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Detailed Implementing Rules for the Law of the People's
Republic of China on Wholly Foreign-Owned Enterprises
(Approved by the State Council on October 28, 1990, promulgated by the Ministry of Foreign Trade and Economy
Cooperation on December 12, 1990, and amended pursuant to the State Council's Decision concerning the amendment to Detailed Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-Owned Enterprises on April 12, 2001)
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Chapter 1. General Provisions
Article 1. These Detailed Implementing Rules are formulated pursuant to Article 23 of the Law of the People's Republic of China on Wholly Foreign-Owned Enterprises.
Article 2. Wholly foreign-owned enterprises shall be governed and protected by the laws of China.
In their business activities in the People's Republic of China, wholly foreign-owned enterprises must abide by the laws
and regulations of China and may not harm China's public interest.
Article 3. The establishment of wholly foreign-owned enterprises must be beneficial to the development of China's
national economy and yield notable economic benefits. The state encourages to foreign-owned enterprises to adopt advance technologies and equipment, develop new products, save energy and raw materials, upgrade and replace existing products; and encourages to establish such foreign-owned enterprises as shall export all or most of their products.
Article 4. The establishment of wholly foreign-owned enterprises in prohibited or restrained industries shall be
subject to the regulations for guiding the direction of foreign investment and the catalog for guiding foreign
investment in industry of China.
Article 5.Applications for the establishment of wholly foreign-owned enterprises shall not be approved in any of the
following circumstances:
1. China's sovereignty or public interest would be harmed;
2. China's state security would be jeopardized;
3. China's laws and regulations would be violated;
4. the requirements for the development of China's national
economy would not be satisfied; or
5. environmental pollution might be caused.
Article 6. Wholly foreign-owned enterprises shall enjoy
autonomy, and shall not be subject to interference, in their
operation and management activities when operating within
their approved scope of business.
Chapter 2. Establishment Procedures
Article 7.The examination and approval of applications for the
establishment of wholly foreign-owned enterprises shall be
carried out by the Ministry of Foreign Economic Relations and
Trade; upon examination and approval, an approval certificate
shall be issued.
The State Council authorizes the People's Government of the
provinces, autonomous regions, municipalities directly under
the central government, municipalities with independent
development plans and Special Economic Zones to examine and
approve applications, and to issue approval certificates, for
the establishment of wholly foreign-owned enterprises in the
following situations:
1. the total amount of investment does not exceed the maximum
amount which the State Council has authorized the People's
Government in question to examine and approve; and
2. the state will not need to allocate raw materials, and the
nationwide comprehensive balance of energy, communications,
transportation, foreign trade export quotas, etc. will not be
affected.
Within 15 days after the People's Government of a province,
autonomous region, municipality directly under the central
government, municipality with independent development plans or
Special Economic Zone has approved the establishment of a
wholly foreign-owned enterprise within its authority as
delegated by the State Council, it shall report its approval
to the Ministry of Foreign Economic Relations and Trade for
the record (the Ministry of Foreign Economic Relations and
Trade and the People's Governments of the provinces,
autonomous regions, municipalities directly under the central
government, municipalities with independent development plans
and Special Economic Zones are hereinafter collectively
referred to as "examination and approval authorities").
Article 8.For the approval of applications for the
establishment of wholly foreign-owned enterprises whose
products would involve export licenses, export quotas or
import licenses or would be products the import of which is
restricted by the state, prior consent shall be obtained from
the department for foreign economic relations and trade in
accordance with the limits of administration authority.
Article 9. Prior to applying for the establishment of a wholly
foreign-owned enterprise, foreign investors shall submit a
report covering the following matters to the local People's
Government at or above county level of the place where they
intend to establish the enterprise. The contents of such
report shall include: the purpose of the wholly foreign-owned
enterprise to be established; the scope and scale of business;
the products to be produced; the technology and equipment to
be used; the area of and requirements for the land to be used;
the conditions for and quantities of the water, electricity,
coal, coal gas or other energy sources required; requirements
for public facilities; etc.
Local People's Governments at or above county level shall
reply to the foreign investors in writing within 30 days after
the date of receipt of their reports.
