|
Detailed Implementing Rules for the Law of the People's
Republic of China on Wholly Foreign-Owned Enterprises
(Approved by the State Council on October 28, 1990, promulgated
by the Ministry of Foreign Trade and Economy Cooperation on
December 12, 1990, and amended pursuant to the State Council's
Decision concerning the amendment to Detailed Implementing
Rules for the Law of the People's Republic of China on Wholly
Foreign-Owned Enterprises on April 12, 2001)
Chapter 1 General Provisions
Article 1: These Detailed Implementing Rules are formulated
pursuant to Article 23 of the Law of the People's Republic
of China on Wholly Foreign-Owned Enterprises.
Article 2: Wholly foreign-owned enterprises shall be governed
and protected by the laws of China.
In their business activities in the People's Republic of China,
wholly foreign-owned enterprises must abide by the laws and
regulations of China and may not harm China's public interest.
Article 3: The establishment of wholly foreign-owned enterprises
must be beneficial to the development of China's national
economy and yield notable economic benefits. The state encourages
to foreign-owned enterprises to adopt advance technologies
and equipment, develop new products, save energy and raw materials,
upgrade and replace existing products; and encourages to establish
such foreign-owned enterprises as shall export all or most
of their products.
Article 4: The establishment of wholly foreign-owned enterprises
in prohibited or restrained industries shall be subject to
the regulations for guiding the direction of foreign investment
and the catalog for guiding foreign investment in industry
of China.
Article 5: Applications for the establishment of wholly foreign-owned
enterprises shall not be approved in any of the following
circumstances:
1. China's sovereignty or public interest would be harmed;
2. China's state security would be jeopardized;
3. China's laws and regulations would be violated;
4. the requirements for the development of China's national
economy would not be satisfied; or
5. environmental pollution might be caused.
Article 6: Wholly foreign-owned enterprises shall enjoy autonomy,
and shall not be subject to interference, in their operation
and management activities when operating within their approved
scope of business.
Chapter 2 Establishment Procedures
Article 7: The examination and approval of applications for
the establishment of wholly foreign-owned enterprises shall
be carried out by the Ministry of Foreign Economic Relations
and Trade; upon examination and approval, an approval certificate
shall be issued.
The State Council authorizes the People's Government of the
provinces, autonomous regions, municipalities directly under
the central government, municipalities with independent development
plans and Special Economic Zones to examine and approve applications,
and to issue approval certificates, for the establishment
of wholly foreign-owned enterprises in the following situations:
1. the total amount of investment does not exceed the maximum
amount which the State Council has authorized the People's
Government in question to examine and approve; and
2. the state will not need to allocate raw materials, and
the nationwide comprehensive balance of energy, communications,
transportation, foreign trade export quotas, etc. will not
be affected.
Within 15 days after the People's Government of a province,
autonomous region, municipality directly under the central
government, municipality with independent development plans
or Special Economic Zone has approved the establishment of
a wholly foreign-owned enterprise within its authority as
delegated by the State Council, it shall report its approval
to the Ministry of Foreign Economic Relations and Trade for
the record (the Ministry of Foreign Economic Relations and
Trade and the People's Governments of the provinces, autonomous
regions, municipalities directly under the central government,
municipalities with independent development plans and Special
Economic Zones are hereinafter collectively referred to as
"examination and approval authorities").
Article 8: For the approval of applications for the establishment
of wholly foreign-owned enterprises whose products would involve
export licenses, export quotas or import licenses or would
be products the import of which is restricted by the state,
prior consent shall be obtained from the department for foreign
economic relations and trade in accordance with the limits
of administration authority.
Article 9: Prior to applying for the establishment of a wholly
foreign-owned enterprise, foreign investors shall submit a
report covering the following matters to the local People's
Government at or above county level of the place where they
intend to establish the enterprise. The contents of such report
shall include: the purpose of the wholly foreign-owned enterprise
to be established; the scope and scale of business; the products
to be produced; the technology and equipment to be used; the
area of and requirements for the land to be used; the conditions
for and quantities of the water, electricity, coal, coal gas
or other energy sources required; requirements for public
facilities; etc.
Local People's Governments at or above county level shall
reply to the foreign investors in writing within 30 days after
the date of receipt of their reports.
Article 10: A foreign investor which wishes to establish a
wholly foreign-owned enterprise shall apply and submit the
following documents to the examination and approval authorities
through the local People's Government at or above county level
of the place where it intends to establish the enterprise:
1. an application for the establishment of a wholly foreign-owned
enterprise;
2. a feasibility study;
3. the articles of association of the wholly foreign-owned
enterprise;
4. the name of the legal representative (or a list of the
names of the members of the board of directors) of the wholly
foreign-owned enterprise;
5. the legal certificates and a certificate of creditworthiness
of the foreign investor;
6. the written reply from the local People's Government at
or above county level of the intended place of establishment
of the wholly foreign-owned enterprise;
7. a list of the supplies requiring to be imported; and
8. other documents to be submitted.
The documents mentioned under items (1) and (3) of the preceding
paragraph must be written in Chinese. Those mentioned under
items (2), (4) and (5) may be written in a foreign language,
but, if written in a foreign language, shall be accompanied
by Chinese translations.
Where two or more foreign investors jointly apply for the
establishment of a wholly foreign-owned enterprise, a duplicate
of the contract between them shall be submitted to the examination
and approval authorities for the record.
Article 11: Examination and approval authorities shall decide
whether to approve or to disapprove an application for the
establishment of a wholly foreign-owned enterprise within
90 days from the date of receipt of all the documents pertaining
to such application. If the examination and approval authorities
find that not all of the aforementioned documents have been
submitted or that they are not in order, it may demand that
the missing document(s) be submitted or that the submitted
documents be amended within a specified period of time.
Article 12: Upon approval by the examination and approval
authorities of an application for the establishment of a wholly
foreign-owned enterprise, the foreign investor shall, within
30 days from the date of receipt of the approval document,
apply to the administration of industry and commerce authorities
for registration and obtain a business license. The date of
issuance of the business license of the wholly foreign-owned
enterprise shall be the date of establishment of the enterprise.
The approval certificate for a wholly foreign-owned enterprise
shall expire automatically if the foreign investor has failed
to apply to the administration of industry and commerce authorities
for registration within a full 30 days from the date of issuance
of the approval certificate.
A wholly foreign-owned enterprise shall carry out tax registration
with the tax authorities within 30 days after the date of
its establishment.
Article 13: Foreign investors may entrust Chinese service
organizations for foreign investment enterprises or other
economic organizations with handling on their behalf the matters
set forth in Article 9, the first paragraph of Article 10
and Article 11, provided that they enter into a contract of
entrustment.
Article 14: Written applications for the establishment of
a wholly foreign-owned enterprise shall include the following:
1. the name, address and place of registration of the foreign
investor and the name, nationality and position of its legal
representative;
2. the name and address of the wholly foreign-owned enterprise
to be established;
3. the scope of business, types of product and scale of production;
4. the total amount of investment, registered capital and
sources of funds of, and the method and time limit of contribution
of capital to, the wholly foreign-owned enterprise to be established;
5. the form of organization, structure and legal representative
of the wholly foreign-owned enterprise to be established;
6. the main equipment to be used and the age of such equipment;
and the level and source of the production technology and
production process to be used;
7. the targeted buyers and areas of sale of the products and
the sales channels and methods;
8. the arrangements for the receipt and expenditure of foreign
exchange;
9. the establishment and staffing of the relevant structure,
and arrangements for the employment, training, wages, welfare
benefits, insurance, labor protection, etc. of staff and workers;
10. the possible degree of environmental pollution and the
measures to solve such problem;
11. the selection and area of the land to be used;
12. the funds, energy and raw materials for capital construction,
production and operation, and the methods for obtaining the
same;
13. the schedule of implementation of the project; and
14. the term of operation of the wholly foreign-owned enterprise
to be established.
Article 15: The articles of association of a wholly foreign-owned
enterprise shall cover the following matters:
1. the name and address;
2. the purpose and scope of business;
3. the total amount of investment, registered capital and
time limit for contribution of capital;
4. the form of organization;
5. the internal organizations and their powers and rules of
procedure; and the duties and limits of authority of such
personnel as the legal representative, the general manager,
the chief engineer and the chief accountant;
6. the principles and systems for financial affairs, accounting
and auditing;
7. labor management;
8. the term of operation, termination and liquidation; and
9. the procedure for amendment of the articles of association.
Article 16: The articles of association of a wholly foreign-owned
enterprise, and any amendments thereto, shall become effective
upon approval by the examination and approval authorities.
Article 17: If a wholly foreign-owned enterprise is divided
or merges or if a major change in its capital occurs due to
any other reason, approval must be obtained from the examination
and approval authorities, and a Chinese registered accountant
shall be engaged to verify the event and to issue a capital
verification certificate. Upon approval by the examination
and approval authorities, the change shall be registered with
the administration of industry and commerce authorities.
Chapter 3 Form of Organization and Registered Capital
Article 18: The form of organization of wholly foreign-owned
enterprises shall be a limited liability company. Upon approval,
they may also have other forms of liability.
In wholly foreign-owned enterprises that are limited liability
companies, the liability of the foreign investors vis-¨¤-vis
the enterprises shall be limited to the amounts of capital
contributed by them.
In wholly foreign-owned enterprises with other forms of liability,
the liability of the foreign investors in respect of the enterprises
shall be as specified in the laws and regulations of China.
Article 19: The term "total amount of investment of a
wholly foreign-owned enterprise" means the total amount
of funds required to set up a wholly foreign-owned enterprise,
i.e. the sum of the capital construction funds and the working
capital required to be invested in order to realize its scale
of production.
Article 20: The term "registered capital of a wholly
foreign-owned enterprise" means the total amount of capital
for the establishment of a wholly foreign-owned enterprise
as registered with the administration of industry and commerce
authorities, i.e. the total amount of capital subscribed by
the foreign investor.
The amount of the registered capital of a wholly foreign-owned
enterprise shall correspond to its scale of business. The
ratio between the registered capital and the total amount
of investment shall conform to the relevant regulations of
China.
Article 21: Wholly foreign-owned enterprises may not reduce
their registered capital during their term of operation. But
if the registered capital must be reduced due to the change
of total investment and business scale, approval in advance
by the examining and approving authorities is required.
Article 22: The increase or assignment of the registered capital
of a wholly foreign-owned enterprise must be approved by the
examination and approval authorities. Upon approval, such
change shall be registered with the administration of industry
and commerce authorities.
Article 23: The mortgage or assignment by a wholly foreign-owned
enterprise to a foreign party of its property or interest
must be approved by the examination and approval authorities
and reported to the administration of industry and commerce
authorities for the record.
Article 24: The legal representative of a wholly foreign-owned
enterprise shall be the responsible person who, pursuant to
the enterprise's articles of association, has the power to
represent the enterprise.
If the legal representative is unable to exercise his powers,
he shall appoint an agent, in writing, to exercise his powers
on his behalf.
Back to top
Chapter 4 Methods and Time Limits for Contribution of Capital
Article 25: Foreign investors may make their capital contributions
in freely convertible foreign currencies, and also by valuating
and contributing machinery, equipment, industrial property,
proprietary technology, etc.
Upon approval by the examination and approval authorities,
foreign investors may also use as capital contribution Renminbi
profits derived by them from other foreign investment enterprises
established in the People's Republic of China.
Article 26: Machinery and equipment valuated and used as capital
contribution by a foreign investor must be the equipment required
indeed by the foreign-owned enterprise.
The amounts at which such machinery and equipment are valuated
may not exceed the current normal prices on the international
market for the same kind of machinery and equipment.
With respect to valuated machinery and equipment to be contributed,
a detailed list of valuated contributions shall be made. Such
list shall include the descriptions, types, quantities, valuation,
etc. of the machinery and equipment. The list shall be annexed
to, and submitted to the examination and approval authorities
along with, the application for establishment of the wholly
foreign-owned enterprise.
Article 27:The title of industrial property and proprietary
technology valuated and used as capital contribution by a
foreign investor must be owned by the foreign investor.
The valuation of such industrial property and proprietary
technology shall be consistent with common international principles
of valuation, and the amount at which they are valuated shall
not exceed 20 percent of the registered capital of the wholly
foreign-owned enterprise.
Detailed information shall be prepared with respect to the
valuated industrial property and proprietary technology to
be contributed. Such information shall include copies of certificates
pertaining to ownership and details of their validity, information
on the technical performance and practical value, the basis
and standards of valuation, etc. The said information shall
be annexed to, and submitted to the examination and approval
authorities along with, the application for establishment
of the wholly foreign-owned enterprise.
Article 28: When valuated machinery and equipment contributed
as capital have arrived at the Chinese port, the wholly foreign-owned
enterprise shall request a Chinese commodity inspection organization
to inspect the same. Such commodity inspection organization
shall issue an inspection report.
In the event of discrepancies between the kinds, quality and
quantities of valuated and contributed machinery and equipment
and the kinds, quality and quantities of the machinery and
equipment specified on the list of valuated contributions
submitted by the foreign investor to the examination and approval
authorities, the examination and approval authorities shall
have the power to demand the foreign investor to rectify such
discrepancies within a specified period of time.
Article 29: The examination and approval authorities shall
have the power to conduct an inspection after valuated industrial
property and proprietary technology contributed as capital
have been put in use. In the event of discrepancies between
such industrial property and proprietary technology and the
information originally supplied by the foreign investor, the
examination and approval authorities shall have the power
to demand the foreign investor to rectify such discrepancies
within a specified period of time.
Article 30: The time limit within which foreign investors
are to contribute their capital shall be stated in the applications
for establishment of a wholly foreign-owned enterprise and
the enterprise's articles of association. Foreign investors
may contribute their capital in instalments, provided that
the final instalment is contributed within three years from
the date of issuance of the business license. The first of
such instalments may not account for less than 15 percent
of the amount of capital to be contributed by the foreign
investor and shall be contributed in full within 90 days from
the date of issuance of the business license of the wholly
foreign-owned enterprise.
If a foreign investor fails to contribute the first instalment
of its capital contribution within the time limit set forth
in the preceding paragraph, its approval certificate shall
automatically expire upon the expiry of such time limit. In
such event, the wholly foreign-owned enterprise shall cancel
its registration with, and turn over its business license
for cancellation to, the administration of industry and commerce
authorities. If the wholly foreign-owned enterprise fails
to cancel its registration and to turn over its business license
for cancellation, the administration of industry and commerce
authorities shall revoke its business license and make a public
announcement.
Article 31: Foreign investors shall contribute according to
schedule all instalments following the first instalment of
their capital contributions. If and when a capital contribution
is 30 days overdue without legitimate reason, the matter shall
be handled pursuant to the second paragraph of Article 31
hereof.
If a foreign investor requests an extension of the time limit
for its capital contribution for legitimate reasons, such
extension shall be agreed to by the examination and approval
authorities and reported to the administration of industry
and commerce authorities for the record.
Article 32: After a foreign investor has contributed all instalments
of its capital contribution, the wholly foreign-owned enterprise
shall engage a Chinese registered accountant to verify the
contribution and to issue an investment verification report,
which shall be submitted to the examination and approval authorities
and the administration of industry and commerce authorities
for the record.
Chapter 5 Use of Land and Fees Therefor
Article 33: The land to be used by wholly foreign-owned enterprises
shall be arranged for by the local People's Governments at
or above county level of the locations of the enterprises
upon examination in the light of local circumstances.
Article 34: Within 30 days from the date of issuance of their
business licenses, wholly foreign-owned enterprises shall
carry out land use procedures with and obtain a land certificate
from the land administration department of the local People's
Governments at or above county level of the places where they
are located, on the strength of their approval certificates
and business licenses.
Article 35: The land certificates shall be the legal certificates
on the strength of which wholly foreign-owned enterprises
may use land. Without approval, wholly foreign-owned enterprises
may not assign their land use rights during their terms of
operation.
Article 36: When collecting their land certificates, wholly
foreign-owned enterprises shall pay land use fees to the land
administration departments of the places where they are located.
Article 37: Wholly foreign-owned enterprises using developed
land shall pay land development fees.
The land development fees mentioned in the preceding paragraph
shall include the requisitioning, demolition, removal and
resettlement expenses and the construction expenses incurred
when linking the wholly foreign-owned enterprise to the existing
infrastructure. Land developers may charge the land development
fees as a lump sum or in annual instalments.
