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20051101
State Administration of Foreign Exchange
Circular of the State Administration of Foreign Exchange Concerning Relevant Issues on Improving Foreign Exchange Administration for
Merger and Acquisition with Foreign Investments
Hui Fa [2005] No. 11
January 24, 2005
The branches and the foreign exchange administration departments of the State Administration of Foreign Exchange in all provinces,
autonomous regions and municipalities directly under the Central Government, and the branches of the State Administration of Foreign
Exchange in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo:
For the purpose of maintaining the balance of payments, guaranteeing the trans-territorial capitals flow orderly and legally, the
relevant issues on improving foreign exchange administration in respect of merger and acquisition with foreign investments are hereby
notified as follows:
I.
A domestic resident who contributes investments abroad to directly or indirectly establish or control an overseas enterprise shall
go through the procedures for approval and registration according to the “Foreign Exchange Administration Measures for Overseas Investments”.
II.
According to the “Interim Provisions for Foreign Investors to Merge or Acquire Domestic Enterprises”, in case a domestic resident
intends to transfer his domestic company’s stock right certificate for an overseas company’s stock right certificate or other property
rights, he shall be approved by the foreign exchange administration department. Domestic residents shall not, without approval, exchange
by using his own domestic assets or stock rights as consideration for transaction for any overseas enterprise’s stock rights or other
property rights.
III.
Any branch or foreign exchange administration department of the SAFE, shall, when handling foreign exchange registration for a foreign-funded
enterprise established through merger or acquisition with foreign investments, focus on verifying whether this overseas enterprise
was established or controlled by domestic residents, whether it has the same management staff with those of the merged or acquired
enterprise(see the annex for details). In the case of the foreign-funded enterprises established by domestic residents via overseas
enterprises by means of merging or acquiring domestic enterprises, all branches and foreign exchange administration departments of
the SAFE shall report their applications for foreign exchange registration to the SAFE for approval.
IV.
In the case of the foreign-funded enterprises which were established by domestic residents via overseas enterprises by means of merging
or acquiring domestic enterprises and have made foreign exchange registration, all branches and foreign exchange administration departments
of the SAFE shall enumerate a detailed name list, and shall focus their supervision and control on the information of such enterprises
in respect of confirmation request for capital verification, foreign exchange registration of foreign investments in the form of
foreign exchange upon transfer of stock rights, registration of stockholders’ loans, remittance of profits abroad, re-investment
with profits, stock right transfer, etc., and timely investigate any problem found.
This Circular shall come into force since the date when it is promulgated. htm/e03846.htm Annex
Annex:
Foreign Exchange Registration Procedures and Rules for Establishment of Foreign-funded Enterprises Through Merger or Acquisition with
Foreign Investments
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Regulation Basis
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Documents to be Examined
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Factors of Verification Principles
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Scope of Authorization
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Notes
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"Interim Measures for the Foreign Exchange Registration of Foreign-funded Enterprises"
"Circular Concerning the Relevant Issues on Strengthening the Approval, Registration and Taxation Administration of Foreign-funded
Enterprises" (MOFTEC FA [2002] No. 575)
"Interim Provisions for Foreign Investors to Merge or Acquire Domestic Enterprises"
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1. A written application;
2. A counterpart of the business license of the legal person of the enterprise;
3. The official reply document and approval certificate of the administrative department of commerce on approving
the establishment of the foreign-funded enterprise through merger or acquisition with foreign investments;
4. The contracts and the rules on merger or acquisition with foreign investments, which have been approved to become
effective;
5. The organizational code certificate;
(Note: All the above documents shall be verified in original copy, or in photocopy affixed with an original stamp,
while the photocopies shall be kept in the archives.)
6. Filling out the "Registration Form on Basic Information of the Foreign-funded Enterprise".
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1. The foreign exchange registration certificate shall clearly indicate the enterprise’s business scope, as well as
the investment method and proportion of each investor.
2. The relevant documents shall be genuine and consistent with each other.
3. The enterprises shall, after obtaining the business license, timely make foreign exchange registration.
4. The written application shall contain the following declaratory words: "There is no direct or indirect associated
stock right or asset relationship between the new foreign stockholder of this Company and the original Chinese stockholder
who transfers his stock rights (or assets), nor is there any other internal transaction act against foreign exchange
administration provisions. All payments and settlements under this transaction are in accordance with the Interim Measures
for Foreign Investors to Merge or Acquire Domestic Enterprises. In case there is any false statement, this Company
will bear the legal liabilities accordingly." Or the said application shall truthfully state direct or indirect
associated stock right or asset relationship between the new foreign stockholder of the Company and the original
Chinese stockholder who transfers his stock rights (or assets).
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1. The branches and their respective sub-branches shall handle the procedures according to the principle of locality.
2. If a domestic resident establishes a foreign-funded enterprise by means of merging or acquiring a domestic enterprise
via an overseas enterprise, its application for foreign exchange registration shall be submitted level by level to
the SAFE for approval.
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1. "Merger and acquisition" mentioned in these Procedures and Rules shall have the same meaning as those
in the "Interim Provisions for Foreign Investors to Merge or Acquire Domestic Enterprises".
2. When handling a foreign-funded enterprise’s foreign exchange registration, the foreign investment contract shall
be examined to determine whether this enterprise was established by foreign investors through merger or acquisition
of stock rights or assets, and whether these Procedures and Rules shall be applied.
3. The contract on merger or acquisition shall be examined to know whether the overseas enterprise carrying out the
merger or acquisition was established or controlled by a domestic resident, and whether it has the same management
staff with those of the merged or acquired enterprise.
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