PART ONE: GENERAL PROVISIONS
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PART ONE: GENERAL PROVISIONS PART ONE: GENERAL PROVISIONS Document Transcript

  • Reference English Translation by Debevoise & Plimpton Rules on Administration of Foreign Invested Venture Capital Investment Enterprises (Jointly issued by the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation, and the State Administration of Foreign Exchange on January 30, 2003, and effective as of March 1, 2003) PART ONE: GENERAL PROVISIONS Article 1 These Rules have been formulated in accordance with the PRC Sino- foreign Cooperative Joint Venture Law, the PRC Sino-foreign Equity Joint Venture Law, the PRC Wholly Foreign-owned Enterprise Law, the Company Law and other relevant laws and regulations in order to encourage foreign companies, enterprises and other economic organizations or individuals (the Foreign Investors) to make venture capital investments in China and to establish and perfect the venture capital investment mechanism of China. Article 2 "Foreign-invested venture capital investment enterprise" (FIVCIE) as used in these Rules means a foreign-invested enterprise established within the territory of China by Foreign Investors, or by Foreign Investors together with companies, enterprises or other economic organizations registered and established under Chinese law (the Chinese Investors), in accordance with these Rules to be engaged in venture capital investment business. Article 3 "Venture capital investment" as used in these Rules means a type of investment activity pursuant to which equity investments are injected mainly into high- and new-tech enterprises that have not been publicly listed (the Investee Enterprises) and venture capital management services are provided in order to obtain capital appreciation benefits. Article 4 A FIVCIE may take the form of a non-legal person entity or the form of a company. Investors of a FIVCIE in the form of a non-legal person entity (Non-Legal Person FIVCIE) shall be jointly and severally liable for such FIVCIE's debts. Alternatively, such investors may also agree in the contract of the FIVCIE that the requisite investor as provided under Article 7 will be jointly and severally liable for the FIVCIE's debts where the assets of the FIVCIE are insufficient to discharge such debts while the liability of each other investor will be limited to the amount of its respective capital contribution subscribed for. The liability of each investor of a FIVCIE in the form of a company (Corporate FIVCIE) shall be limited to the amount of its respective capital contribution subscribed for. CVCA_Eng.doc
  • Article 5 FIVCIEs shall observe relevant Chinese laws and regulations, shall comply with the foreign investment industrial policies, and shall not harm the public interest of China. The legitimate business activities and the lawful rights and interests of FIVCIEs are protected by Chinese law. PART TWO: ESTABLISHMENT AND REGISTRATION Article 6 The following requirements shall be met in order for a FIVCIE to be established: 1. it has at least 2 but at most 50 investors and shall have at least one requisite investor qualified under Article 7; 2. the minimum amount of the total capital contribution subscribed for from all investors shall be US$10 million for each Non-Legal Person FIVCIE and US$5 million for each Corporate FIVCIE. Except for the requisite investors provided under Article 7, each other investor's minimum capital contribution subscribed for shall not be less than US$1 million. Foreign Investors shall make their capital contributions in freely convertible currencies and Chinese Investors in Renminbi; 3. it has a clear organizational structure; 4. It has a clear and legitimate investment direction; 5. except for situations where a FIVCIE has contracted with a venture capital investment management company to manage its activities, each FIVCIE shall have at least three professional personnel who possess venture capital investment experience; and 6. other conditions that may be required by laws and administrative regulations. Article 7 A requisite investor shall meet the following requirements: 1. venture capital investment is its main line of business; 2. in the three years before the application it has had cumulative capital under its management of not less than US$100 million, of which at least US$50 million have been used for venture capital investments; and in the case of the requisite investor being a Chinese Investor, the aforementioned cumulative capital shall be Rmb100 million of which at least Rmb50 million have been used for venture capital investments; 3. it has at least three professional management personnel who possess at least three years experience in the venture capital investment area; 4. an investor may also apply to become a requisite investor if its affiliated entity satisfies the requirements set forth above under this Article. As used in this paragraph, an "affiliated entity" means an entity that controls, is controlled by, or 2 CVCA_Eng.doc
