CHINA LAW DIGEST NEWSLETTER
Vol. 2, No.5 - April 9, 2003
Ministry of Commerce Open for Business |
TOPICS THIS ISSUE:
Foreign Investment:- Regulations of People's Republic of China Cooperative Schools by Chinese and Foreign Parties
- Measures on Administration of Foreign Invested Book, Newspaper and Magazines Distribution Enterprises
Foreign Exchange:- Notice on Several Questions Concerning Sale and Payment of Non -Trade Account Which is Not Regulated in the Current Laws
- Notice on Administration on Foreign Exchange of Fund Management Company With Foreign Invested Equity
- Notice on Perfection of Foreign Exchange Administration on Foreign Direct Investment
LEHMAN, LEE & XU OPENS SHENZHEN OFFICE Lehman, Lee & Xu is pleased to announce the opening of its new office in Shenzhen, Guangdong Province. Please direct all inquiries to attorney Zdravko Jelic at | |
Regulations of People's Republic of China Cooperative Schools by Chinese and Foreign Parties
Issuing Date: March 1, 2003
Issuing Authority: State Council
Effective Date: September 1, 2003
Summary
The Regulations apply to the joint running of an educational institution by Chinese and foreign education institutions (hereinafter referred as "SFJRS Operator") within the PRC territory that mainly recruits Chinese citizen students. SFJRS Operators belong to not-for-profit organizations. SFJRS Operators may run various education institutions at various levels except for those providing compulsory education and special education such as military, police and politics. Foreign religious organization, institution, academy or personnel must not carry out SFJRS within the territory of China. SFJRS must not provide religious education or carry out other religious activities. Foreign education institution, organization or individuals must not independently establish schools or other educational institutions in China that mainly recruits Chinese citizens.
Establishment of SFJRS shall take two steps: preparatory establishment and formal establishment. SFJRS approved of preparatory establishment shall submit application for formal establishment within 3 years after the date of approval; if such application is made late, SFJRS Operators must submit an entirely new application. No recruitment of students can be done during the preparatory establishment.
SFJRS Operators may contribute to SFJRS fund in the form of cash, in-kind assets, land use right, intellectual property rights and other property/asset. Contributions made by SFJRS Operators in the form of intellectual property right must not exceed one third of the total amount of SFJRS fund.
SFJRS Operators may run the cooperative school through board of directors or joint management committees depending on if a SFJRS Operator has legal person status. The Regulations require that the president or other senior executives of SFJRS shall have Chinese national status and reside in Mainland China. Contracted presidents or senior executive shall be approved by examination and approval authorities. Recruitment prospectus and advertisement must be filed with examination and approval authorities. SFJRS shall also prepare financial statements by the end of each accounting year and entrust independent auditor to review and audit the statements. Results of such auditing shall be publicized and reported to examination and approval authorities as well.
It was made clear in Article 39 that the tuition and charges collected by SFJRS shall be used mainly in education and teaching activities and for the purpose of improving operation conditions of the school. The Regulations, however, fail to clarify if the profit made by a SFJRS may be remitted out of China.
Measures on Administration of Foreign Invested Books, Newspaper and Magazines Distribution Enterprises
Issuing Date: March 17, 2003
Issuing Authority: Press Publishing Administration, Ministry of Foreign Trade and Economic Cooperation
Effective Date: May 1, 2003
Summary
Distribution enterprises referred to in the Measures means wholesale and retail of books, newspapers and magazines. The part of the Regulations on wholesale will take place only from December 1 of 2004. Foreign invested distribution enterprises of books, newspapers and magazines may establish equity joint ventures, cooperative joint ventures or wholly foreign-owned enterprises. Foreign investors may also purchase shares from or acquire domestic distribution enterprises of books, newspapers and magazines.
The approval authorities of such foreign invested distribution enterprises are state press publishing authorities and foreign trade and economic cooperation authorities. Foreign investors shall obtain approvals from the state press publishing authorities first and then obtain the approvals from the foreign trade and economic cooperation authorities. Along with the Publishing Business License, Approval Certificate of Foreign Invested Company and Business License from the local administration of industries and commerce shall such distribution enterprise start distributing business.
A wholesale distribution enterprise of books, newspapers and magazines shall qualify requirements as follows: 1) be capable of distributing books, newspapers and magazines and no breach of law within most recent three years; 2) the legal representative or the general manager shall obtain at least medium level distributor professional license; 3) to have no less than 50 square meters of specific business office suitable for purpose of wholesaling, and no less than 500 square meters for independently established office; 4) no less than RMB30 million register capital; and 5) the operation term does not exceed 30 years. For retail enterprises, the minimum register capital requirement is RMB5 million.
If a foreign invested distribution enterprise of books, newspapers and magazines engages in business such as on-line selling, chain operation and reader's club, approvals from the competent authorities shall also be obtained.
Notice on Several Questions Concerning Sale and Payment of Non -Trade Account Which is Not Regulated in the Current Laws
Issuing Date: March 6, 2003
Issuing Authority: State Administration of Foreign Exchange (SAFE)
Effective Date: April 1, 2003
Summary
According to a notice issued by SAFE in 2002, any foreign exchange payment that are not regulated in the notice or other foreign exchange laws and regulations shall be reviewed and approved by foreign exchange administrations. Such rule not only made it inconvenient for domestic institutions but also increase the administration burden of the foreign exchange authorities. The Notice administrates above non-trade account payment by classes, and clarifies the required materials be submitted to the competent authority for ingenuity review.
