Hui Ye Law Firm

17/07/2024

Hui Ye Legal Briefing | Foreign Investment Law 2024

In order to keep abreast of legislative developments in the relevant professional and industry areas of the Specialized Committees, the Company Law and Cross-Border Investment Committee and the International Commercial Dispute Resolution Committee of Hui Ye Law Firm regularly publish new law alerts (Weekly Update) for internal and external reference only.

Contents

I.Foreign Investment Law-Related Releases

a.Ministry of Finance Issues Circular on Relevant Tax Policies on Temporary Inbound Repairs on a Pilot Basis in the China (Shanghai) Free Trade Pilot Zone

II.Corporate Law-Related Releases

a.The State Council Issues Regulation of the State Council on the Implementation of the Company Law of the People's Republic of China on the Registration and Management System of Registered Capital

b.Shanghai Administration for Market Regulation Issues Implementation Plan of the One-Stop on Changes in Enterprise Information

III.Dispute Resolution Related Releases

a.The Supreme Court Issues Several Provisions of the Supreme People's Court on the Application of the Time Effect of the Company Law of the People's Republic of China

b.Shanghai Judicial Administration Issues Administrative Measures for Overseas Arbitration Institutions Setting Up Business Offices in Shanghai

IV.The Pharmaceutical Industry-Related Releases

a.NMPA releases Guiding Principles for On-site Inspection of the Code of Practice for the Quality Management of Medical Devices (Draft for Public Comments)

b.NMPA Issues Notice on Trial Implementation of Submission of Electronic Declaration Information for Drug Registration by Network Transmission

I. Foreign Investment Law-Related Releases

a. Ministry of Finance Issues Circular on Relevant Tax Policies on Temporary Inbound Repairs on a Pilot Basis in the China (Shanghai) Free Trade Pilot Zone

Name: Circular on Relevant Tax Policies on Temporary Inbound Repairs on a Pilot Basis in the China (Shanghai) Free Trade Pilot Zone

Type: Normative legal documents

Competent Authority: Ministry of Finance of the People’s Republic of China

Release Date: July 2, 2024
Effective Date: July 2, 2024

[Main Content]

1. Goods from abroad temporarily permitted to enter the pilot region for repair are bonded, and those that are reshipped out of the country are exempted from customs duties, import-related value-added tax, and consumption tax; if the goods are not reshipped for domestic sale, they are subject to the corresponding taxes and fees per the provisions of the law. However, repairing goods that are prohibited from import or export by the State is strictly prohibited.

Source:

https://gss.mof.gov.cn/gzdt/zhengcefabu/202407/t20240702_3938554.htm

II. Corporate Law-Related Releases

a. The State Council Issues Regulation of the State Council on the Implementation of the Company Law of the People's Republic of China on the Registration and Management System of Registered Capital

Name: Regulation of the State Council on the Implementation of the Management System for the Registration of Registered Capital under the Company Law of the People's Republic of China

Type: Administrative Regulation

Competent Authority: State Council

Release Date: July 1, 2024
Effective Date: July 1, 2024

[Main Content]

1. The official draft of the Regulation removes the transition period from 2024 to 2027 as set out in the draft for comments issued in February of this year. However, this still requires companies to adjust the remaining contribution period to no more than five years by 30 June 2027.

2. The new addition to the official draft allows the Company Registration Authority to publish a notice for companies that have been suspended, ordered to close, or revoked for three years and have not registered for deregistration. Relevant creditors and other interested parties have the right to object; the deregistration will be carried out if no objections arise. In addition, listed companies are required to establish an “audit committee” on the board of directors and stipulate their specific duties and scope of work in the company's Articles of Association.

3. The official draft specifies that for shareholders violating the period of contribution or companies failing to disclose information following the law, penalties will be imposed under the Company Law and the Provisional Regulations on Enterprise Information Publicity.

Source:

https://www.gov.cn/zhengce/content/202407/content_6960376.htm

b. Shanghai Administration for Market Regulation Issues Implementation Plan of the One-Stop on Changes in Enterprise Information

Name: Implementation Plan of the One-Stop on Changes in Enterprise Information

Type: Normative legal documents

Competent Authority: Shanghai Administration for Market Regulation

Release Date: July 4, 2024
Effective Date: July 4, 2024

[Main Content]

1. After the change of enterprise registration information, the seal engraving record, tax-related matters, social insurance registration, and housing provident fund, enterprise contribution registration information will be changed automatically without requiring enterprises to apply to the relevant departments or confirm separately.

2. If the basic deposit account information needs to be changed, the system will share the filled information with the bank proactively and provide an appointment service for the enterprise to change the account.