  • is under common control with the investor concerned and a party is "controlled" by another party if the controlling party owns more than 50% voting power of the controlled party; 5. neither the requisite investor nor its aforementioned affiliated entity shall have been prohibited from being engaged in venture capital investment or investment consultancy business or been subject to penalty for commitment of fraud by the judicial authority or any other relevant regulatory authority in its home country; and 6. in the case of a Non-Legal Person FIVCIE, at least 1% of the total capital contribution subscribed for by all investors to the FIVCIE and at least 1% of the total actual capital contribution from all investors to the FIVCIE shall be made by its requisite investor(s) and such requisite investor(s) shall be jointly and severally liable for the debts of such FIVCIE. In the case of a Corporate FIVCIE, at least 30% of the total capital contribution subscribed for by all investors to the FIVCIE and at least 30% of the total actual capital contribution from all investors to the FIVCIE shall be made by its requisite investor(s). Article 8 The following procedures shall be followed when applying to establish a FIVCIE: 1. Investors shall submit to the provincial-level department in charge of foreign trade and economic cooperation of the place where the FIVCIE is proposed to be established an application for establishment and relevant documents. 2. The provincial-level department in charge of foreign trade and economic cooperation shall, within 15 days after receipt of all materials submitted, complete its initial review and submit the materials to the Ministry of Foreign Trade and Economic Cooperation (hereafter, the Examination and Approval Authority). 3. The Examination and Approval Authority will, within 45 days of its receipt of all application materials submitted to it and upon consultation with and consent by the Ministry of Science and Technology, make a written decision as to whether the application is approved or not. If the application is approved, a Foreign- invested Enterprise Approval Certificate will be issued. 4. Within one month of receipt from the Examination and Approval Authority of the Foreign Invested Enterprise Approval Certificate, the approved FIVCIE shall apply to register, on the strength of the certificate, with the State Administration for Industry and Commerce or its provincial level office where the proposed FIVCIE is to be located having administrative authority over registration of foreign-invested enterprises (the Registration Authority). Article 9 The following documents shall be submitted to the Examination and Approval Authority when applying to establish a FIVCIE: 3 CVCA_Eng.doc
  • 1. the application for establishment signed by the requisite investor(s); 2. the contract of the FIVCIE and the articles of association of the FIVCIE signed by all investors; 3. a written declaration from the requisite investor(s) (on its or their satisfaction of the qualification requirements under Article 7 hereof, the authenticity of all materials submitted, and its or their willingness to strictly comply with these Rules and the requirements of other relevant Chinese laws and regulations); 4. a legal opinion issued by a law firm on the legal existence of the requisite investor(s) and as to the above-referenced declaration having been duly authorized and executed; 5. descriptions of the requisite investor(s)' venture capital investment business, the capital under management for the past three years, the capital actually invested by such investor(s), and the résumés of such investor(s)' venture capital investment management professionals; 6. a copy of each investor's certificate of registration and a copy of its legal representative's authority certificate; 7. the name pre-approval notice for the FIVCIE issued by the name registration authority; 8. if the qualification of a requisite investor is based on the provision of the fourth paragraph under Article 7 hereof, the relevant materials with respect to the qualified affiliated entity shall also be included; and 9. other documents relevant to the application for establishment that are requested by the Examination and Approval Authority. Article 10 All FIVCIEs shall contain in their names the words "Venture Capital Investment". Except for FIVCIEs, no foreign-invested enterprises may contain in its name the words "Venture Capital Investment". Article 11 When applying for establishment of a FIVCIE, the following documents shall be submitted to the Registration Authority and the applicant shall be responsible for the authenticity and the effectiveness of such documents: 1. the application for establishment signed by the chairman of the board or the responsible person of the joint management committee of the FIVCIE; 2. the contract and the articles of association, and the approval documents and certificates issued by the Examination and Approval Authority; 3. each investor's proof of lawful commencement of business or lawful identification; 4 CVCA_Eng.doc
