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PROVISIONAL
REGULATIONS ON THE ESTABLISHMENT OF FOREIGN-FUNDED JOINT STOCK
COMPANIES LIMITED
กก
(Promulgated
by Decree No.1 of the Ministry of Foreign Trade and
Economic Cooperation on January 10, 1995)
กก
Article
1 In order to further expand international economic and technological
cooperation and exchanges and introduce foreign investment to
boost the development of the socialist commodity economy, foreign
companies, enterprises and other economic entities or individuals
( referred to hereinafter as foreign shareholders) are allowed
to jointly set up foreign funded joint stock companies limited
( referred to hereinafter as company) in China jointly with Chinese
companies, enterprises and other economic entities or individuals
( referred to hereinafter as Chinese shareholders), under the
principle of mutual benefit.
Article
2 A foreign-funded joint stock company limited referred to
in these regulations shall be a business legal person set up in
accordance with these regulations and whose capital stock is made
up of equal value shares contributed by both domestic and foreign
shareholders with total value of the shares purchased and held
by the foreign shareholders exceeding 25% of the company's total
registered capital. The company bears its liabilities with its
total assets and each shareholders bears the liabilities in proportion
to the shares held.
Article
3 The companies shall be a form of the foreign-funded enterprise
(FFEs) and bound by the State's related laws and regulations on
FFEs.
Article
4 The companies should be set up in accordance with the State's
related policies and regulations on FFEs. The State encourages
the establishment of production-oriented companies which are equipped
with advanced technologies.
Article
5 A company may be established by means of promotion or public
offer.
Article
6 For a company established through promotion there must be
at least one foreign promoter. The promoters shall also abide
by other stipulations of the Company Law.
For
a company established through public offer in addition to the
requirements stated in the previous paragraph, there must be at
least one promoter having a record of profit-making in the past
three consecutive years. If the promoter is a Chinese shareholder,
concerned financial statements of the past three years prepared
by registered accountants must be presented. If the promoter is
a foreign shareholder, concerned financial statements prepared
by registered accountants of the place where the shareholder resides
must be presented.
Article
7 Registered capital of a company shall be the total capital
stock recorded with registering departments. The registered capital
of a company shall be at least RMB 30 million yuan. Total value
of the shares purchased and held by the foreign shareholders shall
be no less than 25% of the company's total registered capital.
Article
8 In transfer of shares subscribed by the shareholders conditions
set in the previous article must be satisfied. Transfer of shares
purchased by the promotors can only be made at least three years
after the company's registration and the transactions shall be
approved by the departments which approved the company's establishment.
Article
9 After reaching an agreement on establishing a company, the
promoters can entrust one of them to proceed with the following
application procedures:
(1)
Submit a written application, a feasibility study report and assets
evaluation report for the company to competent authorities of
the provinces, autonomous regions, municipalities directly under
the Central Government or cities enjoying provincial status in
planning ( referred to hereinafter as competent departments).
For
the establishment of a company through public offer, prospectus
shall also be submitted.
(2)
After being examined and approved by the competent departments,
the application documents shall then be transferred to departments
in charge of foreign trade and economic cooperation of the provinces,
autonomous regions and municipalities directly under the Central
Government or cities enjoying provincial status in planning, after
whose ratification the promotors can start to sign formal agreements
and articles of association of the company.
(3)
The agreements and articles of association of the company, after
being approved by the departments in charge of foreign trade and
economic cooperation of the provinces, autonomous regions, municipalities
directly under the Central Government or cities enjoying provincial
status in planning, shall be sent to the Ministry of Foreign Trade
and Economic Cooperation (MOFTEC) for ratification. MOFTEC shall
decide within 45 days on approval or rejection.
Article
10 All application documents submitted shall be in Chinese.
When deemed necessary, the documents can also be written in a
foreign language, but the approved and effective Chinese version
shall dominate.
