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The Procedures in Applying for Approval to Establish a Foreign-Invested Enterprise

  Any foreign-invested project has to go through the following three steps: first, the approval of the project proposal (not necessary for the wholly foreign-owned enterprise); second, the approval of the feasibility study report; and finally the approval of contracts and articles of association. 

  I. Approval of the project proposal

  The Chinese party of the foreign-invested enterprise to be established shall submit the project proposal and other relevant documents to the examining and approving authorities and, upon approval, may proceed with the next step. The following items should be included in the project proposal. 
 
  1.  The general condition of the Chinese party to the joint venture, including the name of the Chinese party, its production and business condition, legal address and the name of the legal representative.

  2.  The purpose of establishing the joint venture, with emphasis on the necessity and probability of earning foreign exchange and introducing advanced technology.

  3. The general condition of the foreign party to the joint venture, including the name of the foreign party, the country of registration, legal address, and the name, profession and nationality of the legal representative.

  4.  The scope and scale of the joint venture, with emphasis on the necessity of the project, domestic and foreign demand for the products, production condition and main sales territories.

  5. The total amount of investment, i.e. the sum of fixed funds and current funds needed for the joint venture.

  6. Forms of investment and sources of funds, including each party's investment proportion and fund composition.

  7. Production technology and main equipment, especially the advanced level, practicability and reliability of the technology and equipment as well as some key technical and economic index.

  8.Quantity of main raw materials, water, electricity and gas to be needed and their source of supply.

  9. Number, structure and source of personnel.

  10.Economic benefit, especially arrangements for foreign exchange receipts and expenditures.

  In addition to the project proposal, the Chinese party to the project should also submit to the examining and approving authorities the following documents, according to the scale and characteristics of the project in question:

  1. Letter of intent of cooperation signed by parties to the project.

  2.Credit report of the foreign party to the joint venture.

  3.Other documents required by the examining and approving authorities. 

   II.  Approval of the feasibility study report

  After the approval of the proposal report, parties to the project should prepare and submit the feasibility study report for approval by the examining and approving authorities. The feasibility study report on productive project should include the following items:

  1. The general introduction:

  1) name of the joint venture, its legal address, purpose, and business scope and scale;

  2) the general condition of parties to the joint venture, including the names, the countries of registration, the legal addresses of parties to the joint venture, and the names, positions and nationalities of the legal representatives thereof (the Chinese party to the joint venture should indicate its department in charge.);

  3)total amount of investment and registered capital of the joint venture, including each party's investment proportion, forms of investment, the time limit for contributing investment;

  4)contract term of the joint venture and the proportion of profits to be shared and losses to be borne by each party;

  2.Production arrangement and its basis. The forecast of domestic and foreign markets as well as the production and installation capacity of projects already existing or under construction.

  3. Materials supply arrangement (including energy and transportation) and its basis.

  4.  Project site selection and its basis.

  5.Selection of production technology, equipment model and technological process and its basis (including the arrangement of domestic and imported equipment).

  6.Production management and its basis (including the number, composition and source of the staff, and the business management).

  7. Environmental pollution control, labor safety guarantee and sanitation facilities and their basis.

  8. Way of construction, construction schedule and their basis.

  9. Capital collection and its basis (including the calculation basis for the conversion of original factory buildings and equipment into stocks).

  10. Arrangement of foreign exchange balance and its basis.

  11. Comprehensive analysis on technological and economic benefits.

  In addition to the feasibility study report, parties to the project should also submit to the examining and approving authorities the following documents:

  1.  the project proposal and the approval document;

  2. legal business opening certificates issued by governments of the countries of registration;

  3. the investigation and prediction of the market demand both at home and abroad;

  4.  the arrangement of the raw materials and funds to be needed proposed by the relevant authorities;

  5.   other documents required by the examining and approving authorities. 

  Upon receipt of all the above-mentioned documents, the examination and approval authority shall, within 90 days, decide whether to approve or disapprove the application. 

  III.Approval of contract and articles of association

After the approval of the project proposal and the feasibility study report, parties to the joint venture should start signing contract and formulating articles of association and submit them for approval. 

  IV. The joint venture contract shall include the following main items:

  1.  the names, the countries of registration, the legal addresses of parties to the joint venture, and the names, positions and nationalities of the legal representatives thereof;

  2. the name of the joint venture, its legal address, purpose, and the scope and scale of business;  

  3.the total amount of investment and registered capital of the joint venture, investment contributed by the parties to the joint venture, each party's investment proportion, forms of investment, the time limit for contributing investment, and stipulations concerning incomplete contributions and assignment of investment;

  4. the proportion of profits t o be shared and losses to be borne by each party;

  5. the composition of the board of directors, the distribution of the seats of directors, and the responsibilities, terms of reference and means of recruitment of the general manager, deputy general manager and other senior management personnel;

  6. the main production equipment and technology to be adopted and their source of supply;

  7.the ways and means of purchasing raw materials and selling finished products, and the proportion of products sold within the Chinese territory to those sold abroad;

  8. arrangements for receipts and expenditures in foreign currency;

  9. principles governing the handling of finance, accounting and auditing;

  10. stipulations concerning labor management, wages, welfare and labor insurance;

  11.the duration of the joint venture, its dissolution and liquidation procedures;

  12.the liabilities for the breach of contract;

  13. ways and procedures for settling disputes between the parties to the joint venture;

  14.  the language used for the contract and the conditions for putting the contract into effect. 