  • 4. each investor's proof of creditworthiness; 5. the appointment document and identification certificate of the legal representative and the filing documents for directors, managers, etc. of the enterprise; 6. the enterprise name pre-approval notice; and 7. the proof of the enterprise’s residency or business place. When applying for establishment on a Non-Legal Person FIVCIE, the applicant shall also submit a copy of the articles of association or the partnership agreement of the offshore requisite investor. If the fourth paragraph of Article 7 applies to any investor in the enterprise, a letter of guarantee issued by the affiliated entity stating that it will be jointly and severally liable for such investor's capital contribution obligations shall also be submitted. All documents described above shall be submitted in the Chinese language. Standard Chinese translation version shall be provided if any such document is prepared in a foreign language. Changes in any registered item of a FIVCIE shall be filed for modification registration with the Registration Authority that originally registered the FIVCIE. Article 12 All Corporate FIVCIEs checked and approved by the Registration Authority will be issued an Enterprise Legal Person Business License and all Non- Legal Person FIVCIEs checked and approved by the Registration Authority will be issued a Business License. The Business License shall state the total amount of capital contributions subscribed for by all investors of such Non-Legal Person FIVCIE and the name of the requisite investor(s). PART THREE: CAPITAL CONTRIBUTIONS AND RELEVANT AMENDMENTS Article 13 Capital contributions by investors of a Non-Legal Person FIVCIE and the amendments thereof shall be made pursuant to the following provisions: 1. Investors may, within a maximum period of 5 years, make their capital contributions in instalments based on the progress of the venture capital investments made by the FIVCIE. The amount of the capital contribution to be made in each instalment shall be determined independently by the FIVCIE in accordance with the contract of the FIVCIE and the agreements it signed with its Investee Enterprises. The investors shall agree in the contract of the FIVCIE on the liability and other related measures in connection with an investor's failure to timely contribute its capital. 5 CVCA_Eng.doc
  • 2. During the existence of a FIVCIE, the investors generally may not reduce the amount of their capital contributions subscribed for. However, the investors may reduce the amount of their subscribed capital if such reduction is agreed by the investors collectively representing more than 50% of the total contributed capital to the FIVCIE and the requisite investor(s), will not cause the FIVCIE to be in breach of the legal requirement of a minimum amount of US$10 million subscribed capital, and is further approved by the Examination and Approval Authority (with exception of the reduction by the investors of their contributed capital pursuant to Item (5) of this article or the cancellation upon expiry of the investment period of any unutilized subscribed capital). Investors shall agree in the contract of the FIVCIE on the conditions, procedures and specific steps for the reduction of the amount of their subscribed capital. 3. During the existence of a FIVCIE, no requisite investor may withdraw from such FIVCIE. If a requisite investor does need to withdraw in special cases, such requisite investor shall first obtain the consent of other investors collectively representing more than 50% of the total contributed capital to the FIVCIE and shall transfer its interests to a new investor qualified under Article 7 hereof. In the case of such a transfer, the contract and the articles of association of the FIVCIE shall be amended accordingly and be submitted for approval by the Examination and Approval Authority. A transfer of the subscribed capital or contributed capital by any investor other than the requisite investor(s) shall be handled in accordance with the provisions of the contract of the FIVCIE and the transferee investor shall meet the applicable requirements under Article 6 hereof. In the case of such a transfer, the contract and the articles of association of the FIVCIE shall all be amended accordingly and be filed with the Examination and Approval Authority for its record. 4. After a FIVCIE has been established, additional investors may be admitted if such admission would be consistent with the provisions of these Rules and the contract of the FIVCIE and is further consented to by the requisite investor(s). In such case, the contract and the articles of association of the FIVCIE shall be amended accordingly and be filed with the Examination and Approval Authority for its record. 5. Of the income derived by a FIVCIE from sale or other disposition of its equity investment in an Investee Enterprise, the amount equal to such FIVCIE's original amount of capital contribution to such Investee Enterprise may be distributed directly to the investors. Such distribution will constitute a reduction by the investors of the amount of their contributed capital. A FIVCIE shall stipulate in its FIVCIE contract the specific methods for such distributions and shall, at least 30 days prior to any such distribution, submit to the Examination and Approval Authority and the local foreign exchange administration for their record a statement requesting for a corresponding reduction in the total amount of capital contribution, together with its certification that the remaining uncontributed subscribed capital of the FIVCIE investors and any available funds held by the 6 CVCA_Eng.doc