Article 10. A foreign investor which wishes to establish a
wholly foreign-owned enterprise shall apply and submit the
following documents to the examination and approval
authorities through the local People's Government at or above
county level of the place where it intends to establish the
enterprise:
1. an application for the establishment of a wholly
foreign-owned enterprise;
2. a feasibility study;
3. the articles of association of the wholly foreign-owned
enterprise;
4. the name of the legal representative (or a list of the
names of the members of the board of directors) of the wholly
foreign-owned enterprise;
5. the legal certificates and a certificate of
creditworthiness of the foreign investor;
6. the written reply from the local People's Government at or
above county level of the intended place of establishment of
the wholly foreign-owned enterprise;
7. a list of the supplies requiring to be imported; and
8. other documents to be submitted.
The documents mentioned under items (1) and (3) of the
preceding paragraph must be written in Chinese. Those
mentioned under items (2), (4) and (5) may be written in a
foreign language, but, if written in a foreign language, shall
be accompanied by Chinese translations.
Where two or more foreign investors jointly apply for the
establishment of a wholly foreign-owned enterprise, a
duplicate of the contract between them shall be submitted to
the examination and approval authorities for the record.
Article 11. Examination and approval authorities shall decide
whether to approve or to disapprove an application for the
establishment of a wholly foreign-owned enterprise within 90
days from the date of receipt of all the documents pertaining
to such application. If the examination and approval
authorities find that not all of the aforementioned documents
have been submitted or that they are not in order, it may
demand that the missing document(s) be submitted or that the
submitted documents be amended within a specified period of
time.
Article 12. Upon approval by the examination and approval
authorities of an application for the establishment of a
wholly foreign-owned enterprise, the foreign investor shall,
within 30 days from the date of receipt of the approval
document, apply to the administration of industry and commerce
authorities for registration and obtain a business license.
The date of issuance of the business license of the wholly
foreign-owned enterprise shall be the date of establishment of
the enterprise.
The approval certificate for a wholly foreign-owned enterprise
shall expire automatically if the foreign investor has failed
to apply to the administration of industry and commerce
authorities for registration within a full 30 days from the
date of issuance of the approval certificate.
A wholly foreign-owned enterprise shall carry out tax
registration with the tax authorities within 30 days after the
date of its establishment.
Article 13. Foreign investors may entrust Chinese service
organizations for foreign investment enterprises or other
economic organizations with handling on their behalf the
matters set forth in Article 9, the first paragraph of Article
10 and Article 11, provided that they enter into a contract of
entrustment.
Article 14. Written applications for the establishment of a
wholly foreign-owned enterprise shall include the following:
1. the name, address and place of registration of the foreign
investor and the name, nationality and position of its legal
representative;
2. the name and address of the wholly foreign-owned enterprise
to be established;
3. the scope of business, types of product and scale of
production;
4. the total amount of investment, registered capital and
sources of funds of, and the method and time limit of
contribution of capital to, the wholly foreign-owned
enterprise to be established;
5. the form of organization, structure and legal
representative of the wholly foreign-owned enterprise to be
established;
6. the main equipment to be used and the age of such
equipment; and the level and source of the production
technology and production process to be used;
7. the targeted buyers and areas of sale of the products and
the sales channels and methods;
8. the arrangements for the receipt and expenditure of foreign
exchange;
9. the establishment and staffing of the relevant structure,
and arrangements for the employment, training, wages, welfare
benefits, insurance, labor protection, etc. of staff and
workers;
10. the possible degree of environmental pollution and the
measures to solve such problem;
11. the selection and area of the land to be used;
12. the funds, energy and raw materials for capital
construction, production and operation, and the methods for
obtaining the same;
13. the schedule of implementation of the project; and
14. the term of operation of the wholly foreign-owned
enterprise to be established.
Article 15. The articles of association of a wholly
foreign-owned enterprise shall cover the following matters:
1. the name and address;
2. the purpose and scope of business;
3. the total amount of investment, registered capital and time
limit for contribution of capital;
4. the form of organization;
5. the internal organizations and their powers and rules of
procedure; and the duties and limits of authority of such
personnel as the legal representative, the general manager,
the chief engineer and the chief accountant;
6. the principles and systems for financial affairs,
accounting and auditing;
7. labor management;
8. the term of operation, termination and liquidation; and
9. the procedure for amendment of the articles of association.
