“Haworth & Lexon Law Newsletter” is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, Intellectual property rights, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.
★Attention to Move of Haworth & Lexon, Please!
★Decision by the State Council on Investment System Reform
★Regulations by CSRC on Overseas Listing of the Affiliated Companies of Local Listing Company
★ Latest Laws and Regulations:
• New Measures for Administration of Enterprise Group Finance Companies enforced in Sep.
• Guide Catalog of Destination Countries and Industries of Overseas Investment
• Notice on Several Issues Concerning Taxation Convention Enforcement of Non-resident and Individual Income Tax Law
• Reply by Ministry of Finance and State Administration of Taxation on the Tax Policy of Affiliated Facilities of Building
• Notice by CSRC on the Qualification of Shareholders of Futures Companies• SPC makes it clear on How to Count the Time Limit of Application for Labor Dispute Arbitration of Dissolving A Labor Contract
Attention to Move of Haworth & Lexon, Please!
Effective from August 8, 2004, Haworth & Lexon will officially move its office to the following address:
Suite 2415 , China Merchants Tower
161 Lujiazui (E) Road
Shanghai P. R. China
Tel: 0086 21 6887 9696
Fax:0086 21 6887 8766
Haworth & Lexon has rapidly grown up since its foundation with your kindly support and attention in various aspects. All partners of the firm are very happy to facilitate your development and add you much legal value in the following arenas in future with our qualified internal teams: Corporate, M&A, Restructuring and FDI; Real Estate Property Development and Construction; Securities and Financing; Intellectual Property Rights; International Trade and Shipping; and Commercial Arbitration and Litigation.
Decision by the State Council on Investment System Reform
In July 25, 2004, the State Council set out the Decision on Investment System Reform , which states the enterprises' principal body of investment activities, regulates the government's investment activities, protects the investor's interest, and helps to provide a market with fair competition for all sorts of investors. The main points of the D ecision are as follows:
I. Reform on project approval so as to carry out the enterprises' self-determination. For those projects which are not invested with the government's fund, the examination and approval system is replaced by the verification and approval system and record system for different situations. Only the grand or restricted projects need to be approved by the government in order to protect the public interest. All the other projects, big or small, just need to be recorder. Furthermore, the government shall just check the fund application report as for those investment projects with the government's subsidy, loan or allowance.
II. Standardization of the government's approval system and improvement of the record system. The project application report is the only document which shall be submitted to the authority as for those investment projects with approval system. The project plan, the flexibility study and the commencement report can be skipped.
III. Encouragement of social investment. It widens the social investment scope and even permits the social investment in infrastructure, public utility, and all the other fields which are not prohibited by laws or regulations. As for those projects concerning the national monopoly in resource, the social investors can bid for the project after the government makes the construction plan. The Decision also encourages and supports all sorts of enterprises to invest overseas.
IV. Further widening the methods of financing of enterprise's investment projects. All sorts of enterprises are permitted to collect funds for investment with shares, which helps to establish a multi-level capital market step by step. Reform on the bond's issuing and management system helps to enlarge the scale of bonds issuing and increase the bonds types. Furthermore, it is permitted for enterprises to apply for foreign loan. Establishment of medium and small sized investment companies is encouraged so as to establish and promote the business establishment investment system.
As for the government activities, the Decision requires to define the scope of government investment, standardize government investment funds management, simplify the procedure for approval of government investment projects, compartmentalize the power reasonably, strengthen the supervision of the investment projects, and improve the construction mode.
Moreover, the decision also gives fundamental regulations on improvement of investment macroscopical control and establishment of responsibility system.
Regulations by CSRC on Overseas Listing of the Affiliated Companies of Local Listing Company
Local listing company's affiliated company going overseas for listing is a common method of listing in the international capital market. It means, the parent company makes its part capital, business or a certain subsidiary company independent, and the parent company still occupies the main shareholder after the subsidiary company is listed. In Aug. 10, 2004, China Securities Regulatory Commission promulgated Notice on Relevant Issues Concerning Overseas Listing of the Affiliated Companies of Local Listing Company , regulating the conditions, information disclosure and financial consultant duty of the affiliated company going for overseas listing.
