Given that the government increasingly wants to promote scientific and technological achievements as a form of equity contribution to promote technological innovations and development, the Ministry of Science and Technology and China Securities Regulatory Commission jointly released the Circular on Printing and Distributing the Guiding Opinions on Supporting Equity Contribution by Scientific and Technological Achievements and Identifying Equity (Contribution Circular) on November 15, 2012, which took effect on the same day.

In order to avoid future disputes, the Contribution Circular encourages enterprises, at the formation stage, to explicitly stipulate ownership, evaluation and appraisal and amount and ratio of share conversion to be contributed to the scientific and technological achievements in the sponsorship agreement, investment agreement or articles of associations. The proportion of such contribution can reach as high as 70 percent of the total contribution as prescribed under the PRC Company Law.

The Contribution Circular also mentions protection of scientific and technical personnel’s rights and interests, which shall be explicitly stated in their service invention contracts.