foreign exchange registration.

18. The following matters and their alterations of a foreign-invested company shall be put on record at the company registration organ:

(1) Amendment to the company's articles of association or the amended articles of association (including alteration of total investment) that has been approved by the approving organ and does not involve registration matters;

(2) Directors, supervisors and managers of the company;

(3) Establishment and cancellation of a branch of the company;

(4) Names of members of the company's liquidation team and chief of the liquidation team.

Record procedures are no longer needed to be handled for deferred payment of capital contribution by shareholders of a foreign-invested company and the paid-in registered capital. Instead, alteration of registration shall be handled pursuant to the Administrative Regulations on Company Registration.

When handling record matters, a foreign-invested company shall submit to the company registration organ the record report and related documents to prove the occurrence of the record matters signed by the legal representative (chief of the liquidation team) of the company. If record documents are complete, the company registration organ shall permit the record and at the request of the applicant also issue a certificate for record.

19. If a foreign investor ("the authoriser") alters the receiver of legal documents service ("the authorised") in the territory, he shall sign a new Letter of Authorisation for Legal Documents Service, and also timely put it on record with the company registration organ. If the name, address or other items of the authorised changes, this shall also be put on record with the company registration organ without delay. The company registration organ shall make records in the registration files of the company.

If the foreign investor fails to handle the aforesaid recording, the company registration organ shall regard that the authorised recorded at the company registration organ for receiving legal documents service in the territory is the foreign investor.

20. If a shareholder of a foreign-invested company handles recording for equity mortgage, it shall submit to the company registration organ a letter of application for equity mortgage recording issued by the company, the documents of approval issued by the approving organ and the mortgage contract. After being recorded, the company registration organ may at the request of the applicant provide record certificates on which the name of the shareholder providing the mortgage, the proportion of the mortgaged equity in total equity of the company, the name of the pledgee, the term of mortgage, the approving organ of the mortgage contract and other matters are specified. During the term of mortgage, without the consent of the pledgee, the shareholder providing the mortgage may neither transfer or re-mortgage the already mortgaged equity, nor reduce the amount of capital contribution accordingly.

21. If a foreign-invested company applies for cancellation of alteration registration according to the stipulations of Article 22 of the Company Law, it shall submit a letter of application for cancellation of alteration registration and a document of judgment issued by the people's court to the company registration organ. If foreign investment approval matters are involved, the document of approval issued by the approving organ shall also be submitted. If the stipulations of the Company Law are met, the company registration organ will make a decision of permitting cancellation of the alteration registration. If the matters carried in the business licenses are involved, the business license shall be changed.

22. After a cause for disbandment of a foreign-invested company takes place, if the company fails to set up a liquidation team and conduct liquidation within the term as stipulated by the Company Law and the creditors also fail to apply to the people's court for designating a liquidation team to conduct liquidation, the power organ, shareholders and creditors of the foreign-invested company may pursuant to the stipulations of the Procedures for Liquidation of Foreign-Invested Enterprises apply to the approving organ for special liquidation. Customs procedures shall be handled first for the goods under customs surveillance, and the taxes thereof shall be made up.

23. If a foreign-invested company applies for cancellation of registration, it shall submit related documents pursuant to Article 44 of the Administrative Regulations on Company Registration. Among them, the liquidation report shall also be attached with the certificate for cancellation issued by the taxation organ, the certificate for completion of customs procedures issued by the customs, or the certificate for failure to handle the customs registration procedures. If a foreign-invested company applies for cancellation of registration for termination of operating activities in advance, the document of approval issued by the approving organ shall also be submitted (except for disbandment according to a ruling by the court, bankruptcy or shutdown as ordered by an administrative organ, revoking of business license, revoking of permit for establishment, or cancellation of registration for company establishment).

24. If a foreign-invested company is to establish or cancel a branch, verification and transfer by the original company registration organ is unnecessary, application for registration may be handled directly with the company registration organ for foreign invested companies at the local place of the branch.

If, pursuant to laws, administrative regulations, decisions of the State Council or special stipulations of the state on projects where foreign investment is restricted and in the service trade field, approval by competent departments is necessary for establishment or cancellation of a branch, the application for registration shall be made within 30 days starting from the date when the approval is given. If application is made not in due time, the applicant shall make a report to the original approving organ to confirm the validity of the document or apply for new approval.

25. The company registration organ will no longer handle registration for representative offices of foreign-invested companies. It is no longer necessary for the representative offices already registered to handle alteration or extension procedures. Upon maturity, registration cancellation shall be handled or if necessary, application shall be made for establishment of a branch. A branch of a foreign-invested company is permitted to engage in liaison, consulting and other services within the business scope of the company.

In cases where operating activities are carried out in the name of a representative office, the company registration organ will investigate and give punishment according to law.

26. If shareholders and initiators of a foreign-invested company fail to deliver or deliver not in due time the currency or non-currency properties used as capital contributions, the company registration organ shall impose penalties pursuant to the application principles of the Administrative Rules on Registration of Registered Capital of Companies. For a company established prior to January 1, 2006, the time of capital contribution shall be based on the time of establishment registration.

If a Sino-foreign contractual joint venture company fails to perform the capital contribution obligations in due time, the company registration organ shall order to perform within a prescribed time pursuant to stipulations of Article 9 of the Law on Sino-Foreign Contractual Joint Ventures; if performance still fails to be made in due time, it shall be treated according to the first paragraph of this item; if a foreign-foreign equity joint venture or solely foreign-invested company fails to pay up capital contributions in time, the company registration organ may, in addition to the treatment given according to the first paragraph of this item, also revoke the business license pursuant to stipulations of Article 9 of the Law on Foreign Capital Enterprises.

27. If any foreign-invested company engages without authorisation in operating activities of projects in the encouraged and permitted categories of the Catalogue of Industrial Guide to Foreign Investment by going beyond its ratified registered scope of business, the company registration organ shall give punishment pursuant to Article 73 of the Administrative Regulations on Company Registration.

If any foreign-invested company engages without authorisation in operating activities of projects in the restricted and prohibited categories of the Catalogue of Industrial Guide to Foreign Investment by going beyond its ratified registered scope of business, the company registration organ may certify this as "an unlawful operating act that goes beyond the ratified registered scope of business and engages without authorisation in operating activities to be undertaken only after receiving a permit or other document of approval", on which penalty shall be given pursuant to the stipulations of the Procedures for Investigating and Banning Operations without License. If a crime is constituted, the company shall be prosecuted for taking criminal responsibilities.

28. The Opinions are also applicable to the examination and approval and registration management of companies established by investors of the Taiwan region, the Hong Kong Special Administrative Region and the Macao Special Administrative Region, and Chinese citizens (overseas Chinese) residing abroad, as well as companies set up by foreign-invested investment companies, and foreign-invested venture capital companies.