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Major Institutional Changes underNew

  • 發佈時間:2015-04-15 18:29:32  來源:國際商報  作者:佚名  責任編輯:羅伯特

  byKWMXuPing,MarkSchaubandJenniferYao

  On19January2015,theMinistryofCommerceofthePRC(MOFCOM)publishedadiscussiondraftoftheproposednewForeignInvestmentLaw(DraftFIL)onitsofficialwebsiteforpubliccomments.Aspartofatrendoftransformingtheroleofgovernmentintheeconomyandsimplifyingredtape,thisnewlegislationwillrevamphowChinainteractswithforeigninvestmentwhichhasbeenlong-awaited.

  ChinaisnotthesamecountrywhentheSino-foreignEquityJointVentureEnterpriseLawwaspromulgatedin1979.Inadditiontoitsrapidgrowthanddevelopingeconomy,therehasbeeninrecentyearsstrongandsustainedgrowthinoutboundinvestmentsbyChineseenterprises.ThishasledtoChinachangingfromanetcapitalinflowcountrytoanetcapitaloutflowcountryin2014.NodoubtChina’sperspectivesandstrategiesonbothinboundandoutboundinvestmentregimehavereshapeddramaticallyreflectingthechangingeconomiclandscape.

  TheDraftFIL,onceenacted,willeventuallyreplacethetriooftheSino-foreignEquityJointVentureEnterpriseLaw,theSino-foreignCooperativeJointVentureEnterpriseLawandtheWhollyForeign-investedEnterpriseLawaswellasitsimplementationrulesandancillaryregulations(collectively,“ThreeFIELaws”),andwillhavealong-lastingimpactuponforeigninvestmentbysignificantlyreshapingtheentireChineseforeigninvestmentregulatoryregime.

  TheDraftFILcontains11chaptersand170articles,andcovers:(1)definitionsofforeigninvestorsandforeigninvestments;(2)administrationofforeigninvestmentswhicharesubjecttoentryclearance;(3)nationalsecurityreview;(4)comprehensiveforeigninvestmentinformationreportingsystem;(5)promotinginvestment,protectinginvestmentandcoordinatingcomplaints;(6)legalliabilitiesand(7)miscellaneousprovisions.ComparedtothemoreabstractprovisionsintheThreeFIELaws,theDraftFILismoreextensiveandspecificastohowforeigncapitalwillbeadmittedandadministeredwithinChina.

  Then,whatarethemajorinstitutionalchangesundertheDraftFILandhowwillitimpactontheforeigninvestmentactivities?

  LimitedEntryClearanceReplacingForeignInvestmentApprovals

  TheDraftFILspecifiesthatforeigninvestmentswillreceivenationaltreatment,exceptforonesthatfallunderthespecialadministrativemeasurecatalogue(i.e.the“negativelist”).Thenegativelistwillonlycompriseoftwocategories:theprohibitedindustriesandtherestrictedindustries;foreigninvestmentinindustriesnotlistedinthenegativelistwillnotberequiredtoapplyforentryclearanceormakerecordfilingandwillonlyberequiredtosubmitinformationreports.

  ThenegativelistisverydifferentfromthecurrentIndustryCataloguefortheGuidanceofForeignInvestments(InvestmentCatalogue),whichisthekeydocumentcomplementarytotheprevailingforeigninvestmentapprovalregime.TheInvestmentCataloguespecifiestheencouraged,restrictedandprohibitedindustriesforforeigninvestment,andtheindustriesnotspecifiedaretreatedaspermittedindustries.Nonetheless,ineffectforeigninvestmentineachcategoryrequiresMOFCOMapproval.

  Inthefuture,whentheForeignInvestmentLawcomesintoeffect,anegativelistwillbeneededtoreplacetheInvestmentCatalogue.Thenegativelistisaentryclearanceapproachadoptedbymanydevelopedcountriesandhasbeenwidelyacceptedbyglobalinvestors.AccordingtoMOFCOMstatistics,currentlymorethan70countrieshaveadoptedanegativelistapproach.TheshiftfromcomprehensiveapprovalregimeonforeigninvestmenttoanegativelistapproachisamajorlegislativeandregulatoryimprovementforChina.