  The annex to the contract of a joint venture shall have equal validity with the contract itself. 

  V. Articles of association shall include the following main items:

  1. the name of the joint venture and its legal address;

  2.the purpose, business scope and duration of the joint venture;

  3.the names, the countries of registration and the legal addresses of parties to the joint venture, and the names, positions and nationalities of the legal representatives thereof;

  4. the total amount of investment and registered capital of the joint venture, investment contributed by the parties to the joint venture, each party¨s investment proportion, stipulations concerning the assignment of investment, and the proportion of profits and losses distribution between parties to the joint venture;

  5. the composition of the board of directors, terms of reference and rules of procedure, the term of office of the directors, and the responsibilities of its chairperson and vice-chairperson;

  6. the establishment of management body, rules for handling routine affairs, the responsibilities of the general manager, deputy general manager and other senior management personnel, and means of recruitment and dismissal;

  7. principles governing the handling of finance, accounting and auditing;

  8. dissolution and liquidation;

  9.procedures for the amendment of the articles of association. 

  VI.When applying for establishing a Chinese-foreign equity joint venture, the applicant shall submit the following documents to the examining and approving authorities:

  1.a written application for the establishment of a joint venture;

  2.the feasibility study report jointly prepared by the parties to the joint venture;

  3. joint venture contract and articles of association signed by representatives authorized by the parties to the venture;

  4.list of candidates for chairperson, vice-chairperson of board of directors and directors nominated by the parties to the venture;

  5. written opinions concerning the establishment of the said venture from the department in charge and the people¨s government of the province, autonomous region or municipality directly under the Central Government where the joint venture is located. 

  The aforesaid documents shall be written in Chinese. Documents mentioned in Items 2, 3 and 4 may be written simultaneously in a foreign language agreed upon by the parties to the joint venture. Both versions have the same legal binding force. 

  Upon receipt of all the above-mentioned documents, the examination and approval authority shall, within three months, decide whether to approve or disapprove the application. 

  VII. When applying for establishing a Chinese-foreign contractual joint venture, the applicant shall submit the following documents to the examining and approving authorities:

  1.project proposal for establishing a contractual joint venture, together with the documents of approval issued by the administrative departments;

  2. feasibility report jointly prepared by all parties, together with the documents of approval issued by the administrative departments;

  3. contractual joint venture agreement, contract and articles of association signed by the legal representatives, or their proxies, of all parties to the venture;

  4.business licenses of all parties to the venture, their registration certificates, credit certificates and valid certificates of the legal representatives; in case the foreign party is a natural person, valid certificates of identification, curriculum vitae and credit conditions shall be provided;

  5.  list of candidates for chairperson, vice-chairperson of board of directors and directors agreed upon by the parties to the venture, or the director, deputy director and members of the joint management committee;

  6. other documents required by the examining and approving authorities. 

  Except for documents listed in Item 4 that need to be submitted by the foreign parties, the aforesaid documents must be written in the Chinese language. Documents listed in Items 2, 3 and 5 may be simultaneously written in a foreign language agreed upon by all parties to the venture. 

  The examining and approving authorities shall decide whether to approve the application or not within 45 days from receipt of all required documents. 

  VIII.In case that a foreign investor wishes to establish a foreign-capital enterprise within the territory of China, an application shall be submitted to the examining and approving authorities through the local people¨s governments at or above the county level at the place where the enterprise is to be established, together with the following documents:

  1.a written application for the establishment of a foreign-capital enterprise;

  2.a feasibility study report;

  3. the articles of association of the foreign-capital enterprise;

  4. the name-list of the legal representatives (or the candidates for the board of directors) of the foreign-capital enterprise;

  5.the legal certifying documents and the credit position certifying documents of the foreign investor;

  6.the written reply given by the people¨s government at or above the county level at the place where the enterprise is to be established;

  7. an inventory of goods and materials needed to be imported;

  8. other documents that are required to be submitted. 

  The document mentioned in Items 1 and 3 in the preceding paragraph must be written in the Chinese language; while the documents mentioned in Items 2, 4, 5 in the preceding paragraph may be written in a foreign language, but a corresponding Chinese translation shall be attached. 

  In the event that two or more foreign investors jointly file an application for the establishment of a foreign-capital enterprise, they shall submit a duplicate of the contract concluded and signed between them to the examining and approving authorities for record. 

  The examining and approving authorities shall decide, within 90 days after receiving all the required documents with respect to the application for the establishment of a foreign-capital enterprise, whether to approve or disapprove the application. 

  The examination and approval of the project is officially finished after the examining and approving authorities have approved the contract and articles of association of the foreign-invested project and issued the certificate of approval. Parties to the foreign-invested project shall, within 30 days after receiving the certificate of approval, file an application with the relevant administrative department for registration, and obtain a business license.

 
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