APPROVAL CHANGED TO FILING FOR THE RECORD
Oct. 2016

The Standing Committee of the National People’s Congress abolished the approval requirement for foreign projects in China (FIEs, including wholly foreign-owned enterprises and joint ventures) in September.  No longer do such projects have to undergo the time-consuming and sometiems costly approval process, unless they fall within a negative list (discussed below).  Projects not on the negative list need only make a simplified record filing through an online system no later than 30 days after issuance of the Business License..

The Ministry of Commerce (MOFCOM) and the National Development and Reform Commission published the long-awaited Administrative Measures for Record Filing of Establishment and Change of Registration of Foreign Invested Enterprises (Circular 22) on October 8th, complementing the Notice on Registration of Foreign Invested Enterprises after Carrying Out Record Filing, issued by the State Administration of Industry and Commerce (AIC).  While these regulations provide substantial assistance, applicants are experiencing a temporary period of confusion and delay in some locations.  Local investment commissions (couterparts of  MOFCOM) refuse to issue approval certificates, but some AICs refuse to issue Business Licenses without such certificates, and both organizations are seeking further guidance from higher levels within their agencies.

When implemented, however, removal of the approval requirement will substantially speed up the application and amendment process for most foreign-invested companies.  Taken together with the State Council’s descision to consolidate company licenses, formerly 3 into 1 and now 5 into 1 (combining the organization code, tax registration, statistics registration and social insurance certificates into the business license), most of the former complex and time-consuming business registrations will be eliminated as separate steps.  (Import/export companies and companies operating in certain industries will still require additional licenses specific to their activities.)

The negative list has not been issued. The recently published  Circular 22 appears to indicate no list will be issued for the time being.  Instead investment projects that require approval will be determined by reference to the catalogs of industries that are restricted or prohibited to foreign investment, and industries in the encouraged catalog with restrictions on foreign investment or control.  Industries that fall within these catalogs and categories still require MOFCOM approval, as do all foreign acquisitions of domestic enterprises.

As a caveat, the new application process is likely to follow the former pattern in at least two respects:  1) most currently required documents and the time-consuming legalization process will remain as they are still required for registration with the AIC, and 2) even though the record filing can be submitted to the local counterpart of MOFCOM up to 30 days after the business license is issued, applicants are advised to make the record file first to obtain a certificate indicating to the AIC that MOFCOM has no objections to the application.

If you have questions or would like assistance complying with new regulations in China, please contact Allan Marson at allan@marsonlaw.com or +1 650-387-7038 for a complimentary consultation.