New Developments of PRC Laws on Outbound & Inbound Investment Chunyang Shao/ Tao Jin Jun He Law Offices
Introduction of Jun He Law Offices A Full Service Firm being Founded in April 1989 Headquartered in Beijing with Offices in Shanghai, Dalian, Shenzhen, Haikou, New York; Hong Kong 48 Partners, 3 Consultants; about 200 Associates; Best Law Firm of the PRC 2
General Situation of Outbound Investment Figures: Year 2004 US$5.53b; Total:US$44.9b Outbound Investment Encouraged Offshore Investment in Natural Resource Exploration Particularly Encouraged Methods: Direct Investments; M&A, Export Technology and Labor Force Regions: Both Developing and Developed Countries 3
SDRC s Control on Outbound Investment Relaxed The Interim Measures for the Administration of Examination and Approval of Overseas Investment Projects [SDRC Order No.21 (2004)] Investment between US$30m and US$200m in Natural Resource Development SDRC; > US$200m State Council Investment between US$10m and US$50m in Other Industries SDRC; > US$50m State Council 4
Offshore Capital Raising Formally Allowed by SAFE SAFE Circular on Relevant Issues Concerning Foreign Exchange Administration of Financing and Inbound Investment through Offshore SPC by PRC Residents [SAFE Circular No.75(2005)] Establishment of Offshore SPV Not Approval Is Required; Transferring of Assets to Offshore SPV Allowed; Offshore Private Equity Placement/Red-Chip Listing Possible Offshore VC Fund Raising by Domestic VC Funds Possible 5
General Situation of FDI Overview and Figures China Overall Total FDI: US$562.1 b Year 2004: US$60.6 b Shanghai FDI: 36,300 projects; 116 countries Year 2004: US$86.129 b Fortune 500: 491, 25% Pudong FDI: 1/3 of the city 6
New Developments of FDI Coastal areas Inland CJV and EJV WFOE Traditional Industries Tertiary Industry Greenfield projects Establishment by M&A Consolidation of Investment and Management More IHCs and RHs Technology License Establishment of R&D Centers 7
Major Amendments to PRC Company Law (2005) Major Amendments - Minimum Register Capital Lowered; - Payment of Register Capital Deferred - Capital Contribution in IP Up to 70% - Transferring of Promoter s Shares Relaxed; - Related Transaction More Clearly Defined; - Corporate Governance Strengthened - Minority Shareholders Protection Secured Accumulative Voting; Derivative Litigation; Exit of Investment - Lifting of Company Veil - Severer Liability on Information Disclosure Imposed; 8
Influence of Amendments to PRC Company Law (2005) Private Investment M&A of PRC Companies by Foreign Investors Recognition of IP Corporate Governance Minority Shareholder Protection Corporate Finance Liability of the Management 9
Major Amendments to PRC Securities Law (2005) Mixing of Securities with Banking, Insurance and Trust Investment possible; Securities Issuance More Clearly Defined; Severer Liability on Information Disclosure and Inside Dealing Imposed Investment in Securities by SOEs and Banks Possible Securities Raising and Capital Raising Allowed; System of M&A of Public Companies Improved Supervision of Securities Houses Strengthened Severer and More Practical Liability of Professional Parties Set 10
Influence of Amendments to PRC Securities Law (2005) Development of PRC Securities Market Listing on PRC Domestic Company on Demestic Exchanges M&A of PRC Public Companies 11
Share Merger Reform Overview of the Domestic Securities Market Definition of Share Merger Reform Influence on the Development of Securities Market Opportunities for Foreign Investors 12