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The Conditions and Procedures for Increasing and Reducing Investment by Foreign-capital Enterprises
In accordance with Chinese law, a foreign-capital enterprise within its term of business operations, having proper reasons, shall apply for downsizing production scale and adjusting the total amount of investment and registered capital to original examining and approving authority at the premise of not affecting the normal management and not encroaching the interests of creditors. After approval by original examining and approving authority and verification by the original registration authority, the foreign-capital enterprise can handle the registration of alteration, and submit to State Administration for Industry and Commerce for record.
The prohibitively conditions for applying for adjusting the total amount of investment and registered capital: there is a stipulation of minimum for registered capital in current laws and regulations: the adjusted registered capital is under the lawful amount of money; the enterprise has economic disputes and enters the judicial and arbitral procedures; there is a stipulation of minimum scale for production and management scales in the contracts and articles of association, the adjusted total amount of investment is less than the minimum scale; the contract of Sino-foreign cooperative ventures stipulates that the foreign party can recover its investment beforehand and the recovery is over.
The concrete procedure for applying for adjusting the total amount of investment and registered capital:
1. If a foreign-capital enterprise needs to adjust the total amount of investment and registered capital, it shall submit the resolution unanimously agreed by the board of directors and application signed by the board chairman to examining and approving authority. The reasons of downsizing production and management scale as well as the amount of adjusting the total amount of investment and registered capital should be detailed in the application, accompanied by the balance sheet verified by CPA, schedule of property, creditor name list and business license copy.
2. The original examining and approving authority shall give a preliminary reply whether agrees or not in written form within 30 days after receiving the aforementioned document. The foreign-capital enterprise shall notify the creditor within 10 days after the original examining and approving authority gives a preliminary reply on agreeing to adjust the total amount of investment and registered capital, and within 30 days make an announcement at least three times in the provincial above newspaper. The creditor has authority to ask that enterprise to pay off debt or provide a corresponding guaranty within 30 days of receiving the notification or within 90 days from the date the first announcement was published for the creditors who do not receive the notification.
3. After three announcements, the foreign-capital enterprise shall submit certificates, which the enterprise has published the announcement of downsizing its registered capital three times in newspaper, and the illustration for paying off debt or debt guaranty. The original examining and approving authority shall make a decision whether approves or not within 30 days after receiving the aforementioned documents. After making the approval decision, the original examining and approving authority shall send duplicates of the decision to the Administration for Industry and Commerce, Tax Administration or Customs.
4. Within 30 days after the application of adjusting the total amount of investment and registered capital approved by the original examining and approving authority, the foreign-capital enterprise shall register such changes with the Administration for Industry and Commerce with the regulations, and submit to State Administration for Industry and Commerce for record. In the event that as the original total amount of investment, the amount of equipment and raw material imported with duty-exemption surpass the reduced total amount of investment, the foreign-capital enterprise shall submit to the Customs to verify whether it needs to fill the duty.
We suggest the foreign-capital enterprise to consult the relevant government department or entrust a professional agency about the concrete details and procedures of applying for increasing and reducing investment.
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