Release date: November 8, 22 Implementation date: January 1, 23 DocumentNo.: State Administration for Industry and Commerce, State Administration of Foreign Exchange No.42 Timeliness: The State Administration for Industry and Commerce of the People's Republic of China and State Administration of Foreign Exchange (No.42) are hereby promulgated, since 23. Director of the State Economic and Trade Commission, Li Rongrong, Minister of Finance, Xiang Huaicheng, Director of the State Administration for Industry and Commerce, Wang Zhongfu, Director of the State Administration of Foreign Exchange, Guo Shuqing, November 8, 22 Interim Provisions on Restructuring State-owned Enterprises with Foreign Capital Article 1 In order to guide and standardize the reorganization of state-owned enterprises with foreign capital, promote the strategic restructuring of the state-owned economy and accelerate the pace of establishing a modern enterprise system for state-owned enterprises, To maintain social stability, these Provisions are formulated in accordance with the Company Law of the People's Republic of China, the Contract Law of the People's Republic of China and the laws and regulations of the state on foreign investment and state-owned assets management. Article 2 These Provisions shall apply to the use of foreign capital to restructure or establish state-owned enterprises and corporate enterprises with state-owned shares (except financial enterprises and listed companies) as corporate foreign-invested enterprises (hereinafter referred to as the use of foreign capital to reorganize state-owned enterprises). Article 3 The reorganization of state-owned enterprises with foreign capital as mentioned in these Provisions includes the following situations: (1) The holders of state-owned property rights of state-owned enterprises transfer all or part of their property rights to foreign companies, enterprises and other economic organizations or individuals (hereinafter referred to as foreign investors), and the enterprises are reorganized into foreign-invested enterprises; (2) The holder of state-owned equity in a corporate enterprise transfers all or part of the state-owned equity to foreign investors, and the enterprise is reorganized into a foreign-invested enterprise; (3) Domestic creditors of state-owned enterprises transfer their creditor's rights to foreign investors, and the enterprises are reorganized into foreign-invested enterprises; (4) State-owned enterprises or corporate enterprises with state-owned shares sell all or major assets of enterprises to foreign investors, and foreign investors set up foreign-invested enterprises with the purchased assets alone or together with the enterprises selling assets; (5) A state-owned enterprise or a company-based enterprise with state-owned equity absorbs foreign investors' investment by increasing capital and shares, and reorganizes the enterprise into a foreign-invested enterprise. Article 4 State-owned enterprises and corporate enterprises mentioned in Item (1), (2), (3) and (5) of Article 3 of these Provisions are called reorganized enterprises. State-owned property rights of state-owned enterprises and state-owned equity of corporate enterprises are collectively referred to as state-owned property rights. Holders of state-owned property rights and holders of state-owned shares are collectively referred to as holders of state-owned property rights. Holders of state-owned property rights refer to departments authorized by the state or institutions authorized by the state to invest, enterprises holding state-owned capital and other economic organizations. Holders of state-owned property rights, creditors of state-owned enterprises who transfer their creditor's rights, and enterprises that sell assets are collectively referred to as reorganization parties. Article 5 The reorganizing party shall select foreign investors who meet the following conditions: (1) Having the business qualifications and technical level required by the reorganized enterprise; (2) Having good business reputation and management ability; (3) Having good financial status and economic strength. The reorganizing party shall require foreign investors to propose a reorganization plan to improve the corporate governance structure and promote the sustainable development of the enterprise. The reorganization plan shall include new product development, technological transformation and related investment plans, and measures to strengthen enterprise management. Article 6 The following principles shall be followed when reorganizing state-owned enterprises with foreign capital: (1) Abide by national laws and regulations to ensure national economic security; (two) in line with the requirements of the national industrial policy. If the business scope of an enterprise (including the enterprises in which it directly or indirectly holds shares) belongs to the industries prohibited by the Catalogue for the Guidance of Foreign Investment Industries, foreign investors shall not participate in the reorganization; Enterprises that must be controlled or relatively controlled by the Chinese side shall maintain the position of Chinese holding or relative holding after reorganization; (3) Conducive to economic restructuring and promoting the optimal allocation of state-owned capital; (four) pay attention to the introduction of advanced technology and management experience, establish a standardized corporate governance structure, and promote the technological progress and industrial upgrading of enterprises; (five) adhere to the principles of