|
(Promulgated May 28, 1997 by the Ministry of Foreign Trade
and Economic Cooperation and State Administration for Industry
and Commerce)
Article 1. In accordance with the Company Law of the People's
Republic of China, Law of the People's Republic of China
on Chinese-Foreign Equity Joint Ventures, Law of the People's
Republic of China on Chinese-Foreign Cooperative Joint Ventures,
Law of the People's Republic of China on Wholly Foreign
Invested Enterprises and other relevant laws and regulations,
these Regulations have been formulated in order to promote
the healthy development of foreign investment enterprises,
protect the legitimate rights and interests of each of the
investors and maintain social and economic order.
Article 2. The change of Ownership Interest of the investors
in foreign investment enterprises contemplated herein refers
to the change in the investor or the percentage of the investor's
investment ownership (including those provided as a condition
for cooperation) (hereinafter referred to as "Ownership
Interest") in Chinese-foreign equity joint venture
enterprises, cooperative joint venture enterprises and wholly
foreign-invested enterprises (collectively, hereinafter
referred to as the "Enterprises") established
inside China pursuant to Chinese law, including but not
limited to the change of Ownership Interest of the investor
in the Enterprise arising from the following major causes:
1) assignment of Ownership Interest as agreed by the investors
of the Enterprise;
2 )assignment of Ownership Interest to its affiliates or
other assignees by an investor of the Enterprise upon the
consent of the other investors;
3) change of Ownership Interest of each of the investors
arising from the adjustment of the registered capital of
the Enterprise as agreed by the investors of the Enterprise;
4) assignment of its Ownership Interest as a collateral
security to its creditor upon the consent of the other investors
of the Enterprise, and the assignee or beneficiary has obtained
such Ownership Interest pursuant to law and terms of the
contract;
5) obtaining of the Ownership Interest of the investor
by its successor, creditor or other beneficiary pursuant
to law, due to the bankruptcy, dissolution, rescission,
revocation or death of the investor;
6) the succession of the Ownership Interest of the original
investor by its successor pursuant to law after merger or
split of any investor of the Enterprise;
7) replacement of any investor or change of its Ownership
Interest after the approval of the original examination
and approval authority due to the failure of the investor
of the Enterprise in the performance of its obligations
set forth in the contract and/or articles of association
of the Enterprise.
Article 3. The investor of the Enterprise, when changing
its Ownership Interest, shall observe the relevant laws
and regulations of China, obtain the approval of the examination
and approval authority and go through the formalities with
the registration authority in the change of the filing.
Any change of the Ownership Interest without the approval
of the examination and approval authority shall become invalid.
Article 4. The investor of the Enterprise, when changing
its Ownership Interest, must follow the stipulations of
Chinese laws and regulations on the qualification of the
investor and meet the requirement of the industrial policies.
In accordance with the Directory to Industries for Foreign
Investment, if it is an industry where sole foreign ownership
is not allowed, the change of Ownership Interest shall not
result in a situation where the foreign investor owns all
of the Ownership Interest of the Enterprise. If any Enterprises
becomes a wholly foreign-owned enterprise as a result of
the change of the Ownership Interest, the conditions must
be satisfied for the establishment of a wholly foreign-owned
enterprise as stipulated in the Detailed Rules for the Implementation
of the Law of the People's Republic of China on Wholly Foreign
Invested Enterprises (hereinafter referred to as "WFOE
Rules").
Where State-owned assets must be the majority shareholder
or in a leading position, the change of Ownership Interest
shall not result in a situation where the foreign investor
or non-Chinese State-owned enterprise becomes the majority
shareholder or in the leading position.
Article 5. Unless the foreign investor otherwise assigns
all of its Ownership Interest to the Chinese investor, a
change of Ownership Interest of the investor of the Enterprise
shall not result in a situation where the percentage of
investment by the foreign investor is lower than 25% of
the registered capital of the Enterprise.
