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Foreign Investors to Merge Domestic Enterprises Interim Provisions
Time: 2010-07-15 Click: 19588

(March 7, 2003 Ministry of Foreign Trade and Economic Cooperation, State Administration of Taxation, State Administration for Industry, the State Administration of Foreign Exchange to bring the ○ ○ 三年 Release 3) 
    In order to promote and regulate foreign investors to invest in China, the introduction of foreign advanced technology and management experience, to improve the level of foreign investment, the rational allocation of resources, ensure employment and safeguard fair competition and national economic security, according to foreign-invested enterprises laws, administrative regulations and other relevant laws, administrative regulations, the enactment of this provision. 
    Article The term acquisition of domestic enterprises to foreign investors, foreign investors means the agreement to purchase the territory of non-foreign-invested enterprises (hereinafter referred to as "domestic company") and shareholders equity or capital increase subscription within the company, so that changes within the company set up to foreign-invested enterprises (hereinafter referred to as "Equity Merger and Acquisition"); or foreign investors to establish foreign-invested enterprises, and through which purchases the assets of domestic enterprises and operate the assets, or, a foreign investor purchases by agreement the assets of domestic enterprises, and to the assets to establish foreign-invested enterprise and operate the assets (the "Asset Acquisition"). 
    Third acquisition of domestic enterprises to foreign investors should abide by Chinese laws, administrative regulations and departmental rules, follow fair and reasonable compensation for equal value, the principle of good faith, shall not result in excessive concentration, eliminate or limit competition, or disrupt social economic order and damage public interest. 
    A foreign investor acquires a domestic enterprise, shall comply with Chinese laws, administrative regulations and department rules on the qualifications of investors and industry policy. 
    In accordance with "Guidance Catalogue for Foreign Investment in Industry" does not allow foreign investors a sole proprietor of the industry, mergers and acquisitions may not result in foreign investors to hold all the shares of enterprises; be controlled or relatively controlled by the Chinese industry, the industry’s M & A companies, still the Chinese side in the enterprise holding the controlling or relative position; to prohibit foreign investors to the industry, foreign investors may not engage in mergers and acquisitions of enterprises in the industry. 
    Article foreign investor merges a domestic enterprise to establish foreign-invested enterprises shall be in accordance with the provisions of examination and approval authority for approval to the registration authority for change of registration or establishment registration. After the acquisition of foreign investors in foreign-invested enterprises established in the registered capital contribution ratio of generally not less than 25%. Contribution of foreign investors less than 25%, in addition to laws, administrative regulations, shall be in accordance with the existing approval to establish foreign-invested enterprises, the registration procedures for approval and registration. Examination and approval authorities issued the approval certificate of foreign invested enterprises notation "foreign investment proportion less than 25%" message. Registration authority in the foreign investment enterprise business license issued by the time the word "foreign investment proportion less than 25%" message. 
    Article VI of the provisions of the approving authority for the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as "MOFTEC") or the provincial foreign trade and economic competent departments (hereinafter referred to as "provincial examination and approval authority"), registration authority for the Chinese People’s Republic of SAIC or its authorized local administration for industry and commerce. 
    After the acquisition of foreign-invested enterprises established under the laws, administrative regulations and departmental rules and regulations shall belong to the MOFTEC for approval by the specific type or industry, foreign-invested enterprises, the provincial examination and approval authority the application documents should be forwarded to Ministry of Foreign Trade approval, the MOFTEC shall decide to approve or disapprove. 
    Article foreign investor equity acquisition, M & A foreign investment enterprise established after the succession of the acquired company’s debt and debt. 
    Acquisition of assets of foreign investors, the sale of assets of domestic enterprises to assume their original claims and debts. 
    Foreign investors, the domestic enterprises, creditors and other parties concerned may claim the domestic enterprise to a separate agreement on the disposal of the debt, but this agreement shall not prejudice the interests of third parties, and social public interests. Agreement on the disposal of claims and debts shall be submitted to the approving authority. 
    Sale of assets of domestic enterprises shall make the sale of assets within 10 days from the date of the resolution, notice to creditors, and above the provincial level in the nationally circulated newspaper published announcement. Creditors receiving the notice or from the date of public announcement within 10 days, the right to sell the assets of domestic enterprises to provide corresponding guarantee. 
    Article VIII parties to a takeover of assets evaluation agencies should be transferred to the equity value or the assessment of the proposed sale of assets as the basis for determining transaction prices. Merger parties may agree in China’s asset appraisal institution established according to law. Asset valuation should be adopted internationally accepted assessment method. 