  • FIVCIE are at least equal to all investment obligation of the FIVCIE then outstanding. However, no such distribution shall operate as a defence to any claim against such FIVCIE that it breached any of its investment obligations. Article 14 When a Non-Legal Person FIVCIE applies to the Registration Authority for a modification registration, the aforementioned filing registration certificate issued by the Examination and Approval Authority may be submitted as the corresponding approval document. Article 15 Following each capital contribution by investors of a Non-Legal Person FIVCIE according to the progress of the venture capital investments made by the FIVCIE, the investors shall take the relevant capital contribution verification report and register their capital contributions with the original Registration Authority. The Registration Authority will note in the "amount of capital contributed" column of the Business License the actual amount of capital contributed based on the actual amount contributed. Any Non-Legal Person FIVCIE that has failed to pay or fully pay in the capital subscribed for by its investors within the maximum investment period will be penalized by the Registration Authority in accordance with existing provisions. Article 16 The capital contributions and the relevant amendments with respect to investors of a Corporate FIVCIE shall be handled in accordance with existing provisions. PART FOUR: ORGANIZATIONAL STRUCTURE Article 17 A Non-Legal Person FIVCIE shall establish a joint management committee. A Corporate FIVCIE shall establish a board of directors. The joint management committee or the board of directors shall be constituted as provided by investors in the contract and the articles of association of the FIVCIE and shall manage the FIVCIE on behalf of the investors. Article 18 Management and operating structure shall be established under the joint management committee or the board of directors and shall, within the authority set forth in the contract and the articles of association of the FIVCIE, be responsible for the day-to-day management and operations of the FIVCIE and execute the investment decisions made by the joint management committee or the board of directors. Article 19 The responsible person(s) of the management and operating structure shall meet the following requirements: 1. possessing full capacity for civil acts; 2. having no criminal records; 3. having no record of bad business practices; 7 CVCA_Eng.doc
  • 4. having work experience in the area of venture capital investment and having no record of violations of rules governing operations; and 5. other requirements relating to their management qualifications required by the Examination and Approval Authority. Article 20 The management and operating personnel shall periodically report to the board of directors (or the joint management committee) on the following matters: 1. authorized major investment activities; 2. interim and annual operating performance reports and financial reports; 3. other matters required by laws and regulations; and 4. other relevant matters provided in the contract and the articles of association of the FIVCIE. Article 21 The joint management committee or the board of directors may elect not to establish any management and operating structure, but to contract with a venture capital investment management enterprise or another FIVCIE so that all day-to-day management and operating authority of the FIVCIE will be carried out by such management enterprise or such other FIVCIE. The venture capital investment management enterprise may be a domestic Chinese-funded, a foreign-invested or an offshore venture capital investment management enterprise. Where a venture capital investment management enterprise is engaged, the FIVCIE and the venture capital investment management enterprise shall enter into a management contract pursuant to which the parties will stipulate their respective rights and obligations. Such management contract will become effective only if it has been consented to by all investors and approved by the Examination and Approval Authority. Article 22 Investors of a FIVCIE may agree in the contract of the FIVCIE, in accordance with customary international practice, on an internal profit allocation mechanism and a performance-based compensation system. PART FIVE: VENTURE CAPITAL INVESTMENT MANAGEMENT ENTERPRISES Article 23 The venture capital investment management enterprise engaged to manage a FIVCIE shall meet the following requirements: 1. its main line of business shall be the management of business invested by the engaging FIVCIE; 2. it has at least 3 professional management personnel who possess at least 3 years experience in the venture capital investment area; 8 CVCA_Eng.doc
  • 3. its registered capital or total amount of capital contribution is no less than Rmb1 million or its equivalent in foreign exchange; and 4. it has a sound internal control system. Article 24 A venture capital investment management enterprise may take the form of a company or the form of a partnership. Article 25 A venture capital investment management enterprise may be engaged to manage more than one FIVCIE. Article 26 The venture capital investment management enterprise shall periodically report to the joint management committee or the board of directors of the engaging FIVCIE on all items provided in Article 20 hereof. Article 27 When applying to establish a foreign-invested venture capital investment management enterprise, the requirements set forth in Article 23 hereof shall be met. The application shall be submitted to the Examination and Approval Authority for approval through the provincial-level department in charge of foreign trade and economic cooperation at the place where the proposed foreign-invested venture capital investment management enterprise will be located. The Examination and Approval Authority will, within 45 days of its receipt of all application materials submitted to it, make a written decision as to whether the application is approved or not. If the application is approved, a