Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-owned Enterprises (Revised in 2001)
Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-owned Enterprises (Revised in 2001)
Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-owned Enterprises (Revised in 2001)
Order of the State Council [2001] No.301
April 12, 2001
Approved by the State Council on October 28, 1990, issued by the Ministry of Foreign Trade and Economic Cooperation on December 12, 1990, and amended in accordance with the Decision of the State Council on Amending the Detailed Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-owned Enterprises on April 12, 2001.
Chapter I General Provisions
Article 1 These Rules are formulated in accordance with the Law of the People's Republic of China on Wholly Foreign-owned Enterprises.
Article 2 Wholly foreign-owned enterprises (WFOEs) shall be subject to and protected by the laws of China.
In their business activities within the territory of the People's Republic of China, WFOEs must abide by the laws and regulations of China and may not harm China's public interest.
Article 3 The establishment of WFOEs must be beneficial to the development of China's national economy and yield notable economic benefits. The State encourages WFOEs to use advanced technology and equipment, develop new products, upgrade and replace existing products and conserve energy and raw materials, and encourages the establishment of WFOEs that export their products.
Article 4 Industries in which the establishment of WFOEs is prohibited or restricted shall be regulated in accordance with the provisions of the State on the guidance of foreign investment orientation and the Catalogue for the Guidance of Foreign Investment Industries.
Article 5 No application to establish a WFOE may be approved in any of the following circumstances:
1.Where China's sovereignty or public interest would be harmed;
2.Where China's State security would be jeopardized;
3.Where China's laws and regulations would be violated;
4.Where China's national economic development requirements would not be satisfied; or
5.Where environmental pollution might be caused.
Article 6 WFOEs shall manage their own operations on its own and be free from interference within their approved scope of business.
Chapter II Establishment Procedures
Article 7 The examination and approval of applications to establish WFOEs shall be carried out by the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as "MOFTEC") of the People's Republic of China; approval documents shall be issued following the examination and approval process.
The State Council authorizes the people's governments of the provinces, autonomous regions, municipalities directly under the Central Government, specially designated cities in the State plan and special economic zones to examine and approve applications for the establishment of WFOEs which are under the following circumstances and issue approval documents thereto:
1.where the total amount of investment does not exceed the limits of examination and approval authority specified by the State Council; and
2.where the State does not need to allocate raw materials, and the nationwide balance of energy, communication and transportation, foreign trade export quotas, etc. are not be affected.
Within 15 days of approving the establishment of a WFOE within the scope of authority specified by the State Council, the people's government of the relevant province, autonomous region, municipality directly under the Central Government, specially designated city in the State plan or special economic zone shall report such approval to the MOFTEC for record (the MOFTEC and the people's governments of the provinces, autonomous regions, municipalities directly under the Central Government, specially designated cities in the State plan and special economic zones shall hereinafter be referred to collectively as "examination and approval authorities").
Article 8 Where any application is made to establish a WFOE whose products involve any export license, export quota or import license or are subject to the import restriction of the State, the prior approval of the competent foreign trade and economic cooperation department shall be obtained in accordance with the limits of administrative authority.
Article 9 Prior to applying to establish a WFOE, the foreign investor shall submit a report in relation to the following matters to the local people's government at or above the county level where the enterprise to be established is located. The contents of the report shall include: the purpose of establishing the WFOE; the scope and scale of its business; the products to be produced; the technology and equipment to be used; the area and specifications of land to be used; the specifications and quantities of water, electricity, coal, coal gas and other energy sources required; public facility requirements, etc.
The local people's government at or above the county level shall issue a written reply to the foreign investor within 30 days of receiving such a report submitted by the foreign investor.
Article 10 Any foreign investor who wishes to establish a WFOE shall apply to the examination and approval authority via the people's government at or above the county level where the enterprise to be established is located, and submit the following documents:
1. an application to establish a WFOE;
2. a feasibility study report;
3. the Articles of association of the WFOE;
4. the name of the legal representative (or the names of the members of the board of directors) of the WFOE;
5. the legal certificate and proof of creditworthiness of the foreign investor;
6. the written reply from the people's government at or above the county level where the WFOE to be established is located;
7. a list of required imported goods; and
8. any other documents to be submitted.
The documents described in Items 1 and 3 of the preceding paragraph must be made in Chinese. The documents described in Items 2, 4 and 5 may be made in a foreign language, but shall be accompanied by Chinese translations.
Where two or more foreign investors jointly apply to establish a WFOE, a duplicate copy of the agreement entered into between the investors shall be submitted to the examination and approval authority for record.
Article 11 The examination and approval authority shall make a decision on whether or not to approve an application to establish a WFOE within 90 days of the date on which it receives all the documents pertaining to the application. Where the examination and approval authority finds that the aforementioned documents are incomplete or inappropriate, it may require the applicant to submit the supplemented or corrected documents within a specified period of time.
Article 12 After an application to establish a WFOE is approved by the examination and approval authority, the foreign investor shall, within 30 days from the date on which it receives the approval document, apply to the administrative authority for industry and commerce for registration and obtain a business license. The date of issue of the business license of a WFOE shall be deemed to be the date on which the enterprise is established.
The approval document for a WFOE shall automatically become void and null if the foreign investor fails to apply to the administrative authority for industry and commerce for registration within 30 days of the date on which the approval document is issued.
WFOEs shall register with the appropriate tax authorities within 30 days of their establishment.
Article 13 A foreign investor may appoint a Chinese foreign investment enterprise service organization or other economic organization to handle the matters described in Article 8, Paragraph 1 of Article 9, and Article 10 of these Rules on the foreign investor's behalf, provided that a contract relating to the appointment shall be concluded.
Article 14 An application to establish a WFOE shall include the following information:
1.name, domicile and place of registration of the foreign investor and name, nationality and position of its legal representative;
2.name and domicile of the WFOE to be established;
3.scope of business, product types and scale of production;
4.total amount of investment, registered capital, sources of funds, forms and period of capital contribution of the WFOE to be established;
5.organizational form and structure and legal representative of the WFOE to be established;
6.the major equipment to be used and the condition thereof, and the level and sources of the production technology and processes to be employed;
7.the target customers and sales areas for the products and the marketing methods and channels;
8.the arrangements for payments and receipts of foreign exchange funds;
9.the relevant structural establishment and staffing, and the hiring, training, remuneration, welfare, insurance, labor protection, and other arrangements pertaining to employees;
10.the maximum possible degree of environmental pollution that might be caused, and measures to address this problem;
11.the land to be selected and its area;
12.the funds, energy and raw material required for capital construction, production and operations, and the solution thereof;
13.the schedule for completion of the project; and
14.the operating period of the WFOE to be established.
Article 15 The Articles of association of a WFOE shall cover the following matters:
1.name and domicile;
2.purpose and scope of business;
3.total amount of investment, registered capital and contribution time limit;
4.organizational form;
5.internal organizational structure and the functions and powers and rules of procedure thereof, and the responsibilities and powers of personnel such as the legal representative, the general manager, the chief engineer and the chief accountant;
6.the principles and systems for financing, accounting and auditing;
7.labor management;
8.operating period, termination and liquidation; and
9.the procedure for amending the Articles of association.
Article 16 The Articles of association of a WFOE and any amendments thereto shall become effective upon approval by the examination and approval authority.
Article 17 Any material change in capital due to the division, merger or any other reason shall be subject to the approval of the examination and approval authority, and a Chinese registered accountant shall be engaged to verify such change and issue a capital verification report.
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