The Ministry of Commerce (“MOFCOM”) in the PRC has recently issued a new regulation, the “Decision on Revising the Interim Administrative Measures for Record-filing on the Incorporation and Change of Foreign-invested Enterprises (“FIE”)” (MOFCOM Order 2018 No 6) (“Decision”) for the purpose of information sharing between the MOFCOM and Administration of Industry and Commerce (“AIC”). Upon implementation of the Decision, the record-filing and registration procedures in MOFCOM and AIC will be done by a single application online.
Major Amendments in the Decision
(1) Article 5
Where the establishment of a FIE falls within the scope of record-filing prescribed in the Decision (i.e. except those FIEs that fall under the Special Administrative Measures (Negative List) for Foreign Investment Access 2018), the representative or the agent entrusted by the investor with the establishment process (or if the FIE is a foreign-invested company limited by shares, the representative or the agent shall be entrusted by FIE’s board of directors) will have to fill out and submit an online application for registration of incorporation of FIE and submit the relevant information for record-filing (as detailed in Article 8).
Where a non-FIE is changed to a FIE by way of merger and acquisition or any other means, which fall within the record-filing scope prescribed, the record-filing for the change should be submitted online.
Upon obtaining the application and relevant information from the AIC, MOFCOM will process the application and also notify the investor of the application status.
Take-away Point – Article 5 is the key change in the Decision as it integrates the registration procedure of the AIC with the record-filing procedure of the MOFCOM applications for incorporation or change of FIE. By submitting the application for incorporation or change of FIE at the AIC, it is no longer necessary for the applicant to file separately at the MOFCOM. MOFCOM is now able to receive the application and relevant information through the shared database with AIC.
The last paragraph of Article 5 further provides that the authority shall process the application and inform the applicant in a timely manner.
(2) Article 8
To apply for record-filing of an incorporation or change of a FIE, the FIE or its investor shall upload and submit the following documents online :
(a) Pre-approval of the name of the FIE or the business license of the FIE;
(b) Written undertaking signed by all investors (or all founders) of the FIE or respective authorized representative to confirm, inter alia, the information submitted is accurate and true, and the scope of business does not fall under the Special Administrative Measures for Foreign Investment Access; or in relation to an application for the record-filing on the change of information of FIE, a similar written undertaking signed by the legal representative of the FIE or its authorized representative;
(c) Proof of the representative or agent entrusted by the investor(s) of the FIE, including the power of attorney and the identity proof of the authorized representative or agent. If the FIE is a foreign-invested company limited by shares, proof of the representative or agent being entrusted by the board of directors;
(d) Proof that the investor or the legal representative of the FIE authorizes another party to sign off the relevant documents, including power of attorney and identity proof of the authorized signatory (if applicable);
(e) Identification documents of the corporate and/or individual investor(s) (inapplicable if the application does not involve change of the investor’s basic information);
(f) Identification documents of the legal representative (inapplicable if the application does not involve change of the legal representative);
(g) The organizational chart of the ultimate beneficial owner of the FIE (inapplicable if the application does not involve change of the ultimate beneficial owner of the FIE); and
(h) Where the consideration involves the form of shares of a foreign company, the domestic investor shall provide the Certificate of Foreign Investment by Enterprises.
Where the original of the above documents are in a foreign language, Chinese translations shall be uploaded and submitted at the same time. The FIE or its investors shall ensure the consistency between such Chinese translation and the foreign language originals.
Take-away Point – Article 8(3) has particularly changed the language from “founders” to “the board of directors”, which provides more certainty for the FIE when preparing the authorization to appoint authorized representatives to act on its behalf.
(3) Article 12
Upon receiving the online application for the incorporation or change, the authority will conduct a formality check to ensure the completeness and accuracy of the information submitted and screen whether such application falls within the scope of record-filing. If it falls within the scope of record-filing, the authority will complete the record-filing within 3 working days. If the application is beyond the scope of record-filing, the authority will inform the FIE or its investor(s) accordingly and deal with the application pursuant to the applicable laws within 3 working days and notify the departments concerned to process such application.
Where the authority finds that the information submitted by the FIE or its investor(s) is incomplete, inaccurate or that further explanation is needed for the business scope of the FIE, the authority shall inform the FIE or its investor(s) online to submit all the additional supplementary information in one-go within 15 working days. The time for submitting the supplementary information will not be included in the time limit for processing record-filing by the authority. If the FIE or its investor(s) fails to submit all the additional supplementary information within the 15 working days, the record-filing authority will inform the FIE or its investor(s) online that record-filing is not complete. Provided that it is the same application for incorporation or change, the FIE or its investor(s) may file a separate application for submitting the supplementary information within 5 working days.
The authorities will publish the record-filing results on the Comprehensive Management System so that the FIEs or their investors may check the results online.
Take-away Point – In the case that a FIE fails to complete the record-filing procedure, this new Article 12 allows the applicant to file any additional information required by the authority within 5 working days, instead of filing the whole application for incorporation or change afresh.
The PRC government’s attitude towards foreign investments is getting more relaxed. The Decision has streamlined the application procedure by implementing a more efficient administrative system for FIEs. It is also expected that the time and costs associated with the application for incorporation or change will be reduced and the application process will become more transparent. The Decision is a welcoming move for FIEs who intend to enter the China market.
According to the PRC Legislative Law, the Decision is authorized by the State Council and will remain effective for no more than 5 years unless there is an authorization to continue upon expiry. Interested foreign enterprises may take this opportunity to set up companies in China and bring their business plans into action while the law is in effect.
If you have any questions on the above or other issues relating to foreign investment, experienced lawyers in our China Business Department will be happy to assist.