openness, fairness, impartiality, honesty and credibility, prevent the loss of state-owned assets, and avoid or suspend the creditor's rights of banks and other creditors, and shall not harm the legitimate rights and interests of employees and protect the legitimate rights and interests of foreign investors; (6) Promoting fair competition and not leading to market monopoly. Article 7 Where the property right of a state-owned enterprise or the state-owned equity of a limited liability company invested and established by a wholly state-owned company and two or more state-owned enterprises or other two or more state-owned investors is transferred, the reorganizing party shall seek the opinions of the workers' congress of the reorganized enterprise in advance. The transfer of state-owned shares of a company-based enterprise shall be approved by the shareholders' meeting of the reorganized enterprise. The transfer of the creditor's rights of state-owned enterprises shall be subject to the consent of the holders of state-owned property rights of the reorganized enterprises. Where an enterprise sells all or major assets, it shall obtain the consent of the holder of state-owned property rights of the enterprise or the shareholders' meeting in advance, and notify the creditors. Article 8 The reorganization of state-owned enterprises by using foreign capital shall meet the following requirements: (1) Before the reorganization of enterprises, the holders of state-owned property rights shall organize the reorganized enterprises to conduct asset inventory, define property rights, clear up creditor's rights and debts, employ qualified intermediaries to conduct financial audit, and conduct asset appraisal in accordance with the Administrative Measures for State-owned Assets Appraisal (Order No.91 of the State Council) and Provisions on Several Issues Concerning the Appraisal and Management of State-owned Assets (Order No.14 of the Ministry of Finance). After the evaluation results are approved or put on record in accordance with regulations, they will be used as the basis for determining the price of state-owned property rights and assets. (2) After the reorganization, if the control right of the enterprise is transferred or all or major business assets of the enterprise are sold to foreign investors, the reorganization party and the reorganized enterprise shall formulate a plan for proper placement of employees, which shall be reviewed and approved by the workers' congress. The reorganized enterprise shall use the existing assets to pay off the wages owed to employees, unpaid fund-raising funds, unpaid social insurance premiums and other expenses. The reorganized enterprises and employees implement two-way choice. The retained employees shall re-sign or change the labor contract according to law. Employees who terminate labor contracts should pay economic compensation according to law, and employees who are transferred to social insurance institutions should pay social insurance premiums in full in accordance with law. The required funds should be deducted from the net assets of the reorganized enterprises before the reorganization, or given priority in payment from the proceeds from the transfer of state-owned property rights by state-owned property rights holders. (3) In case of reorganization by selling assets, the creditor's rights and debts of the enterprise are still inherited by the original enterprise; If it is reorganized in other ways, the creditor's rights and debts of the enterprise shall be inherited by the reorganized enterprise. The transfer of mortgaged or pledged state-owned property rights and assets shall conform to the relevant provisions of the Security Law of the People's Republic of China. The debtor's successor shall sign the relevant agreement on the disposal of creditor's rights and debts with the creditor. (4) The reorganization party shall publicly release the reorganization information, extensively solicit foreign investors, and investigate the qualifications, credit standing, financial status, management ability, payment guarantee and operator quality of foreign investors. Give priority to medium and long-term investors who can bring advanced technology and management experience and have high industrial relevance. The reorganization party and foreign investors shall provide relevant information truthfully and in detail at the reasonable request of the other party, and shall not be misleading or fraudulent, and shall bear corresponding confidentiality obligations. (5) If the reorganization of an enterprise is carried out by transferring state-owned property rights or selling assets, the reorganizing party shall give priority to determining foreign investors and transfer prices by public bidding. If the transfer is made by public bidding, the relevant procedures shall be performed according to law, and the relevant information about the state-owned property rights to be transferred or the assets to be sold shall be announced. If the transfer is made by agreement, it should also be operated openly. No matter what transfer method is adopted, the reorganization party and foreign investors shall sign the transfer agreement in accordance with the relevant provisions of the state and these Provisions. The contents of the transfer agreement shall mainly include the basic situation of the transfer of state-owned property rights, the placement of workers, the disposal of creditor's rights and debts, the transfer ratio, the transfer price, the payment method and terms, the delivery of property rights and the reorganization