Source:
https://scjgj.sh.gov.cn/152/20240704/2c984ad69072df2f01907bb64ad43495.html

III. Dispute Resolution Related Releases

a. The Supreme Court Issues Several Provisions of the Supreme People's Court on the Application of the Time Effect of the Company Law of the People's Republic of China

Name: Several Provisions of the Supreme People's Court on the Temporal Effect of the Application of the Company Law of the People's Republic of China

Type: Judicial interpretation

Competent Authority: The Supreme People’s Court

Release Date: June 30, 2024
Effective Date: July 1, 2024

[Main Content]

1. The judicial interpretation follows the principle of retroactivity of the law, clarifies the general rules and favorable retroactivity rules for the application of the old and new laws, and provides detailed judicial guidelines for the convening procedures of shareholders' meetings, both joint and several liabilities for the company's foreign investment, liquidation liability, and other specific controversial situations.

Source:：
https://www.court.gov.cn/fabu/xiangqing/436481.html

b. Shanghai Judicial Administration Issues Administrative Measures for Overseas Arbitration Institutions Setting Up Business Offices in Shanghai

Name: Administrative Measures for Offshore Arbitration Institutions to Establish Business Offices in Shanghai

Type: Normative legal documents

Competent Authority: Shanghai Judicial Administration

Release Date: July 1, 2024
Effective Date: August 1, 2024

[Main Content]

1. Non-profit arbitration institutions from overseas, Hong Kong, Macao, and Taiwan region, as well as arbitration and dispute resolution institutions under international organizations in which China participates meets certain conditions, may apply to the Shanghai Judicial Administration to register and set up a business office in Shanghai to carry out relevant foreign-related arbitration business.

Source:：https://sfj.sh.gov.cn/2020jcgk_gfxwj/20240701/7b6f035ddb9540d289efaf0b3fe69258.html

IV. The Pharmaceutical Industry Related Releases

a. NMPA releases Guiding Principles for On-site Inspection of the Code of Practice for the Quality Management of Medical Devices (Draft for Public Comments)

Name: Guiding Principles for On-site Inspection of the Code of Practice for Quality Management of Medical Devices (Draft for Public Comments)

Type: Draft for public comments

Competent Authority: National Medical Products Administration (NMPA)

Release Date: June 26, 2024
Effective Date: July 15, 2024

[Main Content]

1. Provides drug regulatory authorities with on-site verification standards for medical device enterprises after licensing and filing and dividing inspection results into three levels: (1) “pass inspection,” (2) “rectify within a certain period” and (3) “fail inspection.” This covers key aspects such as the establishment of a quality management system, the implementation of a quality responsibility system, personnel training, and the condition of facilities and equipment.

Source：
https://www.nmpa.gov.cn/xxgk/zhqyj/zhqyjylqx/20240627174834180.html

b. NMPA Issues Notice on Trial Implementation of Submission of Electronic Declaration Information for Drug Registration by Network Transmission

Name: Notice on Trial Implementation of Submission of Electronic Declaration for Drug Registration by Network Transmission

Type: Normative legal documents

Competent Authority: National Medical Products Administration

Release Date: July 1, 2024
Effective Date: July 1, 2024

[Main Content]

1. The Drug Review Center of the NMPA has implemented on a trial basis the network transmission of electronic declaration information for drug registration. During the trial period, applicants may choose network transmission or CD-ROM submission according to the size of the information, after which the submitted electronic declaration information will be verified following the "Verification Standards for Electronic Declaration Information," or the "eCTD Verification Standards", and qualified information will be received for registration.

Source：
https://www.cde.org.cn/main/news/viewInfoCommon/5cb8e4c325ebec432739bfd8346eec96

16/07/2024

Part three of Foreign Company Establishment Process in China

Introduction of employee recruitment and company operation in China

16/07/2024

Part two of Foreign Company Establishment Process in China

Introduction of registration process and tax registration regard company setting up in China

16/07/2024

Part one of Foreign Company Establishment Process in China

24/02/2016

PART V OF A 5 DAYS SERIES!!

INSTALMENT OF

Specifically, the board of directors should have directors from the Chinese party and practice the mechanism of chairman and vice chairman, or at least include the Chinese party in the board of directors regardless of the reason for, purpose of and proportion of the Chinese party’s shareholding. Correspondingly, shareholding incentives should be in line with seats of board of directors. But the second major foreign shareholder holding thirty or forty percentage of shares only has one seat while employee shareholder holding only four or five percentage of shares have to be included in the board of directors according to law and may act as vice chairman if strictly pursuant to laws.

Obviously, the major shareholder and the second major shareholder will question: is this fair and reasonable? If the seats of directors are not formed via agreement but created by law, will it cause potential risks in follow-up corporate governance? By the way, if the joint stock companies in the capital market become Sino- foreign companies due to equity transfer, then whether their board of directors should be restructured pursuant to Article 6 of Sino-Foreign Equity Joint Venture Enterprise Law? Maybe the Foreign Investment Law can be the terminator of such mechanism.

