(Promulgated by Decree No.1 of the Ministry of
Foreign Trade
and Economic Cooperation on January 10, 1995)
Article 1 In order to further expand
international economic and technological cooperation and exchanges and introduce foreign
investment to boost the development of the socialist commodity economy, foreign companies,
enterprises and other economic entities or individuals ( referred to hereinafter as
foreign shareholders) are allowed to jointly set up foreign funded joint stock companies
limited ( referred to hereinafter as company) in China jointly with Chinese companies,
enterprises and other economic entities or individuals ( referred to hereinafter as
Chinese shareholders), under the principle of mutual benefit.
Article 2 A foreign-funded joint stock
company limited referred to in these regulations shall be a business legal person set up
in accordance with these regulations and whose capital stock is made up of equal value
shares contributed by both domestic and foreign shareholders with total value of the
shares purchased and held by the foreign shareholders exceeding 25% of the company's total
registered capital. The company bears its liabilities with its total assets and each
shareholders bears the liabilities in proportion to the shares held.
Article 3 The companies shall be a form
of the foreign-funded enterprise (FFEs) and bound by the State's related laws and
regulations on FFEs.
Article 4 The companies should be set
up in accordance with the State's related policies and regulations on FFEs. The State
encourages the establishment of production-oriented companies which are equipped with
advanced technologies.
Article 5 A company may be established
by means of promotion or public offer.
Article 6 For a company established
through promotion there must be at least one foreign promoter. The promoters shall also
abide by other stipulations of the Company Law.
For a company established through public offer
in addition to the requirements stated in the previous paragraph, there must be at least
one promoter having a record of profit-making in the past three consecutive years. If the
promoter is a Chinese shareholder, concerned financial statements of the past three years
prepared by registered accountants must be presented. If the promoter is a foreign
shareholder, concerned financial statements prepared by registered accountants of the
place where the shareholder resides must be presented.
Article 7 Registered capital of a
company shall be the total capital stock recorded with registering departments. The
registered capital of a company shall be at least RMB 30 million yuan. Total value of the
shares purchased and held by the foreign shareholders shall be no less than 25% of the
company's total registered capital.
Article 8 In transfer of shares
subscribed by the shareholders conditions set in the previous article must be satisfied.
Transfer of shares purchased by the promotors can only be made at least three years after
the company's registration and the transactions shall be approved by the departments which
approved the company's establishment.
Article 9 After reaching an agreement
on establishing a company, the promoters can entrust one of them to proceed with the
following application procedures:
(1) Submit a written application, a
feasibility study report and assets evaluation report for the company to competent
authorities of the provinces, autonomous regions, municipalities directly under the
Central Government or cities enjoying provincial status in planning ( referred to
hereinafter as competent departments).
For the establishment of a company through
public offer, prospectus shall also be submitted.
(2) After being examined and approved by the
competent departments, the application documents shall then be transferred to departments
in charge of foreign trade and economic cooperation of the provinces, autonomous regions
and municipalities directly under the Central Government or cities enjoying provincial
status in planning, after whose ratification the promotors can start to sign formal
agreements and articles of association of the company.
(3) The agreements and articles of association
of the company, after being approved by the departments in charge of foreign trade and
economic cooperation of the provinces, autonomous regions, municipalities directly under
the Central Government or cities enjoying provincial status in planning, shall be sent to
the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) for ratification. MOFTEC
shall decide within 45 days on approval or rejection.
Article 10 All application documents
submitted shall be in Chinese. When deemed necessary, the documents can also be written in
a foreign language, but the approved and effective Chinese version shall dominate.
Article 11 The application for the
establishment of a company shall briefly define:
(1) The promoter's title, residence and legal
representatives;
(2) The name, site and purpose of the company
to be established;
(3) The establishment form of the company,
total shares, share categories, face value of each share, the proportion of share
purchased by the promoters, scope and channels for the shares' sales;
(4) Performance of the promoters in production
and operation, including production, assets and liabilities, and profits, in the past
three consecutive years. (This only applies to companies established through public
offer);
(5) The company's investment orientation and
scope of operation;
(6) The time of application, signatures of the
promoters' legal representatives as well as the seal of the promotors' units;
(7) Other items deemed necessary.
