Tuesday, 29 July 2014

China Updates- Changes to Capital Requirements for FIEs

On 17th June, MOFCOM removed the Capital Contribution Restrictions on Foreign Investments in China. This confirms that the company registration reforms (reported in our newsletter earlier this year) also apply to FIEs (Foreign Invested Enterprises).

These changes, effective from March for domestic companies, include:
(i) Change from a paid-in capital to a subscribed capital system,
(ii) removal of minimum registered capital thresholds,
(iii) removal of the statutory timeline for capital contribution,
(iv) removal of the 30 percent minimum cash contribution requirement,
(v) removal of the capital verification requirement, and
(vi) removal of the annual inspection requirement.

At the time of the original changes, it was unclear whether or to what extent they would apply to FIEs, MOFCOM's notice provides official clarification that they do apply to FIEs,

(a) There will be no specific requirement on the form or the timing of the capital contribution.
(b) Minimum registered capital requirements are (with exceptions) henceforth removed.
(c) Change from "Paid In" to "Subscribed" capital: and no further verification by the authorities of "Paid In"         nor any requirement to register this with SAIC

1. Filing of investment certificated and supporting documentation with the local authority is required once the     capital contribution has been completed.
2. The total investment and registered capital of the FIE is unchanged, including the capital ratio,
3. The changes do not apply to FIEs approved before 1st March 2014 unless separate approval is obtained.

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