Article 16. The articles of association of a wholly
foreign-owned enterprise, and any amendments thereto, shall
become effective upon approval by the examination and approval
authorities.
Article 17. If a wholly foreign-owned enterprise is divided or
merges or if a major change in its capital occurs due to any
other reason, approval must be obtained from the examination
and approval authorities, and a Chinese registered accountant
shall be engaged to verify the event and to issue a capital
verification certificate. Upon approval by the examination and
approval authorities, the change shall be registered with the
administration of industry and commerce authorities.
Chapter 3. Form of Organization and Registered Capital
Article 18. The form of organization of wholly foreign-owned
enterprises shall be a limited liability company. Upon
approval, they may also have other forms of liability.
In wholly foreign-owned enterprises that are limited liability
companies, the liability of the foreign investors vis-¨¤-vis
the enterprises shall be limited to the amounts of capital
contributed by them.
In wholly foreign-owned enterprises with other forms of
liability, the liability of the foreign investors in respect
of the enterprises shall be as specified in the laws and
regulations of China.
Article 19. The term "total amount of investment of a wholly
foreign-owned enterprise" means the total amount of funds
required to set up a wholly foreign-owned enterprise, i.e. the
sum of the capital construction funds and the working capital
required to be invested in order to realize its scale of
production.
Article 20. The term "registered capital of a wholly
foreign-owned enterprise" means the total amount of capital
for the establishment of a wholly foreign-owned enterprise as
registered with the administration of industry and commerce
authorities, i.e. the total amount of capital subscribed by
the foreign investor.
The amount of the registered capital of a wholly foreign-owned
enterprise shall correspond to its scale of business. The
ratio between the registered capital and the total amount of
investment shall conform to the relevant regulations of China.
Article 21. Wholly foreign-owned enterprises may not reduce
their registered capital during their term of operation. But
if the registered capital must be reduced due to the change of
total investment and business scale, approval in advance by
the examing and approving authorities is required.
Article 22. The increase or assignment of the registered
capital of a wholly foreign-owned enterprise must be approved
by the examination and approval authorities. Upon approval,
such change shall be registered with the administration of
industry and commerce authorities.
Article 23. The mortgage or assignment by a wholly
foreign-owned enterprise to a foreign party of its property or
interest must be approved by the examination and approval
authorities and reported to the administration of industry and
commerce authorities for the record.
Article 24. The legal representative of a wholly foreign-owned
enterprise shall be the responsible person who, pursuant to
the enterprise's articles of association, has the power to
represent the enterprise.
If the legal representative is unable to exercise his powers,
he shall appoint an agent, in writing, to exercise his powers
on his behalf.
Chapter 4. Methods and Time Limits for Contribution of Capital
Article 25. Foreign investors may make their capital
contributions in freely convertible foreign currencies, and
also by valuating and contributing machinery, equipment,
industrial property, proprietary technology, etc.
Upon approval by the examination and approval authorities,
foreign investors may also use as capital contribution
Renminbi profits derived by them from other foreign investment
enterprises established in the People's Republic of China.
Article 26. Machinery and equipment valuated and used as
capital contribution by a foreign investor must be the
equipment required indeed by the foreign-owned enterprise.
The amounts at which such machinery and equipment are valuated
may not exceed the current normal prices on the international
market for the same kind of machinery and equipment.
With respect to valuated machinery and equipment to be
contributed, a detailed list of valuated contributions shall
be made. Such list shall include the descriptions, types,
quantities, valuation, etc. of the machinery and equipment.
The list shall be annexed to, and submitted to the examination
and approval authorities along with, the application for
establishment of the wholly foreign-owned enterprise.
Article 27.The title of industrial property and proprietary
technology valuated and used as capital contribution by a
foreign investor must be owned by the foreign investor.
The valuation of such industrial property and proprietary
technology shall be consistent with common international
principles of valuation, and the amount at which they are
valuated shall not exceed 20 percent of the registered capital
of the wholly foreign-owned enterprise.
Detailed information shall be prepared with respect to the
valuated industrial property and proprietary technology to be
contributed. Such information shall include copies of
certificates pertaining to ownership and details of their
validity, information on the technical performance and
practical value, the basis and standards of valuation, etc.