Article 12 Promoters' agreement shall
define:
(1) Name and residence of promoters, and the
names, nationality, residence and title of the promoters' legal representative;
(2) The name and site of the company to be
established;
(3) Purpose and business scope of the company
to be established;
(4) The form of the company's establishment
and organization;
(5) The company's registered capital, total
shares, share categories, amounts, forms and expiration date of shares subscribed by
promoters;
(6) The rights and obligations of promoters;
(7) Responsibilities for violating the
agreement;
(8) Applicable laws and regulations and how to
settle disputes;
(9) The agreement's effective date and
expiration;
(10) The time and site of signing of the
agreement, with the signatures of the promoters;
(11) Other items deemed necessary.
Article 13 Within 30 days after the
approval of the agreements, articles of association of a company by MOFTEC, the promoters
shall open a special bank accout by presenting documents of the approval and pay in a lump
sum the total value of the subscription of the shares within 90 days after the issuance of
the approval. The promoters shall bear joint liability of the company before paying the
total value of the subscription of the shares. Whereas the company fails to start up, the
promoters shall be responsible for the expense incurred during the process of seeking the
company's establishment as well as other joint liabilities.
Article 14 For companies set up through
promotion, the promoters, after paying the total value of the subscription of the shares
as stipulated in Article 11, shall establish a board of directors and a board of
supervisors. The board of directors shall present establishment approval document, the
articles of association and certificate of the assets of the company to competent
departments for the registration of the company's establishment.
For companies set up through public offer, the
promoters, after paying the total value of the subscription of the shares, shall acquire
certificates testifying the company's assets from legal institutions responsible for
testifying assets and liabilities. Within 30 days of the certificate's issuance, the
promoters shall convene an establishment meeting and establish a board of directors and a
board of supervisors. The board of directors, within 30 days of its establishment, shall
submit establishment approval documents, articles of association and certificates on the
company's assets and minutes of the establishment meeting to responsible departments for
the registration of the company's establishment.
The departments responsible for the
registration of companies shall, within 30 days upon receipt of all the required
documents, complete the registration formalities and issue a business license.
Article 15 Sino-foreign joint equity
ventures, Sino-foreign joint cooperative ventures and solely foreign-funded enterprises (
referred to hereinafter as FFEs), when applying to transform into companies, should submit
profit-making records for the past three consecutive years. The original investors of the
FFE, as sole promoter of the company, or with other promoters of the company, shall sign
agreements and articles of association for the establishment of the company and submit the
documents to responsible departments in the place where the FFE is located for initial
approval, which will then move to MOFTEC for final ratification.
When applying for transformation into
companies, the following documents shall be submitted:
(1) Contracts and articles of association of
the original FFE;
(2) Resolution on reorganization by the board
of directors of the original FFE;
(3) Resolution on terminating the original
contracts and articles of association made by the investors of the original FFE;
(4) Evaluation report of the original FFE's
assets;
(5) Agreements signed by promoters ( including
but not limited to former investors of the original FFE);
(6) The company's articles of association;
(7) Business license, approval documents and
financial statements of the past three consecutive years of the original FFE;
(8) Written application for the company's
establishment;
(9) Documents testifying the promotors'
capital credibility;
(10) Feasibility study report.
Article 16 After the approval of the
aforementioned applications by MOFTEC and the payment of the total value of the
subscription of shares, the promoters can undergo transformation formalities with
responsible departments for registering the companies.
Article 17 A company, after
transformation, shall inherit all the legal rights and obligations of the original
foreign-funded enterprise.