  ComprehensiveInformationReportingSystemforForeignInvestment

  Theinformationreportingsystemisdisparatefromtheapprovalorrecordfilingsystem,butmoresimilartoex-postreportingaftercompletionofinvestment.However,thepenaltyforcontraventionunderthereportingsystemissevere.Anycompanyfoundtobenon-compliantwithitsinformationreportingobligationsorconcealingtruth,providingmisleadingorfalseinformationwillnotonlybesubjecttomonetaryfinesarisingfromadministrativeorcriminalliabilities,thepersonsdirectlyresponsiblemayalsobecriminallyliable(Article147and148).

  TheInformationreportingsystemincludestheinvestmentimplementationreport,theinvestmentamendmentreport,theannualreportandthequarterlyreport.Itisworthnoting:

  ◆Investmentimplementationreportmaybesubmittedbeforeorwithinthirtydaysafterthecompletionofaninvestment.However,weunderstand,ifaforeigninvestorsubmitsthereportbeforethecommencementofaninvestment,thereisariskthatsuchreportwillneedtobeamendedorwithdrawnatalaterdateduetopossibleadjustmentintheinvestmentstructure,terminationorabandonmentoftheinvestment.Hence,itmaybemoreefficientifallreportsaresubmittedafterthecompletionoftheinvestment.

  ◆Sharetransfer,pledge,capitalincreaseandothermattersthatusedtorequirepriorapprovals,cannowbereportedwithinthirtydaysafterthecompletionofsuchevent.

  ◆Quarterlyreportonlyappliestolargeforeigninvestedenterprisescontrolledbyforeigninvestors,namely,thoseenterpriseswithtotalassets,salesorrevenuesoverRMB10billionorhavemorethan10subsidiariesinChina.

  NationalSecurityReview

  Since2011,thenationalsecurityreviewrelatedrulesandregulationshavebeenpromulgatedbytheStateCouncilorbywayofannouncementsissuedbyMOFCOM.However,undertheDraftFILforthefirsttimethenationalsecurityreviewwillbeincorporatedasaseparatechapterintheForeignInvestmentLaw(ChapterFour).Thiselevatesthenationalsecurityreviewfromdepartmentalregulationstoofficiallaw.Inadditiontofollowingtheexistingjointministerialmechanismtocarryoutsecurityreviewsonforeigninvestmentandthegeneralandspecialreviewprocedures,thenationalsecurityintheDraftFILhasthefollowingdistinctcharacteristics:

  ◆Thescopeofnationalsecurityreviewseemstobeexpanded.Accordingtothecurrentnationalsecurityreviewprovisions,thenationalsecurityreviewsarelimitedtoforeigninvestmentincertaindomesticindustriesrelatingtonationaldefensesecurity,andforeigninvestmentinothernationalsecurityareaswhichmayhaveanimpactonnationalsecurityandwhereforeigninvestorsmayacquiredefactocontrolofsuchenterprises.Althoughthelistoftargetedindustrieswasneverpublished,rumorsarethatthenationalsecurityreviewisapplicableto57industries.However,underArticle48oftheDraftFIL,nationalsecurityreviewwilllikelyapplyto“anyforeigninvestmentthatharmsorlikelyendangerthenationalsecurity”andisnotlimitedtoacquisitionofcontrollingstakeofdomesticenterprisesortoanyparticularindustry.

  ◆Thenationalsecurityreviewandentryclearancearebetterinter-connectedundertheDraftFILandatthesametimemorespecificinapplication.Ifanyrelevantforeigninvestmentdepartmenthasconcernsastoapotentialnationalsecurityrelatedissueduringtheentryclearanceprocess,thenitwillsuspendthereviewandtransferthecasetothejointministerialpaneltoconductnationalsecurityreview.

  ◆AsthenationalsecurityreviewisnowembeddedintheDraftFILandthushasitsleveloflegaleffectescalated,thenationalsecurityreviewhasajudicialimmunityclausetotheeffectthatthedecisionsofthereviewcannotbeappealedorsubjecttoadministrativereview.