Article 6. Upon the consent of other investors of the Enterprise,
the investor which has made its capital contribution may,
pursuant to the relevant stipulations of the Guarantee Law
of the People's Republic of China (hereinafter referred
to as "Guarantee Law"), by entering into a pledge
contract and subject to the approval of the examination
and approval authority, pledge to the pledgee its Ownership
Interest arising from its contribution. No investor shall
pledge a portion of its Ownership Interest which has not
been contributed. No investor shall pledge its Ownership
Interest to the Enterprise itself.
During the pledge period, the investor which has made the
pledge shall remain unchanged as an investor of the Enterprise,
and without the consent of the pledging investor and the
other investors of the Enterprise, the pledgee shall not
assign the pledged Ownership Interest; and without the consent
of the pledgee, the pledging investor shall not assign or
re-pledge the pledged Ownership Interest.
The stipulations of the relevant laws and regulations as
well as these Regulations shall be applied with respect
to the rights and obligations of the pledging investor and
pledgee and the contents of the pledge contract.
Article 7. The authority for the examination and approval
of any change of Ownership Interest by the investors to
the Enterprise shall be the examination and approval authority
of the establishment of such Enterprises. If the Chinese
investor to a Sino-foreign equity joint venture or a cooperative
joint venture incurs any changes to their Ownership Interest
resulting the enterprise to become a wholly-foreign owned
enterprise, and if such enterprise engages in the industries
where restrictions are imposed on the establishment of wholly
foreign-owned enterprises as set forth in Article 5 of "Detailed
Rules on Foreign Investment", then, the change of Ownership
Interest of the Chinese investor to such enterprise shall
be subject to the approval of the Ministry of Foreign Trade
& Economic Cooperation ("MOFTEC").
If the Enterprise incurs major Ownership Interest changes
due to an increase in registered capital, thus causing its
total investment to exceed the approval power threshold
of the original examination and approval authority, then,
such major Ownership Interest changes of the investors to
the Enterprise shall, in line with the approval power threshold
and the relevant regulations, be submitted for approval
to the higher-level examination and approval authorities.
The authority for the registration of any changes of Ownership
Interest by the investors to the Enterprise shall be the
original registration authority. With respect to any Ownership
Interest changes approved by MOFTEC, formalities shall be
undertaken to register such changes with the State Administration
for Industry and Commerce or the original registration authority
upon authorization thereby.
Article 8. In case of any Ownership Interest changes by
the Chinese investor who invests with State-owned assets,
a relevant State-owned assets appraisal agency must be engaged
to appraise the value of such Ownership Interest subject
to changes before the administrative departments of State-owned
assets confirm such appraisal. The confirmed appraisal result
shall be the basis for fixing the price for such Ownership
Interest changes.
Article 9. If a change of Ownership Interest is required
due to the reasons described under Article 2 (1) and (2)
hereof, the Enterprise shall submit to the examination and
approval authority the following documents:
1) the investor's letter of application for Ownership Interest
changes;
2) the original contract and articles of association of
the Enterprise, together with any amendments made thereto;
3) copies of the approval certificate and business license
of the Enterprise;
4) resolution of the Board of Directors of the Enterprise
regarding Ownership Interest changes by the investors;
5) The Board of Directors?new member list after the investors
to the Enterprise make Ownership Interest changes;
6) any Ownership Interest transfer agreements entered into
between the transferor and the transferee and which have
been executed or acknowledged in other written form by other
investors;
7) other documents required to be submitted to the examination
and approval authority.
Article 10. Ownership Interest transfer agreements shall
mainly include the following:
1) name, address and the legal representative of the transferor
and the transferee, along with the name, title and nationality
of such legal representatives;
2) percentage and price of the Ownership Interest to be
transferred;
3) closing deadline and method of the Ownership Interest
to be transferred;
4) the rights and obligations of the transferee pursuant
to the contract and articles of association of the Enterprise;
5) liabilities for breach of contract;
6) applicable laws and settlement of disputes;
7) effectiveness and termination of the agreements;
8) date and place of execution of the agreements.