According to the Notice , the following conditions shall be met for the affiliated company's overseas listing: the listing company has been making profits for the latest 3 years; the listing company can't make the business or capital obtained through stocks or financing in recent three years as its contributions to the affiliated company; the profit of the affiliated company in the financial report in last financial year can't exceed 50% profit of the listing company; the net capital of the affiliated company in the financial report in last financial year can't exceed 30% net capital of the listing company; the listing company doesn't have the same business scope with the affiliated company, and their capital, finance and management personnel are independent; there's no situation that the capital of the listing company is controlled by any dominating individual or companies; the listing company has no violations of laws in the past 3 years.
The Notice also states that the listing company shall disclose the information of the affiliated company's overseas listing on the day right after the following events happen: resolution of the board of directors or shareholders for the affiliated company's overseas listing; application for overseas listing of the affiliated company being accepted by CSRC; the affiliated company being approved for overseas listing. Furthermore, the listing company shall disclose any events which may affect the stock price and have been disclosed to foreign investors by the affiliated listing company to the local investors. The listing company shall also state the business development of the affiliated company in its annual report.
Moreover, the listing company shall retain the securities management situations which have registered in CSRC and been listed on the recommendation list of CSRC as its financial consultant, supervising the independent status of the listing company for the rest time since the affiliated company going overseas and the whole following financial year.
New Measures for Administration of Enterprise Group Finance Companies enforced in Sep.
Measures for Administration of Enterprise Group Finance Companies were promulgated in July 27 and are going to be enforced in Sep. 1, 2004. The former Measures for Administration of Enterprise Group Finance Companies will be abolished at the same time. The new Measures adjusts the market status of the enterprise group financing company to be a non-banking financial institution for providing financial management service for the members of the group for the purpose of strengthening the management of funds and promoting the efficiency of funds usage. The new Measures lower the requirements of establishing a financing company, permit the financing company to set up subsidiaries, and adjust the business scope of the financing company. Furthermore, the new Measures also permit foreign investment companies to establish financing companies.
Guide Catalog of Destination Countries and Industries of Overseas Investment
Ministry of Commerce and Ministry of Foreign Affairs promulgated Guide Catalog of Destination Countries and Industries of Overseas Investment together recently. This is the first time to give a guide in destination countries and industries of overseas investment. The Catalog is composed of two parts: destination countries which include 67 countries, and industries which cover farming and fishing, mining, manufacture, service and other industries. It also details every industry, for example, the service industry includes trading branch sales, transportation, software development, infrastructure construction and etc. the other industries mainly include electricity producing and supply.
Notice on Several Issues Concerning Taxation Convention Enforcement of Non-resident and Individual Income Tax Law
State Administration of Taxation set out Notice on Several Issues Concerning Taxation Convention Enforcement of Non-resident and Individual Income Tax Law in July 27, 2004. The Notice states the method of calculation of the living days and working days in China of the tax payer. Furthermore, it also stipulates the formula of tax amount of different tax payers.
Reply by Ministry of Finance and State Administration of Taxation on the Tax Policy of Affiliated Facilities of Building
Ministry of Finance and State Administration of Taxation set out Reply on the Tax Policy of Affiliated Facilities of Building in July 23, 2004. The Reply states that taxation is imposed on activities concerning the purchase of the relevant affiliated facilities of buildings, including parking pot, garage, attic and repository. In the case that the affiliated facilities are calculated separately, the tax will be imposed at the local rate; while in the case that the affiliated facilities are calculated with the building together, the tax will be imposed at the same rate as the building.
Notice by CSRC on the Qualification of Shareholders of Futures Companies
Notice on the Qualification of Shareholders of Futures Companies was set out by China Securities Regulatory Commission in July 19, 2004. The Notice regulates the requirements and procedure for a future company to apply for the shareholder qualification, and the documents to be submitted.
SPC makes it clear on How to Count the Time Limit of Application for Labor Dispute Arbitration of Dissolving A Labor Contract
The Supreme People's Court set out Reply Letter on How to Count the Time Limit of Application for Labor Dispute Arbitration of Dissolving A Labor Contract in July 26, 2004, which will come into force in July 29 the same year. The Reply states that the time limit of application for labor dispute arbitration of dissolving a labor contract shall be calculated from the day when the laborer receives the notice for dissolving the labor contract in written in case that a dispute occurs because of dissolving the labor contract according to Article 25.4 of Labor Law .