Article
11 The application for the establishment of a company shall
briefly define:
(1)
The promoter's title, residence and legal representatives;
(2)
The name, site and purpose of the company to be established;
(3)
The establishment form of the company, total shares, share categories,
face value of each share, the proportion of share purchased by
the promoters, scope and channels for the shares' sales;
(4)
Performance of the promoters in production and operation, including
production, assets and liabilities, and profits, in the past three
consecutive years. (This only applies to companies established
through public offer);
(5)
The company's investment orientation and scope of operation;
(6)
The time of application, signatures of the promoters' legal representatives
as well as the seal of the promotors' units;
(7)
Other items deemed necessary.
Article
12 Promoters' agreement shall define:
(1)
Name and residence of promoters, and the names, nationality, residence
and title of the promoters' legal representative;
(2)
The name and site of the company to be established;
(3)
Purpose and business scope of the company to be established;
(4)
The form of the company's establishment and organization;
(5)
The company's registered capital, total shares, share categories,
amounts, forms and expiration date of shares subscribed by promoters;
(6)
The rights and obligations of promoters;
(7)
Responsibilities for violating the agreement;
(8)
Applicable laws and regulations and how to settle disputes;
(9)
The agreement's effective date and expiration;
(10)
The time and site of signing of the agreement, with the signatures
of the promoters;
(11)
Other items deemed necessary.
Article
13 Within 30 days after the approval of the agreements, articles
of association of a company by MOFTEC, the promoters shall open
a special bank accout by presenting documents of the approval
and pay in a lump sum the total value of the subscription of the
shares within 90 days after the issuance of the approval. The
promoters shall bear joint liability of the company before paying
the total value of the subscription of the shares. Whereas the
company fails to start up, the promoters shall be responsible
for the expense incurred during the process of seeking the company's
establishment as well as other joint liabilities.
Article
14 For companies set up through promotion, the promoters,
after paying the total value of the subscription of the shares
as stipulated in Article 11, shall establish a board of directors
and a board of supervisors. The board of directors shall present
establishment approval document, the articles of association and
certificate of the assets of the company to competent departments
for the registration of the company's establishment.
For
companies set up through public offer, the promoters, after paying
the total value of the subscription of the shares, shall acquire
certificates testifying the company's assets from legal institutions
responsible for testifying assets and liabilities. Within 30 days
of the certificate's issuance, the promoters shall convene an
establishment meeting and establish a board of directors and a
board of supervisors. The board of directors, within 30 days of
its establishment, shall submit establishment approval documents,
articles of association and certificates on the company's assets
and minutes of the establishment meeting to responsible departments
for the registration of the company's establishment.
The
departments responsible for the registration of companies shall,
within 30 days upon receipt of all the required documents, complete
the registration formalities and issue a business license.
Article
15 Sino-foreign joint equity ventures, Sino-foreign joint
cooperative ventures and solely foreign-funded enterprises ( referred
to hereinafter as FFEs), when applying to transform into companies,
should submit profit-making records for the past three consecutive
years. The original investors of the FFE, as sole promoter of
the company, or with other promoters of the company, shall sign
agreements and articles of association for the establishment of
the company and submit the documents to responsible departments
in the place where the FFE is located for initial approval, which
will then move to MOFTEC for final ratification.
When
applying for transformation into companies, the following documents
shall be submitted:
(1)
Contracts and articles of association of the original FFE;
(2)
Resolution on reorganization by the board of directors of the
original FFE;
(3)
Resolution on terminating the original contracts and articles
of association made by the investors of the original FFE;
(4)
Evaluation report of the original FFE's assets;
(5)
Agreements signed by promoters ( including but not limited to
former investors of the original FFE);
(6)
The company's articles of association;
(7)
Business license, approval documents and financial statements
of the past three consecutive years of the original FFE;
(8)
Written application for the company's establishment;
(9)
Documents testifying the promotors' capital credibility;
(10)
Feasibility study report.
Article
16 After the approval of the aforementioned applications by
MOFTEC and the payment of the total value of the subscription
of shares, the promoters can undergo transformation formalities
with responsible departments for registering the companies.
Article
17 A company, after transformation, shall inherit all the
legal rights and obligations of the original foreign-funded enterprise.
