中华人民共和国对外贸易经济合作部令
（１９９５年第１号）


　　现将《关于设立外商投资股份有限公司若干问题的暂行规定》予以公布，自发布之日起实施。

　　　　　　　　　　　　　　　　　　　　　　　　　　　　部长　吴仪
　　　　　　　　　　　　　　　　　　　　　　　　　１９９５年１月１０日

　　　　　关于设立外商投资股份有限公司
　　　　　　　 若干问题的暂行规定

　第一条　为进一步扩大国际经济技术合作和交流，引进外资，促进社会主义商品经济的发展，外国的公司、企业和其他经济组织或个人（以下简称外国股东），按照平等互利的原则，可与中国的公司、企业或其他经济组织（以下简称中国股东）在中国境内，共同举办外商投资股份有限公司（以下简称公司）。

　第二条　本规定所称的外商投资股份有限公司是指依本规定设立的，全部资本由等额股份构成，股东以其所认购的股份对公司承担责任，公司以全部财产对公司债务承担责任，中外股东共同持有公司股份。外国股东购买并持有的股份占有公司注册资本２５％以上的企业法人。

　第三条　公司为外商投资企业的一种形式，适用国家法律、法规对于外商投资企业的有关规定。

　第四条　设立公司应符合国家有关外商投资企业产业政策的规定。国家鼓励设立技术先进的生产型公司。

　第五条　公司可采取发起方式或者募集方式设立。

　第六条　以发起方式设立的公司，除应符合《公司法》规定的发起人的条件外，其中至少有一个发起人应为外国股东。
　　以募集方式设立的公司，除应符合前款条件外，其中至少有一个发起人还应有募集股份前３年连续盈利的记录，该发起人为中国股东时，应提供其近３年经过中国注册会计师审计的财务会计报告；该发起人为外国股东时，应提供该外国股东居所所在地注册会计师审计的财务报告。

　第七条　公司的注册资本应为在登记注册机关登记注册的实收股本总额，公司注册资本的最低限额为人民币３千万元，其中外国股东购买并持有的股份应不低于公司注册资本的２５％。

　第八条　股东认购的股份的转让应符合本规定第七条所规定的条件。发起人股份的转让，须在公司设立登记３年后进行，并经公司原审批机关批准。

　第九条　发起人达成设立公司协议后，可共同委托一发起人办理设立公司的申请手续。具体程序是：
　　（一）申请人向其省、自治区、直辖市及计划单列市政府主管部门（以下称主管部门）提交设立公司的申请书、可行性研究报告、资产评估报告等文件。
　　以募集方式设立公司的，申请（还须提交招股说明书）。
　　（二）上述文件经主管部门审查同意后，由主管部门转报省、自治区、直辖市及计划单列市对外经贸部门。上述文件经省、自治区、直辖市及计划单列市对外经贸部门核准后，发起人正式签定设立公司的协议、章程。
　　（三）发起人签定设立公司的协议、章程。报省、自治区、直辖市对外经贸部门审查同意后，报对外贸易经济合作部审查批准。对外贸易经济合作部在４５日内决定批准或不批准。

　第十条　发起人提交的各项文件必须用外文书写。在发起人各方认为需要时，可商定再用一种外文书写，但以审批生效的中文文本为准。

　第十一条　设立公司的申请书应概要说明：
　　（一）发起人的名称、住所、法定代表人；
　　（二）组建公司的名称、住所及宗旨；
　　（三）公司设立方式、股本总额、类别、每股面值、发起人认购比例、股份募集范围和途径；
　　（四）发起人的生产经营情况，包括近３年生产经营、资产与负债、利润等情况，（限于以募集方式设立公司的发起人）；
　　（五）公司的资金投向及经营范围；
　　（六）提出申请的时间，发起人的法定代表签名并加盖发起人单位公章；
　　（七）其他需要说明的事项。

　第十二条　发起人协议应包括以下主要内容：
　　（一）发起人的名称、住所、法定代表人的姓名、国籍、住所、职务；
　　（二）组建公司的名称、住所；
　　（三）公司的宗旨，经营范围；
　　（四）公司设立的方式、组织形式；
　　（五）公司注册资本、股份总额、类别、发起人认购股份的数额、形式及期限；
　　（六）发起人的权利和义务；
　　（七）违约责任；
　　（八）适用法律及争议的解决；
　　（九）协议的生效与终止；
　　（十）订立协议的时间、地点、发起人签字；
　　（十一）其他需要载明的事项。

