Foreign-funded enterprises application procedures for Qingdao

Any investment project has to go through three procedures for approval -- project proposal (except for foreign-funded enterprises), feasibility study, and articles of association and contract.

1.Project proposal

The Chinese party of a foreign-funded joint venture needs to submit a project proposal and supporting documents to the examiner and can proceed to the next step after getting approval. The proposal has to include the following: basic information about the Chinese party, including name, brief description of production and operations, address, and legal advisor.

The purpose, meaning mainly concerning possible foreign exchange earnings from exports and the introduction of technology.

Basic information on the foreign party, including name, country of registration, nationality, address, name of legal advisor, and title.

Business scope and scale, with emphasis on the need for the project, domestic and overseas demand for its products, and major sales region.

Total investment, meaning the sum of fixed funds and working capital to be used for the joint venture project.

For investment mode and source of funds, it should include the amount of investment made by all parties and the composition of funds.

In technology and main equipment, it needs a description of the applicability and reliability of technology and equipment and a major technological and economic index, as well as an explanation of the need for and quantity and source of major raw materials, water, electricity and gas.

Describe the number and nature of personnel.

Explain the economic benefits and arrangement for foreign exchange receipt and disbursement.

The Chinese party also needs to submit the following documents for approval: Cooperation agreement of all parties involved

Foreign investor credit standing

Other relevant documents

2. Feasibility study

After the proposal is approved, the parties involved need to do a feasibility study and submit the results to the examiner for approval. The report should include the following:

Background information

Name, address and business scopes of the joint venture.

Basic information on all parties involved, including name, country of registration, address, title, nationality, legal advisor.

Total amount of investment and registered capital of the joint venture, including contribution ratio, terms, joint venture term, profit distribution, and loss assumption of all the parties;

Manufacturing arrangement, including domestic and overseas market forecasts and production capacity, and current operations or those under construction in China.

Material supply arrangements, including energy sources and transportation.

Project site selection.

Technology and technical selection process, including domestic and foreign equipment allocations.

Production organization, including number of staff, composition, source, and management.

Environmental pollution preparation, work safety, and hygiene.

Construction mode and scheduling.

Fund raising, including computation on input for workshop and equipment as equity.

Foreign exchange receipt and disbursement arrangement.

Analysis of technological and economic benefits.

In addition to the feasibility study, the parties involved need to submit the following:

Project proposal and approval.

Incorporation certificate from country of each party involved;

Domestic and overseas market demand forecast.

Opinion of government department on the raw materials and funding needed for the project;

Any other relevant documents.

The examiner will make a decision on whether or not to grant approval within 90 days from the date of receipt of the above materials.

3. Examination and approval of contract and articles of association

After approval of the foreign investment project proposal and feasibility study report, the parties to the joint venture shall sign the joint venture contract, formulate articles of association, and submit these documents to the examination and approval organ for approval.

4. The joint venture contract shall include the following information:

Name, country of registration, legal address and name, title and nationality of the legal representative of each party to the joint venture;

Name, legal address, tenet, business scope and scale;

Total investment, registered capital of joint venture, contribution amount, ratio, mode and term of each party to the joint venture as well as provisions for default on contribution and assignment;

Profit distribution and loss assumption among all the parties to the joint venture;

Composition of the board of directors; director quota allocation; responsibility, authority and employment of general manager, deputy general manager and other senior officials;

Main production equipment and technology employed and supplier information;

Raw materials purchases and product marketing strategy. Sales rate of products in China and overseas;

Arrangement of foreign exchange receipts and disbursements;

Financial, accounting and audit principles;

Regulations on labor management, salary, welfare and insurance;

Joint venture term, dissolution and liquidation;

Liability in event of breach of joint venture contract;

Plan and procedures for the resolution of disputes among the parties to the joint venture;

Language adopted by the contract and contract effectiveness conditions;

Attachments to the joint venture contract shall bear equal force as the contract.

5. Articles of association of the joint venture shall include the following information:

Joint venture name and legal address;

Joint venture tenet, business scope and term;

Name, country of registration, legal address, name, title and nationality of the legal representative of the parties to the joint venture;

Total investment, registered capital of joint venture, contribution amount, ratio, mode and term of each party to the joint venture, as well as provisions for default on contribution and assignment;

Composition, authority and rules of procedure of the board of directors; director's service term; the duties of the chairman and vice-chairman of the board;

Management organ; business rules; the duties, appointments and dismissals of the general manager, deputy general manager and other senior officials;

Procedures for the modification of the articles of association

Dissolution and liquidation;

Financial, accounting and audit system and principles;

6. The following documents shall be submitted to the examination and approval organ for the establishment of a Chinese-foreign equity joint venture:

Application form for the establishment of equity joint venture;

Feasibility study report prepared by all the parties to the joint venture;

Joint venture contract and articles of association executed by the authorized representative from all the parties of the joint venture;

List of chairman, vice-chairman of the board and directors designated by each party to the joint venture;

Written opinions of the competent department in charge of the Chinese party to the joint venture as well as that of the provincial, autonomous region and municipality government where the joint venture is located;

The above documents must be prepared in Chinese, and items 2, 3 and 4 may at the same time be prepared in a foreign language agreed to by all parties to the joint venture. Documents prepared in both languages shall bear equal force.

The examination and approval organ will make a decision on whether or not to grant its approval within three months from the date of receipt of the above materials.

7. The following documents shall be submitted to the examination and approval organ for the establishment of a Chinese-foreign contractual joint venture:

Project proposal for the establishment of the contractual joint venture and document of the competent department approving the proposal;

Feasibility report prepared by all parties to the joint venture and document of the competent department approving the proposal;

Cooperation agreement, contract and articles of association executed by the legal representative or authorized representative from each party;

Business license or registration certificate and credit standing of each party and effective identification of the legal representative. In case the foreign cooperator is a natural person, valid documents proving their identification, profile and credit standing shall be provided; List of chairman, vice-chairman, directors, and vice-director of members of the joint management committee as confirmed by all the parties through negotiation;

Other documents required by the examination and approval organ.

The above documents shall be submitted in Chinese except documents provided by the foreign cooperator as listed in item 4. For documents listed in items 2, 3 and 5, it is acceptable to submit at the same time documents in a foreign language agreed by all the parties;

The examination and approval organ will make a decision on whether or not to grant its approval within 45 days from the date of receipt of the all the required documents.

8. Foreign-funded enterprises to be established in China

An application shall be submitted to the examination and approval organ through the government at the county level or above where the prospective foreign-funded enterprise is to be established:

Application for the establishment of foreign-funded enterprise; Feasibility study report; Articles of association of foreign-funded enterprises; List of legal representatives (or candidates of the board of directors) of foreign-funded enterprise; Legal certification and credit standing certification of the foreign investor; Written reply by the local government at county level or above where the prospective foreign-funded enterprise is to be established; List of materials to be imported; Other documents required;

Documents in items 1 and 3 shall be made in Chinese, and documents in items 2, 4 and 5 may be prepared in a foreign language, corresponding Chinese translation must be attached.

In case a foreign-funded enterprise is to be established by two or more foreign investors, a copy of the executed contract shall be submitted to the examination and approval organ for recording.

The examination and approval organ will make a decision on whether or not to grant its approval within 90 days from the date of receipt of the all the documents required for the establishment of foreign-funded enterprise. Upon approval of the foreign-invested project contract and articles of association, an approval certificate will be issued indicating the ultimate completion of the project examination and approval procedures. The parties to the foreign-funded project shall, within 30 days after the approval of the contract and articles of association, proceed to the registration authority to undergo registration formalities and receive business licenses.