All pledged obligations laid down in the
contracts and articles of association of the original FFE for the Chinese and foreign
investors shall remain effective and included in the promoter's agreements and articles of
association of the company to be established.
Article 18 When applying to be
transformed into companies, State and collective enterprises, in addition to the other
requirements stipulated in this set of procedures, shall also meet the following
conditions:
(1) The enterprise must have been in operation
for at least five years and have a record of profit-making in the past three consecutive
years;
(2) More than 25% of the enterprise's
registered capital have been subscribed by foreign shareholders with convertible foreign
currency;
(3) The scope of operation of the enterprise
conforms to the industrial policy for FFEs.
Chinese and foreign shareholders, as promoters
of the company, sign agreements and articles of association for the establishment of the
company and submit the documents to competent departments in the place where the FFE is
located for initial approval, which will then move to MOFTEC for final ratification.
When applying for transformation into
companies in this case, the following documents shall be submitted:
(1) Evaluation report of the original
enterprise's assets;
(2) Written application for the establishment
of the company;
(3) Feasibility study reports;
(4) The promoters' agreement;
(5) The company's articles of association;
(6) The business license and financial
statements of the past three consecutive years of the original enterprise;
(7) Documents testifying the promoter's
capital credibility;
(8) Other documents deemed necessary.
Article 19 After the approval of the
aforementioned applications by MOFTEC and the payment of the total value of the
subscription of shares, the promoters can undergo transformation formalities with
competent departments for registering the company.
Article 20 When applying for
transformation into companies, a joint stock company limited, in addition to the other
requirements stipulated in this set of regulations, shall also meet the following
conditions:
(1) The joint stock company limited has been
established after official State approval;
(2) More than 25% of the joint stock company
limited's registered capital have been purchased and held by foreign shareholders with the
payment of convertible foreign currency;
(3) The scope of operation of the joint stock
company limited conforms to the industrial policy for FFEs.
Article 21 A joint stock company
limited which issues B shares, shall submit the following documents when applying for
transformation into companies.
(1) Resolution on the transformation of the
company reached by the shareholder's conference;
(2) Evaluation report of the assets of the
original joint stock company limited;
(3) Written application for the transformation
into a company;
(4) Amendments and revisions of the articles
of association of the original joint stock company limited;
(5) Documents issued by departments in charge
of securities approving the issuance of B shares;
(6) Other documents deemed necessary.
Article 22 A joint stock company
limited, when applying for transformation into a company through increase of shares or
issuance of foreign held shares, shall submit the agreements signed by the company with
the share-subscribers concerned and other necessary documents, in addition to the
documents stipulated in the previous article's sections (1), (2), (3) and (4).
Article 23 A joint stock company
limited which issues shares overseas (including but not limited to H and N shares ) shall
submit the following documents in addition to the documents stipulated in the section (1),
(2), (3) and (4) of article 21 when applying for transformation into a company:
(1) Documents issued by departments in charge
of securities approving the issuance of shares overseas;
(2) Documents issued by overseas securities
institutions approving the issuance of shares by the original joint stock company limited;
(3) Performance of the overseas trading of the
shares issued by the original company.
Article 24 After the approval of the
aforementioned applications, the original joint stock company limited shall submit
approval certificates and papers testifying the collection of stocks to administrative
departments in charge of industry and commerce to undergo the formalities for transforming
into a company.
Article 25 Other related matters not
included in this set of provisional regulations shall follow the Company Law, the State
Council's Special Regulations on Overseas Collection and Issuance of Stocks by Joint Stock
Companies Limited and other related regulations.
Article 26 Companies transformed from
FFEs do not enjoy further tax-exemption or tax-deduction preferences allotted to the
original enterprises.
Article 27 Companies, enterprises and
other economic entities or individuals from Hong Kong, Macao and Taiwan, when establishing
companies in the Mainland, shall follow this set of provisional regulations.
Article 28 This set of Provisional
Regulations shall be interpreted by MOFTEC.
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