　第十三条　发起人设立公司的协议、章程经对外贸易经济合作部批准后，发起人应在３０日内凭对外贸易经济合作部颁发的批准证书到银行开立专用帐户。发起人应自批准证书签发之日起９０日内一次缴足其认购的股份。发起人在公司发行的股份缴足之前应承担连带认缴责任。公司不能设立时，发起人为设立行为所发生的费用和债务负连带责任。

　第十四条　以发起方式设立公司的，发起人按本规定第十一条的规定缴足其认购的股份后，应当选举董事会和监事会，由董事会向公司登记机关报送设立公司的批准文件、公司章程、验资证明等文件，申请设立登记。
　　以募集方式设立公司的，发行股份的股数缴足后，必须经法定的验资机构验资并出具证明，发起人应当在３０日内主持召开公司创立大会，并选举董事会、监事会，董事会应于创立大会结束后３０日内，向公司登记机关报送设立公司的批准文件、公司章程、验资证明、创立大会的会议记录等文件，申请设立登记。
　　公司登记机关自接到全部登记文件之日起３０日内完成登记注册手续，并颁发营业执照。

　第十五条　已设立中外合资经营企业、中外合作经营企业、外资企业（以下简称外商投资企业），如申请转变为公司的，应有最近连续３年的盈利记录，由原外商投资企业的投资者作为公司的发起人（或与其他发起人）签定设立公司的协议、章程，报原外商投资企业所在地的审批机关初审同意后转报对外贸易经济合作部审批。
　　申请转变应报送下列文件：
　　（一）原外商投资企业的合同、章程；
　　（二）原外商投资企业董事会关于企业改组的决议；
　　（三）原外商投资企业投资者关于终止原合同、章程的决议；
　　（四）原外商投资企业资产评估报告；
　　（五）发起人（包括但不限于原外商投资企业投资者）协议；
　　（六）公司章程；
　　（七）原外商投资企业的营业执照、批准证书，最近连续３年的财务报告；
　　（八）设立公司的申请书；
　　（九）发起人的资信证明；
　　（十）可行性研究报告。

　第十六条　上述申请经对外贸易经济合作部批准后，发起人应自批准证书签发并缴足其认购的股本金后向公司登记机关办理变更登记手续。

　第十七条　外商投资企业变更登记为公司后，原外商投资企业的一切权利、义务全部转由公司承担。
　　外商投资企业的中外投资者在原外商投资企业合同、章程中承诺的义务，应列入发起人协议及章程，同样适用所设立的公司。

　第十八条　国有企业、集体所有制企业如申请转变为公司的，除符合本规定其他条款的规定外，还须符合以下条件：
　　（一）该企业至少营业５年并有最近连续３年的盈利记录；
　　（二）外国股东以可自由兑换的外币购买并持有该企业的股份占该企业注册资本的２５％以上；
　　（三）企业的经营范围符合外商投资企业产业政策。
　　中外股东作为发起人签定设立公司的协议、章程，报企业所在地审批机关初审同意后转报对外贸易经济合作部审批。
　　申请转变应报送下列文件：
　　（一）原企业资产评估报告；
　　（二）设立公司的申请书；
　　（三）可行性研究报告；
　　（四）发起人协议；
　　（五）公司章程；
　　（六）原企业的营业执照、最近连续３年的资产负债表；
　　（七）发起人的资信证明；
　　（八）其他必要的文件。

　第十九条　上述申请经对外贸易经济合作部批准后，发起人应自批准证书签发并缴足其认购的股本金后向公司登记机关办理变更登记手续。

　第二十条　股分有限公司申请转变为公司的，除符合本规定其他条款的规定外，还须符合以下条件：
　　（一）该股份有限公司是经国家正式批准设立的；
　　（二）外国股东以可自由兑换的外币购买并持有该股份的有限公司的股份占公司注册资本的２５％以上；
　　（三）股份有限公司的经营范围符合外商投资企业产业政策。

　第二十一条　股份有限公司通过向社会公开发行人民币特种股票（Ｂ股）。申请转变为公司的，应报送如下文件：
　　（一）股东大会对转变为公司的决议；
　　（二）原股份有限公司资产评估报告；
　　（三）申请转变为公司的报告；
　　（四）原股份有限公司章程的补充、修改协议；
　　（五）证券管理部门批准公开发行人民币特种股票（Ｂ股）的文件；
　　（六）其它必要的文件。