The said information shall be annexed to, and submitted to the
examination and approval authorities along with, the
application for establishment of the wholly foreign-owned
enterprise.
Article 28. When valuated machinery and equipment contributed
as capital have arrived at the Chinese port, the wholly
foreign-owned enterprise shall request a Chinese commodity
inspection organization to inspect the same. Such commodity
inspection organization shall issue an inspection report.
In the event of discrepancies between the kinds, quality and
quantities of valuated and contributed machinery and equipment
and the kinds, quality and quantities of the machinery and
equipment specified on the list of valuated contributions
submitted by the foreign investor to the examination and
approval authorities, the examination and approval authorities
shall have the power to demand the foreign investor to rectify
such discrepancies within a specified period of time.
Article 29. The examination and approval authorities shall
have the power to conduct an inspection after valuated
industrial property and proprietary technology contributed as
capital have been put in use. In the event of discrepancies
between such industrial property and proprietary technology
and the information originally supplied by the foreign
investor, the examination and approval authorities shall have
the power to demand the foreign investor to rectify such
discrepancies within a specified period of time.
Article 30. The time limit within which foreign investors are
to contribute their capital shall be stated in the
applications for establishment of a wholly foreign-owned
enterprise and the enterprise's articles of association.
Foreign investors may contribute their capital in instalments,
provided that the final instalment is contributed within three
years from the date of issuance of the business license. The
first of such instalments may not account for less than 15
percent of the amount of capital to be contributed by the
foreign investor and shall be contributed in full within 90
days from the date of issuance of the business license of the
wholly foreign-owned enterprise.
If a foreign investor fails to contribute the first instalment
of its capital contribution within the time limit set forth in
the preceding paragraph, its approval certificate shall
automatically expire upon the expiry of such time limit. In
such event, the wholly foreign-owned enterprise shall cancel
its registration with, and turn over its business license for
cancellation to, the administration of industry and commerce
authorities. If the wholly foreign-owned enterprise fails to
cancel its registration and to turn over its business license
for cancellation, the administration of industry and commerce
authorities shall revoke its business license and make a
public announcement.
Article 31. Foreign investors shall contribute according to
schedule all instalments following the first instalment of
their capital contributions. If and when a capital
contribution is 30 days overdue without legitimate reason, the
matter shall be handled pursuant to the second paragraph of
Article 31 hereof.
If a foreign investor requests an extension of the time limit
for its capital contribution for legitimate reasons, such
extension shall be agreed to by the examination and approval
authorities and reported to the administration of industry and
commerce authorities for the record.
Article 32. After a foreign investor has contributed all
instalments of its capital contribution, the wholly
foreign-owned enterprise shall engage a Chinese registered
accountant to verify the contribution and to issue an
investment verification report, which shall be submitted to
the examination and approval authorities and the
administration of industry and commerce authorities for the
record.
Chapter 5. Use of Land and Fees Therefor
Article 33. The land to be used by wholly foreign-owned
enterprises shall be arranged for by the local People's
Governments at or above county level of the locations of the
enterprises upon examination in the light of local
circumstances.
Article 34. Within 30 days from the date of issuance of their
business licenses, wholly foreign-owned enterprises shall
carry out land use procedures with and obtain a land
certificate from the land administration department of the
local People's Governments at or above county level of the
places where they are located, on the strength of their
approval certificates and business licenses.
Article 35. The land certificates shall be the legal
certificates on the strength of which wholly foreign-owned
enterprises may use land. Without approval, wholly
foreign-owned enterprises may not assign their land use rights
during their terms of operation.
Article 36. When collecting their land certificates, wholly
foreign-owned enterprises shall pay land use fees to the land
administration departments of the places where they are
located.
Article 37. Wholly foreign-owned enterprises using developed
land shall pay land development fees.
The land development fees mentioned in the preceding paragraph
shall include the requisitioning, demolition, removal and
resettlement expenses and the construction expenses incurred
when linking the wholly foreign-owned enterprise to the
existing infrastructure. Land developers may charge the land
development fees as a lump sum or in annual instalments.
Article 38. Wholly foreign-owned enterprises using undeveloped
land may develop the land themselves or entrust relevant
Chinese units with such development. The construction of
infrastructural facilities shall be centrally arranged by the
local People's Governments at or above county level of the
places where the wholly foreign-owned enterprises are located.
