Article 1 In order to further expand international economic and technological cooperation and exchanges and introduce foreign investment to boost the development of the socialist commodity economy, foreign companies, enterprises and other economic entities or individuals (referred to hereinafter as foreign shareholders) are allowed to jointly set up joint stock limited companies with foreign investment (referred to hereinafter as company) in China jointly with Chinese companies, enterprises and other economic entities or individuals (referred to hereinafter as Chinese shareholders), under the principle of mutual benefit.
Article 2 A joint stock limited company with foreign investment referred to in these provisions shall be a business legal person set up in accordance with these provisions and whose capital stock is made up of equal value shares contributed by both domestic and foreign shareholders with total value of the shares purchased and held by the foreign shareholders exceeding 25% of the company's total registered capital. The company bears its liabilities with its total assets and each shareholder bears the liabilities in proportion to the shares held.
Article 3 The companies shall be a form of enterprises with foreign investment and bound by the State's related laws and regulations on enterprises with foreign investment.
Article 4 The companies should be set up in accordance with the State's related policies and regulations on enterprises with foreign investment. The State encourages the establishment of production oriented companies which are equipped with advanced technologies.
Article 5 A company may be established by means of promotion or public offer.
Article 6 For a company established through promotion there must be at least one foreign promoter. The promoters shall also abide by other stipulations of the Company Law.
For a company established through public offer in addition to the requirements stated in the previous paragraph, there must be at least one promoter having a record of profit-making in the past three consecutive years. If the promoter is a Chinese shareholder, Concerned financial statements of the past three years prepared by registered accountants must be presented. If the promoter is a foreign shareholder, concerned financial statements prepared by registered accountants of the place where the shareholder resides must be presented.
Article 7 Registered capital of a company shall be the total capital stock recorded with registering departments. The registered capital of a company shall be at least RMB 30 million. Total value of the shares purchased and held by the foreign shareholders shall be no less than 25% of the company's total registered capital.
Article 8 In transfer of shares subscribed by the shareholders conditions set in the previous article must be satisfied. Transfer of shares purchased by the promoters can only be made at least three years after the company's registration and the transactions shall be approved by the departments which approved the company's establishment.
Article 9 After reaching an agreement on establishing a company, the promoters can entrust one of them to proceed with the following application procedures:
1. Submit a written application, a feasibility study report and assets evaluation report for the company to competent authorities of the provinces, autonomous regions, municipalities directly under the Central Government or municipalities separately listed on the State plan (referred to hereinafter as competent departments).
For the establishment of a company through public offer, prospectus shall also be submitted.
2. After being examined and approved by the competent departments, the application documents shall then be transferred to departments in charge of foreign trade and foreign economic cooperation of the provinces, autonomous regions and municipalities directly under the Central Government or municipalities separately listed on the State plan, after whose ratification the promotors can start to sign formal agreements and articles of association of the company.
3. The agreements and articles of association of the company, after being approved by the departments in charge of foreign trade and economic cooperation of the provinces, autonomous regions. municipalities directly under the Central Government or municipalities separately listed on the State plan, shall be sent to MOFTEC for ratification. MOFTEC shall decide within 45 days on approval or rejection.
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