of enterprises. Article 9 The reorganization of state-owned enterprises by using foreign capital shall be handled according to the following procedures: (1) The reorganization party (two or more reorganization parties shall determine one reorganization party) shall apply to the competent economic and trade department at the same level for reorganization. The application materials for reorganization shall be accompanied by the feasibility study report, the information of the reorganizers and the reorganized enterprises, the information of foreign investors (including the financial reports of the last three years audited by certified public accountants and the market share of products or services of enterprises in the same industry that have actual control rights in China), the reorganization plan (including employee placement, creditor's rights and debts disposal and enterprise reorganization plan), the business scope and ownership structure of the reorganized enterprises (including those directly or indirectly held by them) and other documents. The competent economic and trade department that accepts the application shall conduct the examination in accordance with the authority of the Provisions on Guiding the Direction of Foreign Investment and relevant laws and regulations. If the central enterprises and their wholly-owned or controlled enterprises are reorganized, the reorganized enterprises directly or indirectly hold the equity of listed companies, and the total assets of the reorganized enterprises are not less than 3 million US dollars, they shall be audited by the competent economic and trade department of the State Council; For those that may lead to market monopoly and hinder fair competition, a hearing shall be organized before the audit. The competent economic and trade department shall give a reply on whether or not to approve the reorganization within 45 days after receiving the application materials; If a hearing is needed, a reply on whether to agree or not shall be made within 3 months. If the state has other provisions on the utilization of foreign capital by the reorganized enterprises and the industries to which the enterprises directly or indirectly hold shares, and the nature of the state-owned shares held by the holders of state-owned shares of listed companies changes due to the change of property rights, such provisions shall prevail. (2) The transfer agreement signed by the reorganization party and foreign investors shall be submitted for approval in accordance with the relevant provisions of the Notice of the Ministry of Finance on Printing and Distributing the Interim Measures for State-owned Capital and Financial Management of Enterprises (Caiqi [21] No.325). The transfer agreement shall take effect after it is approved. The transfer agreement shall be accompanied by the registration certificate of state-owned property rights, the approval or filing of the audit and asset evaluation report of the reorganized enterprise, the employee resettlement plan, the creditor-debtor agreement, the enterprise reorganization plan, the relevant resolutions of the reorganizing party and the reorganized enterprise, and the opinions or resolutions of the employees' congress of the reorganized enterprise. (three) the reorganization party or the reorganized enterprise shall go through the examination and approval procedures for foreign-invested enterprises according to law with the approval documents of the reorganization application and transfer agreement; If the reorganized enterprise is a joint stock limited company, it shall be handled in accordance with the relevant provisions of the Company Law of the People's Republic of China. (4) The reorganized enterprise or investor shall go through the registration formalities with the original registration authority with the right of registration of foreign-invested enterprises or the registration authority with the right of registration of foreign-invested enterprises in its domicile in accordance with the provisions of the registration management regulations with the approval documents in items (1) and (3) of this article; If the reorganized enterprise is a joint stock limited company, it shall be handled in accordance with the relevant provisions of the Company Law of the People's Republic of China. (5) The reorganizing party shall, on the basis of the approval documents of the reorganization application and transfer agreement, the foreign exchange registration certificate and relevant documents, go through the formalities of delivery of state-owned property rights and registration of ownership change in accordance with relevant regulations, and entrust a certified public accountant to issue a capital verification report according to law. If the reorganized enterprise land was originally allocated by the state, it shall go through the formalities of examination and approval and transfer of the land use right according to law. (6) The foreign exchange income from the transfer of state-owned property rights, creditor's rights or the sale of assets by the reorganizing party shall be settled after being submitted to the foreign exchange administration department for approval by the approval documents of the reorganization application and transfer agreement and relevant documents. If the reorganized enterprise absorbs foreign investors' investment through capital increase and share expansion, it may, with the approval of the foreign exchange administration department, open a foreign exchange capital account to retain the foreign exchange funds invested by foreign