23/02/2016

PART IV OF A 5 DAYS SERIES!!



Just as it is unreasonable to have restrictions on the entity of the Chinese party, it is also unreasonable to make the chairman and vice-chairman mechanism compulsory. It is obviously a historical problem. But the two problems are not at the same level. The former may directly affect the achievement of attracting foreign investment while the latter cause inconvenience to corporate governance. As for the former, relevant government authorities shall act against the legislation law and try to get over it in a roundabout way. As for the latter, whether it is reasonable or not, approval and registration authorities strictly adhere to the provisions.

There has been many such kinds of cases. Wholly foreign owned companies have practiced similar employee shareholding plan as incentives for their core Chinese employees. As the employees are apparent shareholders, the nature of the companies changes from wholly foreign owned companies into Sino-foreign equity joint ventures. In order to effect particular changes, the company shall prepare various standard and official forms such as joint venture contracts as required by the approval and registration department. The major shareholder allocates a small portion of shares to employees for the purpose of financial incentives and on the part of employees they only expect the financial profits of the shareholding. In respect of the share transfer, the company has neither taken into consideration the resetting of corporate governance nor the restructuring of the board of directors. Then when effecting change and registration of particulars, the company encounters problems in restructuring and appointment of chairman and vice- chairman. The approval and examination and registry authorities hold that since the wholly owned foreign company becomes an equity joint venture, it shall be subject to Article 6 of Sino- Foreign Equity Joint Venture Enterprise Law. To be continued…

22/02/2016

PART III OF A 5 DAYS SERIES!!



The first paragraph of Article 6 under Sino- Foreign Equity Joint Venture Enterprise Law of the P.R.C. stipulates: “if an EJV has a board of directors, the number of its members and composition shall be determined in the contract and the articles of association through consultation by all parties to the EJV. The appointment, dismissal, and replacement of the members shall be at the discretion of the parties to the EJV. The chairman and vice chairman shall be determined through consultation by the parties to the EJV or elected by the board of directors. Where the chairman is from one of the Chinese and Foreign Parties to the EJV, the vice chairman shall then be from the other. The board shall make decisions on major issues of the EJV based on the principles of equality and mutual benefit.”

This Article gives rise to a practical issue, i.e. whether the board of directors of an EJV should have a vice chairman and chairman at the same time and whether they should be from different parties or not, i.e. if the chairman is from one party then the vice-chairman should be from the other party.

In practice, such question on the establishment and appointment of a chairman and vice-chairman is not so prominent when two parties of an EJV are both very strong. For a long time, restrictions on domestic investors prescribed in Sino-Foreign Equity Joint Venture Enterprise Law (only restricted to companies and economic organizations) make this detailed question not so prominent. However, it should be noted that some departments and local regulatory documents make breakthrough on restrictions on investment entities. Regardless of the validity and legality of such break-through, it is already put into practice and has been acknowledged (including companies intending to go public).
Therefore, Chinese parties of EJVs’ are more diverse and natural person as the Chinese party provide more reasons for joint ventures. Mechanisms such as employee holding shares are more convenient in EJV. In the context of such diversity, joint ventures are like other common companies and their shareholders may hold shares for diverse reasons and purposes, including for the purpose of sharing the bonus other than operating and controlling the companies. Therefore, a problem comes out: is it necessary to have both the chairman and the vice chairman so as to check and balance power?

19/02/2016

PART II OF A 5 DAYS SERIES!!



The “Three Laws Governing Foreign Investment” (namely “Sino-Foreign Equity Joint Venture Enterprise Law of the P.R.C.”, “Sino-Foreign Cooperative Joint Venture Enterprise Law of the P.R.C.”, and “Wholly Foreign-Owned Enterprise Law of the P.R.C.”) were formulated in 1970s or 1980s. Though they have been revised again and again, its inborn deficiency makes it hard to keep abreast of the time.

The roughness and simplicity of “Three Laws Governing Foreign Investment” is more conspicuous when contrasted to the largely revised Company Law. The new Company Law abolishes the super national treatment for foreign investments under the “Three Laws Governing Foreign Investment”. But due to applicability, those modern commercial norms and criteria stipulated in the Company Law are not fully and effectively enjoyed by the foreign investment enterprises, including the separation of the decision-making right, executive right and supervision right (the three powers separation), etc.

In respect of legislation, “Three Laws Governing Foreign Investment” take a stance that the special protection and care should be given to the Chinese party through intervention of the planning economy system as the Chinese party and the foreign party are opposed to each other. As the Wholly Foreign-Owned Enterprise Law only has one party, intervention of such system is much fewer and therefore well merged with the Company Law. In the other two laws, there remain the special provisions such as the Board of Directors being the highest authority, which makes the no-different Sino-foreign companies far different from what Company Law stipulates. Among all those discrepancies, Article 6 of Sino-Foreign Equity Joint Venture Enterprise Law of the P.R.C. was one of those confusing provisions.

