Corporate and Investment Law Newsletter (5)

Haworth & Lexon Law Newsletter

Corporate and Investment

No.2, 2005 (Total:No.5)    Mar 10th, 2005

Edited by Haworth & Lexon

“Haworth & Lexon Law Newsletter” (Corporate and Investment) is issued every month, mainly introducing the legal change in the fields of corporate, investment 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.


Notice on Relevant Issues on Improving Foreign Exchange Administration for M&A with Foreign Investments


State Administration of Foreign Exchange (SAFE) promulgated Notice on Relevant Issues on Improving Foreign Exchange Administration for M&A with Foreign Investments on Jan 24, 2005.


In accordance to this Notice, domestic resident should get the approval and registration of SAFE for directly or indirectly establishing and controlling an overseas company in according to Administration for Overseas Investment Exchange Matter.


    The Notice also stipulates that the share exchange between domestic resident and overseas company should be approved by SAFE; SAFE would mainly focus on whether the overseas company is established or controlled by the domestic residents during the M&A approval.


The Notice has a great influence upon the foreign investment bank and Venture Capitals, and actually restrains the traditional overseas IPO way of domestic private company. In accordance with the Notice, if the domestic private enterprise wants overseas IPO, it shall first get approval by SAFE for the establishment of oversea offshore company and the M&A by this offshore company of domestic company; secondly, the unclear requirement to get such approval adds uncertainty to the IPO plan. There are a number of oversea IPO programs facing the stagnancy because of the promulgation of the Notice.


Besides, the application documents, procedure, and approval standards all have problems. For example, how can personal investor get the approval documents from the Governing department according to the Administration for Overseas Investment Exchange Matter for getting SAFEs approval? If the domestic controlled offshore company invests a new WOFE instead of M&A, does it need SAFEs approval? For those domestic held offshore companies already being established, do they still need the oversea-investment approval if they want to purchase the domestic company? What is the exact definition of domestic resident?


We would keep on attention for any new regulation or practice on the matter.


Haworth & Lexon Law Office has rich experience in the fields of corporate and investment. If you have any queries on the above legal matters, we are happy to provide you with our advice. Please contact Mr. Chambers Yang, the Attorney and Partner of the firm at:

Tel: 8621-6887 9696  Fax: 8621-6887 8766   Email: