Regulations of Shanghai Municipality on Examination and
Approval of Foreign-Invested Enterprises
(Adopted on August 23, 1996 at the 29th Session of the
Standing Committee of the Tenth Municipal People's Congress
of Shanghai)
Chapter I General Provisions
Article 1 For the purpose of opening further to the
outside world, of promoting international economic and technical
cooperation and of facilitating the establishment of foreign-invested
enterprises in Shanghai by Chinese and foreign investors ,
the present Regulations are formulated in accordance with
the Law of the People's Republic of China on Chinese-Foreign
Equity Joint Ventures, the law of the People's Republic of
China on Chinese-Foreign Contractual Cooperative Joint Ventures
and the law of the People's Republic of China on Foreign Wholly-Owned
Enterprises and other relevant laws and regulations and with
due consideration being given to the specific conditions in
Shanghai Municipality.
Article 2 The foreign-invested enterprises mentioned
in the present Regulations refer to Chinese-foreign equity
joint ventures, Chinese-foreign contractual cooperative joint
ventures and foreign wholly-owned
enterprises. The present Regulations are applicable to the
establishment of foreign-invested enterprises in Shanghai
and to the revision of contracts and articles of association
after establishment.
Article 3 Foreign investors are encouraged to establish
foreign-invested enterprises of the following types in Shanghai:
(1) Those that bring in advanced technology and equipment
or scientific management;
(2) Those that are capable of upgrading present products and
tapping international markets;
(3) Those that help promote the modernization of Shanghai.
Application for the establishment of foreign-invested enterprises
shall not be approved under any of the following circumstances:
(a) If state security is threatened and the well-being of
the public jeopardized;
(b) If the environment or human physical health is threatened;
(c) If existing laws and regulations are contravened.
Article 4 The Shanghai Municipal People's Government
( hereinafter abbreviated as "the Municipal People's
Government") shall decide and make public targeted fields
for guiding foreign investment in accordance with the provisions
relating to targeted fields for guiding foreign investment
and the guide catalogues of industries for foreign investment
published by the State and with due consideration being given
to the specific conditions in Shanghai Municipality .
Chinese and foreign investors shall decide on their investment
projects in accordance with the targeted fields for guiding
foreign investment and the guide catalogues of industries
for foreign investment published by the Municipal People's
Government.
Article 5 The Shanghai Municipal Foreign Investment
Commission (hereinafter abbreviated as SFIC) shall be in charge
of the examination and approval of foreign-invested enterprises
in Shanghai. The SFIC, the Pudong New Area Administration,
the Waigaoqiao Free Trade Zone Administrative Committee, the
county people's governments and other relevant authorized
departments of the Municipal People's Government (hereinafter
referred to one and all as examination and approval authorities)
shall exercise their power to examine and approve the establishment
of foreign-invested enterprises in accordance with what authority
has respectively been delegated to each of them by the State
or the Municipality. Any project that according to law and
regulations is subject to examination and approval by relevant
authorized departments of the State Council must as a first
step undergo a preliminary examination by the SFIC in conjunction
with the Shanghai Municipal Planning Commission or the Shanghai
Municipal Economic Commission before submission to relevant
higher authorities.
Chapter II The Establishment of Foreign-Invested Enterprises
Section 1 Chinese-Foreign Equity Joint Ventures
Article 6 After the Chinese and foreign investors concerned
have confirmed their intention to form a Chinese-foreign equity
joint venture, they shall make a preliminary feasibility study
of the proposed project, with the Chinese Party seeing to
the preparation of a project proposal and the requisite appendices
and to the submission of them to a relevant examination and
approval authorities for approval. Copies of the project proposal
and the requisite appendices shall be made and submitted to
other relevant departments at the same time. The relevant
departments shall, within ten days after the date of receipt
of the project proposal and the requisite appendices ,give
an official opinion on the basis of their preliminary examination
and submit it to the examination and approval authorities
concerned.
Article 7 The examination and approval authorities
concerned shall, within twenty days after the date of receipt
of the project proposal and the requisite appendices, make
a decision on whether or not to
grant approval and send copies of its decision to the relevant
departments. Examination and approval authorities other than
the SFIC shall send a copy of their decision to the SFIC at
the same time that it sends copies to the relevant departments.
Article 8 An approved project proposal , as the basis
for making the feasibility report, shall have a period of
validity of one year. If for some special reasons the period
of validity needs to be extended , the Chinese party shall
submit an application for extension to the original examination
and approval authorities not less than thirty days before
the expiry. When approval is granted, the period of validity
may be extended, but the extension must not exceed six months.
Article 9 After obtaining approval for the project
proposal, the Chinese and foreign investors concerned shall
go through the procedures of making an application for preliminary
examination and approval of the name of the equity joint venture
with the administrative department in charge of industry and
commerce.
Article 10 After obtaining approval for the project
proposal, the Chinese and foreign investors concerned shall
arrange for the settlement, one by one, of such matters as
fund raising, location, technologies to use, equipment, raw
materials supply, foreign exchange balance, auxiliaries to
urban infrastructure, etc.; shall make an analysis and estimate
of marketing, site selection and planning, environmental protection,
labor safety, economic returns, etc. ; and on such a basis
shall work together for a feasibility report, a joint-venture
contract and the articles of association and submit these
for approval by the relevant examination and approval authority.
If the Chinese and foreign investors concerned use fixed assets,
current assets, intangible assets and other types of assets
in the form of their monetary worth as investment, an assessment
shall be made of those assets according to relevant regulations
of the State. If Certain contents in the feasibility report,
the contract and the articles of association require prior
examination by some relevant authorities according to the
provisions of laws and regulations, approval by the said relevant
authorities must first be obtained.
Article 11 The examination and approval authority concerned
shall, within thirty days after the date of receipt of the
feasibility report, the contract and the articles of association,
make a decision on whether or not to grant approval.
Article 12 After obtaining approval for the feasibility
report, the contract and the articles of association, the
Chinese party shall bring the requisite documents to the examination
and approval authorities concerned for the issuance of a certificate
of approval. The examination and approval authorities concerned
shall issue the certificate of approval within three days
after the date of receipt of the requisite documents.
Section 2 Chinese-Foreign Contractual Cooperative Joint
Ventures
Article 13 The application and examination/approval
for the establishment of a Chinese-foreign contractual cooperative
joint venture by Chinese and foreign investors shall be carried
out by reference to the stipulations of Articles 6 to 12 of
the present Regulations.
Section 3 Foreign Wholly-Owned Enterprises
Article 14 The application and Examination/approval
for the establishment of foreign wholly-owned enterprises
by foreign investors shall be carried out by reference to
the stipulations of Article 6 to 12 of the present Regulations.
For the establishment of foreign wholly-owned enterprises,
foreign investors shall, according to the relevant regulations
of the State, authorize a proper qualified consulting agency
to handle matters of application, submission for examination
and approval, etc..
Chapter III Revision of Contracts and Articles of Association
of Foreign-Invested Enterprises
Section 1 Chinese-Foreign Equity Joint Ventures
Article 15 In case one party to an equity joint venture
intends to assign all or part of its investment to the other
party or parties, a consensus must be reached and a resolution
adopted at the meeting of the board of directors of the enterprise
concerned before an application is submitted to the original
examination and approval authorities for approval. If one
party to an equity joint venture intends to assign all or
part of its investment to a third party unconnected with the
equity joint venture concerned, a consent in writing by the
other party or parties concerned must be obtained and a consensus
reached and resolution adopted at the meeting of the board
of directors of the enterprise concerned before an application
is submitted to the original examination and approval authorities
for approval. After the application for assignment of investment
is approved , the parties to the joint venture concerned shall
make timely revisions in the contract and the articles of
association of their enterprise. The revised contract and
articles of association must then be submitted to the original
examination and approval authorities for approval.
Article 16 In case an equity joint venture intends
to increase its registered capital, a consensus must be reached
and a resolution adopted at the meeting of the board of directors
of the enterprise concerned before an application is submitted
to the original examination and approval authorities for approval.
If approval for the proposed increase in registered capital
is beyond the limits of authority of the original examination
and approval authorities, that authorities shall refer the
case to a higher-level examination and approval authorities
for approval. An equity joint venture under normal circumstances
may not out back its registered capital during the contract
period of operations. If there should indeed be justifiable
reasons for a out-back , an application must be submitted
to the original examination and approval authorities for approval
in accordance with the relevant regulations of the State.
Article 17 If an equity joint venture intends to alter
its scope of business, an application may be submitted to
the original examination and approval authorities for approval
on condition that the parties to the joint venture have paid
in according to schedule the full sum of their respective
committed share of the registered capital. If approval for
the proposed alteration in scope of business is beyond the
limits of authority of the original examination and approval
authorities, that authority shall refer the case to a higher-level
examination and approval authorities for approval.
