Regulations of Shanghai Municipality on Examination and Approval of
Foreign-Invested Enterprises
(Adopted on August 23, 1996 at the 29th Session of the Standing
Committee of the Tenth Municipal People's Congress of Shanghai)
Chapter I General Provisions
Article 1 For the purpose of opening further to the outside
world, of promoting international economic and technical cooperation
and of facilitating the establishment of foreign-invested
enterprises in Shanghai by Chinese and foreign investors , the
present Regulations are formulated in accordance with the Law of the
People's Republic of China on Chinese-Foreign Equity Joint Ventures,
the law of the People's Republic of China on Chinese-Foreign
Contractual Cooperative Joint Ventures and the law of the People's
Republic of China on Foreign Wholly-Owned Enterprises and other
relevant laws and regulations and with due consideration being given
to the specific conditions in Shanghai Municipality.
Article 2 The foreign-invested enterprises mentioned in the
present Regulations refer to Chinese-foreign equity joint ventures,
Chinese-foreign contractual cooperative joint ventures and foreign
wholly-owned
enterprises. The present Regulations are applicable to the
establishment of foreign-invested enterprises in Shanghai and to the
revision of contracts and articles of association after
establishment.
Article 3 Foreign investors are encouraged to establish
foreign-invested enterprises of the following types in Shanghai:
(1) Those that bring in advanced technology and equipment or
scientific management;
(2) Those that are capable of upgrading present products and tapping
international markets;
(3) Those that help promote the modernization of Shanghai.
Application for the establishment of foreign-invested enterprises
shall not be approved under any of the following circumstances:
(a) If state security is threatened and the well-being of the public
jeopardized;
(b) If the environment or human physical health is threatened;
(c) If existing laws and regulations are contravened.
Article 4 The Shanghai Municipal People's Government (
hereinafter abbreviated as "the Municipal People's Government")
shall decide and make public targeted fields for guiding foreign
investment in accordance with the provisions relating to targeted
fields for guiding foreign investment and the guide catalogues of
industries for foreign investment published by the State and with
due consideration being given to the specific conditions in Shanghai
Municipality .
Chinese and foreign investors shall decide on their investment
projects in accordance with the targeted fields for guiding foreign
investment and the guide catalogues of industries for foreign
investment published by the Municipal People's Government.
Article 5 The Shanghai Municipal Foreign Investment
Commission (hereinafter abbreviated as SFIC) shall be in charge of
the examination and approval of foreign-invested enterprises in
Shanghai. The SFIC, the Pudong New Area Administration, the
Waigaoqiao Free Trade Zone Administrative Committee, the county
people's governments and other relevant authorized departments of
the Municipal People's Government (hereinafter referred to one and
all as examination and approval authorities) shall exercise their
power to examine and approve the establishment of foreign-invested
enterprises in accordance with what authority has respectively been
delegated to each of them by the State or the Municipality. Any
project that according to law and regulations is subject to
examination and approval by relevant authorized departments of the
State Council must as a first step undergo a preliminary examination
by the SFIC in conjunction with the Shanghai Municipal Planning
Commission or the Shanghai Municipal Economic Commission before
submission to relevant higher authorities.
Chapter II The Establishment of Foreign-Invested Enterprises
Section 1 Chinese-Foreign Equity Joint Ventures
Article 6 After the Chinese and foreign investors concerned
have confirmed their intention to form a Chinese-foreign equity
joint venture, they shall make a preliminary feasibility study of
the proposed project, with the Chinese Party seeing to the
preparation of a project proposal and the requisite appendices and
to the submission of them to a relevant examination and approval
authorities for approval. Copies of the project proposal and the
requisite appendices shall be made and submitted to other relevant
departments at the same time. The relevant departments shall, within
ten days after the date of receipt of the project proposal and the
requisite appendices ,give an official opinion on the basis of their
preliminary examination and submit it to the examination and
approval authorities concerned.
Article 7 The examination and approval authorities concerned
shall, within twenty days after the date of receipt of the project
proposal and the requisite appendices, make a decision on whether or
not to
grant approval and send copies of its decision to the relevant
departments. Examination and approval authorities other than the
SFIC shall send a copy of their decision to the SFIC at the same
time that it sends copies to the relevant departments.
Article 8 An approved project proposal , as the basis for
making the feasibility report, shall have a period of validity of
one year. If for some special reasons the period of validity needs
to be extended , the Chinese party shall submit an application for
extension to the original examination and approval authorities not
less than thirty days before the expiry. When approval is granted,
the period of validity may be extended, but the extension must not
exceed six months.
