Order of the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation and the State Administration of Foreign Exchange Concerning the Promulgation of the Regulations on the Administration of Foreign-invested Venture Capital Companies

Order of the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation and the State Administration of Foreign Exchange Concerning the Promulgation of the Regulations on the Administration of Foreign-invested Venture Capital Companies

Order of the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation and the State Administration of Foreign Exchange [2003] No.2

January 30, 2003

The Regulations on the Administration of Foreign-invested Venture Capital Companies, adopted at the 11th ministerial meeting of the Ministry of Foreign Trade and Economic Cooperation, are hereby promulgated for implementation as of March 1, 2003.

Shi Guangsheng, Minister of Foreign Trade and Economic Cooperation
Xu Guanhua, Minister of Science and Technology
Wang Zongfu, Director-General of the State Administration for Industry and Commerce
Jin Renqing, Director-General of the State Administration of Taxation
Guo Shuqing, Director-General of the State Administration of Foreign Exchange

Regulations on the Administration of Foreign-invested Venture Capital Companies

Chapter I General Provisions
　
Article 1 These Regulations are formulated in accordance with the PRC Sino-foreign Cooperative Joint Venture Law, the PRC Sino-foreign Equity Joint Venture Law, the PRC Wholly Foreign-owned Company Law, the Company Law and other relevant laws and regulations in order to encourage foreign companies, businesses and other economic organizations or individuals ("Foreign Investors") to make venture capital investments in China and to establish and perfect the venture capital investment mechanism of China.
　
Article 2 A "foreign-invested venture capital company" ("FVCC") as used herein means a foreign-invested company established within the territory of China by Foreign Investors, or by Foreign Investors together with companies, businesses or other economic organizations registered and established under the Chinese law ("Chinese Investors") in accordance herewith to be engaged in venture capital investment business.
　
Article 3 "Venture capital investment" as used herein means a form of investment activity pursuant to which equity investments are injected mainly into new and high-tech companies that have not been publicly listed ("Investee Companies") and venture capital management services are provided in order to obtain capital appreciation benefits.
　
Article 4 An FVCC may take the form of a non-corporate entity or the form of a company. Investors of an FVCC in the form of a non-corporate entity ("Non-corporate FVCC") shall be jointly and severally liable for such FVCC's debts. Alternatively, such investors may also agree in the contract of the FVCC that the requisite investor as specified under Article 7 hereof will be jointly and severally liable for the FVCC's debts where the assets of the FVCC are insufficient to discharge such debts while the liability of each other investor will be limited to the amount of its respective capital contribution subscribed for. The liability of each investor of an FVCC in the form of a company ("Corporate FVCC") shall be limited to the amount of its respective capital contribution subscribed for.
　
Article 5 FVCCs shall observe relevant Chinese laws and regulations, comply with the foreign investment industrial policies, and shall not harm the public interest of China. The legitimate business activities and the lawful rights and interests of FVCCs are protected by the Chinese law.

Chapter II Establishment and Registration
　
Article 6 The following requirements shall be met in order for an FVCC to be established:
1. It has more than two and less than 50 investors and shall have at least one requisite investor as stated in Article 7 hereof;
2. The minimum amount of the total capital contribution subscribed for from all investors shall be USD10 million for each Non-corporate FVCC and USD 5 million for each Corporate FVCC. Except for the requisite investors as stated in Article 7 hereof, each other investor's minimum capital contribution subscribed for shall not be less than USD1 million. Foreign Investors shall make their capital contributions in freely convertible currencies and Chinese Investors in Renminbi;
3. It has a clear organizational structure;
4. It has a clear and legitimate investment direction;
5. except for the case where an FVCC has authorized a venture capital management ("VCM") company to manage its business, each FVCC shall have at least three professional personnel who have venture capital investment experience; and
6. Other conditions that may be required by laws and administrative regulations.
　
Article 7 A requisite investor shall meet the following requirements:
1. venture capital investment is its main line of business;
2. in the three years before the application it has had cumulative capital under its management of not less than USD100 million, of which at least USD50 million have been used for venture capital investments; and in the case that the requisite investor is a Chinese Investor, the aforementioned cumulative capital shall be CNY100 million, of which at least CNY50 million has been used for venture capital investments;
3. it has at least three professional management personnel who possess at least three years of experience in the venture capital investment area;
4. an investor may also apply to become a requisite investor if its affiliated entities satisfy the requirements set forth above under this Article. As used in this paragraph, an "affiliated entity" means an entity that controls, is controlled by, or is under common control with the investor concerned and a party is controlled by another party if the controlling party owns more than 50% voting power of the controlled party;
5. neither the requisite investor nor its aforementioned affiliated entities shall have been prohibited from being engaged in venture capital investment or investment consultancy business or been subject to penalty for commitment of fraud by the judicial authority or any other relevant regulatory authority in its home country; and
6. in the case of a Non-corporate FVCC, at least 1% of the total capital contribution subscribed for by all investors to the FVCC and at least 1% of the total actual capital contribution from all investors to the FVCC shall be made by its requisite investor(s) and such requisite investor(s) shall be jointly and severally liable for the debts of such FVCC. In the case of a Corporate FVCC, at least 30% of the total capital contribution subscribed for by all investors to the FVCC and at least 30% of the total actual capital contribution from all investors to the FVCC shall be made by its requisite investor(s).
　
Article 8 The following procedures shall be followed for the establishment of an FVCC:
1. Investors shall submit to the provincial-level department in charge of foreign trade and economic cooperation of the place where the FVCC is proposed to be established an application for establishment and relevant documents.
2. The provincial-level department in charge of foreign trade and economic cooperation shall, within 15 days after receipt of all materials submitted, complete its initial review and submit the materials to the Ministry of Foreign Trade and Economic Cooperation ("Approval Authority").
3.
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