Capital Contributions
Q1: When did the Use of Equity Interests to Make Capital Contributions to Foreign-invested Enterprises ("Tentative Provisions") take effect?
A: Tentative Provisions took effect on 22 October 2012.
Q2 Equity Interests of what types of companies are allowed to be contributed as registered capital?
A:
1. Foreign invested enterprises ("FIEs"), including joint ventures (both co-operative and equity joint ventures) and wholly-foreign owned enterprises);
2. Companies which are wholly owned by PRC nationals or entities ("Domestic Companies"); and
3. Companies listed in the PRC
Q3: What companies can receive Equity Interests as capital contributions?
1. Newly-established FIEs;
2. existing FIE;
3. Domestic Company which is converted into an FIE as a result of the capital contribution.
4. Consideration for participation in private placements relating to PRC listed companies.
Q4: What are not provided by Tentative Provisions
A:
l It does not provide explicit legal basis for allowing unlisted overseas shares to be used as the means for funding a China acquisition or newly established FIEs.
l The processes and documentation requirements for the underlying M&A transactions implicit in using Equity Interests in this way have not been streamlined or simplified as a result of the Tentative Provisions, which generally refer to various existing rules governing such transactions.
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