The Ministry of Commerce recently released the "Interim Provisions Concerning the Equity Contribution of Foreign-Invested Enterprises, which has already been put in force since October 22, 2012.

“Temporary Provisions” clearifies that if the investors establishing and changing a foreign-invested enterprise with the capital contributions made with equities shall be approved by the Ministry of Commerce in accordcance with the related provisions on the approval and management of foreign investment, or it should be approved by the commerce department of the province, autonomous region, municipality directly under the Central Government or specially designated city in the State plan where the enterprises in question are located.

The povision also points out that after the equity contributions are made, the invested enterprise, the equity enterprise and other companies holding shares directly or indirectly should comply with “Guiding the Direction of Foreign Investment Provisions”, “The Foreign Investment Industrial Guidance Catalogue” and other related provisions on foreign investment. If some of the related companies do not comply with the provisions, they should remove the related assets, business or transfer shares before they declare the equity contributions. The foreign investor should not evade the foreign investment management in the way of equity contributions.

Besides, the provision stipulates that the equity used in the investment should have clear ownership, integrated right and be able to be transferred according to law. If the equity enterprise is a foreign-invested enterprise, the establishment of the enterprise should be approved according to law and the enterprise should comply with the policies of the foreign-invested industries. In the invested enterprise, the total sum of the equity contributions of all shareholders and other contributions made by the valuation of the non-monetary property should be no more than 70 percent of the enterprise’s registered capital.

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