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Article 1. To standardize action related to the merge and separate establishment of foreign investment enterprises and to protect the legal rights of investors of the enterprises and creditors, the present Regulations are enacted in accordance with the Company Law of the People' Republic of China and with laws and administrative regulations on foreign investment enterprises. Article 2. These regulations are applicable to the merge and separate establishment between Chinese foreign joint ventures, Chinese-foreign contractual joint ventures with legal status, wholly foreign-owned enterprises, and companies limited with foreign investment (hereinafter referred to as companies) that are established within Chinese territory in accordance with the Chinese laws. Merge between foreign investment companies and enterprises with Chinese domestic investment shall be handled in reference to the relevant laws and regulations and the present Regulations. Article 3. Merge referred to in the present Regulations refers to the merge into one company of two or more companies through signing agreement according to the rules of the Company Law. Merge of companies may take the forms of assimilative emerge and newly established merge. Assimilative merge refers to a company accepting other companies remains to exist while the accepted companies will be dismissed. Newly established merge refers to two or more companies merge into one new company with the dismissal of each original party of the merge. Article 4. Separate establishment referred to in the present Regulations refers to the fact that one company is divided into two or more companies in accordance with the Company Law, and through decisions made by the company's supreme executive body. Separate establishment may take the forms of continuous-existence separate establishment and dismissed-separate establishment. Continuous-existence separate establishment refers to the fact that one company is divided into two or more companies while the company remains to exist after the establishment of one or more new companies. Dismissed-separate establishment refers to the fact that one company is divided into two or more companies while the company itself is dismissed after the establishment of two or more new companies. Article 5. Merge or separate establishment of companies shall abide by the Chinese laws, regulations and the present Regulations, shall follow the principle of self-willingness, equality and fair competition, and shall not be harmful to the social public interest and to the legal rights of the creditors. Merge or separate establishment of companies shall be accorded with the stipulations of the Provisional Regulations Guiding the Directions of Foreign Investment and of the Guiding Catalog of Industries for Foreign Investment, and shall not lead to solo investment, share-controlling or dominance status by foreign investors in companies of industries where solo investment, share-controlling or dominance status by foreign investors are not allowed. Alteration in profession or scope of business of companies as a result of merge or separate establishment shall be governed by the relevant laws, regulations and provisions of the State industry policies, and shall go through the approval procedures. Article 6. Merge or separate establishment of companies shall be accorded with the regulations issued by the departments of the Customs, taxation and foreign exchange. After verifying by the departments of examination and approval, the Customs and taxation, etc., companies which continue to exist or the newly established after merge or separate establishment shall continue to enjoy the same various treatments of foreign investment enterprises as they enjoyed originally. Article 7. Merge or separate establishment of companies shall be examined and approved by the original departments for examination and approval, and shall go to the registration department for registration for the establishment, alteration or turn in. Where there exist more than two original departments for examination and approval for the companies to be merged, the registration departments authorized by the department of foreign trade and economic cooperation in the place where the merged companies are located and the State Administration for Industry and Commerce (hereinafter referred to as SAIC for short) shall be the institutions functioning for examination and approval and registration. Where there are companies to be merged, of which total amount of investment exceeds the power of the original authorities for examination and approval or that of the authorities for examination and approval in the place where the merged companies are located, the merge shall be examined and approved by the authorities having respective power for examination and approval. When there are companies to be merged, of which at least one is a share limited company, the merge shall be examined and approved by the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as MOFTEC for short). Article 8. Dismissal of the original companies or establishment of new companies in different places owing to merge or separate establishment, opinions should be sought from the authorities for examination and approval in the place where the companies are located. Article 9. Companies shall not be merged or separately be established before they pay in their capital, provide conditions for cooperation and actually start production and operation in accordance with the companies contract and the articles of association. Article 10. Merge between liability limited companies will become liability limited company after merge. Merge between share limited companies will become share limited company after merge. Merge between share limited companies on sale and liability limited companies will become share limited company after merge. Merge between share limited companies not on sale and liability limited companies will become either share limited company or liability limited company after merge. Article 11. When the share limited companies are merged or the companies become a liability limited one after such merge, their registered capital after merge shall be the totality of the original amount of their registered capital. Where the liability limited companies and share limited companies are merged into one share limited company, the