A Big Reform in the Foreign Investment Administration of China -- On-line Recordation Replacing MOFCOM Approval

source:  date:2016-11-25  author:


On Oct. 8, 2016, Ministry of Commerce of China (MOFCOM) announced Interim Measures for the Administration of Recordation on the Establishment and Change of Foreign-invested Enterprises (the “Measures”), which is a big reform in the foreign investment administration of China.

 

From Approval to Recordation, a Big Change

Before these Measures, the MOFCOM Approval is the first step and a complicated procedure for the establishment of any foreign-invested enterprise (FIEs, including JVs, WFOEs, Partnerships) and every change thereof.

Now, all you need to do is to file on-line the documents needed, which is no longer a pre-condition to business license issuance or change. You can have your business license and start business activities as a legal person of China while waiting for the receipt of this recordation.

 

Issues Eligible for Recordation- Who can benefit from the Measures

The establishment and all the changes of FIEs are eligible for recordation, except for the following two categories:

1.       Foreign investment that is subject to the Special Administration Measures on the Admission of Foreign Investment, which are related to the sectors of business in which foreign investment is restricted or prohibited. – See Appendix for a list of such sectors;

2.       M&A of a non-FIE Chinese company by a foreign investor.

 

Recordation Procedure

Ø  On-line filing: the applicant (foreign investor or its representative) to fill in the information on-line and upload supporting documents. The documents required are mainly about the identity of the foreign investors and their ultimate controllers. The joint venture contract and articles of association are no longer required to be submitted. (articles of association are still needed in registration phase, the same as non-FIE companies).

Ø  When to file: for establishment of FIEs, the filing shall be made after the pre-approval of company name, and no later than 30 days from obtaining business license. For the change of an existing FIE, the filing shall be made within 30 days after the change occurs.

 

Conclusion

The Measures will greatly simplify the procedure of MOFCOM administration of foreign investment, and FIEs in China will find them spend less time and energy in handling governmental approvals.

 

Appendix:

Scope of sectors subject to Special Administration Measures on the Admission of Foreign Investment:

s   Oil and gas exploration;

s   R & D and manufacture of automobile key technologies;

s   Aircraft and ship building;

s   nuclear power plants;

s   power grids;

s   airports, railway networks,

s   integrated water conservancy construction;

s   air transport, maritime transport;

s   accounting, auditing;

s   crop breeding;

s   mining prospecting, mining and smelting;

s   Production and processing of food oil and cereals;

s   vehicle, ship, satellite receiver equipment manufacturing;

s   electricity, heat, gas, water network construction and operation;

s   railways, highways, waterways, air transport;

s   telecommunication;

s   grain, cereals, cotton wholesale;

s   Gas stations;

s   Banks, insurance, securities;

s   market research, credit investigation and rating;

s   surveying and mapping;

s   education;

s   medical care; radio and television;

s   large-scale theme parks;

s   performance brokers;

s   China's endemic species and technology, minerals,

s   Air traffic control,

s   social survey,

s   tobacco;

s   compulsory education and special education;

s   publishing, film and television, Internet culture;

s   cultural relics;

s   golf courses;

s   villa construction;

s   weapons and ammunition;

s   gaming;

s   pornography