Solving the difficulties which arise out of China’s New Foreign Investment Law
On October 1, 2016 China changed its system for government control over foreign investment. The change was accomplished by revising the statutes concerning wholly foreign owned entities (WFOEs), equity joint ventures and contractual joint ventures and by promulgating a new basic regulation governing registration of foreign invested entities (FIEs).
China’s new Foreign Invested Enterprise (FIE) online filing registration is used by the foreign investor to state who will be the actual controlling person of the foreign invested entity. The online form defines this person as ether (1) the person or persons who collectively have 50% ownership in the foreign investor that will establish the FIE, or (2) the persons who actually control the foreign investor through means other than ownership, such as contractual control over the foreign investor’s decision making body.
In modern corporation ownership and management it can be difficult to answer this seemingly simple question, given the complex structures for non-public companies that are intentionally structured to ensure that no single individual has actual control.
The ownership structure can involve individuals, trusts, funds, private equity, limited partnerships, etc. However, the new online form only allows for one response: either the controlling person is an individual or group of individuals, or the controlling person is a public corporation, and can only be categorized in the following way:
- Foreign Listed Company
- Foreign Natural Person
- Foreign Government Agency
- International Organization
- Domestic Listed Company
- Domestic Natural Person
No private business entity of any kind is listed in the categories. Therefore, all individuals who control the enterprise will have to be recorded. Where an entity is one of the owners, the ownership of the entity will also have to be reported. Only natural persons or the name of a public company can be provided.
The reason for this change? China does not want the identity of the actual owners of entities to be hidden any longer, and particularly China wishes to identify those engaged in round trip investments.
Additional new requirements make the new system both time consuming and difficult to comply with, and the whole process of registering a wholly foreign owned entities became much more difficult.
However, Amicorp’s Shanghai office is ready to assist you with this process and other services. We offer a number of services to foreign clients for their PR China investments based on the new compliance:
- PRC company setup / registration
- Actual control people filling
- Annual compliance services
- Accounting and tax filling services
- Trademark registration in China
Why a listing on the DCSX in Curaçao can help in this new environment
For (fast growing) Chinese companies seeking to raise capital, an IPO in Europe can be a superior route to funding growth. CEO’s from Chinese companies with an overseas listing experience various benefits, such as gaining high quality recognition, foreign currency share price denomination as M&A currency, higher valuation and less underpricing and a more diversified (institutional) investor base. Listing in Curaçao on the Dutch Caribbean Securities Exchange (“DCSX”) adds additional advantages like a faster listing and approval process and the possibility to become a shareholder of the DCSX. Amicorp has access to the leading listing advisor and broker for the DCSX in Curaçao. Please feel free to contact us in order to explore if a listed on the DCSX would be a good feasible opportunity for your company.