investors. (7) The application for reorganization, transfer agreement and its approval documents involving key state enterprises, state-approved debt-to-equity swap enterprises and enterprises belonging to restricted industries in the Catalogue for the Guidance of Foreign Investment Industries, which are examined and approved by local economic and trade authorities and financial authorities below the quota, shall be reported to the economic and trade authorities in the State Council and the financial authorities in the State Council respectively for the record. Article 1 Foreign investors shall pay the transfer price or capital contribution in freely convertible currencies or other lawful property rights remitted from abroad. With the approval of the foreign exchange administration department, the transfer price or capital contribution can also be paid with the RMB net profit or other legitimate property rights and interests obtained from investment in China. The above-mentioned other legitimate property rights and interests include: (1) the property obtained by foreign investors from other foreign-invested enterprises held in China due to liquidation, equity transfer, early recovery of investment, capital reduction, etc.; (2) Foreign investors purchase state-owned property rights or assets of state-owned enterprises or corporate enterprises with state-owned shares; (three) the creditor's rights of foreign investors to buy state-owned enterprises; (4) Other modes of capital contribution as prescribed by laws and regulations. When conducting capital verification for foreign investors, certified public accountants shall perform capital verification procedures and issue capital verification reports in accordance with the Notice of the Ministry of Finance and the State Administration of Foreign Exchange on Further Strengthening the Capital Verification of Foreign-invested Enterprises and Improving the Foreign Exchange Registration System (Cai Shui [22] No.117). Article 11 In case of reorganization by transfer, foreign investors shall generally pay the full price within 3 months from the date of issuance of the business license of the foreign-invested enterprise. If there are real difficulties, more than 6% of the total price shall be paid within 6 months from the date of issuance of the business license, and the rest shall be guaranteed according to law and paid within one year. Article 12 Where the control right of an enterprise is transferred after the transfer of state-owned property rights or all or major operating assets of the enterprise are sold to foreign investors, the reorganizing party has the right to know and supervise the production, operation and financial status of the reorganized enterprise before the foreign investors pay the full price, and the foreign investors and the reorganized enterprise shall provide corresponding convenience. A foreign investor may not conduct business activities with the above assets before investing in the establishment of a foreign-invested enterprise with the acquired assets. Thirteenth state-owned property rights, assets transfer income collected by the reorganization party, in accordance with the relevant provisions of the the State Council municipal finance department management and use. Article 14 The net profit, income from equity transfer, funds received at the expiration or termination of the operation of the enterprise and other lawful income of foreign investors from the reorganized enterprise may be remitted abroad according to law. Approved by the foreign exchange administration department, it can also be used for domestic reinvestment. Article 15 In the process of reorganizing state-owned enterprises by using foreign capital, the tax policy shall be implemented in accordance with the provisions of the laws and administrative regulations of the state on taxation, and the charging policy shall be implemented in accordance with the provisions of the Notice of the State Planning Commission, the State Economic and Trade Commission, the Ministry of Supervision, the Ministry of Finance, the Audit Office, and the the State Council State Council for Rectification on the Reduction and Exemption of Relevant Charges in the Process of Enterprise Reform, Reorganization and Transformation (No.177 [1998]). Article 16. If the reorganization party and the personnel of the reorganized enterprise exceed their authority, neglect their duties, collude with foreign investors privately, embezzle and accept bribes, and damage the legitimate rights and interests of the state, creditors and employees, the relevant departments shall give administrative penalties and sanctions according to law; If a crime is constituted, criminal responsibility shall be investigated according to law. Article 17 If the functionaries of government agencies in charge of examination and approval, in violation of these Provisions, approve without authorization or abuse power for personal gain during examination and approval, thus harming the legitimate rights and interests of the state, creditors and workers, the relevant departments shall, according to the management authority of cadres, investigate the administrative responsibilities of the persons who are directly responsible and the persons in charge; If a crime is constituted, criminal responsibility shall be investigated according to law. Eighteenth investors from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Province and established foreign-invested enterprises participating in the reorganization of state-owned enterprises shall be governed by these Provisions.