Provisions on the Merger And Division of Foreign-invested Enterprises

Article 1 These Provisions are formulated in accordance with the Company Law of the People's Republic of China and the laws and administrative regulations concerning foreign-invested enterprises for the purpose of regulating the acts relating to the merger and division of foreign-invested enterprises and protecting the lawful rights and interests of the investors and creditors thereof.

Article 2 These Provisions shall apply to the merger or division of Chinese-foreign equity joint ventures, incorporated Chinese-foreign contractual joint ventures, foreign-capital enterprises and joint stock limited companies with foreign investment (hereinafter referred to as companies) that have been set up within the territory of the People's Republic of China in accordance with the Chinese laws.
The merger of such a company with a Chinese-invested company shall be handled with reference to the relevant laws, administrative regulations and these Provisions.

Article 3 The term "merger" as used in these Provisions refers to the consolidation through the conclusion of agreements into one company of two or more companies in accordance with the relevant provisions of the Company Law.
The merger of companies may be achieved in two forms: merger by absorption or merger by new establishment.
Merger by absorption refers to a company that absorbs other companies as its own future components, the absorbing company continues to exist while the participating ones are dissolved.
Merger by new establishment refers to the merging of two or more companies into a new company, with all the participating companies dissolved after the establishment of the new company.

Article 4 The term "division" as used for the purpose of these Provisions refers to the splitting up of a company into two or more companies in accordance with the relevant provisions of the Company Law and on the resolution of the organ of supreme power of the company.
The division of a company may take the form of division by continued existence or division by dissolution.
Division by continued existence refers to the division of a company where the original company exists after it has been split up into two or more companies, and more than one new companies have been set up thereafter.
Division by dissolution refers to the division of a company where the original company has been split up into two or more companies, and more than two new companies are established thereafter.

Article 5 The merger or division of companies shall be carried out in strict observance of the laws and administrative regulations of China and these Provisions, and on the basis of the principle of free, equal and fair competition, and the public interests of society and the legitimate rights and interests of the creditors shall not be jeopardized.
The merger or division of companies must be in conformity with the provisions in the Interim Provisions on Orienting Foreign Investments and the Catalog of Guidance to Industries for Foreign Investment, and it shall not lead to the sole ownership, controlling interest or predominance of foreign investors in the companies of the industries where sole ownership, controlling interest or predominance of foreign investors are prohibited.
Where the merger or division of a company has resulted in changes in the line of business it has operated in and its business scope, such a merger or division shall have to conform to the provisions of the relevant laws, administrative regulations and the pertinent industrial policies and the necessary procedures of examination and approval must be performed.

Article 6 The merger or division of a company shall be in compliance with the provisions promulgated by such administrative departments as the Customs, tax and foreign exchange control. The companies that have either survived the division or emerged from the merger as newly established companies shall continue to enjoy the treatment for foreign-invested enterprises the original companies enjoyed upon the verification by the examining and approving departments and such administrative departments as the Customs, tax and foreign exchange control.

Article 7 The merger or division of a company shall be examined and approved by the original examining and approving authorities and the procedures of registration relating to the establishment, changes or cancellation thereof shall be executed by the relevant registration department.
Where there are two or more examining and approving departments or registration departments over the companies to be merged, the registration department authorized by the competent department of foreign trade and economic relations and the state administration for industry and commerce (hereinafter referred to as the SAFIAC) in the locality where the companies are located shall act as the examining and approving and registration authorities.
Where the total amount of investment of the companies to be merged exceeds the authority of the original examining and approving department or that of the examining and approving department in the locality where the merged company is situated, the examination and approval shall be performed by the examining and approving department that has the corresponding authority to do so.
Where at least one of the companies to be merged is a joint stock company, the merger shall be examined and approved by the Ministry of Foreign Trade and Economic Relations (hereinafter referred to as the MOFTEC) of the People's Republic of China.

Article 8 The opinions of the examining and approving departments in the localities where the company to be dissolved or to be established is situated shall be solicited with regard to the dissolution of the original companies or the establishment of new companies in other places.

Article 9 No merger or division shall be effected before the investors of the company have come current with their investment contributions in accordance with the provisions in their contracts orArticle of association, and provided the conditions for cooperation, and the company has become operative in either production or business.

Article 10 The company that emerges from the merger between two or more liability limited companies shall be a liability limited company.
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