Article 38: Wholly foreign-owned enterprises using undeveloped
land may develop the land themselves or entrust relevant Chinese
units with such development. The construction of infrastructural
facilities shall be centrally arranged by the local People's
Governments at or above county level of the places where the
wholly foreign-owned enterprises are located.
Article 39: The scales for the land use fees and land development
fees charged to wholly foreign-owned enterprises shall be
set in accordance with the relevant regulations of China.
Article 40: The term of the use of land by a wholly foreign-owned
enterprise shall be the same as its approved term of operation.
Article 41: In addition to obtaining land use rights in accordance
with this Chapter, wholly foreign-owned enterprises may obtain
such rights pursuant to other laws and regulations of China.
Chapter 6. Purchases and Sales
Article 42: Wholly foreign-owned enterprises shall have the
right to decide on their own on the purchase of machinery,
equipment, raw materials, fuel, spare parts, accessories,
components, devices, means of transportation, office articles,
etc. for their own use (hereinafter referred to as "supplies").
When purchasing supplies in China, wholly foreign-owned enterprises
shall be granted terms equal to those granted to Chinese enterprises,
given that conditions are equal.
Article 43: Wholly foreign-owned enterprises may sell their
products in China. The state encourages wholly foreign-owned
enterprises to export their products.
Article 44: Wholly foreign-owned enterprises shall have the
right to export their own products, and they may also entrust
Chinese foreign trade companies or companies outside the People's
Republic of China with selling their products on their behalf.
Wholly foreign-owned enterprises shall have the right to sell
their own products in China, and they may also entrust Chinese
commercial organizations with selling their products on their
behalf.
Article 45: For those of the machinery and equipment contributed
as capital by foreign investors for which China requires an
import license, the wholly foreign-owned enterprises shall,
either directly or through an appointed agency, apply for
import licenses to and obtain the same from the licensing
authorities, on the strength of the enterprises¡¯ approved
lists of imported equipment and supplies.
With respect to the supplies imported by wholly foreign-owned
enterprises within their approved scopes of business which
are required for use in their own production and for which
China requires an import license, the enterprises shall draw
up annual import plans and, once every six months, apply for
import licenses to and obtain the same from the licensing
authorities.
For those of the products exported by wholly foreign-owned
enterprises for which China requires an export license, the
enterprises shall draw up annual export plans and, once every
six months, apply for export licenses to and obtain the same
from the licensing authorities.
Article 46: The prices of the supplies and technical services
imported by wholly foreign-owned enterprises may not exceed
the arm's length prices of the same supplies and services
on the international market at that time. The prices of products
exported by wholly foreign-owned enterprises shall be set
by wholly foreign-owned enterprises themselves by reference
to the prices on the international market at that time, provided
that they may not be lower than reasonable export prices.
The tax authorities shall have the power to investigate pursuant
to the tax laws the legal liability of wholly foreign-owned
enterprises evading taxes by such means as importing at high
prices and exporting at low prices, etc.
Article 47: Wholly foreign-owned enterprises shall provide
statistical information and submit statistical statements
in accordance with the Statistics Law of the People's Republic
of China and China's regulations concerning the system for
statistics on the use of foreign investment.
Chapter 7 Taxation
Article 48: Wholly foreign-owned enterprises shall pay taxes
in accordance with the laws and regulations of China.
Article 49: The staff and workers of wholly foreign-owned
enterprises shall pay individual income tax in accordance
with the laws and regulations of China.
Article 50: Wholly foreign-owned enterprises shall be exempt
from duties and taxes in accordance with Chinese relevant
taxation laws on the following imported supplies:
1. machinery, equipment, spare parts and building materials,
and the materials required for the installation and reinforcement
of machinery, used by the foreign investors as capital contribution;
2. machinery, equipment, spare parts, means of transportation
for use in production and production management equipment
imported by wholly foreign-owned enterprises with funds from
their total amounts of investment and required for their own
production;
3. raw materials, auxiliary materials, components, spare parts
and packaging materials imported by wholly foreign-owned enterprises
for the production of export products.