registered capital of the company after merge shall be the totality of the value of shares converted into by the value of net assets each share of the original liability limited companies contains and the total shares of the original share limited companies. Article 12. Where there is merge between companies accorded with Clause one of Article 11 of the present Regulations, the stock equity proportion of the invested parties in the company after merge shall be determined, as stipulated by the State, through negotiations between the investors or calculated in accordance with the appraisal result of the stock equity value of the original company done by an assets evaluation institution, and shall be recorded in the company's contract and the articles of association after merge. But the equity share of the foreign party shall not be below 25% of the registered capital in the merged company. Article 13. The volume of registered capital of a company after separation shall be determined by the supreme executive body of the original company before separation, in accordance with the relevant laws and regulations concerning foreign investment enterprises and regulations of the registration institutions. But the totality of the volume of registered capital of all companies after separation shall be equal to the total volume of registered capital of the company before separation. Article 14. The stock equity ratio of all investors in their companies after separation shall be determined in their companies' contracts and the articles of association, but the equity ratio of each foreign party shall not be below 25% of the registered capital in its company after separation. Article 15. The merge of companies takes the form of assimilative merge, the date of establishment of the accepting company shall be the date of establishment of the merged company; for those taking the form of newly established company, the date on which the registration institution gives its approval for the establishment registration and issues business license shall be the date of the establishment of the company after merge. Where companies are newly established as a result of separation, the date on which the registration institution gives its approval for the establishment registration and issues business license shall be the date of the establishment of the companies after separation. Article 16. When merge or separation involves listing share limited companies, it must be acted in conformity with the relevant laws and regulations and the regulations on listing companies issued by the departments for supervision of securities under the State Council, and shall go through necessary procedures for examination and approval. Article 17. Merge between foreign investment companies and Chinese enterprises with domestic investment shall be carried out in accordance with the Chinese laws and regulations on using foreign investment and China's industry policies, and shall meet the conditions as follows: (1) The Chinese enterprises with domestic investment to be merged must be liability limited companies or share limited companies established in accordance with the norms stipulated in the Company Law of the People's Republic of China; (2) The investors must meet with the qualifications required for the investors engaged in the related industries of the company after merge as stipulated in the relevant laws, regulations and rules by the departments concerned; (3) The equity share of the foreign party shall not be below 25% of the registered capital in the company after merge; and (4) All parties to the agreement on merge shall guarantee full employment of their original staff members and workers of the companies to be merged or make rational arrangement. Article 18. For assimilative merge of companies, the accepting party should be the applicant. For merge in the form of newly established company, an applicant should be determined through negotiations of all parties. The following documents should be submitted by the applicant to the authorities for examination and approval: (1) Application for the merge of the companies and agreement on merge of the companies signed by the legal representatives of all companies concerned; (2) Decision on the merge of companies made by the supreme authorities of each of the companies; (3) Contracts and the articles of association of all companies; (4) Copies of approval certificates and business licenses of all companies; (5) Credit examination reports of all companies provided by authorized Chinese institutions for credit examination; (6) Balance sheet and property list of all companies; (7) Audit reports of the previous year of all companies; (8) List of creditors of all companies; (9) Company's contract and the articles of association after merge; (10) Membership list of the institution with supreme power of the company; and (11) Other documents required by the authorities for examination and approval. Article 19. The agreement on companies' merge should include the following contents: (1) Names, addresses and legal representatives of all contractual parties for merge; (2) Name, address and legal representative of the company after merge; (3) The total amount of investment and registered capital after merge; (4) The form of merge; (5) The succession plan for creditors' rights and debts of the contractual parties for merge; (6) Measures for the arrangement of the staff members and workers; (7) Infringement liabilities; (8) Ways for settlement of disputes; (9) Date and place for signing agreement; and (10) Other items deemed necessary to stipulate by the contractual parties for merge. Article 20. When companies planned to be merged involve two or more original authorities for examination and approval, the companies to be dismissed should submit an application for dismissal to the original authorities for examination and approval before they submit the relevant documents in accordance with Article 18 of the present Regulations to the authorities concerned for examination and approval. The original authorities for examination and approval should give a reply within 15 days upon the date of the receipt of the application for dismissal as stipulated in the preceding Clause. Where there is no reply after 15 days from the original authorities for examination and approval, it will be deemed that the original authorities for examination and approval have agreed