Article 9 After obtaining approval for the project proposal,
the Chinese and foreign investors concerned shall go through the
procedures of making an application for preliminary examination and
approval of the name of the equity joint venture with the
administrative department in charge of industry and commerce.
Article 10 After obtaining approval for the project proposal,
the Chinese and foreign investors concerned shall arrange for the
settlement, one by one, of such matters as fund raising, location,
technologies to use, equipment, raw materials supply, foreign
exchange balance, auxiliaries to urban infrastructure, etc.; shall
make an analysis and estimate of marketing, site selection and
planning, environmental protection, labor safety, economic returns,
etc. ; and on such a basis shall work together for a feasibility
report, a joint-venture contract and the articles of association and
submit these for approval by the relevant examination and approval
authority. If the Chinese and foreign investors concerned use fixed
assets, current assets, intangible assets and other types of assets
in the form of their monetary worth as investment, an assessment
shall be made of those assets according to relevant regulations of
the State. If Certain contents in the feasibility report, the
contract and the articles of association require prior examination
by some relevant authorities according to the provisions of laws and
regulations, approval by the said relevant authorities must first be
obtained.
Article 11 The examination and approval authority concerned
shall, within thirty days after the date of receipt of the
feasibility report, the contract and the articles of association,
make a decision on whether or not to grant approval.
Article 12 After obtaining approval for the feasibility
report, the contract and the articles of association, the Chinese
party shall bring the requisite documents to the examination and
approval authorities concerned for the issuance of a certificate of
approval. The examination and approval authorities concerned shall
issue the certificate of approval within three days after the date
of receipt of the requisite documents.
Section 2 Chinese-Foreign Contractual Cooperative Joint Ventures
Article 13 The application and examination/approval for the
establishment of a Chinese-foreign contractual cooperative joint
venture by Chinese and foreign investors shall be carried out by
reference to the stipulations of Articles 6 to 12 of the present
Regulations.
Section 3 Foreign Wholly-Owned Enterprises
Article 14 The application and Examination/approval for the
establishment of foreign wholly-owned enterprises by foreign
investors shall be carried out by reference to the stipulations of
Article 6 to 12 of the present Regulations. For the establishment of
foreign wholly-owned enterprises, foreign investors shall, according
to the relevant regulations of the State, authorize a proper
qualified consulting agency to handle matters of application,
submission for examination and approval, etc..
Chapter III Revision of Contracts and Articles of Association of
Foreign-Invested Enterprises
Section 1 Chinese-Foreign Equity Joint Ventures
Article 15 In case one party to an equity joint venture
intends to assign all or part of its investment to the other party
or parties, a consensus must be reached and a resolution adopted at
the meeting of the board of directors of the enterprise concerned
before an application is submitted to the original examination and
approval authorities for approval. If one party to an equity joint
venture intends to assign all or part of its investment to a third
party unconnected with the equity joint venture concerned, a consent
in writing by the other party or parties concerned must be obtained
and a consensus reached and resolution adopted at the meeting of the
board of directors of the enterprise concerned before an application
is submitted to the original examination and approval authorities
for approval. After the application for assignment of investment is
approved , the parties to the joint venture concerned shall make
timely revisions in the contract and the articles of association of
their enterprise. The revised contract and articles of association
must then be submitted to the original examination and approval
authorities for approval.
Article 16 In case an equity joint venture intends to
increase its registered capital, a consensus must be reached and a
resolution adopted at the meeting of the board of directors of the
enterprise concerned before an application is submitted to the
original examination and approval authorities for approval. If
approval for the proposed increase in registered capital is beyond
the limits of authority of the original examination and approval
authorities, that authorities shall refer the case to a higher-level
examination and approval authorities for approval. An equity joint
venture under normal circumstances may not out back its registered
capital during the contract period of operations. If there should
indeed be justifiable reasons for a out-back , an application must
be submitted to the original examination and approval authorities
for approval in accordance with the relevant regulations of the
State.
Article 17 If an equity joint venture intends to alter its
scope of business, an application may be submitted to the original
examination and approval authorities for approval on condition that
the parties to the joint venture have paid in according to schedule
the full sum of their respective committed share of the registered
capital. If approval for the proposed alteration in scope of
business is beyond the limits of authority of the original
examination and approval authorities, that authority shall refer the
case to a higher-level examination and approval authorities for
approval.
