Q&A for Foreign Business Practice in China

Q:We are a company registered and established in Germany， but the nature of our company is a subsidiary. Recently， we want to invest a new company in Beijing. Can we， a subsidiary of a foreign company， are allowed to invest in China? If can， what preparations shall we make for such investment?A:There are no explicit provisions on the nature of a company which plans to invest in China， but there are provisions on the industry to be invested. For details， please refer to the Catalogue for the Guidance of Foreign Investment Industries (amended in 2007). According to the type of the company that you want to establish， you shall observe the Detailed Rules for the Implementation of the Law of the People’s Republic of China on Foreign-invested Enterprises， the Detailed Rules for Implementation of the Law of the People’s Republic of China on Sino-foreign Equity Joint Venture and the Detailed Rules for Implementation of the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Venture.Q:Are foreign investment permitted in gold smelting projects?A:In accordance with the industrial category (X) of Restriction for Foreign Investment in the Cata- logue of Industries for Guiding Foreign Investment (Revised 2007)， non-ferrous metal metallurgy and rolling processing industry: 1. Rare metal smelting including tungsten， molybdenum， tin (excluding tin compounds) and stibium(including antimony oxide and antimony sulphide)， and gold smelting belongs to the restricted category， the items of which differs from each other due to different content. You are advised to directly consult the local competent commercial authorities for specific procedures.Q:Is the alcohol exclusive wholesale certificate required for a brewery? If yes， how to get the certificate and what procedures are required?A:For the purpose of regulating the alcohol circulation order， promoting the orderly development of alcohol market and safeguarding state interests and the legitimate rights and interests of alcohol producers， operators and consumers， the MOFCOM has formulated the Measures for the Administration of Alcohol Circulation (No. 25 Decree of the MOFCOM， 2005) according to the relevant laws and regulations of China.Reference information:Article 6 of the Measures for the Administration of Alcohol Circulation (No. 25 Decree of the MOFCOM， 2005): Any entity or individual engaged in wholesale and retail of alcohol (hereinafter referred to the alcohol operators) shall go through procedures for filing and registration with the competent commercial department at the same level of the administration for industry and commerce in the place where the operator is domiciled according to the jurisdiction administration principle within 60 days after receiving the business license.Q:Clients from Nigeria come to China for commercial negotiation， which needs the official invitation letters of Chinese party. Which department shall I make application in? What materials shall be prepared? Is it charged or not?A:I suggest that you contact the local competent commercial authority for handling related issues. Where one foreigner needs to handle valid commercial visa (F) once or twice due to economic and trade activities in China， the visa notice may be handled via local competent commercial authority; or invitation letter or invita- tions of fairs of all kinds issued by economic and trade committees or bureaus (general companies) in the districts and counties where invitation units of Chinese party are located may be posted or faxed to foreign party (except otherwise special provisions). Foreigners may hold visa notices or invitation letters or invitations to go through procedures of visa in the embassies and consulates of China abroad and then come to China.Q:A is a foreign-invested enterprise， which rein- vests in China and sets up a 100% owned B Co.， Ltd. Is B a foreign-invested enterprise? In case A establishes B jointly with a domestic company in which A holds 25% equities， is B still foreign-invested enterprise?A:According to the Provisional Rules on Investment in China by Foreign-invested enterprises ([2000] No.6 of the Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce)， in case the share of foreign investment in the reinvested registered capital of foreign-invested enterprise in the central and western regions of China is more than 25%， it may be treated as foreign-invested enterprises. With the Approval Certificate of Foreigninvested Enterprises and the Business License (Noted)， enterprises with foreign reinvestment may enjoy the treatment specified by state laws and regulations.According to the Provisions on Establishment of Companies of Investment Nature by Foreign Investors， the establishment of an enterprise with investment from an investment company shall be separately submitted for approval in accordance with the approval authority and approval procedures for the examination and approval of foreign-invested enterprises.Q:How to accurately and easily confirm the legitimacy of an enterprise? Which certificates are required?A:According to the relevant provisions of the Company Law of the People’s Republic of China (amended in 2005)， the public may apply for inquiry of the registration of any company with the company registration authority and the latter shall