If, upon approval, the imported supplies mentioned in the
preceding paragraph are sold in the People's Republic of China
rather than being exported or are used for the production
of products to be sold in the People's Republic of China rather
than for the production of export products, duties and tax
shall be paid in accordance with China's tax laws.
Article 51: Export products produced by wholly foreign-owned
enterprises other than products the export of which is restricted
by China, shall be exempt from duties and taxes in accordance
with Chinese taxation laws.
Back to top
Chapter 8 Exchange Control
Article 52: The foreign exchange matters of wholly foreign-owned
enterprises shall be handled in accordance with the relevant
exchange control regulations of China.
Article 53: On the strength of their business licenses issued
by the administration of industry and commerce authorities,
wholly foreign-owned enterprises may open accounts with banks
in the People's Republic of China allowed to engage in foreign
exchange business. The payments into and out of such accounts
shall be supervised by the banks with which they have been
opened.
The foreign exchange revenue of wholly foreign-owned enterprises
shall be deposited in the foreign exchange accounts with their
banks. Foreign exchange expenditure shall be paid out of their
foreign exchange bank accounts.
Article 54: Wholly foreign-owned enterprises which wish to
open foreign exchange accounts with banks outside the People's
Republic of China for reasons of production and business needs
must obtain approval from China's exchange control authorities
and regularly report details of the foreign exchange receipts
and payments and submit the banks¡¯ statements in accordance
with the regulations of China's exchange control authorities.
Article 55: Upon payment of tax in accordance with China's
tax laws, the wages and other lawful foreign exchange income
of the expatriate, Hong Kong, Macao and Taiwan staff and workers
of wholly foreign-owned enterprises may be freely remitted
out of the country.
Chapter 9 Financial Affairs and Accounting
Article 56: Wholly foreign-owned enterprises shall establish
a financial and accounting system in accordance with the laws
and regulations of China and the regulations of China's financial
authorities and shall submit such system to the financial
and taxation authorities of the place where they are located
for the record.
Article 57: The fiscal year of wholly foreign-owned enterprises
shall commence on January 1 of the Gregorian calendar and
end on December 31 of the same year.
Article 58: Wholly foreign-owned enterprises shall make allocations
to a reserve fund and a bonus and welfare fund for staff and
workers from their profits after paying income tax in accordance
with China's tax laws. The rate of allocations to the reserve
fund may not be lower than 10 percent of the after-tax profits;
once the cumulative amount of allocations equals 50 percent
of the registered capital, no further allocations need be
made. The rate of allocations to the bonus and welfare fund
for staff and workers shall be determined by the wholly foreign-owned
enterprises themselves.
Wholly foreign-owned enterprises may not distribute profits
until the losses from preceding fiscal years have been made
up. Retained profits from preceding fiscal years may be distributed
together with the distributable profits of the current fiscal
year.
Article 59: Accounting vouchers, books and statements printed
by wholly foreign-owned enterprises themselves shall be written
in Chinese. Those written in a foreign language shall include
notes in Chinese.
Article 60: Wholly foreign-owned enterprises shall keep independent
accounts.
The annual accounting statements and liquidation accounting
statements of wholly foreign-owned enterprises shall be prepared
in accordance with the regulations of China's financial and
taxation authorities. If accounting statements are prepared
in a foreign currency, Renminbi accounting statements shall
be prepared simultaneously by translating such foreign currency
amounts into Renminbi.
Chinese registered accountants shall be engaged to verify
the annual accounting statements and liquidation accounting
statements of wholly foreign-owned enterprises and to issue
a report thereon.
The annual accounting statements and liquidation accounting
statements of wholly foreign-owned enterprises described in
the second and third paragraphs, together with the reports
issued by the Chinese registered accountants, shall be submitted
within the prescribed time limits to the financial and taxation
authorities and, for the record, to the examination and approval
authorities and the administration of industry and commerce
authorities.
Article 61: Foreign investors may engage at their own expense
Chinese or foreign accounting staff to inspect the accounting
books of their wholly foreign-owned enterprises.
Article 62: Wholly foreign-owned enterprises shall submit
annual balance sheets and profit and loss statements to the
financial and taxation authorities and, for the record, to
the examination and approval authorities and the administration
of industry and commerce authorities.
