ChinaFIG investment advisors provide guidance to organizations on China policies related to China investments, China joint ventures, and China mergers & acquisitions.
Foreign Invested Enterprise Treatment - Article 9, Order #10
If a Foreign Party’s portion of registered capital of the Foreign Invested Enterprise (FIE) created from the acquisition is more than 25% of the company, the company will receive FIE treatment. If the Foreign Parties portion of the registered capital of the FIE created is less then 25% of the company, the company will not receive FIE treatment and any foreign loans incurred must be processed according to the rules governing foreign loans incurred by non-FIEs, unless otherwise allowed by laws or regulations. The approval and examination administration issues such companies a FIE or Certificate of Approval (COA), which will include the phrase stating “the foreign investment ratio is less than 25%”. The registration authority shall issue the Business License and the State Administration of Foreign Exchange shall issue the Foreign Exchange Certificate, also indicating “the foreign investment ratio is less than 25%”.
Being acquired by a Domestic Company or individual/related Party of the Domestic Company, in the name of a overseas/foreign company which was formed outside of China will not be deemed a FIE. If however, the overseas/foreign company increases the registered capital of the Domestic Company by 25%, FIE treatment could be enjoyed.
The ability of a Chinese listed company to receive FIE treatment must be in accordance with other state provisions.