　第二十二条　股份有限公司通过增资扩股或转股发行外国股东持有的股份，申请转变为公司的，除报送前条第（一）、（二）、（三）、（四）款规定的文件外，还应报送股份有限公司与定向购股人的购股协议等其他必要的文件。

　第二十三条　股份有限公司在境外发行境外上市外资股（包括但不限于Ｈ股和Ｎ股）并在境外上市申请转变为公司的，除报送第二十一条第（一）、（二）、（三）、（四）款规定的文件外还应报送如下文件：
　　（一）证券管理部门批准境外上市的文件；
　　（二）境外证券机构批准原股份有限公司股票上市的文件；
　　（三）境外上市的原股份有限公司股票交易情况。

　第二十四条　上述申请经对外贸易经济合作部批准后，原股份有限公司应持批准证书和公司的募股证明向工商行政管理机关办理变更登记手续。

　第二十五条　本暂行规定未规定的公司的其他事宜，按《公司法》，“国务院关于股份有限公司境外募集股份及上市的特别规定”及有关规定办理。

　第二十六条　凡属外商投资企业改组成公司的，其减免税等优惠期限，不再重新计算。

　第二十七条　香港、澳门、台湾地区的公司、企业、其他经济组织或个人，在大陆投资设立公司的，准用此暂行规定。

　第二十八条　本暂行规定由对外贸易经济合作部负责解释。
 

Tentative Provisions on Certain Questions on the Establishment of Foreign-funded Companies Limited by Shares

(Promulgated by the Ministry of Foreign Trade and Economic Co-operation on, and effective as of, 10 January 1995.)

Article 1: In order to further expand international economic and technical co-operation and exchange, import foreign investment and promote the development of the socialist commodity economy, foreign companies, enterprises and other economic organisations or individuals (hereafter, "foreign shareholders") may establish foreign-funded companies limited by shares (hereafter, "companies") inside the People's Republic of China in conjunction with Chinese companies, enterprises or other economic organisations (hereafter, "Chinese shareholders") on the basis of the principles of equality and mutual benefit.

Article 2: For the purposes of these Provisions, the term "a foreign-funded company limited by shares" shall refer to an enterprise legal person that is established in accordance with these Provisions, that divides all of its capital into equal shares, whose shareholders are liable to the company to the extent of the shares subscribed by them, that is liable for its debts to the extent of all its assets, whose shares are jointly held by Chinese and foreign shareholders, with the number of shares bought and held by such shareholders accounting for 25% or more of its registered capital.

Article 3: A company shall be a type of foreign investment enterprises and shall be governed by provisions of State laws and regulations concerning foreign investment enterprises.

Article 4: The establishment of a company shall conform to the State's industrial policy on foreign investment enterprises. The State encourages the establishment of production-oriented companies with advanced technology.

Article 5: Companies may be established by means of promotion or share offer.

Article 6: For a company to be established by means of promotion, it shall have at least one foreign shareholder among its promoters, in addition to compliance with the requirements for promoters set forth in the PRC, Company Law.

For a company to be established by means of a share offer, in addition to compliance with the requirements of the preceding paragraph, it shall also have at least one sponsor with a record of profitability for the last consecutive three years prior to the offer. Where such promoter is a Chinese shareholder, it shall provide its financial accounting reports, audited by an accountant registered in China, for the last three years. Where such promoter is a foreign shareholder, it shall provide financial reports audited by an accountant registered in the place where such foreign shareholder resides.

Article 7: The registered capital of a company shall be the total amount of paid-up share capital registered with the registry. The minimum amount of registered capital of a company shall be Rmb 30 million, of which the number of shares purchased and held by foreign shareholders shall represent no less than 25% of the registered capital of the company.

Article 8: Transfer of shares subscribed by a shareholder shall comply with the requirements prescribed in Article 7 hereof. Transfer of shares by a promoter shall be effected after three years of the registration of the company's establishment and subject to approval by the authority that examined and approved the company.

Article 9: After promoters have reached an agreement on the establishment of a company, they may jointly appoint a promoter to carry out the application procedures for establishment of such company. The specific procedures shall be:

  1. the applicant shall submit documents such as an application for approval to establish the company, a feasibility study report, an asset appraisal report, etc. to the competent authorities of the government of his/her province, autonomous region, centrally-governed municipality or municipality with an independent development plan ("competent authorities").

