FOREIGN INVESTED ENTERPRIESES REGISTRATION PROCEDURES
The establishment of foreign investment enterprises (FIE)
consists of three phases: (1) approval of the project proposal,
feasibility study report, Joint Venture Contract and Articles
of Association; (2) registration with the AIC; and (3) post-establishment
procedures.
REGISTRATION PHASE - REGISTRATION WITH THE AIC
The AIC is the registration authority of enterprises, companies
and other economic organizations. The SAIC and the local AlCs
are the registration and administration authorities of FIEs.
The major laws and regulations in this regard are the Administrative
Regulations of Enterprise Legal Persons and the Implementing
Detailed Rules for the Administrative Regulations of Enterprise
Legal Persons.
On December 29, 1993, China promulgated the Company Law,
which became effective on July 1, 1994. A company registration
system was later established by the promulgation of the Administrative
Regulations on the Registration of Companies effective July
1, 1994. At present, the enterprise registration system and
the company registration system exist concurrently. By definition,
FIEs are enterprises. On the other hand, most FIEs are companies
as well. Therefore, both the enterprise registration system
and the company registration system will apply to FIEs.
The Company Law provides that the Company Law applies to
limited liability foreign investment companies. In the event
that the Chinese law relating to EJVs, CJVs and WFOEs have
different provisions, these provisions should prevail over
the Company Law. The Company Law is also applicable to the
company registration system. Therefore, EJVs, CJVs and WFOEs
are still subject to the enterprise registration system. The
registration and administration of FICLBSs should be governed
by the Company Law and the Administrative Regulations on the
Registration of Companies.
The SAIC is the authority in charge of the registration and
administration of FIEs. The SAIC has delegated its authority
to local AlCs. The SAIC is responsible for the nationwide
registration and administration of foreign investment enterprises.
Based on the development of foreign investment enterprises
in China, the SAIC authorizes the local AlCs which have the
necessary ability and resources to register FIEs to handle
the registration of FIEs located in their respective jurisdictions
on behalf the SAIC within the authority delegated by the SAIC.
Currently, the SAIC is responsible for the registration
and administration of FIEs approved by the central government.
An AIC at a city level authorized by the SAIC is responsible
for the registration and administration of FIEs approved by
the people's government of its own jurisdiction. The AlCs
at the provincial level are responsible tor the registration
and administration of all the other FIEs.
(1) The Reservation of the Names of FIEs
Before the Chinese and foreign investors enter into any Joint
Venture Contract or Articles of Association, they should apply
for a reservation of the name of the FIE with the AIC. The
AIC will review the name of the FIE and decide whether or
not to register the name of the FIE. The time limit for the
AIC to make such a decision is within ten days after all the
documents are submitted.
After registration, the AIC will issue a Notice of Enterprise
Name Reservation. The validity period for company name reservation
is six months. During the validity period, the reserved names
should not be used for operational activities. The reserved
names may not be assigned. If the validity period has expired
but the FIE has not been registered with the AIC, the name
reservation will lose effect. The relevant parties should
return the name reservation document issued by the AIC within
ten days after the expiration of the validity period.
If the reserved name is used by the parties to an FIE to
engage in operational activities, or the relevant parties
fail to return the name reservation document issued by the
AIC within ten days after the expiration of the validity period,
the AIC may give a warning or impose a penalty between USD60
and USD600. However, Chinese law fails to specify whether
the penalty should be imposed on the foreign investors or
Chinese investors.
The name of an FIE should consist of four parts: trade name,
industry, organization form and location. The trade name,
industry and organization form must be listed in that sequence.
Subject to approval by the SAIC, the name of an FIE may contain
no reference to its location.
An FIE should indicate in its name the industry it is mainly
engaged in pursuant to the classification of industries enacted
by the Chinese government or the major characteristics of
its operations.
The corporate form of an FIE should be indicated at the end
of the name of the FIE under PRC law. The corporate form of
an enterprise comprises limited liability companies, companies
limited by shares and other forms. The location of an FIE
may be placed at the beginning of the company name according
to Chinese practice, or between the trade name and the corporate
form according to foreign practice. Unless otherwise approved
by the SAIC, the name of an FIE should not contain wording
such as "China", "Sino" or "International".
However, Chinese law expressly allows a WOFE to use the wording
"China" in the middle of its name.
If the name of an FIE uses the wording "group",
the FIE should be the parent of several foreign investment
enterprises established by the same foreign investor.
Under Chinese law, an enterprise group must comply with the
following conditions:
(i) The parent company of the enterprise group must have a
registered capital of over USD6,000,000 and have at least
five subsidiaries;
(ii) The total amount of the registered capital of the parent
company and the subsidiary companies exceeds USD12,000,000;
and
(iii) Every member of the enterprise group is a legal person.
