On October 8, 2016, the Ministry of Commerce (MOFCOM) issued the Interim Measures for Filing Administration of Establishment and Change of Foreign Invested Enterprises (“Measures”).

1. Sphere of Application

Pursuant to Article 2 of the Measures, foreign invested enterprises (“FIE”) that do not involve the implementation of the special management measures for access as stipulated by relevant foreign investment laws and regulations may complete the establishment and change formalities through filing without the necessity of approval.

2. Procedure of Filing

2.1 Filing of Establishment – Online Application

Subject to Article 5 of the Measures, the filing of the establishment of the FIE shall be handled before the business license is issued or within 30 days after the business license is issued. The FIE or its investor may fill out and submit the filing information and materials online via the comprehensive management system.

This article shows that filing of the establishment of the FIE is not the pre-condition for business registration of the FIE anymore. Therefore, the procedure and timeline for the establishment registration is more flexible than before.

2.2 Filing of Registration Change – Online Application

The filing of registration change of the FIE shall be conducted within 30 days after the occurrence of the change. The FIE may fill out and submit the filing information and materials online via the comprehensive management system.

The time limit of 30 days shall be calculated when the FIE’s authority makes the relevant resolution or the decision.

2.3 Required Documents for Online Application

For the filing of establishment and registration change, the FIE or its investor shall submit the following documents online via the comprehensive management system:

a. Pre-Approval Certificate of the FIE’s Name (applied only before obtaining the business license) or the business license of the FIE;
b. Application Report for the Establishment/Change Filing of the FIE which shall be signed by the investors or the legal representative of the FIE;
c. Proof regarding the appointment of agent by the investors or the FIE, including the POA and the identification proof of the agent;
d. Proof regarding the appointment of the signatory by the investor or the legal representative of the FIE, including the POA and the identification proof of the signatory (not applied if there is no said appointed signatory);
e. The identification certificate of the investors;
f. The identification certificate of the legal representative of the FIE.

Chinese translation is necessary if the said documents are written in foreign languages.

3. Special Circumstances

3.1 Modification of the Investment before Obtaining the Business License of the FIE

Subject to Article 8, under the condition that the investors of the FIE has submitted the filing information and the actual investment information has changed before the issuance of the business license, the FIE shall conduct the filing modification at the competent authority within 30 days after the business license is issued.

3.2 Filing Modification of the Established FIE

Subject to Article 9, where a change occurs to a FIE which has been established upon approval and, after the change, the FIE is not subject to special management measures for foreign investment access as stipulated by the relevant government, the FIE shall go through filing formalities. Once such filing is completed, the Approval Certificate of the FIE which was issued before shall become null and void simultaneously.

3.3 Filing Modification Approval

Subject to Article 10, if modified issues of the FIE involve the implementation of the special management measures for access, the FIE shall conduct the approval formality instead of the filing modification.

4. Review of Online Application by the Competent Authority

After the FIEs submit the online application of filing, the competent department in charge of commerce will review the filing information to confirm if they are complete and correct, and to clarify if the application belongs to the sphere of filing or approval. In general, the competent department shall complete the filing process within 3 working days after the application and announce the filing results via the comprehensive management system (Article 11). After the filing, the FIEs may obtain a receipt of the filing at the competent department (Article 12).

5. Filing by Investors from Hong Kong, Macau and Taiwan

Subject to Article 33, the Measures shall also apply to investors from Hong Kong, Macau and Taiwan whose investment doesn’t involve the implementation of the special management measures for access.

Comments:

Since the National People's Congress Standing Committee has decided to revise four foreign investment laws including the Foreign Invested Enterprise Law, the promulgation of the Measures could ensure successful articulation of the laws.

Meanwhile, the application of the Measures will tremendously simplify the procedure of the establishment and registration change of the FIEs, which will definitely contribute to their cost-saving. Thus the foreign investment in China will be promoted to a large extent.

However, there still remain ambiguous issues that shall be further clarified by the MOFCOM. For instance, regarding the required documents to be submitted, according to the former practice, relevant foreign identification documents must be notarized by Notary Public and legalized by the Chinese Embassy in the country where the investor is located, which will take a long time. The Measures do not mention if the notarization and the legalization are still mandatory.

On the other hand, the following issues shall be further clarified which may affect the application of the Measures, among others:

a. Whether the application of the Measures shall rely on the issuance of the special management measures which will distinguish the scope of foreign investment subject to the newly filing mechanism instead of the current pre-approval mechanism;
b. Whether M&A transactions in China involving the foreign investment shall apply to the filing mechanism established by the Measures;
c. Whether the application process of business license and foreign exchange registration will be clear before relevant rules on such registration are changed/adjusted together with the filing mechanism established by the Measures.