    Where a company is to be established by means of a share offer, the applicant must also submit a prospectus;

  2. the competent authorities shall refer the above-mentioned documents to the foreign economic relations and trade authorities of the province, autonomous region, centrally-governed municipality or municipality with an independent development plan after examining and approving such documents. Following examination and approval of such documents by the foreign economic relations and trade authorities of the province, autonomous region, centrally-governed municipality or municipality with an independent development plan, the promoters shall officially enter into an agreement on the establishment of the company and the company's articles of association; and,

  3. the agreement entered into by the promoters on the establishment of the company and the company's articles of association shall be submitted to the Ministry of Foreign Trade and Economic Co-operation for examination and approval after being submitted to the foreign economic relations and trade authorities of the province, autonomous region or centrally-governed municipality for examination and approval. The Ministry of Foreign Trade and Economic Co-operation shall decide whether to grant or deny approval within 45 days.

Article 10: All documents submitted by promoters must be in Chinese. When all promoters consider that there is a need, they may agree to use one foreign language additionally. However, the Chinese version that has been examined and approved and become effective shall prevail.

Article 11: An application for approval to establish a company shall concisely state:

  1. the names, domicile and legal representatives of the promoters;

  2. the name, domicile and purpose of the company to be established;

  3. the method of establishing the company, total share capital, category of shares, face value of each share, ratio of subscriptions by promoters, as well as the scope and method of the share offer;

  4. details of the production and business of the promoters, including details of production, business, assets, liabilities, profits, etc. in the last three years (only applicable to promoters of companies to be established by means of a share offer);

  5. the application of the company's funds and the business scope of the company;

  6. the timing of submission of the application, the signatures of the legal representatives of the promoters and the official seals of the promoter's work units; and,

  7. other particulars that are required to be specified.

Article 12: A promoter's agreement shall contain the following main particulars:

  1. the names and domicile of the promoters and the names, nationality, domicile and positions of the legal representatives;

  2. the name and domicile of the company to be established;

  3. the purpose and business scope of the company;

  4. the method of establishment and form of organisation of the company;

  5. the registered capital, total amount of shares, category of shares, the number of shares subscribed by the promoters, as well as the method of and time limit for subscription by the promoters;

  6. the rights and obligation of the promoters;

  7. the liability for breach of contract;

  8. the governing law and settlement of disputes;

  9. the taking effect of and termination of the agreement;

  10. the time and place of conclusion of the agreement and the signatures of the promoters; and,

  11. other particulars that are required to be specified.

Article 13: After an agreement on the establishment of a company by promoters and the company's articles of association have been approved by the Ministry of Foreign Trade and Economic Co-operation, the promoters shall open a special bank account within 30 days on the strength of the approval certificate issued by the Ministry of Foreign Trade and Economic Co-operation. The promoters shall pay a lump sum in full for the shares subscribed within 90 days of the date of issuance of the approval certificate. The promoters shall hold joint and several liability until the shares issued by the company have been paid up in full. Where the company fails to be established, the promoters shall hold joint and several liability for the expenses and debts incurred for the purpose of establishment.

Article 14: After the promoters of a company established by means of promotion have paid up their subscribed shares in accordance with Article 11 hereof, they shall elect the Board of Directors and board of supervisors. The Board of Directors shall submit documents such as the document approving the establishment of the company, the company's articles of association, the capital verification certificates, etc. to the company registry for applying for registration of establishment.

Where a company is to be established by means of a share offer, a supporting document shall be presented by a statutory capital verification organisation after the amount of shares to be issued has been paid up. The promoters shall, within 30 days, convene and preside over an inaugural meeting of the company and elect the Board of Directors and the board of supervisors. The Board of Directors shall, within 30 days of the completion of the company's inaugural meeting, submit documents such as the document approving the establishment of the company, the company's articles of association, the capital verification certificate, the minutes of the inaugural meeting, etc. to the company registry for applying for registration of establishment.

The company registry shall complete the registration procedures and issue a business licence within 30 days of receiving all the registration documents.

