The State Administration of Foreign Exchange of the People’s Republic of China (“SAFE”) is the principal gatekeeper for incoming and outgoing investment made in foreign currency. SAFE wields tremendous influence over capital inflows and outflows and, as such, the rules it promulgates can significantly affect inbound investments. Recently, SAFE issued Circular 19, the ‘Operating Rules for the Administration of Foreign Exchange in Financing and Round-trip Investment by Residents in China via Special-Purpose Companies’, an important addition to an existing body of rules and regulations of special importance to foreign investors.

Continue Reading New Developments for Foreign Special Purpose Companies and Round-Trip Investment

On March 31, 2009, the China Securities Regulatory Commission ("CSRC"), the nation’s securities watchdog, issued the Measures on Administration of Initial Public Offering and Listing on the Growth Enterprise Market (the "Measures"). The long-awaited Growth Enterprise Market (GEM) was finally launched when the Measures came into effect on May 1, 2009. GEM is a NASDAQ-style stock market designed to nurture cash-hungry, innovation-driven startup firms in China. The Measures require applicants to have a minimum 10 million yuan, or nearly 1.5 million U.S. dollars in accumulated net profit in the two years prior to a listing. In Comparison, an application to list on the main boards requires a minimum 30 million yuan in accumulated net profit in the three previous three years.

Continue Reading The New Chinese Growth Enterprise Market Is Launched — Stock Transfer Duties On “State-Owned” VC Firms and PE Funds?

In June 2009, the Chinese government promulgated a series of regulations strengthening supervision of asset restructuring regarding state-owned shareholders in listed companies. The regulations are: Notice on Regulating the Issues Concerning the Asset Restructuring between State-owned Shareholders and Listed Companies (the "Notice"); Interim Measures for the Administration of State-owned Shareholders’ Transfer of Their Shares of Listed Companies (the "Transfer Rules"); the Interim Provisions on the Administration of the Acceptance of Listed Companies’ Shares by State-owned Entities (the "Acceptance Rules"); and Interim Provisions on the Administration of the Marks of Listed Companies’ State-owned Shareholders (the "Marks Rules").

Continue Reading China Strengthens Supervision of State-Owned Asset Restructuring

In August 2008, in order to attract the private equity ("PE") investment in Shanghai, four governmental divisions of the Shanghai Municipality jointly issued the Notice on Business Registration and Other Issues of Equity Investment Enterprises ("Notice"), which regulates the categories, investors, forms, capital, and taxation of equity investment enterprises.

Continue Reading Shanghai Adopts Rules on Private Equity Investment

In June 2007, the Administration for Industry and Commerce of Zhejiang Province announced Measures on Administration of the Registration of Equity Contribution to Other Companies, which provided for the first time for a shareholder to use his equity interest in one company as a capital contribution to another company.  Subsequently, the Administration for Industry and Commerce of Shanghai Municipality promulgated a similar Measures on Registration of Equity to Other Companies under existing laws and regulations such as the Company Law and Regulations on Company Registration.  This article discusses issues related to such equity contribution.

Continue Reading Shareholder’s Equity as Capital Contribution to Other Companies

On August 6, 2008, the Regulations of the People’s Republic of China on the Management of Foreign Exchanges (“the Regulation”) completed an in-depth amendment process making four major changes to the duties of the State Administration of Foreign Exchange (SAFE) and rules related to the State’s foreign exchange system. The main principle is to introduce balanced management of inflow and outflow of foreign exchange funds and to leave room for further policies on capital outflow.

Continue Reading Four Major Changes Boost Reform of the Foreign Exchange System

On June 28, 2008, the Basic Rules for Corporate Internal Control (“Rules”) were jointly issued by the Ministry of Finance, the National Audit Office, the China Securities Regulatory Commission, the China Banking Regulatory Commission and the China Insurance Regulatory Commission. The Rules will take full effect on July 1, 2009 and initially affect only listed companies.

Continue Reading The New Chinese Corporate Internal Control Rules