    Acquisition of domestic enterprises to foreign investors, leading to the formation of equity investment in state-owned assets or state-owned assets transfer of property rights change, the state-owned assets management in accordance with the relevant provisions of an assessment to determine transaction prices. 
    Prohibit the assessment of the price significantly lower than transfer of ownership or sale of assets, in effect to the transfer of capital abroad. 
    If a foreign investor merges a domestic enterprise to establish foreign-invested enterprises, foreign investors should be from foreign investment enterprise business license is issued within 3 months from the date of transfer of ownership of the shareholders, or sell assets to pay all of the price of domestic enterprises. The prolongation of the special circumstances, approved by the approving authority shall, foreign investment enterprise business license is issued within 6 months from the date of payment of all of the price of more than 60% a year, pay off the balance, according to the actual payment of the contribution proportional distribution of income. 
    Foreign investor equity mergers and acquisitions, foreign investment enterprises established after the capital increase, and investors should be changes in the foreign-invested enterprises established in the contract and articles of association by the enterprise. Provides a full payment, the investors should foreign investment enterprise business license from the date of issuance paid within 6 months; provides paid by installments, the first investors in their respective capital contribution shall not be less than the amount the shareholders subscribe 15% and should be foreign investment enterprise business license from the date of issuance paid within 3 months. 
    Acquisition of assets of foreign investors, and investors should be established in enterprises with foreign investment contracts and articles of association by the enterprise. Foreign investment enterprises, and through which purchases the assets of a domestic enterprise and operates such assets, with assets equal to the price of some of the investment, investors should be provided in the first paragraph of this within the time limit on the price to pay to pay; the remainder of the funding second paragraph should be in accordance with the provisions of this section, the manner agreed to pay period. 
    Foreign investor merges a domestic enterprise to establish foreign-invested enterprises, foreign investment proportion less than 25%, investments in cash and should be foreign investment enterprise business license from the date of issuance paid within 3 months; investors in kind or industrial property, investment, and should be foreign investment enterprise business license from the date of issuance paid within 6 months. 
    As a means of payment, shall conform to relevant laws and administrative regulations. Foreign investors have a right to dispose of its stock or its legal owner of the RMB assets as a means of payment, subject to foreign exchange management department for approval. 
   Article foreign investors within the agreement to purchase the equity shareholders of the Company, within the company to change after the establishment of enterprises with foreign investment, the foreign-invested enterprises registered capital of the former territory of the registered capital of foreign investors to buy shares for its investment proportion in the original registration share capital. By equity capital increase while the domestic company, the acquisition of foreign-invested enterprises established after the registered capital of the former territory of the registered capital and increased capital sum; foreign investor and the acquired company by other investors, in the assessment of the domestic assets of the company basis, to determine their respective registered capital of foreign invested enterprises in the investment ratio. 
    Foreign investors within the company’s capital increase subscription, change within the company after the establishment of enterprises with foreign investment, the foreign-invested enterprises registered capital of the former territory of the registered capital and increased capital sum. Foreign investor and other shareholders of the original domestic company in the domestic assets of the company based on an assessment to determine their respective registered capital of foreign invested enterprises in the investment ratio. 
    By equity shareholders of the domestic company in China natural person shareholders in the original position of the company have more than one year, upon approval, may continue to change the foreign-invested enterprises established after the Chinese investors. 
    Article foreign investor equity acquisition, M & A foreign investment enterprise established after the ratio should be determined according to the following aggregate amount of investment: 
    (1) The registered capital of 2.1 million U.S. dollars less the total investments shall not exceed the registered capital of 10 sevenths; 
    (2) The registered capital of 2.1 million U.S. dollars over five million dollars, the total investment shall not exceed 2 times the registered capital; 
    (3) The registered capital of more than 5 million U.S. dollars to 12 million U.S. dollars, the total investments shall not exceed 2.5 times the registered capital; 
    (4) The registered capital of more than 12 million U.S. dollars, total investment of no more than 3 times the registered capital. 
    Article XII of the foreign investor equity takeover, investors should be established after the merger the total investment enterprises with foreign investment approval authority to have the appropriate approval authority and submit the following documents: 
    (1) of the domestic limited liability company’s shareholders agreed to the resolution of foreign investors in equity merger, or acquisition of foreign investors within the Corporation agreed to the shareholders equity merger of General Assembly resolutions; 
    (2) change according to the domestic company into a foreign investment enterprise; 
    (3) acquisition of foreign-invested enterprises established after the contracts and articles of association; 
    (4) the territory of foreign investors to buy shares or shareholders within the company’s capital increase subscription agreement; 
    (5) of the domestic company’s most recent fiscal year’s financial audit report; 
    (6) The identity of investors or the business certificate and credit certificate; 
    (7) of the domestic companies invested enterprises in the information note; 
    (8) of the domestic companies and the investment enterprise business license (copy); 
    (9) of the domestic company employee relocation plan; 
    (10) The provisions of Article VII, Article XIX required to be submitted. 