provide inquiry services. According to the provisions of the above-mentioned law， please make inquiry with the administration for industry and commercial in the place where the company is registered.Q:Our company has obtained the approval documents of the MOFCOM and now the sharehold- ers have decided to make liquidation ahead of schedule. Do we need to obtain the approval of the MOFCOM for such liquidation， or just go through procedures with local commercial department?A:According to the Imple-mentation Rules for the Law of People’s Republic of China on Sino-Foreign Equity Joint Venture(amended in 2001) and the Measures for the Liquidation of Foreigninvested Enterprises， you have to apply for approval with the original approval authority.Q:Whether the approval of the MOFCOM is required for the entire change of a Sino-foreign joint venture of limited liabilities to a company limited by shares? If required， whether the application of such approval shall take the way of promotion?A:The applicant of the foreign-invested company limit-ed by shares to be established shall submit such docu- ments as the application form， research report of feasibility and assets appraisal statement to the competent authority of the province， autonomous region， municipality directly under the Central Government or separately planning city where it is located. The aforesaid documents will be submitted to the foreign trade and economic relationship bureau of the province， autonomous region， municipality directly under the Central Government or separately planning city by the competent authority after examination and approval. The initiator may officially sign the agreements on establishment of the company and the articles of association after approval of aforesaid documents by the competent commercial department of the province， autonomous region， municipality directly under Central Government or separately planning city.After such examination and approval， the abovementioned documents shall also be submitted to the MOFCOM for approval. For details， please refer to the Interim Provisions on Some Issues concerning Establishment of Foreign-invested Company Limited by Shares (Decree of the Ministry of Foreign Trade and Economic Cooperation[1995] No. 1).Q:How to handle the procedures for transfer of foreigninvested enterprises to domestic-invested enterprises?A:1. For the alteration of equities of the investors of foreign-invested enterprises， the examination and ap- proval authorities should， in accordance with Article 17 of the Provisions on the Alteration of Investors’ Equities in Foreignfunded Enterprises， decide to approve or not within 30 days upon the receipt of all the required documents.2. For alteration of the items of foreign-funded enterprises， besides submission of the application letter of alteration， copies of approval certificate and copies of the business license， the documents required for approval should be submitted according to the Implementing Regulations for the Law of the People’s Republic of China on Sino-foreign Equity Joint Ventures， the Detailed Rules for the Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures， the Detailed Rules for the Law of the People’s Republic of China on Foreign-Capital Enterprises and the relevant special laws and regulations， including board resolution， contractual revised agreement and the revised agreement of article of association.Q:Shall the creditors be informed in the written form after the preliminary reply of the merger of for- eign companies from the Ministry of Commerce that has been published in the nationwide media? If so， how to determine the scope of creditors? Whether shall all those with debt relationship be informed?A:In accordance with Clauses 2 and 3 of Article 29 of the Provision on the Merger and Division of Enterprises with Foreign Investment (Revised 2007)， the applicants of companies to be merged shall submit the examination and approval authorities the documents including certification of the company to its creditors and statements of handling the rights of creditors and debts related to the company.Information source:China’s General Principles of Civil Law provides that a debt represents a special relationship of rights and obligations established between the parties concerned， either according to the agreed terms of a contract or legal provisions. The party entitled to the right shall be the creditor， and the party assuming the obligations shall be the debtor. The right enjoyed by the creditor is called creditor’s right and the obligation the debtor is responsible for is called debt.Q:What requirements are needed to establish vehicle export companies with foreign investment?A:For foreign trade companies engaged purely in whole car export， the state has no specific regulations on the types of companies. You may refer to the Implementing Measures of the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises， the Detailed Rules on the Implementation of the Law of the People’s Republic of China on Sino-Foreign Joint Cooperative Ventures， the Measures for the Administration on Foreign Investment in Commercial Fields and the Automobile Trade Policy. For the way of registration， please contact the local administration for commerce， industry and commerce， customs and other government departments.