Article 1 The Provisions are formulated in accordance with the laws and administrative regulations governing foreign investment enterprises and other relevant laws and administrative regulations to promote and regulate foreign investors' investment in China introduce advanced technologies and management experience from abroad, improve the utilization of foreign investment, rationalize the allocation of resources, ensure employment and safeguard fair competition and national economic security.
Article 2 For the purpose of the Provisions, mergers and acquisitions of a domestic enterprise by foreign investors shall mean that foreign investors, by agreement, purchase equity interest from shareholders of domestic enterprise with no foreign investment (hereinafter referred to as the "Domestic Company") or subscribe to the increase in the registered capital of the Domestic Company with the result that such Domestic Company changes into a foreign investment enterprise (hereinafter referred to as "Equity Merger and Acquisition"); or the foreign investors establish a foreign investment enterprise and then, through such enterprise, purchase the assets of a domestic enterprise by agreement and operate such assets, or the foreign investors purchase the assets of a domestic enterprise by agreement and use such assets as investment to establish a foreign investment enterprise to operate such assets (hereinafter referred to as "Asset Merger and Acquisition").
Article 3 In mergers and acquisitions of domestic enterprises, foreign investors shall comply with the laws, administrative regulations and departmental rules and adhere to the principles of fairness, reasonableness, compensation for equal value, and honesty and good faith, and shall not create excessive concentration, eliminate or hinder competition, disturb the social economic order or harm the societal public interests.
Article 4 In mergers and acquisitions of domestic enterprises, foreign investors shall comply with the requirements regarding the investors' qualifications and industrial policy as set forth in the laws, administrative regulations and departmental rules and the relevant requirements under industry policies.
In the case of industries where no wholly foreign ownership is allowed under the Guidance Catalog of Foreign Investment Industries, any merger or acquisition of a domestic enterprise engaging in the industry shall not lead to the foreign investors' whol ly ownership of all equity interest in the acquired enterprise. In the case of industries wh ich require the Chinese party to be controlling or relatively controlling, the Chinese p arty shall remain to be in the controlling or relatively controlling position in the acquired enterprise after any merger or acquisition of the domestic enterprise engaging in such industries. In the case of industries where operation by foreign investors is prohibited, no foreign investors may merge with or acquire any enterprise engaging in such industries.
Article 5 Any merger or acquisition of a domestic enterprise by foreign investors to set up a foreign investment enterprise shall be subject to the approval of the e xamination and approval authorities in accordance with the Provisions, and procedures for change registration or establishment registration shall be handled with the registration authorities. The contribution made by the foreign investors to the registered capital of the foreign investment enterprise established after the merger or acquisition shall generally not be less than 25% of the registered capital. Except as provided otherwise by the laws or administrative regulations, if the contribution made by foreign investors is less than 25% of the registered capital, the foreign investment enterprise shall be subject to the examination, approval and registration in accordance with the currently applicable examination and registration procedures for the establishment of a foreign investment enterprise. When issuing the foreign investment enterprise approval certificates, the examination and approval authority shall add a notation "foreign investment proportion less than 25% ". When issuing the foreign investment enterprise business licenses, the registration authority shall add the notation "foreign investment proportion less than 25%".
Article 6 For the purpose of the Provisions, the examination and approval authority shall be the Ministry of Foreign Trade and Economic Cooperation of the PRC (hereinafter referred to as "MOFTEC") or the administrative authority in charge of foreign trade and economic cooperation at the provincial level (hereinafter referred to as the "Provincial Examination and Approval Authority "), and the registration authority shall be the State Administration for Industry and Commerce of the PRC (hereinafter referred to as "SAIC") or its authorized local industrial and commercial bureaus. If the foreign investment enterprise established after the merger or acquisition falls into a specific type or a specific industry subject to MOFTEC approval in accordance with the laws, administrative regulations and departmental rules. The provincial examination and approval authority shall submit the application documents to MOFTEC for examination and approval and MOFTEC shall decide to approve or disapprove the application in accordance with the law.
Article 7 In the case of Equity Merger and Acquisition by foreign investors, the foreign investment enterprise established thereafter shall succeed to the creditor's rights and liabilities of the merged or acquired Domestic Company. In the case of Asset Merger and Acquisition by foreign investors, the domestic enterprise selling assets shall assume all its original creditor's rights and liabilities.
The Foreign investors, merged or acquired domestic enterprises, creditors and other parties may reach separate agreements regarding the disposition of the creditor's rights and liabilities of the merged or acquired domestic enterprises, provided that the agreement shall not result in any damage to any third party interest or societal public interest. Any agreement on the disposition of the creditor's rights and liabilities shall be submitted to the examination and approval authority.
The domestic enterprise selling assets shall, within 10 days of the adoption of the resolution to sell its assets, gives notice to its creditors and makes a public announcement on a newspaper at the provincial level or above with national circulation. A creditor of the domestic enterprise may, within 10 days from the date of receipt of such notice or publication of such public announcement, requests the domestic enterprise selling assets to provide the corresponding security. |