It should be noted that an enterprise group consists of the
parent company, wholly owned subsidiaries and other subsidiaries.
An enterprise group is an association of a number of enterprises
under the Articles of Association of the enterprise group.
An enterprise group does not have legal person status. The
registration of an enterprise group should follow the Tentative
Provisions on the Registration of enterprise Groups. The FIE
whose name contains the wording "group" is the parent
company. The name of the enterprise group may be used in advertising
and promotion. However, an enterprise group should not engage
in operational activities and enter into economic contracts.
An FIE does not have to apply for a name in a foreign language.
However, if it does so, its foreign language name should be
consistent with the Chinese name.
The foreign language name is only a translation of the Chinese
name. Chinese law does not regulate foreign language names
of FIEs, nor will an AIC register the foreign language name
of an FIE. The Chinese name of an FIE may contain the trade
name of a foreign investor. However, no foreign language is
permitted to be used in the Chinese name. In addition, Pinyin
and numbers (except for Chinese character numbers) should
not be used in the Chinese names of FIEs.
(2) Registration of FIEs
Within thirty days after the approval authority approves
the establishment of an FIE, the investors should apply for
the registration of the FIE with the AIC. The AIC should make
a decision on whether or not to approve the registration within
thirty days after the AIC accepts the application. The company
registration system contain* similar provisions. In practice,
most AlCs are still following the enterprise registration
system in registration of FIEs.
(3) Business License of the PRC and Enterprise Legal Person
Business License of the PRC
After the AIC decides to register an FIE, it will issue a
business license to the FIE. In China, the business licenses
issued to FIEs have "the People's Republic of China"
before the words "business license". The business
license granted to domestic entities does not have "the
People's Republic of China" in its title. If the FIE
has legal person status, the AIC will issue a Legal Person
Business License of the People's Republic of China. If the
FIE does not have legal person status, the AIC will issue
a Business License of the People's Republic of China. Business
licenses have two versions: original and duplicate.
The major content of the business license of an FIE consists
of the following items:
(i) Operation Term
Operation term refers to the term as set forth in the approved
Joint Venture Contract and Articles and Association commencing
from the registration date of the FIE.
(ii) Validity Period
For an original business license, the validity period of the
business license should correspond to the time limit for capital
contribution. After the capital contribution is completed,
the validity period of the business license should match the
operation term of the FIE.
For a duplicate business license, the columns of "Operation
Period" and "Validity Period" should be the
same as those of the original business license. The validity
period of the duplicate business license should be one year
commencing from the date on which the business license is
issued or amended. However, the validity period of a duplicate
business license should not exceed that of the original business
license.
(iii) Registration Number
The registration number of the business license of an FIE
contains tour parts. The first part is the category of the
foreign investment enterprise, including EJVs, CJVs, WFOEs
and FICLBSs. The second part is the abbreviation of the location
of the FIE. The third part denominates the legal status of
the registered entity, including an FIE, a branch or a Rep
Office. The fourth part is the serial number of the registered
entity. The formula for the registration number is Qi He (Zuo,
Du or Gu) + abbreviation of the location+Zong (Fen or Ban)
+ Serial Number. The word "Qi" stands for enterprise.
"He" stands for an EJV. "Zuo" stands for
a CJV. "DU" stands for a WFOE. "Gu" stands
tor a FICLBS. "Zong" stands for an enterprise. "Fen"
stands for a branch. "Ban" stands for a Rep Office.
(4) Enterprise Types
FIEs established by foreign, Taiwan, Hong Kong or Macao investors
should be classified as follows:
(i) If the FIE is established by a foreign investor, the FIE
should be a Sino-foreign equity joint venture, Sino-foreign
cooperative joint venture or a wholly foreign owned enterprise;
(ii) If the FIE is established by Taiwan, Hong Kong or Macao
investors, the FIE should be an equity joint venture, cooperative
joint venture or wholly owned enterprise followed by a parenthesis
indicating Taiwan investment, Hong Kong investment or Macao
investment. If the Taiwan, Hong Kong or Macao investors are
involved at the same time, the parenthesis should indicate
Taiwan, Hong Kong and Macao together;
(iii) If an FIE is established by both foreign investors and
Taiwan, Hong Kong or Macao investors, the FIE should a Sino-foreign
equity joint venture, Sino-foreign cooperative joint venture
and wholly foreign owned, enterprise; and
(iv) A FICLBS should always be referred to as a foreign investment
company limited by shares no matter whether or not Taiwan,
Hong Kong or Macao investors are involved.
Back to top
|