Since 2014, China has largely removed restrictions on the registered capital of corporations in China through the revised PRC Company Law, the Reform Plan1 and the State Council Decision 6482. However, the relevant rules applicable specifically to foreign invested enterprises (FIEs) remained unchanged, causing confusion among the FIEs. On 28 October 2015, the Ministry of Commerce of China issued the Decision on Amending Certain Rules and Normative Documents (关于修改部分规章和规范性文件的决定) (MOFCOM Decision), which took effect on the same day. Among some of the changes, the MOFCOM Decision removed inconsistency between the relevant rules applicable to FIEs and those that apply to corporations in China in general.

More specifically, pursuant to the MOFCOM Decision:

  • the minimum registered capital requirements on the following FIEs were removed:
    • venture capital enterprises;
    • management companies of venture capital enterprises;
    • holding companies (please note that a foreign invested holding company with a registered capital of less than USD 30 million may be subject to certain restrictions on its business scope and its ability to borrow foreign debts. In addition, to be qualified as a national regional headquarters, a foreign invested holding company still must have at least USD 100 million paid-in capital, or USD 50 million paid-in capital if its invested companies in China meet certain assets and profit thresholds);
    • joint stock companies;
    • auction companies;
    • financial leasing companies;
    • logistics companies; and
    • international freight forwarding companies.
  • the statutory time limits on capital contribution to the following FIEs were removed:
    • venture capital enterprises;
    • holding companies (please note that a foreign invested holding company would be subject to certain restrictions on its business scope and its ability to set up branches in China if its paid-in capital is less than USD 30 million or if it has not invested at least USD 30 million in capital investments); and
    • joint stock companies (please note that before a foreign invested joint stock company established by way of a public offering (in contrast to a company established by way of promotion) may be registered with the local Administration of Industry and Commerce, its registered capital still must be fully paid in).
  • full contribution of registered capital is no longer required for an FIE to:
    • make equity investments in China;
    • merge with another FIE;
    • be divided up; and
    • in the case of a foreign invested commercial enterprise, set up new stores in China.
  • full contribution of registered capital to an FIE is no longer required for its shareholders to invest their equity interests in the FIE into another FIE.

Footnotes

1 The State Council's Circular on Distributing Reform Plan on Registered Capital Registration System/国务院关于印发注册资本登记制度改革方案的通知, which entered into effect on 7 February 2014.
2 The State Council's Decision to Repeal and Amend Certain Administrative Regulations/国务院关于废止和修改部分行政法规的决定, which entered into effect on 1 March 2014.

Originally published on 2 December 2015

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