Foreign
Invested Joint Stock Companies
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Method of establishment
Establishment of FICs follows the same procedures
and conditions as set out for joint stock limited
companies in the Company Law of the People¡¯s Republic
of China. FICs can therefore be established by means
of promotion or share offer. However, additional
requirements are listed in the Regulations as follows:
¡ö if established
by promotion, at least one promoter must be a foreign
shareholder; or
¡ö
if established by share offer, at least one promoter
must have a record of profitability for the three
years prior to the offer, evidenced by financial
statements audited by a registered accountant.
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New establishment
When promoters agree to establish an FIC, they must
submit an application, including a feasibility study
and asset appraisal report (and a share offer prospectus
if establishment is to be by share offer) to the
governmental authority in charge in the province,
autonomous region or directly-governed municipality.
If approved by the authority in charge, the application
will be passed to the Ministry of Foreign Trade
and Economic Cooperation (¡®MOFTEC¡¯) department at
the corresponding level. MOFTEC must decide on an
application within 45 days. After MOFTEC approval
a formal agreement to establish the company and
articles of association can be signed by the promoters.
The promoters must open a bank account within 30
days of MOFTEC approval, and must pay in sufficient
funds to cover all of the share capital subscribed
by them within 90 days of the date of the approval
letter.
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Conditions for establishment
To gain approval for establishment of an investment
company, foreign investors must meet the following
general conditions:
¡ö
be creditworthy;
¡ö
have the necessary economic strength;
¡ö
provide registered capital for the investment company
of at least US$30mn in freely convertible currency;
and
¡ö for
investment companies in the form of an equity joint
venture, the Chinese investor must have total assets
of at least RMB100mn.
In addition, the foreign investor must either:
¡ö possess total
assets of at least US$400mn in the year immediately
preceding the application for establishment;
¡ö have already
established at least one foreign investment enterprise
in China with total paid up contributions of registered
capital of at least US$10mn; and
¡ö
have approvals in hand from the authorities for
at lest three investment project proposals.
or:
¡ö have
established at least ten foreign investment enterprises
in China which are engaged in production or infrastructure
construction; and
¡ö
have total paid up contributions to registered capital
of over US$30mn.
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Foreign Investment in the Retail and Wholesale
Sectors-Commercial Joint Ventures
Establishment procedures
Investors must go through a two-stage approval procedure
to establish a Commercial Joint Venture, First,
the proposed investors have to submit a feasibility
study report to the local economic and trade commission
of the pilot area where they propose to set up the
Commercial Joint Venture. The local economic and
trade commission will then forward the report to
the State Economic and Trade Commission (¡°SETC¡±)
for approval. Second, after approval by SETC, the
joint venture contract and articles of association
have to be submitted to the Ministry of Foreign
Trade and Economic Co-operation (¡°MOFTEC¡±) for approval.
Upon approval, MOFTEC will then issue an approval
certificate.
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