    M & A foreign investment enterprise established after the business scope, scale, land-use right, other relevant government departments involved in licensing, the license file should be submitted. 
    By the acquired company’s original business scope of investment companies with foreign investment shall comply with the requirements of industrial policies; do not meet, and should be adjusted. 
    The provisions of Article XIII of the 12th Article of the share purchase agreement, the domestic company shall apply the laws of China Capital Increase Agreement, and shall include the following main elements: 
    (1) the status of parties to the agreement, including the name (name), address, legal representative of the name, position, nationality, etc.; 
    (2) to purchase or subscribe for shares and the price of the share capital increase; 
    (3) implementation of the agreement period, the method of execution; 
(4) The parties to the agreement the rights and obligations; 
    (5) breach of contract, dispute resolution; 
    (6) signing time and place. 
    Article XIV acquisition of assets of foreign investors, purchased the assets should be based on actual transaction prices and production scale to be established to determine the total investment of foreign invested enterprises. The proposed foreign-invested enterprises registered capital and total investment ratio should be consistent with the relevant requirements. 
    Article XV of assets of foreign investors in mergers and acquisitions, and investors should be established according to the total investment of foreign invested enterprises, business type and industry sector, the establishment of foreign-invested enterprises in accordance with the laws, administrative regulations and departmental rules and regulations shall, to have corresponding authority of the approving authority to submit the following documents: 
    (1) within the enterprise property rights holders or the authority agreed to sell the assets of the resolution; 
    (2) The application for the establishment of foreign invested enterprises; 
    (3) The proposed foreign-invested enterprises in the contract, articles of association; 
    (4) The proposed foreign-invested enterprises and domestic enterprises have signed the asset purchase agreement, or, foreign investors and domestic enterprises have signed the asset purchase agreement; 
    (5) of the domestic enterprise’s articles of association, business license (copy); 
    (6) to inform the domestic enterprise, announced that the creditors; 
    (7) identity of investors or the business that the credit documents; 
    (8) The settlement of employees of the domestic enterprise; 
    (9) The provisions of Article VII, Article XIX required to be submitted. 
    In accordance with the provisions of the preceding paragraph to buy and operate the assets of domestic enterprises, involving other relevant government departments permit, the permit should be submitted. 
    Agreement to purchase domestic enterprises to foreign investors to the asset investment assets and the establishment of foreign invested enterprises, foreign-invested enterprises established, shall not carry out the asset management activities. 
    The provisions of Article XV Article XVI of the asset purchase agreement provisions should apply Chinese law, and should include the following main elements: 
    (1) the natural state parties to the agreement, including the name (name), address, legal representative of the name, position, nationality, etc.; 
    (2) a list of assets to be purchased, the price; 
    (3) implementation of the agreement period, the method of execution; 
    (4) The parties to the agreement the rights and obligations; 
    (5) breach of contract, dispute resolution; 
    (6) the signing time and place. 
    Article XVII foreign investor merges a domestic enterprise to establish foreign-invested enterprises, in addition to the provisions of Diershitiao otherwise provided, the provisions of the approving authority shall receive all the documents submitted within 30 days, according to the decision to approve or disapprove. Decision and approval by the approving authority shall issue a foreign investment enterprise approval certificate. 
    Agreement to purchase the territory of foreign investors, shareholders equity, the approving authority decides to approve the relevant approval documents shall also be copied to share transfer side, respectively, the local foreign exchange administrative departments within the company. Share transfer side handle for the local foreign exchange administrative departments of foreign exchange earnings from foreign exchange registration procedures and issue shares to foreign investors acquisition price paid in place of the foreign Registration Certificate clearly. 
    Article XVIII acquisition of assets of foreign investors, the investor shall receive the approval of foreign invested enterprises within 30 days from the date of the certificate to the registration authority to apply for the establishment of registration and obtain a foreign investment enterprise business license. 