Foreign-invested Enterprise Approval Certificate will be issued. Within one month of receipt of the Foreign-invested Enterprise Approval Certificate, the approved foreign-invested venture capital investment management enterprise shall apply to register with the Registration Authority on the strength of such Approval Certificate. Article 28 When applying for establishment of a foreign-invested venture capital investment management enterprise, the following documents shall be submitted to the Examination and Approval Authority: 1. the application for establishment; 2. the contract and articles of association of the foreign invested venture capital investment management enterprise; 3. a copy of each investor's registration certificate and a copy of its legal representative's certificate; and 4. other relevant documents in support of the application that may be requested by the Examination and Approval Authority. Article 29 All foreign-invested venture capital investment management enterprise shall contain in their names the words "Venture Capital Management ". Except for foreign-invested venture capital investment management enterprises, no foreign- invested enterprise may contain in its name the words " Venture Capital Management 9 CVCA_Eng.doc
  • ". Article 30 Within 30 days from the approval date of the management contract, an offshore venture capital investment management enterprise authorized to be engaged in venture capital investment management business within China for FIVCIEs shall apply to the Registration Authority for business registration. When applying for such business registration, the following documents shall be submitted and the offshore venture capital investment management enterprise shall be responsible for the authenticity and the effectiveness of such documents: 1. the registration application signed by the chairman of the board of the offshore venture capital investment management enterprise or the person having the authority to sign on behalf of such offshore venture capital investment management enterprise; 2. the management contract and the approval document issued by the Examination and Approval Authority therefor; 3. the articles of association or the partnership agreement of the offshore venture capital investment management enterprise; 4. the proof of lawful commencement of business of the offshore venture capital investment management enterprise; 5. the certificate of creditworthiness of the offshore venture capital investment management enterprise; 6. the power of attorney for, the résumé and identification certificate of, the person responsible for China projects appointed by the offshore venture capital investment management enterprise; and 7. the proof of the offshore venture capital investment management enterprise's business place in China. All documents described above shall be submitted in the Chinese language. Standard Chinese translation version shall be provided if any such document is prepared in a foreign language. PART SIX: OPERATION MANAGEMENT Article 31 FIVCIEs may be engaged in the following businesses: 1. using all of its own capital to make equity investments including in the form of setting up new enterprises, making investment into existing enterprises, acquiring equity interests from transferring investors in existing enterprises, and any other form of investment permitted by applicable State laws and regulations; 10 CVCA_Eng.doc
  • 2. providing consulting services relating to venture capital investment; 3. providing management consulting services to their Investee Enterprises; and 4. conducting other businesses approved by the Examination and Approval Authority. Funds of FIVCIEs shall be used primarily to make equity investments in their Investee Enterprises. Article 32 FIVCIEs may not be engaged in the following activities: 1. investing in areas that are prohibited by the State to be invested by foreign entities; 2. investing, directly or indirectly, in publicly traded stocks and corporate bonds, however, after an Investee Enterprise becomes publicly listed, shares previously acquired by the FIVCIE concerned shall not be subject to this restriction; 3. investing, directly or indirectly, in real estate not for its self-use; 4. borrowing to make investments; 5. use funds of people other than its investors to make investment; 6. extending loans or guarantees, except for corporate bonds with at least one year's maturity and convertible bonds, in each case issued by an Investee Enterprise of the FIVCIE (this provision however takes no position on whether an Investee Enterprise may under Chinese law issue such convertible bonds); and 7. any other activity prohibited to be engaged by laws, regulations or provisions of the FIVCIE contract. Article 33 Investors shall agree on an investment period in their FIVCIE contract during which the FIVCIE may make portfolio investments. Article 34 A FIVCIE derives its income primarily from the successful sale or other disposition of its equity investments in Investee Enterprises. When a FIVCIE sells or otherwise disposes of an equity investment in an Investee Enterprise, it may choose appropriate exit mechanisms in accordance with the law. Such exit mechanisms include: 1. to transfer to other investors all or any part of its equity interest in an Investee Enterprise; 2. to enter into an equity interest repurchase agreement pursuant to which the Investee Enterprise will, in accordance with the law, buy back the equity interest held by the FIVCIE on certain terms and conditions; 11 CVCA_Eng.doc