to the dismissal of the company. When the original authorities for examination and approval give a negative reply within the period as stipulated in the preceding Clause to the company's application for dismissal, the company to be dismissed may submit the application for dismissal to the responsible department of foreign trade and economic cooperation at the higher level to both the original authorities for examination and approval and the authorities for examination and approval after merge, and the said department shall give a judgment within 30 days upon the receipt of the application for dismissal from the company. If the authorities for examination and approval disagree or do not approve the merge of companies, the reply on the dismissal of the companies shall become invalid. Article 21. The companies to be dismissed should submit to the authorities for examination and approval the following documents: (1) Application for separate establishment of the companies signed by the legal representatives of the companies; (2) Decision on separate establishment of the companies by the companies' body with supreme power; (3) Agreement on separate establishment of the companies signed by companies that remain to exist or be newly established (hereinafter referred to as separate establishment contractual parties) after separation; (4) Contracts and the articles of association of the companies; (5) Copies of approved certificates and business licenses of the companies; (6) Credit examination reports of the companies provided by authorized Chinese institutions for credit examination; (7) Balance sheet and property list of the companies; (8) List of creditors of the companies; (9) Contracts and the articles of association of all companies after merge; (10) Membership list of the institution with supreme power of the companies; and (11) Other documents required by the authorities for examination and approval. If a new company is set up overseas as a result of the separate establishment of the company, the company must also submit the opinion on the new company set up in the seperate establishment signed by the approval authority in the place where the new company is going to set up. Article 22. The agreement on the separate establishment of the companies should include the following contents: (1) Names, addresses and legal representatives of the contractual parties for separate establishment; (2) The total amount of investment and registered capital of the companies after separate establishment; (3) The form of separate establishment; (4) Plan agreed by the contractual parties for property partition of the companies to be separately established; (5) The succession plan agreed by the contractual parties for creditors' rights and debts of the companies to be separately established; (6) Measures for the arrangement of the employees; (7) Infringement liabilities; (8) Ways for the settlement of disputes; (9) Date and place for signing agreement; and (10) Other items deemed necessary by the contractual parties of separate established companies. Article 23. Companies continue to exist or to be newly established after separate establishment shall have to succeed all of the creditors' rights and debts of the companies dismissed as a result of separate establishment of companies. Companies after separate establishment shall succeed in accordance with the agreement for separate establishment the creditors' rights and debts of the original companies. Article 24. The authorities for examination and approval should give a written reply on whether they agree to the merge or separate establishment within 45 days upon the receipt of the submitted documents as prescribed in Articles 18 and 20 of the present Regulations. In case the merge with other companies are to be examined and approved by MOFTEC, and that MOFTEC considers that the merge will have a trend of professional monopoly or will possibly formulate a market-controlling status of some of the specific commodities or services that may hinder from participating fair competition, it may call, after the receipt of the documents prescribed in the previous Clause, a hearing of the companies intended to merge, which is attended by the departments and institutions concerned, and may organize an investigation on the companies and their market. In such situation, the period for examination and approval as prescribed in the preceding Clause may be extended to 180 days. Article 25. Companies to be merged or separately be established should send out a notification to the creditors within 10 days from the date on which the authorities for examination and approval give a tentative written reply, agreeing to the merge or separate establishment of companies, and should publish it at least for 3 times within 30 days in the newspapers distributed nationwide at or above the provincial level. The companies should explain in the above mentioned notification and announcement the plan for debt succession of the existing companies. Article 26. Creditors of the companies have the right to ask the companies to revise their plan for debts succession within 30 days from the date of the receipt of the notification prescribed in Article 25 of the present Regulations, or to ask the companies to clear off debts or provide guarantee for the debts. Creditors without receiving the notification enjoy the same right within 90 days from the date on which the announcement is made. In case creditors of the companies did not exercise the right within the period prescribed in the above-mentioned Clause, it would be deemed that the creditors had agreed to the succession plan for creditors and debts of the companies to be merged or separately be established, and that the creditors' claimant shall have no effect on the merge or separate establishment of the companies. Article 27. If creditors of the companies to be merged or separately be established have no different opinions within 90 days from the date on which the first announcement of merge or separate establishment is made, the applicant of the companies for merge or companies intended to be separately established should submit to the authorities for examination and approval the following documents: (1) Proof for the announcement published by the companies for three times in the newspapers about their merge or separate establishment; (2) Proof for the notification given by the companies to