Article 15: If an established Sino-foreign equity joint venture, Sino-foreign co-operative joint venture or wholly foreign-owned enterprise (hereafter, "foreign investment enterprise") wishes to apply for approval to convert into a company, it shall have a record of profitability for the last consecutive three years. The investors in the original foreign investment enterprise shall act as promoters (or together with other promoters) of the company to sign an agreement on the establishment of the company and the articles of association, and refer the same to the Ministry of Foreign Trade and Economic Co-operation for examination and approval following preliminary examination and approval by the authority of the place where the original foreign investment enterprise is located.

The following documents shall be submitted for the application for approval of conversion:

  1. the contract and articles of association of the original foreign investment enterprise;

  2. the resolution on the restructuring of the Board of Directors of the original foreign investment enterprise;

  3. the resolution of the investors in the original foreign investment enterprise to terminate the original contract and articles of association;

  4. the appraisal report on the assets of the original foreign investment enterprise;

  5. the agreement among the promoters (including but not limited to the investors of the original foreign investment enterprise);

  6. the articles of association of the company;

  7. the business licence, approval certificate and financial reports for the last three consecutive years in respect of the original foreign investment enterprise;

  8. the application for approval of establishment of the company;

  9. supporting documents of the promoters on credit standing; and

  10. a feasibility study report.

Article 16: Following approval of the above-mentioned application by the Ministry of Foreign Trade and Economic Co-operation, the promoters shall register the change with the company registry after an approval certificate is issued and they pay up their subscribed shares in full.

Article 17: After a foreign investment enterprise is registered as a company, all the rights and obligations of the original foreign investment enterprise shall be transferred to the company.

The obligations undertaken by Chinese and foreign investors in a foreign investment enterprise in the original contract and articles of association of such foreign investment enterprise shall be incorporated in the promoters' agreement and the articles of association and shall likewise apply to the company established.

Article 18: A State-owned company or a collectively-owned enterprise that wishes to apply for approval to convert into a company must, in addition to compliance with other Articles hereof, meet the following requirements:

  1. the enterprise has been operating for at least five years and a record of profitability for the last consecutive three years;

  2. the shares in the enterprise purchased with freely convertible currency and held by foreign shareholders represent 25 per cent or more of the registered capital of the enterprise; and

  3. the business scope of the enterprise conforms with the industrial policy on foreign investment enterprises.

The Chinese and foreign shareholders shall act as promoters to enter into an agreement on the establishment of the company and the articles of association, and refer the same to the Ministry of Foreign Trade and Economic Co-operation for examination and approval following preliminary examination and approval by the authority of the place where such enterprise is located.

The following documents shall be submitted for the application for approval of conversion:

  1. the appraisal report on the assets of the original enterprise;

  2. an application for approval of the establishment of the company;

  3. a feasibility study report;

  4. the agreement among the promoters;

  5. the articles of association of the company;

  6. the business licence of the original enterprise and balance sheets for the last three consecutive years in respect of the original enterprise;

  7. supporting documents of the promoters on credit standing; and

  8. other necessary documents.

Article 19: Following approval of the above-mentioned application by the Ministry of Foreign Trade and Economic Co-operation, the promoters shall register the change with the company registry after an approval certificate is issued and they pay up their subscribed shares in full.

Article 20: A company limited by shares that wishes to apply for approval to convert into a company must, in addition to compliance with other Articles hereof, meet the following requirements:

  1. the company limited by shares was established with the official approval of the State;

  2. the shares in the enterprise purchased with freely convertible currency and held by foreign shareholders represent 25 per cent or more of the registered capital of the company; and,

  3. the business scope of the enterprise conforms with the industrial policy on foreign investment enterprises.

Article 21: A company limited by shares that wishes to apply for approval to convert into a company by issuing special Renminbi-denominated shares (B-shares) to the public shall submit the following documents:

  1. the resolution of a shareholders' general meeting on conversion into a company;

  2. the appraisal report on the assets of the original company limited by shares;

  3. an application for approval of conversion into a company;

  4. the agreement serving as a supplement or an amendment to the articles of association of the original company limited by shares;

  5. the document of the securities regulatory authorities approving the issue of special Renminbi-denominated shares (B-shares) to the public; and,

  6. other necessary documents.

Article 22: A company limited by shares that wishes to apply for approval to convert into a company by issuing shares to be held by foreign shareholders' by means of issuing new shares or converting shares in order to increase its capital, must submit other necessary documents such as the share purchase agreement between the company limited by shares and the share purchasers under a private placement scheme, in addition to the documents prescribed under Items (1), (2), (3) and (4) of the preceding Article.