Article 39. The scales for the land use fees and land
development fees charged to wholly foreign-owned enterprises
shall be set in accordance with the relevant regulations of
China.
Article 40. The term of the use of land by a wholly
foreign-owned enterprise shall be the same as its approved
term of operation.
Article 41. In addition to obtaining land use rights in
accordance with this Chapter, wholly foreign-owned enterprises
may obtain such rights pursuant to other laws and regulations
of China.
Chapter 6. Purchases and Sales
Article 42. Wholly foreign-owned enterprises shall have the
right to decide on their own on the purchase of machinery,
equipment, raw materials, fuel, spare parts, accessories,
components, devices, means of transportation, office articles,
etc. for their own use (hereinafter referred to as
"supplies").
When purchasing supplies in China, wholly foreign-owned
enterprises shall be granted terms equal to those granted to
Chinese enterprises, given that conditions are equal.
Article 43. Wholly foreign-owned enterprises may sell their
products in China. The state encourages wholly foreign-owned
enterprises to export their products.
Article 44. Wholly foreign-owned enterprises shall have the
right to export their own products, and they may also entrust
Chinese foreign trade companies or companies outside the
People's Republic of China with selling their products on
their behalf.
Wholly foreign-owned enterprises shall have the right to sell
their own products in China, and they may also entrust Chinese
commercial organizations with selling their products on their
behalf.
Article 45. For those of the machinery and equipment
contributed as capital by foreign investors for which China
requires an import license, the wholly foreign-owned
enterprises shall, either directly or through an appointed
agency, apply for import licenses to and obtain the same from
the licensing authorities, on the strength of the
enterprises¡¯ approved lists of imported equipment and
supplies.
With respect to the supplies imported by wholly foreign-owned
enterprises within their approved scopes of business which are
required for use in their own production and for which China
requires an import license, the enterprises shall draw up
annual import plans and, once every six months, apply for
import licenses to and obtain the same from the licensing
authorities.
For those of the products exported by wholly foreign-owned
enterprises for which China requires an export license, the
enterprises shall draw up annual export plans and, once every
six months, apply for export licenses to and obtain the same
from the licensing authorities.
Article 46. The prices of the supplies and technical services
imported by wholly foreign-owned enterprises may not exceed
the arm's length prices of the same supplies and services on
the international market at that time. The prices of products
exported by wholly foreign-owned enterprises shall be set by
wholly foreign-owned enterprises themselves by reference to
the prices on the international market at that time, provided
that they may not be lower than reasonable export prices. The
tax authorities shall have the power to investigate pursuant
to the tax laws the legal liability of wholly foreign-owned
enterprises evading taxes by such means as importing at high
prices and exporting at low prices, etc.
Article 47. Wholly foreign-owned enterprises shall provide
statistical information and submit statistical statements in
accordance with the Statistics Law of the People's Republic of
China and China's regulations concerning the system for
statistics on the use of foreign investment.
Chapter 7. Taxation
Article 48. Wholly foreign-owned enterprises shall pay taxes
in accordance with the laws and regulations of China.
Article 49. The staff and workers of wholly foreign-owned
enterprises shall pay individual income tax in accordance with
the laws and regulations of China.
Article 50. Wholly foreign-owned enterprises shall be exempt
from duties and taxes in accordance with Chinese relevant
taxation laws on the following imported supplies:
1. machinery, equipment, spare parts and building materials,
and the materials required for the installation and
reinforcement of machinery, used by the foreign investors as
capital contribution;
2. machinery, equipment, spare parts, means of transportation
for use in production and production management equipment
imported by wholly foreign-owned enterprises with funds from
their total amounts of investment and required for their own
production;
3. raw materials, auxiliary materials, components, spare parts
and packaging materials imported by wholly foreign-owned
enterprises for the production of export products.
If, upon approval, the imported supplies mentioned in the
preceding paragraph are sold in the People's Republic of China
rather than being exported or are used for the production of
products to be sold in the People's Republic of China rather
than for the production of export products, duties and tax
shall be paid in accordance with China's tax laws.
Article 51. Export products produced by wholly foreign-owned
enterprises other than products the export of which is
restricted by China, shall be exempt from duties and taxes in
accordance with Chinese taxation laws.