  • 3. the Investee Enterprise to go to public on domestic or foreign stock exchanges when it meets the listing conditions under laws and administrative regulations. The FIVCIE will then be able to transfer its equity interest in the Investee Enterprise on the stock market; and 4. other mechanisms permitted by Chinese laws and administrative regulations. The specific procedures of how an Investee Enterprise could buy back its equity interest held by a FIVCIE will be separately formulated by the Examination and Approval Authority together with the Registration Authority. Article 35 FIVCIEs shall declare their income and pay taxes pursuant to State tax law. In the case of a Non-Legal Person FIVCIE, each investor may declare its income and pay its enterprise income tax separately pursuant to relevant provisions of State tax law. Alternatively, the Non-Legal Person FIVCIE may, by application and upon approval, elect to jointly calculate and pay income tax for all investors pursuant to tax laws. The specific administrative procedures on collection of enterprise income tax of a Non-Legal Person FIVCIE will be separately issued by the State Administration of Taxation. Article 36 Profits and other gains that the foreign investors of a FIVCIE are entitled to receive may be remitted offshore by the FIVCIE using funds deposited in its foreign exchange account or foreign exchange funds purchased from designated foreign exchange banks based on a profit distribution resolution adopted by the joint management committee or the board of directors, auditor's report issued by an accounting firm, foreign investors' proof of inflow of investment funds and capital contribution verification reports, evidence of payment of taxes and the related tax returns (where tax exemption or reduction treatment is applicable, certification documents issued by relevant tax departments to such effect shall also be provided). Return of the original capital contributions received by foreign investors from a FIVCIE may be remitted out of China by purchase of foreign exchange by application in accordance with the law. The opening and use of foreign exchange accounts, capital adjustments, and other foreign exchange receipts and payments of a Corporate FIVCIE shall be handled in accordance with existing provisions on foreign exchange administration. Provisions on foreign exchange administration concerning Non-Legal Person FIVCIEs will be formulated separately by the State Administration of Foreign Exchange. Article 37 Investors shall agree on a term for the FIVCIE in the contract and the articles of association of the FIVCIE, which generally shall not exceed 12 years. Upon expiration, the term may be extended if approved by the Examination and Approval Authority. Upon approval by the Examination and Approval Authority, a FIVCIE may be 12 CVCA_Eng.doc
  • dissolved before its term expires and its contract and articles of association will be terminated early. No such approval is required, however, if all investments of a Non- Legal Person FIVCIE have been sold or otherwise disposed of, the debts of such FIVCIE have been discharged, and the remaining assets of such FIVCIE have been distributed to its investors, but a written notice of any such dissolution shall be given to the Examination and Approval Authority for its record by such FIVCIE at least 30 days before the dissolution is to become effective. All dissolving FIVCIEs shall be liquidated in accordance with relevant regulations. Article 38 A FIVCIE shall apply to the original Registration Authority for cancellation registration within 30 days after completion of its liquidation. When applying for cancellation registration, the following documents shall be submitted and the FIVCIE shall be responsible for the authenticity and the effectiveness of such documents: 1. the application for cancellation registration signed by chairman of the board, the responsible person of the joint management committee, or the responsible person of the liquidation committee; 2. a resolution of the board of directors or the joint management committee; 3. the liquidation report; 4. the certificates for cancellation registration issued by tax authority and customs; 5. the approval documents or the filing registration certificates issued by the Examination and Approval Authority; and 6. other documents required to be submitted pursuant to the provisions of laws and administrative regulations. A FIVCIE will terminate upon check and approval by the Registration Authority of its cancellation registration. The joint and several liability assumed by the requisite investor(s) of a Non-Legal Person FIVCIE shall not be exempted as a result of termination of such FIVCIE. PART SEVEN: EXAMINATION AND REGULATION Article 39 Investment activities by FIVCIEs within China shall be handled with reference to the provisions of the Guiding the Direction of Foreign Investment Provisions and the Foreign Investment Industrial Guidance Catalogue. Article 40 When investing in any Investee Enterprise that falls into the encouraged or permitted industry category, a FIVCIE shall file a report for record with the 13 CVCA_Eng.doc