Article 23: A company limited by shares that wishes to apply for approval to convert into a company issues listing foreign investment shares (including but not limited to H-shares and N-shares) outside China, seeks a listing outside China and applies for approval to convert into a company must submit the following documents, in addition to the documents prescribed under Items (1), (2), (3) and (4) of Article 21:

  1. the document of the securities regulatory authorities approving the listing outside China;

  2. the document of the securities authorities outside China approving the listing of the shares of the original company limited by shares; and

  3. details of the trading in the shares of the original company limited by shares listed outside China.

Article 24: After the above-mentioned application is approved by the Ministry of Foreign Trade and Economic Co-operation, the company limited by shares shall register the change with the administration for industry and commerce on the strength of the approval certificate and the company's share offer certificate.

Article 25: Any matters concerning companies not specified in these Tentative Provisions shall be handled in accordance with the PRC, Company Law; the State Council, Companies Limited by Shares Issuing and Listing of Shares Outside China Special Provisions and relevant regulations.

Article 26: Where foreign investment enterprises are restructured as companies, the period of preferential treatment for such enterprises in respect of tax reduction and exemption, etc. shall not be counted anew.

Article 27: Companies, enterprises, other economic organisations or individuals from Hong Kong, Macau and Taiwan that invest in the establishment of companies in China shall be permitted to use these Tentative Provisions.

Article 28: The Ministry of Foreign Trade and Economic Co-operation shall be responsible for the interpretation of these Tentative Provisions.
 
 
 
 
 
 
 
 

Certain Questions on the Establishment of Foreign-funded Companies Limited by Shares Tentative Provisions

Introduction
The Ministry of Foreign Trade and Economic Cooperation ("MOFTEC") of the People's Republic of China promulgated the MOFTEC, Certain Questions on the Establishment of Foreign Investment Companies Limited by Shares Tentative Provisions (the "Tentative Provisions") on 10 January 1995. The Tentative Provisions set out specific guidelines for the establishment of foreign investment companies limited by shares. This article will provide an introduction of the historical background for the promulgation of the Tentative Provisions and a summary of the Tentative Provisions.

Historical Background
Prior to the promulgation of the Tentative Provisions, there were no specific guidelines for the requirements or application procedure for the establishment of a foreign investment company limited by shares. The Standards for Companies Limited by Shares Opinion ("the Standard Opinion") issued by the State Commission for the Reform of the Economic System on 15 May 1992, which were the governing regulations for PRC companies before the PRC, Company Law ("the Company Law") became effective on 1 July 1994, provided that, upon approval, MOFTEC would issue a certificate to a company limited by shares having foreign investors holding more than 25% of its equity interest. Thereafter, such company would be subject to the laws and regulations governing foreign investment enterprises (FIEs). The Standard Opinion did not specify other requirements or application procedures for the recognition as such of a foreign investment company limited by shares. Nor did the Standard Opinion specify the laws or regulations applicable to a foreign investment company limited by shares.

The Standard Opinion was superseded by the Company Law in July 1994. Article 18 of the Company Law is concerned only with "limited liability companies" (as opposed to companies limited by shares) with foreign investment. It merely provides that where laws and regulations governing Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures and FIEs have provisions other than those contained in the Company Law, those provisions shall apply.

While an overall legal framework relating to foreign investment companies limited by shares was not established, various authorities had promulgated several notices and measures to deal with specific issues relating to foreign investment companies limited by shares. An example relates to foreign exchange control. According to the Foreign Exchange Control Matters of Enterprises Listed Overseas Notice ("the Foreign Exchange Control Notice") issued by the China Securities Regulatory Commission and the State Administration for Exchange Control (the "SAEC") in January 1994, so long as an enterprise's overseas share offering proceeds in foreign currency equal or exceed 25% of such enterprise's total net asset value, such enterprise will, upon MOFTEC's granting to it the status of Sino-foreign joint venture, be subject to foreign exchange control regulations applicable to Sino-foreign joint ventures. The Foreign Exchange Control Notice also provides that an enterprise listed overseas may, upon SAEC approval, deposit all proceeds from sales of securities overseas in a foreign exchange bank account. Dividends payable to such enterprise's overseas shareholders may, upon SAEC approval, be remitted from such foreign exchange bank account.

