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The Procedures and Documents for the Alteration of Investors’ Equities in Foreign-funded Enterprises
The procedure for the alteration of investors’ equities in foreign-funded enterprises mainly includes two steps:
1) Be approved by examination and approval departments.
2) Submit for alteration registration with registration departments. However, in case of alteration of the equities of a Chinese investor that has invested with State-owned assets, another procedure is necessary. Relevant departments in charge of valuation of State-owned assets shall evaluate the equities to be altered before being approved by examination and approval departments. Such evaluation shall also be verified by departments in charge of management of State-owned assets.
The equities are altered due to different reasons; the foreign-funded enterprise shall submit different documents to examination and approval departments. Because that agreed transfer of equities between investors in the enterprise and transfer of equities to other related enterprises or other transferees by an investor in the enterprise with agreement from other investors, the enterprise shall submit the following documents to examination and approval departments:
1. Application for alteration of equities of investors in the enterprise;
2. The original contracts and articles of association of the enterprise and agreements on their revision;
3. Duplicates of certificates of approval for the establishment of the enterprise and business licenses;
4. Resolutions of the board of directors of the enterprise on the alteration of equities of investors;
5. List of members on the board of directors after alteration of equities of investors in the enterprise;
6. Agreement on equity transfer reached between the transferor and the transferee and signed or confirmed in other written form by other investors;
7. Other documents required by examination and approval departments. Because that the alteration of equities of each investing party due to readjustment of registered capital of the enterprise agreed to by investors in the enterprise, apart from submitting the first, second, third, fourth and fifth item of aforementioned documents, the enterprise shall also submit agreements on alteration of equities reached between its investors to examination and approval departments. Because that ownership of equities of investors by pledgees or beneficiaries in accordance with legal terms or contracts that have been pledged by investors in the enterprise to creditors with agreement from other investors, the enterprise shall submit, apart from the first, second, third and fifth item of aforementioned documents, valid documents certifying ownership of the equities of the original investors by pledgees or other beneficiaries if the equities transferred are owned by pledgees or other beneficiaries. In case that ownership of equities by inheritors, creditors or other beneficiaries in accordance with law due to bankruptcy, dismission, cancellation, revocation, or death of an investor in the enterprise and inheritance of equities of the initial investor by a successor due to merge or split of investors in the enterprise, apart from the first, second, third and fifth item of aforementioned documents, valid documents certifying the ownership by pledgees of the equities of the original investors to examination and approval departments. In case of need for alteration of investors or equities due to failure on the part of an investor in the enterprise to perform investment duties as stipulated in enterprise contracts or in articles of association, with approval from departments in charge of examination and approval, the enterprise shall submit, apart from the first, second, third and fifth item of aforementioned documents, the following documents to examination and approval departments:
1.Report on asset verification presented by Chinese certified public accountants and the accounting firms where they work.
2.Documents certifying the observant party’s request for the breaching party to pay or complete payment of investment. In case of purchase of shares by new investors, certificates of legal inauguration of business and certificates of creditability of these new investors shall also be submitted to examination and approval departments. If the breaching party has paid part of the investment in line with the original contract and articles of association of the enterprise, relevant documents concerning liquidation of this part of investment shall also be submitted.
If a Chinese investor that has invested with State-owned assets intends to alter its equities, the enterprise shall submit the following documents to examination and approval departments:
1. Opinion of the department in charge of this Chinese investor about the alteration of the equities of this investor.
2. Report on asset evaluation presented by departments in charge of evaluation of State-owned assets.
3. Letter of verification of the above-mentioned report from departments in charge of management of State-owned assets.
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