Article 18 If the parties to an equity joint venture
share a common wish for an extension of the duration of their
joint venture, an application must be submitted to the original
examination and approval authorities for approval not less
than six months before the expiry of the term. If the parties
to an equity joint venture share a common wish for the termination
of their contract before its date of expiry, a consensus must
be reached and a resolution adopted at the meeting of the
board of directors of the enterprise concerned before an application
is submitted to the original examination and approval authorities
for approval. If in conformity with the relevant regulations
of the State or with what has already been agreed upon in
the existing contract a party or some parties to an equity
joint venture call for the termination of the contract before
its date of expiry, an application must be submitted to the
original examination and approval authorities for approval.
After the dissolution of an equity joint venture is approved
, liquidation must be carried out according to the relevant
laws and regulations.
Article 19 If a change in partnership in an equity
joint venture entails another change such as that in registered
capital or scope of business or duration or in more than one
such item alone, an application must
first be submitted for a change in partnership. When this
has been approved by the original examination and approval
authorities, an application can then be submitted for other
changes.
Article 20 Revisions of the contract and the articles
of association of an equity joint venture other than those
stipulated in Articles 15 to 19 of the present Regulations
shall be handled according to the relevant laws and regulations.
Article 21 The examination and approval authorities
concerned shall make a decision on whether or not to approve
an application for making a revision or revisions as specified
in Articles 15 to 19 within thirty days after the date of
receipt of the application and other requisite appendices.
Section 2 Chinese-Foreign Contractual Cooperative Joint
Ventures
Article 22 The revision of contracts and articles of
association of Chinese-foreign contractual cooperative joint
ventures shall be handled by reference to the stipulations
of Articles 15 to 21 of the present Regulations.
Section 3 Foreign Wholly-Owned Enterprises
Article 23 The revision of articles of association
of foreign wholly-owned enterprises shall be handled by reference
to the stipulations of Articles 15 to 21 of the present Regulations.
Chapter IV Legal Liability
Article 24 If Chinese and foreign investors withhold
the truth or resort to deception when they apply for the establishment
of a foreign-invested enterprise, for making revisions in
the contract and the articles of
association, or for termination of a contract before its date
of expiry, the examination and approval authorities concerned
may reject their application, decide against approval of the
application or revoke the certificate of approval. Where consequences
are entailed, the relevant department(s) in charge shall deal
with them according to law.
Article 25 If in the course of executing its duties
of examination and approval an examination and approval authorities
and/or a relevant department in charge violate laws, regulations
and the stipulations f the present Regulations, they shall
hold legal liability for their violation(s) by law.
Article 26 If a staff member of an examination and
approval authorities or of a relevant department in charge
neglects his/her duties, engages in malpractice to serve friends,
relatives or himself/herself, or solicits and accepts bribes,
administrative disciplinary measures shall be taken against
him/her. Anyone whose misdeed constitutes a crime shall be
investigated and punished under the criminal law.
Article 27 If Chinese and foreign investors or foreign-invested
enterprises consider unacceptable the decision f an examination
and approval authorities or the specific administrative behavior
of a relevant department in charge, they may apply for a reconsideration
of their case or take administrative proceedings according
to the stipulations of the Regulations on Administrative Reconsideration
and the Law of the People's Republic of China on Administrative
Proceedings.
Chapter V Supplementary Provisions
Article 28 Chinese and foreign investors who intend
to establish in the Municipality enterprises of other investment
forms shall go through examination and approval procedures
according to the relevant stipulations of the State regulations
and of the present Regulations.
Article 29 Chinese and foreign investors shall register
with the administrative department in charge of industry and
commerce and obtain a business license within thirty days
after the date of receipt of the certificate of approval for
the establishment of a foreign-invested enterprise. The date
of signing and issuance of the business license is the official
birth day of the enterprise. A foreign-invested enterprise
shall go to departments in charge of taxation, customs, foreign
exchange control, etc. to complete required procedures within
thirty days after the date of receipt of the business license.
Article 30 The establishment of businesses in the Municipality
by companies, enterprises and other economic entities or individuals
in Hong Kong, Macao and Taiwan or by Chinese citizens who
are permanent residents of foreign countries shall be dealt
with by reference to the stipulations of the present Regulations.
Article 31 The SFIC shall formulate rules for implementation
the basis of the present Regulations for submission to the
Municipal People's Government for approval. When approval
is gained, the said rules for implementation shall be enforced.
The SFIC is responsible for interpreting the present Regulations
in their practical applications.
Article 32 The present Regulations shall become effective
on October 1, 1996 whereupon the Provisions of Shanghai Municipality
on Application and Approval of Chinese-Foreign Equity Joint
Ventures, Chinese-Foreign Contractual Cooperative Joint Ventures
and Foreign Wholly-Owned Enterprises adopted on June 20, 1986
at the 22nd Session of the Standing Committee of the Eighth
Municipal People's Congress of Shanghai is annulled.
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