Article 11. If any Ownership Interest change is required
due to reasons described under Article 2 (3), such change
shall conform to the relevant specific regulations of MOFTEC
and the State Administration for Industry and Commerce.
The Enterprise shall, in addition to submitting the documents
described under Article 9 (1), (2), (3), (4) and (5), submit
the Ownership Interest agreements entered into by the investors
to the examination and approval authority.
Article 12. After the execution of an Ownership Interest
pledge contract between an Enterprise investor and a pledgee,
the following documents shall be submitted for review to
the examination and approval authority which approved the
establishment of such Enterprise:
1) resolutions of the Board of Directors of the Enterprise
and other investors approving the pledge of its Ownership
Interest by the pledgor;
2) the pledge contract executed by the pledging investor
and the pledgee;
3) the investment certificate of the pledging investor;
and
4) the investment verification report for the Enterprise
issued by the accountant registered in China and his/her
accounting firm.
The examination and approval authority shall, within 30
days upon receiving all the documents set forth in the foregoing
section, decide whether or not to approve the documents
The Enterprise shall, within thirty (30) days after it obtains
the approval from the examination and approval authority
regarding the pledge of the Ownership Interest by its pledging
investor, handle the procedures for filing with the original
registration authority in virtue of the relevant written
approval.
Any pledge which fails to go through the examination and
approval process and filing procedures as set forth in this
Article shall become invalid.
Article 13. If in accordance with the provisions of the
Guarantee Law, the pledged Ownership Interest upon transfer
is owned by the pledgee or other beneficiaries, in addition
to the documents required in Article 9 (1), (2), (3) and
(5), the Enterprise shall also submit to the examination
and approval authority valid documents certifying the title
of the pledgee or other beneficiaries to the Ownership Interest
of the original investor. The examination and approval authority
shall go through the reviewing process on the basis of the
above documents and documents described in Article 12 hereof
as well as the relevant laws and regulations.
Article 14. Where the Ownership Interest needs to be changed
due to the reasons set forth in Article 2 (5) and (6) hereof,
in addition to the documents required in Article 9 (1),
(2), (3) and (5), the Enterprise shall also submit to the
examination and approval authority valid documents certifying
the title of the new owner of the Ownership Interest to
the Ownership Interest of the original investor.
In case of any change to the investors of the Enterprise
due to the provisions of Article 2 (5) and (6) hereof, if
the other investors of the Enterprise do not agree to continue
the operation, they may apply to the original examination
and approval authority for the termination of the contract
and the articles of association of the original Enterprise.
Upon the termination thereof, the person who has obtained
the Ownership Interest shall have right to join the liquidation
committee and participate in the distribution of the assets
of the Enterprise remaining after the liquidation; if the
person who has obtained the Ownership Interest does not
agree to continue operation, upon the unanimous agreement
of the other investors of the Enterprise, he may assign
his Ownership Interest to the other investors of the Enterprise
or any third party in accordance with these Regulations.
Article 15. If the investor needs to be replaced or the
Ownership Interest needs to be changed due to the reasons
set forth in Article 2 (7) hereof, the non-defaulting investor
shall be entitled to unilaterally apply to the examination
and approval authority for such changes. In addition to
the documents required in Article 9 (1), (2), (3) and (5),
the Enterprise shall also submit to the examination and
approval authority the following documents:
1) the investment verification report for the Enterprise
issued by the accountant registered in China and his/her
accounting firm; and
2) the documents certifying the non-faulting party notifying
the defaulting party to make or make in full its capital
contributions.
