On July 30, 2017, the Ministry of Commerce (MOFCOM) issued the newly revised Interim Administrative Measures for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises (the “Revised Measures”).
The Revised Measures enlarges the scope of record-filing so that merger & acquisition by foreign fund of non-foreign-invested enterprises and listed companies in China is subject to record-filing which is simpler than the former approval procedure.
The Revised Measures has no change in the application scope, meaning it is still applicable to the incorporation and change of foreign-invested enterprises where the Special Management Measures of the State on the Access of Foreign Investment is not involved.
It is clarified that the Special Management Measures of the State on the Access of Foreign Investment refers to the Foreign Investment Access Special Management Measures for the Free Trade Pilot Area (negative list 2017 edition) from July 10, 2017, and Implementation of the Special Management Measures for Foreign Investment Access (negative list of foreign investment access) in Foreign Investment Industry Guidance Catalog (Revision 2017) from July 28, 2017.
Where a non-foreign-invested enterprise is converted into a foreign-invested enterprise due to M&A, if it falls into the scope of record-filing in accordance with the provisions of the Revised Measures, the M&A can be done by record-filing of MOFCOM instead of going through the former approval procedure.
In practice, where foreign investors merge non-foreign-invested enterprises related to important industries, national economy and the actual control of famous trademark or time-honored trademark domestic enterprises, special report to MOFCOM is still needed.
Where a foreign investor invests in a non-foreign-invested listed company, or a listed company with foreign investment receives new strategic investment by foreign investors, and it falls within the scope of the record-filing as prescribed in Revised Measures, the listed company shall go through the record-filing before or within 30 days after the registration at the securities registration and settlement institution.
Two exceptions are 1) cases where Special Management Measures of the State on the Access of Foreign Investment is involved and 2) Related M&A.
Two new documents are required for record-filing in either case of incorporation or change according to the Revised Measures:
1) The ownership structure of the final actual controller of foreign-invested enterprises.
2) The enterprise overseas investment certificate in the case that the foreign investors make payment by shares of overseas companies.
China adheres to the combination of record-filing management and approval management on the access of foreign investment. With the Revised Measures, the record-filing management will play a bigger and more significant role, which simplifies the procedure of incorporation and change of foreign invested enterprises.