The Ministry of Commerce of the People’s Republic of China (“MOFCOM”) has published the Notice on Improvement of Approval and Administration of Foreign Investment (“Notice”) on its official website in order to implement the reforming capital registration system pursued by the State Council several months earlier.
According to the Notice, the limitation or stipulation of the percentage of initial contribution, the percentage of capital contribution in cash and time limit of contribution for foreign invested companies (“FIEs”, including companies with investment from Taiwan, Hong Kong and Macao) is abolished. Indeed, the sum of subscribed capital, the contribution method, and time limit contribution shall be agreed upon by and between the investors (shareholders, the promoter) of the company and shall be stated in the Joint Venture (Cooperative) Contract and the Articles of Association. The appropriate competent MOFCOM department should state consent to these arrangements in the relevant approvals.
Meanwhile, unless otherwise provided in law, administrative regulations and State Council decisions concerning particular industries, the requirements on minimum amount of registered capital for specific industries are removed. However, as stipulated in the Notice, relevant requirements concerning registered capital and total investment amount for FIEs shall still be satisfied.
For those industries or companies for which the State Council has stipulated that the system for registration of subscribed capital is not applicable, the existing provisions on registered capital are still valid until any amendment is made. Apart from such industries or companies, no capital verification procedure is any longer required. Nevertheless, it is still important to consider payments of paid-in capital. The status of paid-in capital contributions within the time limit will be recorded and included in MOFCOM’s foreign investment administration information system for statistic purpose. The company shall issue capital contribution certificate with information of company name, registration date, registration capital and investors’ name etc. included to investor once the capital contribution is actually made. For statistic purpose, the company shall submit a copy of the capital contribution certificate to the competent regulatory MOFCOM department for recordal, and provide related certificates and materials proving the contribution within 30 days as of the issuance of the capital contribution certificate
MOFCOM has also set out a timeline for the application of the Notice. For foreign investment approved before 01 March 2014, investors shall continue to conduct contribution obligations in accordance with the previous Joint Venture Contracts and Articles of Association; the investors shall apply to the competent MOFCOM department for amendments of such arrangement and the competent commerce department at all levels shall review and approve the application in accordance with the Notice.
The Notice is a step of alignment with the newly amended PRC Company Law. Hopefully, further amendments of laws and regulations concerning FIEs will be made in the future in order to achieve complete alignment with PRC Company Law.