Interim Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign investors
Updated: 2006-04-17 10:20 Article 4 In mergers and acquisitions of domestic enterprises, foreign
investors shall comply with the requirements regarding the investors'
qualifications and industrial policy as set forth in the laws, administrative
regulations and departmental rules and the relevant requirements under industry
policies. In the case of industries where no wholly foreign ownership is allowed
under the Guidance Catalog of Foreign Investment Industries, any merger or
acquisition of a domestic enterprise engaging in the industry shall not lead to
the foreign investors' wholly ownership of all equity interest in the acquired
enterprise. In the case of industries which require the Chinese party to be
controlling or relatively controlling, the Chinese party shall remain to be in
the controlling or relatively controlling position in the acquired enterprise
after any merger or acquisition of the domestic enterprise engaging in such
industries. In the case of industries where operation by foreign investors is
prohibited, no foreign investors may merge with or acquire any enterprise
engaging in such industries.
Article 5 Any merger or acquisition of a domestic enterprise by foreign
investors to set up a foreign investment enterprise shall be subject to the
approval of the examination and approval authorities in accordance with the
Provisions, and procedures for change registration or establishment registration
shall be handled with the registration authorities. The contribution made by the
foreign investors to the registered capital of the foreign investment enterprise
established after the merger or acquisition shall generally not be less than 25%
of the registered capital. Except as provided otherwise by the laws or
administrative regulations, if the contribution made by foreign investors is
less than 25% of the registered capital, the foreign investment enterprise shall
be subject to the examination, approval and registration in accordance with the
currently applicable examination and registration procedures for the
establishment of a foreign investment enterprise. When issuing the foreign
investment enterprise approval certificates, the examination and approval
authority shall add a notation "foreign investment proportion less than 25%".
When issuing the foreign investment enterprise business licenses, the
registration authority shall add the notation "foreign investment proportion
less than 25%Ħħ.
Article 6 For the purpose of the Provisions, the examination and approval
authority shall be the Ministry of Foreign Trade and Economic Cooperation of the
PRC (hereinafter referred to as "MOFTEC") or the administrative authority in
charge of foreign trade and economic cooperation at the provincial level
(hereinafter referred to as the "Provincial Examination and Approval
Authority"), and the registration authority shall be the State Administration
for Industry and Commerce of the PRC (hereinafter referred to as "SAIC") or its
authorized local industrial and commercial bureaus. If the foreign investment
enterprise established after the merger or acquisition falls into a specific
type or a specific industry subject to MOFTEC approval in accordance with the
laws, administrative regulations and departmental rules, the provincial
examination and approval authority shall submit the application documents to
MOFTEC for examination and approval and MOFTEC shall decide to approve or
disapprove the application in accordance with the law.
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