  ActualControlerandPotentialImpact

  onVIEStructure

  TheDraftFILintroducesforthefirsttimetheconceptofactualcontrollerfromtheforeigninvestmentperspective,i.e.whetheracompanyisconsideredasaforeigninvestedordomesticcompanyisnotsolelybasedontheplaceofregistrationbutfocusingon“actualcontrol”.Accordingtothedefinitionof“ChineseInvestor”,ChinesenationalsandthecompaniesundertheircontrolwillbeclassifiedasChineseInvestors.Atthesametime,thedefinitionof“control”alsoreferencesfrominternationallyaccepteddefinition,includingcontrolofshares,votingrightsorotherequityinterestsofacompany,controlofthedecision-makingbodiesofthecompany,orpossessionofdecisivepowertoinfluencethemanagement,finance,personnelortechnologyofthecompanythroughcontractual,trustorotherarrangements.Accordingtotheabovedefinitions,thelegalvalidityandtheassociatedrisksofvariableinterestentities(VIE)structuremayneedtobereassessed.

  ThelegalityofVIEstructuresandfundstransferundertheVIEstructurehavebeenthefocusofforeigninvestorsforalongtime.Allmajoroverseascapitalmarketregulatorsarealsoassessingthelegalandregulatoryrisksunderthestructure.AccordingtotheDraftFIL,undertheVIEstructure,iftheactualcontrollerisofChinesenationality,thentherelevantdomesticcompanyshallbetreatedasaChineseinvestorand,therefore,theentryclearanceandtheinformationreportingsystemsapplicabletoforeigninvestedenterpriseswillnotapply.Accordingly,underthissituation,theVIEstructuremaybeconsideredaslegitimate.Conversely,iftheactualcontrollerisaforeignentityornational,thenthedomesticcompanieswillbetreatedasforeign-investedcompanies,andanyoperationwithoutentryclearancemaybeconsideredasillegal.

  However,forcompaniesthataresuccessfullylistedoverseasorcompaniescontrolledbyforeigninvestorswithoperationsinChinausingVIEstructurespriortothepromulgationoftheForeignInvestmentLaw,theDraftFILdoesnotprovideaclearanswerastohowtheywillbeperceivedifdomesticcompaniesfallintotheNegativeListandsuchdecisionislikelytobeinfluencedbythefeedbackreceivedfromthecommentssolicationprocess.Basedonourspeculation,becauseoftheinfluentialpowerofmanycompaniesusingVIEstructuresinvariousindustries,therisksthattheexistingVIEstructureisconsideredasillegalafterthepromulgationofForeignInvestmentLawarerelativelylow.Inthefuture,theregulatorswilllikelytakeaverycautiousapproachandmakedecisionsonacase-by-casebasisdependingontheactualsituation.

  TheForeignInvestmentLaw,ifpromulgatedinitscurrentdraftform,willfundamentallychangethecurrentforeigninvestmentregulatorylandscape.Assuchitsimplementationwillrelyontheformulationofrelevantimplementationrulesaswellasothercomplementaryguidance,suchastheNegativeList,thenationalsecurityreviewguidanceandinformationreportingrules.WhilethecirculationoftheDraftFILisanimportantfirststepinthecontextofthelandmarkreform,thereisstillaverylongwaytogointheestablishmentofanewforeigninvestmentregimeandthefullimplementationoftheForeignInvestmentLaw.AccordingtotheLegislativeWorkPlanfortheStateCouncilin2014,theamendmentoftheThreeFIELawsfallswithinthe‘researchprojects’of2014.MOFCOM,asthedepartmentresponsiblefordraftingtheForeignInvestmentLaw,hasstartedtocirculatetheDraftFILforpubliccommentsattheverystartof2015.ThisdemonstratesthedeterminationoftheChinesegovernmenttocarryoutreform.Uponexpirationoftheperiodsolicitingpubliccomments(approximately1month),MOFCOMwillrevisetheDraftFILonthebasisofcommentsgatheredfromthepublic,andsubmitthereviseddrafttothestandingmeetingoftheStateCouncilfordeliberationandthencirculateanupdateddraftfortheStandingCommitteeoftheNationalPeople’sCongresstoreview.Withtheobjectiveofestablishinga“newopeneconomysystem”andalongwiththenegotiationofSino-USandSino-EUbilateralinvestmentagreements,webelivewearenowatthedawnoftheeraofthenewForeignInvestmentLaw.

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