their creditors; (3) Statement made by the companies about the handling of creditors' rights and debts; and (4) Other documents deemed necessary by the authorities for examination and approval. Article 28. The authorities for examination and approval should decide within 30 days from the date of the receipt of the documents prescribed in Article 27 of the present Regulations about whether or not they will approve the merge or separation of companies. Article 29. Under the circumstance of companies taking assimilative form for merge, the company of the accepting party should go to the original authorities for examination and approval for alteration of the approval certificate for foreign investment enterprise, and register with the registration department for the change; the accepted party or parties should go to the original authorities for examination and approval for turning in the approval certificate for foreign investment enterprise, and to the registration department for canceling the registration of the companies. In the circumstance of companies taking the newly established form for merge, all the parties of the companies merged should go to the original authorities for examination and approval for turning in their approval certificate for foreign investment enterprise, and to the registration department for canceling registration of the companies; the newly established companies should go, through applicant, to the authorities for examination and approval for approval certificate for foreign investment enterprise, and to the registration department for registration of the establishment of the companies. Under the conditions of companies taking the form of continuous-existence separate establishment, the company that continues to exist should go to the authorities for examination and approval for alteration of the approval certificate for foreign investment enterprise, and register with the registration department for the change; the newly established companies should go to the authorities for examination and approval for approval certificate, and to the registration department for registration of the establishment of the companies. In the case of companies adopting the form of dismissed-separate establishment, the original company should go to the original authorities for examination and approval for turning in its approval certificate for foreign investment enterprise, and to the registration department for canceling registration of the company; the newly established company should go to the authorities for examination and approval for approval certificate for foreign investment enterprise, and to the registration department for registration of the establishment of the company. Article 30. Applicants for companies merge or companies to be separately established should go within 30 days from the date on which the authorities for examination and approval give approval for merge or separate establishment to the correspondent authorities for examination and approval for matters of dismissal, continuous existence or newly established companies appeared as a result of merge or separate establishment, and go through procedures for turning in, alteration or receiving approval certificate for foreign investment enterprise. Article 31. The companies should go to the registration department from the date of turning in, alteration or receiving the approval certificate for foreign investment enterprise, and go through registration procedures for turning in, alteration or establishment in accordance with the provisions laid down in the Regulations of the People's Republic of China on the Registration of the Legal Person of the Enterprise and the Regulations of the People's Republic of China on Company Registration. Registration for establishment should be made after going through by the companies concerned the registration procedures for alteration and turning in. The disposition plan of company's property and the succession plan for creditors' rights and debts stated in the agreement for the merge or separate establishment of companies, and the documents of the authorities for examination and approval for approving the companies merge or separate establishment shall be regarded as clearance report presented for registration cancellation. Article 32. The parties concerned shall take correspondent legal responsibilities after going through by the companies registration procedures for turning in and alteration for the new merge or separate establishment, in case that they did not go through, in accordance with the laws, registration procedures for the establishment of the companies. Article 33. The revised contracts and the articles of association signed by the investors of the companies as a result of merge or separate establishment of companies shall become effective on the date on which the authorities for examination and approval give approval for alteration or issue after verification approval certificate for foreign investment enterprises. Article 34. Companies merged or continue to exist or newly established should give a notification of the change of the creditors and debtors, within 30 days from the date of making alteration or receiving business license, to the creditors and debtors of the companies dismissed as a result of merge or separate establishment, and should make an announcement in the newspapers distributed nationwide at or above the provincial level. Article 35. companies merged or continue to exist or newly established should go through registration procedures, within 30 days from the date of changing or receiving business license, with the departments of taxation, the Customs, land property and foreign exchange. Article 36. When equity transfer is involved in the process of merge or separate establishment, it shall be handled in accordance with the laws, regulations and rules governing the change of investors' equity of foreign investment enterprises. Article 37. The merge or separate establishment of companies in the mainland China by investors from Hong Kong, Macao and Taiwan Province shall be handled in reference to the present Regulations. Article 38. The Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce shall be responsible for the interpretation of the present Regulations. Article 39. These Regulations shall be enforced as of the date of November 1, 1999. |
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