Newsletter
REGULATIONS ON FOR-EIGN-FUNDED INVESTMENT COMPANIES
On 10 June 2003 the PRC Ministry of Commerce promulgated its Regulations on the Establish-ment of Foreign-Funded Investment Companies, which took effect on 10 July. Under the regula-tions, foreign investors (including investors from Hong Kong, Macao and Taiwan) may set up limited-liability companies within the PRC to carry on direct investment business. Such companies may be established either as wholly owned subsidiaries or as joint ventures with Chinese investors, but they must meet the con-ditions set out in the regulations, and may only carry on investment business within the scope permitted by the regulations.
When a foreign investor or its wholly owned subsidiary sets up an investment company, the foreign investor must provide a letter guaran-teeing payment of the registered capital of the company invested by the investment company. The regulations also define the form, qualifying conditions, and business scope of enterprises in the PRC in which such investment company may invest, and the scope of services that it may provide to its invested enterprises. In addition to the above substantive content, the regulations define the procedures for setting up an invest-ment company.