On September 3, 2016, at the bimonthly meeting of the Standing Committee of the National People’s Congress, it was announced that from October 1, 2016, foreign direct investment in China will be subject to record-filing procedures instead of examination and approval, except investment included in a blacklist. Laws on wholly foreign-owned enterprises, sino-foreign equity joint ventures, cooperative joint ventures (as well as the Law on Investment Protection for Taiwanese) have been amended, stating that record filing applies to enterprises falling outside areas subject to special state administration.
The same day, the Ministry of Commerce published the Adminstrative Interim Measures on Record Filing for the Establishment of and Changes to Foreign Investment Enterprises (the "new Measures"). The deadline for public comments is September 22, 2016, and the new Measures are due to take effect on October 1, 2016.
Highlighs of the new Measures:
1. Record-filing procedures apply to the establishment of and changes to foreign invested enterprises (“FIEs”) falling outside areas subject to special state administration.
- Regarding establishment, all investors must complete the record-filing procedures through the online filing system before the business license is issued, or the FIE must complete them within 30 days after the business license is issued.
- Regarding changes,1 the FIE must complete record-filing procedures through the online filing system within 30 days after the changes occur, i.e., the date the resolution or decision is made, unless otherwise provided by other laws and regulations on effectiveness.2
2. The competent authorities are the Ministry of Commerce, the provincial bureaus of commerce, and the administration committees of FTZs and national economic technology development zones.
3. Within three working days after online submission, the applicant will obtain the filing receipt from the competent authority by presenting a copy of the notice of name preregistration or the business license.
4. Certificates of approval will be invalidated.
5. The new Measures apply to investment companies, venture capital investment companies and equity investment companies. However, they do not specify whether merger and acquisition by foreign investors, foreign investment in listed companies, capital contribution by equity shares in other FIEs and investment of FIEs are subject to filing.
6. Merger filing and a state security review, if applicable, will be conducted before record filing.
7. Legal consequences for related infringements:
- Not complying with record-filing obligations: penalty of up to RMB 30,000.
- Engaging in restricted business transactions without preliminary approval: penalty of up to RMB 30,000 and an order to stop business transactions until approval.
- Engaging in a prohibited business: penalty of up to RMB 30,000, an order to stop business transactions and the obligation to transfer shares/assets within a specified time.