    Foreign investor equity acquisition, the acquired company should be in accordance with the provisions of the original registration authority for change of registration, to receive foreign investment enterprise business license. Original registration authority jurisdiction are not registered, should the application documents are received within 10 days from the date of transfer has jurisdiction over the registration administrative organ, together with a domestic company registered in the file. The acquired company for modification of registration, shall submit the following documents and their authenticity, validity is responsible for: 
    (1) change of registration; 
    (2) of the domestic company under the "Company Law" and the Articles of Association to make the transfer or capital increase on the equity shareholders will (General Assembly) resolution; 
    (3) the territory of foreign investors to buy shares or shareholders within the company’s capital increase subscription agreement; 
    (4) modified the original articles of association or articles of association shall be required to submit amendments and enterprises with foreign investment contracts; 
    (5) foreign investment enterprise approval certificate; 
    (6) identification documents of foreign investors or business certificate, credit documents; 
    (7) The revised list of the board of directors, additional directors record the names and residence documents and additional documents of appointment of directors; 
    (8) the provisions of the State Administration for Industry and other relevant documents and certificates. 
    Transfer of state-owned shares and foreign investors to subscribe with the state-owned companies increased capital stock, and should be submitted to economic and trade department of the approval document. 
    Investors from receiving foreign investment enterprise business license within 30 days, to taxation, customs, land management and foreign exchange management and other relevant departments for registration. 
    Article XIX acquisition of domestic enterprises to foreign investors, one of the following circumstances, investors should be on the case to the MOFTEC and the SAIC Report: 
    (1) party to the takeover turnover in the Chinese market more than 1.5 billion yuan; 
    (2) a year in the domestic relevant industries enterprises amounted to more than 10; 
    (3) party to the takeover market share in China has reached 20%; 
    (4) takeover leads to one of the parties market share in China reached 25 percent. 
    Not up to the conditions described in the preceding paragraph, but there should be competition between domestic enterprises, the relevant departments or trade associations of the request, the MOFTEC or SAIC that the market share of foreign investors involved in large mergers and acquisitions, or there are other serious impact on market competition or the people’s livelihood and national economic security, and other important factors, can also require foreign investors to make a report. 
    The acquisition of a party, including affiliates of foreign investors. 
    They shall be involved in the Takeover of Domestic Enterprises provides one of the circumstances referred to in Article XIX, the MOFTEC and the State Administration for Industry and that may lead to excessive concentration, hamper fair competition or harm consumer interests, shall receive to submit all the documents provided within 90 days, convened jointly or separately by negotiation departments, institutions, enterprises and other interested parties and hold hearings and approve or disapprove the decision according to law. 
    Overseas M & A Article 1 of the following circumstances, the acquirer should be before announcing the takeover proposal or report to competent authority in the country, to the MOFTEC and the State Administration for Industry and submit the takeover proposal. MOFTEC and SAIC shall examine whether the domestic market caused by excessive concentration, hinder domestic fair competition, and harm the interests of domestic consumers, and shall make decision whether to grant: 
    (1) overseas acquisition by a party in our country has assets of more than 3 billion yuan; 
    (2) outside the party to the takeover in the Chinese market turnover of 1.5 billion yuan or more; 
    (3) outside the party to the takeover and its associated companies in China has reached 20 percent market share; 
    (4) The foreign acquisitions, mergers and acquisitions outside the party and its affiliated companies in China reached 25 percent market share; 
    (5) Due to overseas mergers and acquisitions, foreign acquisition of shares directly or indirectly a party within the related industries of foreign invested enterprises will be more than 15. 
    Article 2 of the following conditions of mergers and acquisitions, a party may apply to the MOFTEC and the State Administration for Industry and exemption of examination: 
    (1) to improve market conditions for fair competition; 
    (2) restructuring loss-making enterprises and the employment of; 
    (3) the introduction of advanced technology and management talent and improve the international competitiveness of enterprises; 
    (4) can improve the environment. 
    Twenty-three investors to submit documents on the document classified in accordance with the provisions, together with file directory. Provided all the documents submitted in Chinese. 
    Article 4 Foreign investors in China, according to an investment company set up by domestic enterprises, application of this provision. 
    Foreign investor equity acquisition of domestic foreign-invested enterprises, foreign-invested enterprises apply the current laws, administrative regulations and the "foreign-invested enterprises to change certain provisions equity investors", which is not provided, reference to these regulations. 
    Twenty-five Hong Kong SAR, Macao SAR and Taiwan investors in mergers and acquisitions in other parts of the business, refer to the regulations. 
    The provisions of Article 6 since April 12, 2003 shall come into force. 
  
Above is only for reference, please check the relevant departments use the official text released

 
 
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