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28 Oct 2016

China SAIC Releases New Measures to Further Simplify Foreign Direct Investment Process

On 8 October 2016, the Ministry of Commerce (“MOFCOM”) officially issued the Interim Measures for the Record-Filing Administration of the Establishment and Modification of Foreign-Invested Enterprises (Order No.3 of 2016, “Measures”), signifying the official change of China’s foreign investment administration system from an approval regime to a record-filing regime (Please refer to our previous newsletter for more details: China Officially Cancels Overall Approval Regime for Foreign Investment). To promote the record-filing regime, the State Administration for Industry and Commerce (“SAIC”) released the Notice of the SAIC on Registering Foreign-Invested Enterprises upon the Implementation of the Record-Filing Regime (“Notice”) on 30 September 2016. The implementation of the Measures and the Notice has significantly simplified the filing and approval processes for foreign direct investment in China.

Division of Responsibility

Prior to the record-filing regime, generally every establishment and modification of FIEs first required obtaining approval from a competent MOFCOM branch, followed by further AIC registration. Once the record-filing regime is adopted, AIC registration will be required for all FIE establishments and modifications, but only certain matters will require MOFCOM approval or registration:

  • MOFCOM Approval: MOFCOM approval will only be required to establish an FIE engaged in an industry appearing in the “Negative List”. For these matters, the current approval regime still applies, i.e., FIE establishment requires approval from the competent MOFCOM branch first, followed by AIC registration.
  • MOFCOM Filing: The Measures list a series of matters relating to FIES that require record filing with the MOFCOM. These include adjusting the registered capital, total investment amount, business scope, organizational structure, legal representative, and/or investor information of FIEs engaged in industries not appearing in the “Negative List”. For these matters, AIC registration may occur before completing MOFCOM filing.
  • No MOFCOM Involvement: No MOFCOM filing or approval is required to undertake certain ordinary changes in an FIE (e.g., changing the general manager and his/her scope of authorization, changing an investor’s authorized signatory). However, many such changes will still require AIC registration (e.g., changing an FIE’s articles of association). 

In sum, except for establishing an FIE in a negative list industry, AIC registration is now the key process for the majority of establishments and modifications for FIEs. Even for matters requiring MOFCOM filing, AIC registration may be undertaken before the MOFCOM record filing occurs. These changes make it clear that the AIC is now taking the lead role in the administration of FIEs.

Consolidated Application and Certificates

The record filing reforms closely follow the recent efforts by the SAIC and other authorities to consolidate five certificates previously obtained by PRC companies into one. This reform has been in effect since 1 October 2016 and applies to newly established enterprises (including FIEs). Now, investors are only required to complete “one form” and submit “one set of documents” to “one window” to obtain a Business License, Certificate of Organization Code, Tax Registration Certificate, Social Insurance Registration Certificate, Statistics Registration Certificate and other certificates. Previously, investors were required to undertake separate procedures with separate authorities for corporate changes, tax registration, social insurance registration and statistics registration, which will no longer exist.

In summary, recent record filing reforms have greatly simplified the corporate establishment and modification process for foreign direct investment in the PRC. In the future, the AIC will to an even greater extent be the leading interface for the establishment and administration of FIEs. 

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