Haworth & Lexon Law Newsletter
No.2, 2001 (Total:No.2) October 8th, 2001
Edited by Haworth & Lexon
?SPAN style="FONT: 7pt 'Times New Roman'"> Latest Laws on Foreign Investment
?SPAN style="FONT: 7pt 'Times New Roman'"> Comment on “Interim Provisions on the Establishment of Foreign-Funded Business-starting Investment Enterprises”
?SPAN style="FONT: 7pt 'Times New Roman'"> What Trust Law Brings to Us
?SPAN style="FONT: 7pt 'Times New Roman'"> Provisions of the Supreme People’s Court Concerning Some Issues on Freezing and Auctioning the State-owned Shares and Public Corporate Shares of Listed Companies
Latest Laws on Foreign Investment
Ministry of Foreign Trade and Economic Cooperation, Ministry of Science and State Administration for Industry and Commerce jointly promulgated “Interim Provisions on the Establishment of Foreign-Funded Business-starting Investment Enterprises”, which will be valid on Sep. 1st. (Please see below for more comments)
Ministry of Foreign Trade and Economic Cooperation promulgated “Interim Measures on the Administration of Examination and Approval of Foreign-funded Lease companies”, which will enter into force on Sept. 1st. According to the regulation, foreign-funded lease companies should be established in the form of limited company. Besides, lease companies are sorted into 2 categories: financial lease companies and non-financial lease companies, different standards and different requirements will respectively apply to these 2 categories.
Ministry of Personnel and State Administration for Industry and Commerce jointly issued “Regulation of Labour Market Management”, which become valid on Oct. 1st. Regulation for this time, provides that foreign-funded can enter into intermediate service of Chinese labour market on condition that they co-operate with Chinese-funded intermediate service supplier.
The State Council promulgated the amended “Regulation of Printing”, which shall enter into force on Aug. 2nd. The most significant changing point is permitting foreign investor to establish a wholly foreign-owned enterprise to operate printing of packaging and decorating.
After long time preparation and wait, “Interim Provisions on the Establishment of Foreign-Funded Business-starting Investment Enterprises” finally came onto stage and shall enter into force on Sept. 1st. This remarks that foreign venture capital should be subjected to Chinese Law other than secretly run in Chinese market before.
In the light of provisions, foreign investors can either choose wholly foreign owned enterprise or joint venture as the way of entry into Chinese market. But they must meet strict limitations and requirement in the aspects such as: total investment capital, operating period, investment scope, etc.
Despite the limitations, there are some material breakthroughs:
1. Provide new method of withdrawal of venture capital
2. Limited liability partnership is recognized by the regulation
3. Foreign-funded business-starting investment enterprises enjoy the same treatment with foreign investment enterprises
Adopted during the ninth session of NPC on April 28th, Trust Law of PRC shall enter into force on Oct 1st. How to remark the implementation of “Trust Law”, and how it will influence within the legal circle?
Trust is a property administration system to mean conduct whereby a trustor entrusts a trustee with his property rights on the basis of credit and confidence. Trust law is the special norm regulates all legal relationship based on trust.
Firstly, establishment of trust: Chapter 2 of the “Trust Law” provides that trust can be based on contract, testament, or other forms subject to laws and administrative regulations. Trust cannot be formed with the sole purpose of litigation or loan’s repayment demanding. Trust can be categorized into civil trust, commercial trust or trust for public interest.
Secondly, trust assets: Movable property, immovable property, stocks, securities, intellectual property of patent, trademark, copyright and other property rights can be regarded as the trust assets. But personal right as well as forbidden flow property can’t be the trust assert. While restricted flow property whether can be the trust assert is depended on the examination and certification issued by the relevant governing institutions.
Besides, Trust Law also provides items on legal relationship concerning with parties concerned to trust, the modification, termination of the trust, trust for public good, etc. The State Council is authorized to issue detailed method on how the trustee run the business in the form of trust institutions.
Provisions of the Supreme People's Court Concerning Some Issues on Freezing and Auctioning the State-owned Shares and Public Corporate Shares of Listed Companies
-------Auctioning and Transferring legal person shares have been recognized
Official from China Securities Regulatory Commission have been questioning the way of auctioning legal person shares. Now the legality has been indirectly recognized by “Provisions of the Supreme People?s Court Concerning Some Issues on Freezing and Auctioning the State-owned Shares and Public Corporate Shares of Listed Companies” implemented on Sept. 30th.
The judicial interpretation firstly provides details on preservation of auctioning and transferring legal person shares. The interpretation has specific items on freezing, evaluating, auctioning, and transferring stock rights. In practice, several aspects below need highlighting.