FREQUENTLY ASKED QUESTIONS
CHINA FOREIGN INVESTED COMPANY
Investment Policies & Relevant Regulations
Q10: What organization is responsible for the examination and approval of Sino-foreign funded financial institutions?
The application will be submitted to the General Office of the People's Bank of China for approval after its first examination by the Shanghai Branch of the People's Bank of China.
Q11: Are there any differences between cooperative enterprises and joint ventures?
The main difference between cooperative enterprises and joint ventures lies in the fact that shares are not calculated merely by capital and that profit is divided not according to the proportion of shares but according to the investment-distribution ratio based on the content.
Q12: How does a Sino-foreign joint venture divide its profit?
The profit is divided according to the proportion of each party's investment to the total capital.
Q13: How does a Sino-foreign cooperative enterprise divide its profit?
The profit or product is divided, and risk and loss are shared according to the agreement in the contract.
Q14: What if the contract of a Sino-foreign joint venture which has already been signed conflicts with the newly promulgated law?
The contracts carried out inside the border of China, such as that of Sino-foreign joint ventures, of Sion-foreign cooperative enterprises and of Sino-foreign collectively exploring and developing natural resources, can still be carried out according to the contract even if there is a new law.
Q15: What are the regulations on foreign investor's proportion in a jointly invested or solely foreign-funded enterprise?
A foreign investor's investment can not be less than 25% of the registered capital in a Sino-foreign joint venture.
Q16: What is the lowest investment quota of overseas businessmen in a jointly invested or solely foreign-funded enterprise?
The lowest investment of an overseas businessman in a Sino-foreign joint venture or a wholly foreign-invested enterprise shall be no less than USD 200,000 and that in a foreign funded enterprise shall be no less than USD 200,000.
Q17: By what means of forms can a Sino-foreign joint venture pay the investment?
Each party of the joint venture can invest by means of either money or other things that can be evaluated in terms of money like buildings, machinery, materials, industrial property right, know-how and land-using right. Each party cannot draw back its capital within the term of joint venture.
Q18: Are there any regulations stipulating the time limit of investment?
Sino-foreign joint ventures: each party of the joint venture shall include in the contract the timing of investment and shall pay its capital before the deadline drawn up in the contract. The enterprise shall, according to the related provisions, issue a certificate of receiving the amount of investment, which shall be handed over to both the original authoritative office and ICAB.
If the investment capital is required to be paid off at one time, each party of the joint venture shall pay it off within six months after the issue of the business license. If the investment capital is paid up by installment, each party of the joint venture shall pay no less than 15% of the total investment within three months after the issue of the business license.
The failure of either party of the joint venture to pay off the investment capital before the deadline means self-dismissal of the joint venture and invalidity of the enterprise's approval certificate. The joint venture shall have it written off at ICAB and hand in the business license for cancellation. If not, the ICAB shall withdraw the enterprise's business license and make it known to the public.
Sino-foreign cooperative enterprises: Chinese and foreign partners shall carry out their duties of paying off all the investment capital and offering cooperation in accordance with laws, regulations and contract. If any party cannot fulfil its duty beyond the time limit, the ICAB has the right to set a deadline; if it still hasn't fulfilled its duty when the deadline is due, the authoritative office for approval and ICAB shall handle it according to the relevant regulations.
Q19: What shall be done if the foreign party wants to withdraw its shares?
(1) The board of directors shall decide to terminate the joint venture ahead of schedule;
(2) The joint venture shall work out its liquidation account according to the regulations;
(3) The property after liquidation shall be allocated to each party according to the proportion of their investments.
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