  • authorized department in charge of foreign trade and economic cooperation of the place where such Investee Enterprise is located. The authorized local department in charge of foreign trade and economic cooperation shall complete a filing and verification procedure and issue to such Investee Enterprise a Foreign-invested Enterprise Approval Certificate within 15 days of receipt of the materials filed with it. The Investee Enterprise will then apply to register with the Registration Authority on the strength of such Approval Certificate. The Registration Authority will decide whether it will register or refuse to register in accordance with relevant laws and administrative regulations. Upon approval for registration, a Foreign-invested Enterprise Legal Person Business License will be issued. Article 41 When investing in any Investee Enterprise that falls into the restricted industry category, a FIVCIE shall apply to the provincial department in charge of foreign trade and economic cooperation where the proposed Investee Enterprise is located and submit the following documents: 1. a declaration from the FIVCIE that it has adequate amount of funds for the proposed investment; 2. a copy of the FIVCIE's approval certificate and business license; and 3. the contract and articles of association of the proposed Investee Enterprise that the FIVCIE has signed with other investors in the proposed Investee Enterprise. The provincial-level department in charge of foreign trade and economic cooperation shall, within 45 days of receipt of such application, decide by a written response whether or not it approves the proposed investment. If the investment is approved, a Foreign-invested Enterprise Approval Certificate will be issued. The Investee Enterprise shall then apply for registration with the Registration Authority based on such written response and the Foreign-invested Enterprise Approval Certificate. The Registration Authority will decide whether it will register or refuse to register in accordance with relevant laws and administrative regulations. For any investment authorized for registration, a Foreign-invested Enterprise Legal Person Business License will be issued. Article 42 Investments by FIVCIEs within China in service areas that are gradually liberalized for foreign investments shall be examined and approved in accordance with relevant State regulations. Article 43 Any increase or transfer by a FIVCIE of its investments in any Investee Enterprise shall also be handled in accordance with the procedures set forth under Articles 40, 41, and 42. Article 44 A FIVCIE shall file a report with the Examination and Approval Authority for its record within one month after its completion of the applicable procedures set forth under Articles 40, 41, 42 and 43. 14 CVCA_Eng.doc
  • Article 45 Each FIVCIE shall in addition file a report in each March on its fund raising and utilization information for the last year with the Examination and Approval Authority for its record. The Examination and Approval Authority shall, within five working days after receipt of such documents filed by a FIVCIE for its record, issue to the FIVCIE a filing registration certificate which will constitute one of the mandatory documents when the FIVCIE is called for the joint annual inspection. Failure to comply with the filing requirements set forth in this article will be penalized accordingly by the Examination and Approval Authority after consultation with relevant departments of the State Council. Article 46 An Investee Enterprise will be entitled to the preferential treatments available to foreign-invested enterprises if the actual capital contribution held by foreign investors of the investing FIVCIE or the combined equity percentage of foreign investors of such FIVCIE and all other foreign investors is at least 25% of the Investee Enterprise's registered capital. Otherwise, the Investee Enterprise will not be entitled to the preferential treatments available to foreign-invested enterprises. Article 47 If an established domestic enterprise has Chinese natural person investor(s) and is converted into a foreign-invested enterprise as a result of a FIVCIE's investment, such Chinese natural person(s) may continue to keep its or their shareholder(s)' status as Chinese natural person(s) in such enterprise. Article 48 If any responsible person of the management and operating structure of a FIVCIE or any responsible person of a venture capital investment management enterprise is engaged in illegal practice, liability will be pursued in accordance with the law; and in serious cases, such persons shall also be prohibited from conducting venture capital investments and the related investment management activities. PART EIGHT: SUPPLEMENTARY PROVISIONS Article 49 Establishment of FIVCIEs in mainland China by investors from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan area shall be handled with reference to these Rules. Article 50 The Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration of Industry and Commerce, the State Administration of Taxation, and the State Administration of Foreign Exchange shall be responsible for the interpretation of these Rules. Article 51 These Rules shall take effect as of March 1 2003. The Tentative Rules on Establishment of Foreign-invested Venture Capital Investment Enterprises jointly issued by the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, and the State Administration for Industry and Commerce on August 28 2001 shall be repealed simultaneously. 15 CVCA_Eng.doc
  • (Provided by Debevoise & Plimpton; for questions or further assistance, please contact Richard Xu (徐 云 律师) at +852-2160-9851 or rxu@debevoise.com) 16 CVCA_Eng.doc