Problems relating to Trade and Investment on China
7. Procedures for the operation of the Foreign Investment Law |
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Issue |
Issue details |
Requests |
Reference |
| (1) Disallowed Capital Increase/Reduction | - A member firm subsidiary (MFS) increased its capital by contribution of its parent company. It wiped out the accumulated loss, and the borrowings. Despite the MFS's desire to effect simultaneous capital reduction that should have corrected the corporate financial position, and enabled dividend payments, GOC disallowed MFS's request, due to the absence of precedent. | - It is requested that GOC acts flexibly in company's acceptance of capital contribution. | |
| (2) Delayed approval on Fund Withdrawal after Capital Increase | - Even if a FFE increases capital to a subsidiary (Member Firm's subsidiary (MFS)) in China, it takes about one month before funds are actually available. In emergency, MFS has no alternative but rely on borrowing from outside sources. | - It is requested that GOC takes steps to expedite the process for the fund withdrawal approval. | |
| (3) Mandatory Establishment of Act (Organ) under the Companies Act | - Dispersion in the operation of companies act places FFEs and MFSs in difficult position. Since enforcement in January 2006, establishment of act (establishment of shareholders meeting/auditor) has become a mandate, while this mandate does not apply to FFEs established prior to implementation of the company act. Relative to the procedures on capital increase, or change in bylaws, requirements are increasing from the local municipality administration for industry and commerce that assumes the position the approval shall not be give on the capital increase or change in bylaws unless the applicants meet the requirements. There is no other choice for the applicants. | - It is requested that GOC thoroughly ensures that requirement for establishment of act (shareholders meeting/auditor) does not apply to foreign funded investment enterprises, established prior to 1 January 2006. | - Notice of the State Administration for Industry and Commerce on Implementing the Implementation Opinions on Some Issues concerning Law Application for the Administration of Examination and Approval and Registration of Foreign-funded Investment Companies (No.102 [2006] of the State Administration for Industry and Commerce), Para. 2 |
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