Article 18 If the parties to an equity joint venture share a
common wish for an extension of the duration of their joint venture,
an application must be submitted to the original examination and
approval authorities for approval not less than six months before
the expiry of the term. If the parties to an equity joint venture
share a common wish for the termination of their contract before its
date of expiry, a consensus must be reached and a resolution adopted
at the meeting of the board of directors of the enterprise concerned
before an application is submitted to the original examination and
approval authorities for approval. If in conformity with the
relevant regulations of the State or with what has already been
agreed upon in the existing contract a party or some parties to an
equity joint venture call for the termination of the contract before
its date of expiry, an application must be submitted to the original
examination and approval authorities for approval. After the
dissolution of an equity joint venture is approved , liquidation
must be carried out according to the relevant laws and regulations.
Article 19 If a change in partnership in an equity joint
venture entails another change such as that in registered capital or
scope of business or duration or in more than one such item alone,
an application must
first be submitted for a change in partnership. When this has been
approved by the original examination and approval authorities, an
application can then be submitted for other changes.
Article 20 Revisions of the contract and the articles of
association of an equity joint venture other than those stipulated
in Articles 15 to 19 of the present Regulations shall be handled
according to the relevant laws and regulations.
Article 21 The examination and approval authorities concerned
shall make a decision on whether or not to approve an application
for making a revision or revisions as specified in Articles 15 to 19
within thirty days after the date of receipt of the application and
other requisite appendices.
Section 2 Chinese-Foreign Contractual Cooperative Joint Ventures
Article 22 The revision of contracts and articles of
association of Chinese-foreign contractual cooperative joint
ventures shall be handled by reference to the stipulations of
Articles 15 to 21 of the present Regulations.
Section 3 Foreign Wholly-Owned Enterprises
Article 23 The revision of articles of association of foreign
wholly-owned enterprises shall be handled by reference to the
stipulations of Articles 15 to 21 of the present Regulations.
Chapter IV Legal Liability
Article 24 If Chinese and foreign investors withhold the
truth or resort to deception when they apply for the establishment
of a foreign-invested enterprise, for making revisions in the
contract and the articles of
association, or for termination of a contract before its date of
expiry, the examination and approval authorities concerned may
reject their application, decide against approval of the application
or revoke the certificate of approval. Where consequences are
entailed, the relevant department(s) in charge shall deal with them
according to law.
Article 25 If in the course of executing its duties of
examination and approval an examination and approval authorities
and/or a relevant department in charge violate laws, regulations and
the stipulations f the present Regulations, they shall hold legal
liability for their violation(s) by law.
Article 26 If a staff member of an examination and approval
authorities or of a relevant department in charge neglects his/her
duties, engages in malpractice to serve friends, relatives or
himself/herself, or solicits and accepts bribes, administrative
disciplinary measures shall be taken against him/her. Anyone whose
misdeed constitutes a crime shall be investigated and punished under
the criminal law.
Article 27 If Chinese and foreign investors or
foreign-invested enterprises consider unacceptable the decision f an
examination and approval authorities or the specific administrative
behavior of a relevant department in charge, they may apply for a
reconsideration of their case or take administrative proceedings
according to the stipulations of the Regulations on Administrative
Reconsideration and the Law of the People's Republic of China on
Administrative Proceedings.
Chapter V Supplementary Provisions
Article 28 Chinese and foreign investors who intend to
establish in the Municipality enterprises of other investment forms
shall go through examination and approval procedures according to
the relevant stipulations of the State regulations and of the
present Regulations.
Article 29 Chinese and foreign investors shall register with
the administrative department in charge of industry and commerce and
obtain a business license within thirty days after the date of
receipt of the certificate of approval for the establishment of a
foreign-invested enterprise. The date of signing and issuance of the
business license is the official birth day of the enterprise. A
foreign-invested enterprise shall go to departments in charge of
taxation, customs, foreign exchange control, etc. to complete
required procedures within thirty days after the date of receipt of
the business license.
Article 30 The establishment of businesses in the
Municipality by companies, enterprises and other economic entities
or individuals in Hong Kong, Macao and Taiwan or by Chinese citizens
who are permanent residents of foreign countries shall be dealt with
by reference to the stipulations of the present Regulations.
Article 31 The SFIC shall formulate rules for implementation
the basis of the present Regulations for submission to the Municipal
People's Government for approval. When approval is gained, the said
rules for implementation shall be enforced. The SFIC is responsible
for interpreting the present Regulations in their practical
applications.
Article 32 The present Regulations shall become effective on
October 1, 1996 whereupon the Provisions of Shanghai Municipality on
Application and Approval of Chinese-Foreign Equity Joint Ventures,
Chinese-Foreign Contractual Cooperative Joint Ventures and Foreign
Wholly-Owned Enterprises adopted on June 20, 1986 at the 22nd
Session of the Standing Committee of the Eighth Municipal People's
Congress of Shanghai is annulled.
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