If any new investor intends to make investment, the certificate
for legal business operation of the new investor and a letter
of credit standing shall be submitted to the examination
and approval authority. If the defaulting party has made
partial contribution in accordance with the provisions of
the original contract and the articles of association of
the Enterprise, relevant documents regarding the clearance
by the Enterprise of the partial contribution made by the
defaulting party shall also be submitted to the examination
and approval authority.
Article 16. In case of any change to the Ownership Interest
of the Chinese investor who made the investment with State-owned
assets, the Enterprise must also submit the following documents
to the examination and approval authority:
1) opinion of the competent department of the Chinese investor
on the change of the Ownership Interest of the Enterprise;
2) asset appraisal report on the Ownership Interest to
be changed issued by a State-owned asset appraisal authority;
and
3) letter of confirmation issued by the State-owned asset
administration department on the above asset appraisal report.
Article 17. The examination and approval authority shall,
within 30 days upon receiving all the documents required
to be submitted, decide whether or not to approve the documents.
The Enterprise shall, within 30 days after the examination
and approval authority grants the approval of the change
of the Ownership Interest of the Enterprise, go through
the formalities with the examination and approval authority
for the change of the Certificate of Approval of Foreign
Investment Enterprises.
The Chinese investor who has obtained all of the Ownership
Interest of the Enterprise shall, within 30 days after the
approval of the change of the Ownership Interest of the
Enterprise is granted by the examination and approval authority,
return to the examination and approval authority for cancellation
the Certificate of Approval of Foreign Investment Enterprises.
The examination and approval authority shall, within 15
days upon the cancellation of the Certificate, send a notice
to the original registration organization of the Enterprise
regarding the cancellation of the Certificate of Approval
of the Foreign Investment Enterprises.
Article 18. The Enterprise shall, within 30 days upon the
change or cancellation of the Certificate of Approval of
Foreign Investment Enterprises, apply to the registration
organization for the change of registration in accordance
with the Regulations of the People's Republic of China on
the Administration of Registration of the Enterprise Legal
Person and the Regulations of the People's Republic of China
on the Administration of Company Registration. Failing that
shall result in corresponding penalty by the registration
organization according to relevant regulations.
Article 19. When applying for a change of the registration
of the Ownership Interest, the Enterprise shall submit to
the registration organization the relevant documents submitted
to examination and approval authority, the approved document
of the examination and approval authority and the other
documents required by the registration organization.
If the investor needs to be replaced or the Ownership Interest
needs to be changed due to the reasons set forth in Article
2 (7) hereof, in addition to the documents set forth in
Article 15 hereof, the Enterprise shall also submit to the
registration organization the document appointing the new
members of the Board of Directors of the Enterprise, their
ID certificates as well as the resolution of the new Board
of Directors.
If the Chinese investor of the Enterprise obtains all of
the Ownership Interest of the Enterprise because of the
change of the investor's Ownership Interest, the Enterprises
shall, when applying for change of registration, submit
relevant documents to the registration organization as required
for the established of the type of the proposed enterprise.
Upon the approval of the registration organization, the
Business License of the People's Republic of China of Enterprise
Legal Person will be revoked and the Business License of
the Enterprise Legal Person will be issued instead.
Article 20. The agreement of Ownership Interest transfer
as well as the agreement of amendment to the original contract
and the articles of association shall be effective as of
the date of the approval of the change of the Certificate
of Approval of Foreign Investment Enterprises. After such
agreements become effective, the investors of the Enterprise
shall be entitled to the relevant rights and undertake relevant
obligations according to the contract and the articles of
association as amended.
Article 21. The assignment of the shares not publicly listed
of foreign investment shareholding limited companies shall
be implemented with reference to these Regulations except
otherwise stipulated by laws and regulations.
Article 22. The change of the Ownership Interest of the
Enterprise invested by companies, enterprises, and other
economic organizations as well as individuals of Hong Kong,
Macao and Taiwan in other parts of China shall be implemented
with reference to these Regulations.
Article 23. These Regulations shall be implemented as of
the date of promulgation.
|