Article 63: Wholly foreign-owned enterprises shall maintain
their accounting books in the place where they are located.
Such accounting books shall be subject to supervision by the
financial and taxation authorities.If a wholly foreign-owned
enterprise violates the provisions of the preceding paragraph,
the financial and taxation authorities may impose a fine on
it and the administration of industry and commerce authorities
may order it to suspend business or revoke its business license.
Chapter 10 Staff and Workers
Article 64: Wholly foreign-owned enterprises shall enter into
labor contracts with the staff and workers they employ in
the People's Republic of China, in accordance with the laws
and regulations of China. Such contracts shall specifically
cover such matters as employment, dismissal, remuneration,
welfare, labor protection, labor insurance, etc.
Wholly foreign-owned enterprises may not employ children as
laborers.
Article 65: Wholly foreign-owned enterprises shall be responsible
for the business and technical training of their staff and
workers and establish an assessment system, in order that
the production and management skills of their staff and workers
are sufficient to meet the enterprises¡¯ production
and development requirements.
Chapter 11 Labor Union
Article 66: The staff and workers of wholly foreign-owned
enterprises shall have the right to establish basic-level
labor unions and carry on labor union activities in accordance
with the Law of the People's Republic of China on Labor Unions.
Article 67: The labor union of a wholly foreign-owned enterprise
shall represent the rights and interests of the staff and
workers. It shall have the right to enter into a labor contract
with the enterprise on behalf of the staff and workers and
to supervise the implementation thereof.
Article 68: The basic tasks of the labor union of a wholly
foreign-owned enterprise shall be to protect the lawful rights
and interests of the staff and workers in accordance with
the laws and regulations of China, to assist the enterprise
in arranging and using the bonus and welfare fund for staff
and workers in a rational way; to organize the staff and workers
to engage in political, scientific, technological and vocational
study; to organize cultural and athletic activities; and to
teach the staff and workers to observe labor discipline and
make efforts to accomplish the various economic tasks of the
enterprise.
When a wholly foreign-owned enterprise studies and decides
on matters such as rewards, punishment, the wage system, welfare
benefits, labor protection, labor insurance, etc., of staff
and workers, a representative of its labor union shall have
the right to attend the meeting. Wholly foreign-owned enterprises
shall listen to the opinions of their labor unions and obtain
their cooperation.
Article 69: Wholly foreign-owned enterprises shall actively
support the work of their labor unions and, in accordance
with the Law of the People's Republic of China on Labor Unions,
provide them with the necessary premises and equipment for
office work and meetings and for use in organizing collective
welfare, cultural and athletic activities for staff and workers.
Wholly foreign-owned enterprises shall each month allocate
labor union funds at the rate of 2 percent of the total take-home
pay of their staff and workers. Such funds shall be used by
their labor unions in accordance with the measures for the
use of labor union funds formulated by the All-China Federation
of Trade Unions.
Chapter 12. Term, Termination and Liquidation
Article 70: The term of operation of wholly foreign-owned
enterprises shall be set forth by the foreign investors in
their applications for the establishment of a wholly foreign-owned
enterprise, on the basis of the specific circumstances of
the industries and enterprises in question, and shall be approved
by the examination and approval authorities.
Article 71: The term of operation of wholly foreign-owned
enterprises shall be reckoned from the date of issuance of
their business licenses.
If the term of operation of a wholly foreign-owned enterprise
needs to be extended upon expiry, a written application for
extension of the term of operation shall be submitted to the
examination and approval authorities 180 days prior to expiry.
The examination and approval authorities shall decide whether
to approve or reject the application within 30 days from the
date of receipt thereof.
Wholly foreign-owned enterprises which have obtained approval
to extend their term of operation shall register the change
with the administration of industry and commerce authorities
within 30 days from the date of receipt of the approval document
for such extension.
Article 72: A wholly foreign-owned enterprise shall be terminated
in any of the following circumstances:
1. its term of operation has expired;
2. it suffers heavy losses due to mismanagement and the foreign
investor decides to dissolve it;
3. it suffers heavy losses due to an event of force majeure
such as a natural disaster, war, etc.;
4. it becomes bankrupt;
5. it is lawfully closed because it has violated the laws
and regulations of China, thereby harming the public interest;
or
6. another reason for dissolution as specified in the wholly
foreign-owned enterprise's articles of association has arisen.