18/02/2016

PART I OF A 5 DAYS SERIES!!

< WHO HAS THE SAY IN THE COMPOSITION OF BOARD OF DIRECTORS OF EQUITY JOINT VENTURES?>

By Emma Zhang

As market economy develops till today, foreign investments of various kinds are no longer alien to domestic enterprises. We not only embrace foreign investments, but also walk out to invest overseas. But the legal system that regulates the projects involving foreign parties in China lags far behind. Instead of focusing on the entry administration, security examination and other macro aspects, the regulatory authorities meddle in the micro aspects, which sometimes causes confusion on the contrary.

17/02/2016

< HUI YE PARTER WAS INVITED TO GIVE A KEYNOTE SPEECH AT THE STATE-OWNED ENTRERPRISES SEMINAR INITIATED BY THE STATE-OWNED ASSETS SUPERVISION AND ADMINISTRATION COMMISSION OF CHENGDU>

The recently held Keynote Speech at the State-owned Enterprises Seminar attracted more than 50 attendees, including leaders from the the State- Owned Assets Supervision and Administration Commission of Chengdu and legal department heads from state-owned departments. Gordon Yang, the managing partner, Paulo Guo, the senior partner, and Yingzhi Bi, director of Chengdu branch office were also invited to attend the Seminar.

Paulo Guo gave a training speech entitled “Multinationals’ Legal Affairs Management and Reflection”, which was highly acclaimed by the attendees. Mr. Guo gave a brief introduction about the origin and development of legal counseling in state-owned enterprises and legal risk management of Chinese companies. Then he analyzed the main problems faced by the state-owned companies. By taking Germany, France and USA multinationals as examples, he made a detailed comparison and analysis about the governance structure, management mode, organization of the legal department, function and responsibilities of the legal department, the management of the headquarter legal department over the local legal department as well as the title and responsibilities of the general counsel of a group. Mr. Guo elaborated further on the compliance management of multinationals and enhancing management capability of the legal personnel (eg. network- based review and approval system, legal documents e-filing, contract e-filing). He also gave his opinion and suggestion to the general counsels of the state owned companies who were present at the meeting on the establishment of a legal counsel system, management mode, construction of a legal department, authority building of a legal department.

In addition, HUI YE Law Firm invited Great China General Counsel and compliance director of Swiss Clariant Group and China General Counsel of France Air Liquide Group. They introduced their management expertise at the seminar, which was highly welcomed by the attendees.

16/02/2016

< HUI YE WAS INVITED TO JOINTLY HOLD AN SALON ACTIVITY WITH THE LABOR COMMITTEE OF THE SHANGHAI BAR ASSOCIATION>

Recently, HUI YE Law Firm was invited to jointly hold the salon activities with the Labor Committee of the Shanghai Bar Association.

Kaichang Zhou, partner of HUI YE Law Firm gave a presentation on the determination of labor relations.

In the activity, firstly, Mr. Zhou analyzed the practical problems and classical cases in the determination of labor relations; in this way, he elaborated the profound theories in simple words and shared his experience in determination of labor relations. Secondly, Mr. Zhou mentioned the theoretical problem in determination of labor relations, which was highly acclaimed. Lastly, he had a in-depth discussion with attendee lawyers on other related problems and detailedly answered their questions.

More than 40 lawyers attended this salon activity, including lawyers from Dacheng Law Office, MWE China Law Offices, Chen & Co. Law Firm, Shanghai Qingrui Law Office, Lanbai Law Firm, Watson & Band Law Offices, Shanghai A&Z Law Firm, Long’an Law Firm, Yuanye Lawyer, Rongli Law Firm, Tang & Partners Law Firm and Rolmax Law Office.

05/02/2016

On December 18th, 2015, HUI YE Law Firm invited Mr. Zhao Chu to give a lecture on anti-terrorist war and the change of the international strategy pattern. Mr. Zhao is a famous columnist and commentator of the media military strategy and international issues. Mr. Fu Weigang hosted the lecture.

Mr. Zhao said that the international anti-terrorist war changed the international pattern, which coincided with the strategic opportunity of China. After the terrorist attack in Paris, a new round of international anti-terrorist war is now on its way. This war is quite different from the historical war and unilateral policy dominated by the USA after 9/11 in its pattern and form. It is of great significance to realize international policies and influence the USA strategy and Asia-Pacific pattern. We support anti-terrorist war and wish lasting peace of the world.

This lecture attracted more than 100 lawyers in various practice areas and representatives of both domestic and foreign enterprises. Mr. Zhao’s lecture was accompanied with rounds of applauds and concluded in success.