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LEGAL: One More Step to the Negative List Scheme
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One More Step to the Negative List Scheme

By Manuel Torres (Managing Partner of Garrigues China), Lucy Luo (Principal Associate), Echo Shen (Corporate Associate)


BT 201611 120 03 Legal shutterstock 1640904895On September 3rd, 2016, the National People's Congress Standing Committees of the People's Republic of China (the "PRC") adopted the Decision on Revising Four Laws Including the Law of the People's Republic of China on Wholly Foreign-owned Enterprises (in Chinese 《关于修改〈中华人民共和国外资企业法〉等四部法律的决定》) (the "Decision"), which will take effect on October 1st, 2016.


Currently, except for enterprises registered in the free trade zones , the foreign-invested enterprises and those enterprises invested by Taiwanese ("FIEs") shall obtain prior approval from the Ministry of Commerce ("MOC") and its local counterparts for their incorporation and rendering major changes. However, upon the effectiveness of the Decision, after the special administrative measures is announced by the State (the "National Negative List"), the FIEs not in the National Negative List shall adopt record-filing procedure for incorporation and changes while for the FIEs in the National Negative List, the current administrative approval procedure will still apply.


Specifically for each type of FIEs not in the National Negative List, the decision shows following items will be switched to record-filing procedure:

BT 201611 120 04 Legal shutterstock 1640904895
On the same day of the publication of the decision, MOC released the Interim Measures for the Record-filing Administration for the Incorporation and Change of Foreign-invested Enterprises (Draft for Comment) (in Chinese 《外商投资企业设立及变更备案管理暂行办法》(征求意见稿)") (the "Draft for Comment") soliciting for public comments before September 22nd, 2016. This Draft for Comments addresses the specific administrative requirements, procedures and other issues in relation to the implementation of the decision.


Applicable scope of the Draft for Comments
According to the Draft for Comments, the record-filing procedure will apply to the FIEs that are not covered under the National Negative List (the "Applicable Enterprises").


The incorporation and changes of the Applicable Enterprises are required to be administrated by record-filing.


Record-filing procedures
The Draft for Comments stipulates a relatively flexible time frame for the required record-filing.


- At Incorporation Stage:
It can be performed either after obtaining the name reservation notice before the issuance of the business license, or 30 days after the issuance of the business license.

- For record-filing of modification:
It shall be performed within 30 days after the decision or resolution of such change has been made.


The Draft for Comments classifies the record-filing items into seven categories, among which, some items which are not requested by MOC are now to be recorded, such as modification of business types, project nature, information of the ultimate controller, resource of funds, etc.. Detailed requirements may be further clarified by the MOC.


1All applications for record-filing shall be submitted via online record-filing system. The record-filing authority will perform a formal examination towards the integrity and accuracy of the submitted information. For applications that fall into the scope of record-filing, the competent authority shall complete the record-filing within 3 working days. After receiving the notice for the completion of record-filing, the Applicable Enterprises or their investors can obtain a receipt for such record-filing.


Foreign investments which may involve anti-monopoly and national security review shall be subject to anti-monopoly and security review in accordance with relevant laws and regulations.


It seems that the central government intends to implement the record-filing procedure nationwide from 1st October, 2016. However, the National Negative List, which is needed for the implementation of the decision, has not been issued yet.


Besides, currently the articles of associations of FIEs, EJV contracts and CJV contract will become effective only after approved by competent authorities, same as the modification. As the administrative measures of examination and approval will be partially replaced by record-filing from 1st October, 2016, the above mentioned agreements, contracts and articles of association shall be reviewed and modified to meet the formalities under the new administrative regime.


Garrigues will keep a close watch on the practice and the final version of the Draft for Comments and keep you posted.


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