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The Legal Issues on the Registered Capital of Foreign Investment Enterprises
The regulations on the registered capital of foreign investment enterprises in China are different with domestic companies'. This article will brief the legal issues related with the foreign investment enterprises paying registered capital from the minimum amount of the registered capital, the proportion of registered capital and total amount of investment as well as the time limit for contributing investment.
1. The minimum amount of the registered capital
According to Chinese law, different industries have different regulations concerning the minimum amount of the registered capital of a limited liability company in foreign investment enterprises. Among which, not less than Renminbi 500,000 Yuan if it primarily engages in production; not less than Renminbi 500,000 Yuan if it primarily engages in commodity wholesale; not less than Renminbi 300,000 Yuan if it primarily engages in commodity retail; not less than Renminbi 100,000 Yuan if it primarily engages in Scientific and technical development, consulting or service. The registered capital of other type of industries shall not be less than Renminbi 30,000 Yuan. The minimum amount of the registered capital of a joint stock limited company shall be Renminbi 10,000,000 Yuan.
In accordance with the related regulations, there are special requests for the minimum registered capital when foreign investors investing in some industries: The registered capital of retail-oriented jointly-operated commercial enterprises shall not be less than 50 million RMB, that of those in middle and western areas shall not be less than 30 million RMB; the registered capital of wholesale-oriented commercial enterprises shall not be less than 80 million RMB, that of those in middle and western areas shall not be less than 60 million RMB. The minimum registered capital for a foreign bank or an equity joint-venture bank shall be in amount of a freely convertible currency equivalent to RMB 300 million Yuan; and that for a foreign finance company or an equity joint-venture finance company shall be in amount of a freely convertible currency equivalent to RMB 200 million Yuan. The registered capital for a joint investment travel agency shall not be less than 5 million RMB. The registered capital of the joint venture engages in advertising industry shall not be less than 300,000 US dollars. The registered capital of joint venture foreign trade company shall not be less than RMB 100 million Yuan. The registered capital of international freight forwarder joint venture shall not be less than 1 million US dollars. The minimum amount of registered capital of foreign investment insurance company shall be 20 million RMB or in amount of a freely convertible currency equivalent to20 million RMB. Foreign investors establish investment companies, its registered capital shall not be less than 30,000,000 US dollars. The registered capital of establishment of foreign-funded joint stock companies limited shall not be less than 30,000,000 RMB.
2. The proportion of registered capital and total amount of investment
Besides The minimum amount of the registered capital, Chinese law also has following provisions on the proportion of registered capital and total amount of investment of the Chinese-foreign equity joint venture:
1). Where the total amount of investment of the Chinese-foreign equity joint venture is less than 3,000,000 U.S. dollars (including 3,000,000 U.S. dollars), the registered capital shall account for seven tenth of the total amount of investment at least.
2). Where the total amount of investment of the Chinese-foreign equity joint venture is between over 3,000,000 U.S. dollars to 10,000,000 U.S. dollars (including 10,000,000 U.S. dollars), the registered capital shall account for half of the total amount of investment at least. Where the total amount of investment is less than 4,200,000 U.S. dollars, the registered capital shall be not less than 2,100,000 U.S. dollars.
3). Where the total amount of investment of the Chinese-foreign equity joint venture is between over 10,000,000 U.S. dollars to 30,000,000 U.S. dollars (including 30,000,000 U.S. dollars), the registered capital shall account for two fifths of the total amount of investment at least. If the total amount of investment is less than 12,500,000 U.S. dollars, the registered capital shall be not less than 5,000,000 U.S. dollars.
4). Where the total amount of investment of the Chinese-foreign equity joint venture is over 30,000,000 U.S. dollars, the registered capital shall account for one third of the total amount of investment at least. If the total amount of investment is less than 36,000,000 U.S. dollars, the registered capital shall be not less than 12,000,000 U.S. dollars.
3. The time limit for contributing investment
Different from the domestic companies that shall contribute the registered capital before its registration, foreign investment enterprises can contribute the registered capital after its registration. The time limit for a foreign investor to make the investment contributions shall be clearly stipulated in the written application for the establishment of the foreign-capital enterprise and also in the articles of association of the enterprise. When contribution of capital shall be made in one single installment; all partners to the joint venture shall do so within six months upon the issuance of the joint venture's business license. When contribution of capital shall be made in several separate installments; the first installment from each joint venture partner shall be 15% of their respective agreed amounts of contribution. All joint venture partners shall put up their required amounts of capital for the first installment within three months upon issuance of the joint venture's business license. For the time limit of last installment, there have following stipulations: exclusively foreign-owned enterprises shall pay off the contribution of capital within 3 years. Joint equity and cooperative ventures with less than 500,000 U.S. dollars (including 500,000 U.S. dollars) registered capital, the contribution of capital shall be paid off within one year upon the issuance of the joint equity and cooperative venture's business license; the registered capital is between over 500,000 U.S. dollars to 1,000,000 U.S. dollars (including 1,000,000 U.S. dollars), the contribution of capital shall be paid off within a year and a half upon the issuance of the joint equity and cooperative venture's business license; the registered capital is between over 1,000,000 U.S. dollars to 3,000,000 U.S. dollars (including 3,000,000 U.S. dollars), the contribution of capital shall be paid off within two years upon the issuance of the joint equity and cooperative venture's business license; the registered capital is between over 3,000,000 U.S. dollars to 10,000,000 U.S. dollars (including 10,000,000 U.S. dollars), the contribution of capital shall be paid off within three years upon the issuance of the joint equity and cooperative venture's business license; the contribution of capital is over 10,000,000 U.S. dollars, the time limit of investment contributions shall be examined and approved by examining and approving authorities according to the actual situation.
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