All
pledged obligations laid down in the contracts and articles of
association of the original FFE for the Chinese and foreign investors
shall remain effective and included in the promoter's agreements
and articles of association of the company to be established.
Article
18 When applying to be transformed into companies, State and
collective enterprises, in addition to the other requirements
stipulated in this set of procedures, shall also meet the following
conditions:
(1)
The enterprise must have been in operation for at least five years
and have a record of profit-making in the past three consecutive
years;
(2)
More than 25% of the enterprise's registered capital have been
subscribed by foreign shareholders with convertible foreign currency;
(3)
The scope of operation of the enterprise conforms to the industrial
policy for FFEs.
Chinese
and foreign shareholders, as promoters of the company, sign agreements
and articles of association for the establishment of the company
and submit the documents to competent departments in the place
where the FFE is located for initial approval, which will then
move to MOFTEC for final ratification.
When
applying for transformation into companies in this case, the following
documents shall be submitted:
(1)
Evaluation report of the original enterprise's assets;
(2)
Written application for the establishment of the company;
(3)
Feasibility study reports;
(4)
The promoters' agreement;
(5)
The company's articles of association;
(6)
The business license and financial statements of the past three
consecutive years of the original enterprise;
(7)
Documents testifying the promoter's capital credibility;
(8)
Other documents deemed necessary.
Article
19 After the approval of the aforementioned applications by
MOFTEC and the payment of the total value of the subscription
of shares, the promoters can undergo transformation formalities
with competent departments for registering the company.
Article
20 When applying for transformation into companies, a joint
stock company limited, in addition to the other requirements stipulated
in this set of regulations, shall also meet the following conditions:
(1)
The joint stock company limited has been established after official
State approval;
(2)
More than 25% of the joint stock company limited's registered
capital have been purchased and held by foreign shareholders with
the payment of convertible foreign currency;
(3)
The scope of operation of the joint stock company limited conforms
to the industrial policy for FFEs.
Article
21 A joint stock company limited which issues B shares, shall
submit the following documents when applying for transformation
into companies.
(1)
Resolution on the transformation of the company reached by the
shareholder's conference;
(2)
Evaluation report of the assets of the original joint stock company
limited;
(3)
Written application for the transformation into a company;
(4)
Amendments and revisions of the articles of association of the
original joint stock company limited;
(5)
Documents issued by departments in charge of securities approving
the issuance of B shares;
(6)
Other documents deemed necessary.
Article
22 A joint stock company limited, when applying for transformation
into a company through increase of shares or issuance of foreign
held shares, shall submit the agreements signed by the company
with the share-subscribers concerned and other necessary documents,
in addition to the documents stipulated in the previous article's
sections (1), (2), (3) and (4).
Article
23 A joint stock company limited which issues shares overseas
(including but not limited to H and N shares ) shall submit the
following documents in addition to the documents stipulated in
the section (1), (2), (3) and (4) of article 21 when applying
for transformation into a company:
(1)
Documents issued by departments in charge of securities approving
the issuance of shares overseas;
(2)
Documents issued by overseas securities institutions approving
the issuance of shares by the original joint stock company limited;
(3)
Performance of the overseas trading of the shares issued by the
original company.
Article
24 After the approval of the aforementioned applications,
the original joint stock company limited shall submit approval
certificates and papers testifying the collection of stocks to
administrative departments in charge of industry and commerce
to undergo the formalities for transforming into a company.
Article
25 Other related matters not included in this set of provisional
regulations shall follow the Company Law, the State Council's
Special Regulations on Overseas Collection and Issuance of Stocks
by Joint Stock Companies Limited and other related regulations.
Article
26 Companies transformed from FFEs do not enjoy further tax-exemption
or tax-deduction preferences allotted to the original enterprises.
Article
27 Companies, enterprises and other economic entities or individuals
from Hong Kong, Macao and Taiwan, when establishing companies
in the Mainland, shall follow this set of provisional regulations.
Article
28 This set of Provisional Regulations shall be interpreted
by MOFTEC.
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