Notice of the State Administration of Foreign Exchange on Relevant Issues Concerning Foreign Exchange Administration for Offshore Investment, Financing and Round-Trip Investment Undertaken by Domestic Residents via Special Purpose Vehicles (“Circular 37”) (国家外汇管理局关于境内居民通过特殊目的公司境外投融资及返程 投资外汇管理有关问题的通知), issued by the State Administration of Foreign Exchange (“SAFE”)
Circular 37 replaces SAFE’s Notice of the State Administration of Foreign Exchange on Relevant Issues Concerning Foreign Exchange Administration for Financing and Round-Trip Investment Undertaken by Domestic Residents via Overseas Special Purpose Vehicles, enacted in 2005, known as Circular 75.
Circular 37 reflects SAFE’s intention to facilitate foreign exchange registration procedures for offshore financing and investment transactions carried out by Chinese residents (Circular 37 refers to Chinese institutions or Chinese individuals, “Chinese Residents”), by introducing major changes to the previous framework. One of the main changes consists of the extension of the definition of special purpose vehicles (“SPVs”). Under Circular 75, an SPV is defined as an offshore enterprise directly established or indirectly controlled by a Chinese Resident, which uses the domestic assets or interest of such Chinese Resident for the purposes of obtaining equity financing (including financing through the convertible bond). Circular 37 broadens the definition of SPVs to include the use of, not only domestic but also overseas, assets or interest of the Chinese Resident for the purposes of, not only obtaining financing, but also carrying out investments overseas.
Also, SAFE registration formalities for SPVs have been notably simplified. Another relevant change relates to the possibility of retaining capital gains and dividends from the SPV outside China.
Furthermore, channels of offshore financing have been broadened, and Circular 37 allows domestic enterprises directly or indirectly controlled by Chinese Residents to advance loans to a duly registered SPV in compliance with existing regulations, based on real and reasonable demands. Date of issue: July 14, 2014. Date of effectiveness: July 14, 2014.
Date of issue: July 14, 2014. Date of effectiveness: July 14, 2014.