The Provisions on the Establishment of Investment Companies by Foreign Investors were amended and adopted at the 12th executive meeting of the Ministry of Commerce on 13 November 2004 ("the Provisions").
The term "investment company" is defined as a company established by a foreign investor in the form of either a wholly-owned enterprise or a Sino-foreign joint venture to engage in direct investments. A foreign investor who intends to establish an investment company must meet the following conditions:-
It must have a good credit status and have total assets of not less than US$400 million during the year before the application; it must have established a foreign-funded enterprise in China to which it has actually contributed US$10 million or more of registered capital, and have 3 or more project proposals for planned investment projects which have been approved; or
It must have a good credit status and have established 10 or more foreign-funded enterprises in China to which it has actually contributed US$300 million or more of registered capital;
(b) If it establishes an investment company by means of joint venture, the Chinese investor must have a good credit status and have total assets of not less than RMB 100 million during the year before the application;
(c) The registered capital of the investment company must be not less than US$30 million.
If the foreign investor that applies to establish an investment company meets the condition in (a) above, it must issue a letter of warranty to the examination and approval authority, guaranteeing the contribution by the established investment company of the registered capital when investing in China.
An investor must submit the following documents to the relevant authorities for examination and approval:-
(a) in the case of establishing the JV investment company, an application report, contracts and articles of association signed by all parties to the investment; in the case of establishing a wholly-owned investment company, application form, feasibility study report and articles of association signed by the foreign investor;
(b) certification of credit status, certification of registration (photocopies) and certification of the legal representative (photocopies) of all parties to the investment;
(c) the approval certificate (photocopy) and business licence (photocopy) of the enterprise invested by the foreign investor and the capital verification report (photocopy) issued by a Chinese CPA;
(d) the balance sheets of all parties to the investment for the latest three years which have been audited in accordance with the law;
(e) letter of warranty;
(f) other documents required by the Ministry of Commerce.
The Provisions also set out the type of business activities that the investment company may carry out in China. Furthermore, according to the Provisions, an investment company must implement its project investment plans and submit information on investment and operation during the first year to the Ministry of Commerce.
For more information on the above issues, or if you have any questions in relation to other China related matters, please contact our China Practice Group.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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