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Regulations of Shanghai Regarding Application and Approval of Sino-foreign Equity and Contractual Joint Ventures and Wholly Foreign-Owned Enterprises

(Effective Date:1986.08.01--Ineffective Date:) 


(Promulgated on July 11, 1986 by Shanghai Municipal People's Government)

CHAPTER I. GENERAL PRINCIPLES

Article 1. In order to expand economic cooperation and technical exchanges with foreign countries, and to facilitate the establishment in the city of Shanghai between Chinese and foreign investors of joint ventures with Chinese and foreign investment, coproduction joint or wholly foreign-owned enterprises (hereunder called "joint or foreign enterprises") the following regulations are hereby formulated according to China's laws and regulations concerned and in connection with the actual conditions existing in the Shanghai Municipality.

Article 2. Chinese and foreign investors should choose investment projects according to the orientation and overall planning of the Shanghai municipality under which foreign capital and technology are to be imported.

Article 3. With the exception of projects that, according to State regulations, should be submitted for approval by responsible departments under the State Council, all other applications for the establishment of the "joint or foreign enterprises" in the Shanghai Municipality should be examined and approved by Shanghai's Municipal Foreign Economic and Trade Commission (MFETC).

CHAPTER II. ESTABLISHMENT OF JOINT VENTURES WITH CHINESE AND FOREIGN INVESTMENT

Section 1. Compilation and Submission of Project Proposal 

Article 4. Chinese or foreign investors can either do their own selection of partners for joint investment or indirectly through the introduction of advisory agencies that have been approved by the MFETC, and sign a letter of intent on the basis of the information available on the prospective partners' respective scope of business and credit standing.

Article 5. After having decided on their intention to cooperate, Chinese and foreign investors should make a preliminary feasibility study of the joint venture project. Then, the Chinese investor(s) will compile the project proposal, and after forwarding it to the bureau concerned or to the district or county people's government for signature and comments, the proposal will then be passed on to the MFETC for examination and approval. The Commission's decision (approval or disapproval) will be given within 30 days of the receipt of the proposal.

Article 6. Before approval of the project, both the Chinese and foreign parties must not sign any binding documents.

Article 7. When a joint venture project has two or more Chinese investors who belong to two or more responsible departments, only one department will be designated by the MFETC as the responsible department for the project.

Article 8. Approval given to project proposal will be effective for one year. If it is necessary to extend the effective period, investors should forward a written application to the examination and approval organization one month before the expiration date. The extension cannot be more than half a year. If the designated period is over and there is no application for delay, the project proposal will automatically become null and void.

Section 2. Compilation and Submission of Feasibility Study Report, Contract and Regulation Rules 

Article 9. After approval of project proposal, Chinese and foreign investors should make a feasibility study of the joint venture project to ascertain specifically matters concerning funding, construction site, equipment, raw materials, marketing, labor and wages, balance of foreign exchange and all the necessary ancillary works to match the infrastructural facilities, for which the signature and comments should be obtained from the department concerned.

Article 10. The Chinese party to the joint venture is responsible for submitting the jointly compiled feasibility study report, and after signing the contract and articles of association that the two parties have signed to the responsible bureau, district or county people's government for signature and comments, which, in turn, will be forwarded to the MFETC for examination and approval. After receival of the feasibility study report and contract, The Commission's decision (approval or disapproval) is to be given within 30 days of the receipt of the said report, contract and articles of association.

Section  3. Application for Issuance of Approval Certificate

Article 11. When the Chinese and foreign investors apply for the issuance of the approval certificate, the application report may be forwarded by the Chinese investor(s) to the MFETC to be examined and approved. The application should be accompanied by the following documents:

(1) Legal certificates of the Chinese and foreign investors;

(2) Approved project proposal;

(3) Approved feasibility study report, contract and articles of association (including letter(s) of authorization);

(4) Name list of the board of directors and high-ranking management personnel.

Article 12. The MFETC is to issue the approval certificate within 10 days after receipt of the application.

CHAPTER III. ESTABLISHMENT OF SINO-FOREIGN COPRODUCTION ENTERPRISES

Article 13. The application and approval procedure or setting up Sino-foreign coproduction enterprises is handled with reference to the articles concerned in Chapter 2 of the present regulations.

CHAPTER IV. ESTABLISHMENT OF WHOLLY FOREIGN-OWNED ENTERPRISES

Article 14. Foreign investors wishing to establish wholly -owned enterprises should entrust Chinese agencies approved by the Municipal Foreign Economic and Trade Commission provide advisory service to foreign companies and individuals to handle such matters as relates to application, submission and approval.

Article 15. After preliminary examination of the project proposal by the MFETC, the proposal will be forwarded to the responsible department concerned in the State Council for examination and approval.

Article 16. After approval of the project proposal, foreign investors should refer to the foregoing Articles 6 and 11, and submit the documents concerned to the MFETC, which, in turn, will pass the documents on to the responsible department concerned in the State Council that examines, approves and issues the approval certificate.

CHAPTER V. SUPPLEMENTARY ARTICLES

Article 17. The Chinese and foreign investors should, on evidence of the approval certificate, register with, apply for a business license from the Municipal Administration for Industry and Commerce within 30 days of the receipt of the approval certificate.

The date on which the business license is issued is the date on which the said enterprise is formally established for business.

Article 18. Where the contract and articles of association have each a corresponding foreign language version, it should be submitted together with the Chinese language version. The Chinese language version, however, is the standard one for examination and approval.

Article 19. The specific requirements and the form of the project proposal and the feasibility study report are prescribed by the MFETC.

Article 20. These regulations are also applicable to overseas Chinese investors, and to investors from Hongkong and Macao.

Article 21. The specific application of these regulations will be explained by the MFETC.

Article 22. These regulations have been adopted by the Standing Committee of Shanghai's People's Congress and will come into force on August 1, 1986.

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