First of all, the Notice rules that any foreign exchange payment less than US$50,000 of equivalent shall be reviewed by designated banks; any foreign exchange payment exceeding US$50,000 but less than US$500,000 or equivalent shall be reviewed by branches of SAFE; and any foreign exchange payment exceeding US$500,000 or equivalent shall be reviewed by SAFE.
It is also made clear by the Notice that for those export enterprises that didn't breach foreign exchange administration within most recent two years, those important import units, those making foreign exchange payment frequently and those institutions of the Communist Party, government or army, are not subject to such payment limits upon approvals.
The Notice requires all designated banks to record every such non-trade payment and report to SAFE regularly.
Notice on Administration on Foreign Exchange of Fund Management Company With Foreign Invested Equity
Issuing Date: March 29, 2003
Issuing Authority: State Administration of Foreign Exchange (SAFE)
Effective Date: May 1, 2003
Summary
Fund management companies with foreign invested equity (foreign invested FMC) include fund management companies established by overseas and domestic shareholders or converted fund management companies from transferring equities to overseas investors or subscribing by overseas investors. The Notice rules that no foreign exchange account shall be opened before a foreign invested FMC obtain approval for establishment from the China Securities Regulatory Commission.
The foreign exchange account of a foreign invested FMC may receive capital contribution from overseas shareholders and make payment under current account or other payment as approved by SAFE. A foreign invested FMC may settle its foreign exchange account upon presentation of required documents to the local SAFE. If a foreign invested FMC need to distribute profit to its foreign shareholders, it shall provide the following documents to local SAFE for approval: 1) written payment application; 2) tax pay off certificate and application documents; 3) audited annual profit distribution report; 4) Board Resolution on profit distributing; 5) the company's current foreign exchange account bank statement and other documents that may be required by local SAFE. Please note that if a foreign invested FMC did not distribute profit to its foreign shareholders of one year, it shall file with the local SAFE, which is a required document for making payment to its foreign investors for future profit distribution.
Notice on Perfection of Foreign Exchange Administration on Foreign Direct Investment
Issuing Date: March 3, 2003
Issuing Authority: State Administration of Foreign Exchange (SAFE)
Effective Date: April 1, 2003
Summary
As new issues emerged in the area of foreign direct investment, there was an increasing demand on setting up correspondence foreign exchange administration principles and working procedures. The Notice detailed regulated on foreign exchange administration in the following ten major areas:
- Opening and administration of specific foreign exchange account of foreign investors;
- Capital contribution of foreign investors by using capital in the designated bank's offshore account and administration of capital contribution of foreign investors by using the non-resident individual remittance account;
- Types and sources of capital contribution by foreign investors to foreign invested enterprises;
- Administration on foreign investors acquiring equity of domestic enterprises;
- Administration on onshore investment of non-investment foreign invested enterprises;
- Administration on foreign invested enterprises with foreign investment less than 25%;
- Perfection of verification of contributed capital and foreign exchange registration;
- Administration of reduction of contributed capital;
- Requirements on reviewing of capital verification report and audit report; and Simplifying the process of capital payment settlement and foreign parties retrieve investment in advance.
Under the Notice, foreign investors who do not have foreign invested enterprises but engage in direct investment or relative activities in China, may apply to the local SAFE to open specific foreign exchange account in the name of the foreign investors. The foreign investors can open such specific foreign exchange account with one bank only unless approved by the authorities otherwise. The foreign exchange account is categorized into four types according to their purposes: investment account, acquisition account, expense account and security account.
The Notice allows foreign investors to make contribute through their capital in the designated banks offshore accounts. And such bank transfer does not require approval from the SAFE.
The Notice enlarges the scope of capital contribution from the original foreign exchange, in-kind assets, intangible assets or renminbi profits to any liquidation assets, share transfer assets, assets after reduction of capital contribution, non distributed profits, profit payable, "three funds" or debt-converted-equity, etc. The Notice also requires that foreign exchange registration when foreign investors or investment foreign invested enterprises acquire equity from domestic enterprises and make payment to purchase the equity.
China Lawyers, Notaries, Patent, Copyright and Trademark Agents
http://www.lehmanlaw.com
Beijing Office | Shanghai Office |
6th floor, Dongwai Diplomatic Office Building
23 Dongzhimenwai Dajie
Beijing 100600 China
Tel.: (86)(10) 8532-1919
Fax: (86)(10) 8532-1999
Email: mail@lehmanlaw.com | Suite 1310, Kerry Centre
No. 1515, West Nanjing Road
Shanghai 200040 China
Tel: (86)(21) 6288-2698
Fax:(86)(21) 6288-2699
Email: shanghai@lehmanlaw.com |
The China Law Digest News is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
Unsubscribe |
Internet Explorer users, please click here: chinalawdigest@lehmanlaw.com?subject=Remove%20China%20Law%20Digest%20%21*ADDITIONAL_FIELD1*%21 |
Netscape users, please send email to: chinalawdigest@lehmanlaw.com
with
Remove China Law Digest !*ADDITIONAL_FIELD1*!
in the Subject Line. |