Therefore, the promulgation of the Tentative Provisions by MOFTEC finally completes the body of laws and regulations governing a foreign investment company limited by shares under the current PRC legal framework.

General Provisions
The Tentative Provisions provide that a foreign investment company limited by shares is a type of FIE and shall be governed by those provisions of PRC laws and regulations that govern FIEs. A foreign investment company limited by shares may be established by means of sponsorship or share offer. The minimum amount of registered capital of a foreign investment company limited by shares shall be Rmb 30 million. Shares of a foreign investment company limited by shares representing not less than 25% of its registered capital shall be held by foreign investors.

With respect to any proposed transfers by a sponsor for shares subscribed during the establishment of a foreign investment company limited by shares, the Tentative Provisions provide that no transfer of sponsor shares may be effected until three years after the establishment of the company and any transfer shall comply with the 25% foreign ownership requirement.

The Tentative Provisions lay down the application procedure for becoming a foreign investment company limited by shares. Detailed information such as where to apply, review and approval procedure, information to be included in the application documents, the language to be used for the application documents and registration procedure after approval from MOFTEC is included.

Most importantly, the Tentative Provisions, for the first time, set forth detailed guidelines for the qualifications and application procedure for the establishment of a foreign investment company limited by shares through the conversion of other types of enterprises. Article 15 of the Tentative Provisions provides that a Sino-foreign equity joint venture, a Sino-foreign cooperative joint venture or a FIE may apply to become a foreign investment company limited by shares by submitting to MOFTEC various corporate documents including its financial information showing operating profit in the most recent three consecutive years. Article 18 provides that a State-owned enterprise or a collective ownership enterprise applying to become a foreign investment company limited by shares:

  1. must have been operating for at least five years, with operating profit in the most recent three consecutive years;

  2. must have foreign shareholders who subscribe with convertible foreign currency for, and hold, shares representing at least 25% of the company's total registered capital; and

  3. its scope of business must be consistent with the State's industrial policy relating to FIEs.

Article 20 of the Tentative Provisions provides that for a company limited by shares to become a foreign investment company limited by shares, in addition to complying with other provisions set forth in the Tentative Provisions:

  1. its original establishment must have been formally approved by the PRC government;

  2. it must have foreign shareholders who subscribe with convertible foreign currency for, and hold, shares representing at least 25% of the company's total registered capital; and,

  3. its scope of business must be consistent with the State's industrial policy relating to FIEs.

Articles 21, 22 and 23 of the Tentative Provisions itemise documents to be submitted to MOFTEC for a company limited by shares to become a foreign investment company limited by shares through the issuance of B-shares, issuance or transfer of shares to foreign investors, or issuance overseas of foreign investment shares e.g. H-shares. Such documents include:

  1. shareholders' resolutions to approve such change of status;

  2. an asset valuation report prepared at the time of the original corporatisation;

  3. a report for the application to change the company's status into a foreign investment company limited by shares;

  4. amendments to or an agreement to amend the articles of association, and

  5. approval documents and agreements relating to the issuance or transfer of shares.

For a company that has issued foreign investment shares that are listed overseas, it should also submit to MOFTEC:

  1. approval documents from the securities regulatory authorities for the overseas listing;

  2. approval documents from the overseas stock exchange on which its shares are listed, and;

  3. information relating to the trading of such shares.

Once an enterprise becomes a foreign investment company limited by shares, it will be able to apply for a licence to conduct import and export business and, upon the approval of the SAEC, will have unrestricted access to officially sanctioned swap centres in order to convert Renminbi into certain specified foreign currencies.

With respect to the special preferential tax treatments available for FIEs and foreign enterprises as provided under the PRC, Foreign Investment Enterprise and Foreign Enterprise Income Tax Law Implementing Rules, which became effective as of 1 July 1991, because such preferential tax treatments are only available to Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures and foreign enterprises, unless an enterprise is entitled to preferential tax treatments prior to its conversion into a foreign investment company limited by shares, the acquisition of this status does not confer such preferential tax treatments. A Sino-foreign equity joint venture, Sino-foreign cooperative joint venture or foreign enterprise may continue to enjoy the preferential tax treatments that it already has for the remaining period of such tax treatments after its conversion into a foreign investment company limited by shares.

C.Y. Leung, Partner & C. Lance Chen, Associate
Baker & McKenzie, Hong Kong

(Source: China's New Companies Vol 3, 1995)(Editor's notes pending updating.)
1