In any of the circumstances mentioned under items (2), (3)
and (4) of the preceding paragraph, the wholly foreign-owned
enterprise shall voluntarily submit a written application
for termination to the examination and approval authorities
for approval. The date of the examination and approval authorities¡¯
approval shall be the date of the enterprise's termination.
Article 73: A wholly foreign-owned enterprise which has been
terminated pursuant to items (1), (2), (3) or (6) of Article
75 shall make a public announcement and notify its creditors
within 15 days from the date of termination. In addition,
it shall, within 15 days from the date of issuance of the
public announcement of termination, submit a proposal to the
examination and approval authorities concerning the procedure
and principles of liquidation and the candidates for the liquidation
committee, and implement the same upon examination and approval
by the examination and approval authorities.
Article 74: A liquidation committee shall be composed of the
legal representative of the wholly foreign-owned enterprise,
representatives of its creditors and representatives of the
relevant competent authorities. In addition, accountants,
lawyers, etc. registered in China shall be invited to serve
on the committee.
The liquidation expenses shall be paid out of the property
currently held by the foreign-owned enterprise on a priority
basis.
Article 75: A liquidation committee shall exercise the following
powers:
1. convene creditors¡¯ meetings;
2. take over the management of and sort out the enterprise's
property, and prepare a balance sheet and a property list;
3. valuate the property and state the basis for the calculation
of the values assigned;
4. prepare the liquidation plan;
5. redeem the enterprise's claims and satisfy its debts;
6. recover any amounts to be contributed by the shareholders
which have not yet been contributed;
7. distribute the balance of the property; and
8. represent the wholly foreign-owned enterprise when it sues
or is being sued.
Article 76: Prior to completion of the liquidation of a wholly
foreign-owned enterprise, the foreign investor may not remit
or carry the enterprise's funds out of the People's Republic
of China and may not dispose of the enterprise's property
on its own authority.
Upon completion of the liquidation of a wholly foreign-owned
enterprise, if the sum of the net amount of its assets and
the balance of its property exceeds its registered capital,
the portion in excess shall be regarded as profit, and income
tax shall be paid on such portion in accordance with China's
tax laws.
Article 77: Upon completion of the liquidation of a wholly
foreign-owned enterprise, procedures for the cancellation
of registration shall be carried out with, and its business
license shall be returned for cancellation to, the administration
of industry and commerce authorities.
Article 78: When wholly foreign-owned enterprises liquidate
and dispose of their property, Chinese enterprises or other
organizations shall have a preemptive right to purchase the
same, provided that conditions are equal.
Article 79: A wholly foreign-owned enterprise which is terminated
pursuant to item (4) of Article 75 shall be liquidated by
reference to the relevant laws and regulations of China.
A wholly foreign-owned enterprise which is terminated pursuant
to item (5) of Article 75 shall be liquidated in accordance
with the relevant regulations of China.
Chapter 13 Supplementary Provisions
Article 80: All items of insurance of wholly foreign-owned
enterprises shall be taken out from insurance companies in
the People's Republic of China.
Article 81: Economic contracts between wholly foreign-owned
enterprises and other companies, enterprises or other economic
organizations and persons shall be governed by the Contract
Law of the People's Republic of China.
Economic contracts between wholly foreign-owned enterprises
and foreign companies, enterprises or individuals shall be
governed by the Foreign Economic Contract Law of the People's
Republic of China.
Article 82: Matters concerning wholly-owned enterprises established
in Mainland China by companies, enterprises, or other economic
organizations and individuals from Hong Kong, Macao and Taiwan
or by Chinese citizens resident abroad shall be handled by
reference to these Detailed Implementing Rules.
Article 83: Expatriate, Hong Kong, Macao and Taiwan staff
and workers of wholly foreign-owned enterprises may carry
in reasonable quantities of means of transport and daily necessities
for their own use. Such staff and workers shall carry out
customs formalities for such goods in accordance with the
regulations of China.
Article 84: These Detailed Rules shall be implemented as from
the date of promulgation.
- End -
Back to top
|