Chapter 8. Exchange Control
Article 52. The foreign exchange matters of wholly
foreign-owned enterprises shall be handled in accordance with
the relevant exchange control regulations of China.
Article 53. On the strength of their business licenses issued
by the administration of industry and commerce authorities,
wholly foreign-owned enterprises may open accounts with banks
in the People's Republic of China allowed to engage in foreign
exchange business. The payments into and out of such accounts
shall be supervised by the banks with which they have been
opened.
The foreign exchange revenue of wholly foreign-owned
enterprises shall be deposited in the foreign exchange
accounts with their banks. Foreign exchange expenditure shall
be paid out of their foreign exchange bank accounts.
Article 54. Wholly foreign-owned enterprises which wish to
open foreign exchange accounts with banks outside the People's
Republic of China for reasons of production and business needs
must obtain approval from China's exchange control authorities
and regularly report details of the foreign exchange receipts
and payments and submit the banks¡¯ statements in accordance
with the regulations of China's exchange control authorities.
Article 55. Upon payment of tax in accordance with China's tax
laws, the wages and other lawful foreign exchange income of
the expatriate, Hong Kong, Macao and Taiwan staff and workers
of wholly foreign-owned enterprises may be freely remitted out
of the country.
Chapter 9. Financial Affairs and Accounting
Article 56. Wholly foreign-owned enterprises shall establish a
financial and accounting system in accordance with the laws
and regulations of China and the regulations of China's
financial authorities and shall submit such system to the
financial and taxation authorities of the place where they are
located for the record.
Article 57. The fiscal year of wholly foreign-owned
enterprises shall commence on January 1 of the Gregorian
calendar and end on December 31 of the same year.
Article 58. Wholly foreign-owned enterprises shall make
allocations to a reserve fund and a bonus and welfare fund for
staff and workers from their profits after paying income tax
in accordance with China's tax laws. The rate of allocations
to the reserve fund may not be lower than 10 percent of the
after-tax profits; once the cumulative amount of allocations
equals 50 percent of the registered capital, no further
allocations need be made. The rate of allocations to the bonus
and welfare fund for staff and workers shall be determined by
the wholly foreign-owned enterprises themselves.
Wholly foreign-owned enterprises may not distribute profits
until the losses from preceding fiscal years have been made
up. Retained profits from preceding fiscal years may be
distributed together with the distributable profits of the
current fiscal year.
Article 59. Accounting vouchers, books and statements printed
by wholly foreign-owned enterprises themselves shall be
written in Chinese. Those written in a foreign language shall
include notes in Chinese.
Article 60. Wholly foreign-owned enterprises shall keep
independent accounts.
The annual accounting statements and liquidation accounting
statements of wholly foreign-owned enterprises shall be
prepared in accordance with the regulations of China's
financial and taxation authorities. If accounting statements
are prepared in a foreign currency, Renminbi accounting
statements shall be prepared simultaneously by translating
such foreign currency amounts into Renminbi.
Chinese registered accountants shall be engaged to verify the
annual accounting statements and liquidation accounting
statements of wholly foreign-owned enterprises and to issue a
report thereon.
The annual accounting statements and liquidation accounting
statements of wholly foreign-owned enterprises described in
the second and third paragraphs, together with the reports
issued by the Chinese registered accountants, shall be
submitted within the prescribed time limits to the financial
and taxation authorities and, for the record, to the
examination and approval authorities and the administration of
industry and commerce authorities.
Article 61. Foreign investors may engage at their own expense
Chinese or foreign accounting staff to inspect the accounting
books of their wholly foreign-owned enterprises.
Article 62. Wholly foreign-owned enterprises shall submit
annual balance sheets and profit and loss statements to the
financial and taxation authorities and, for the record, to the
examination and approval authorities and the administration of
industry and commerce authorities.
Article 63. Wholly foreign-owned enterprises shall maintain
their accounting books in the place where they are located.
Such accounting books shall be subject to supervision by the
financial and taxation authorities.
If a wholly foreign-owned enterprise violates the provisions
of the preceding paragraph, the financial and taxation
authorities may impose a fine on it and the administration of
industry and commerce authorities may order it to suspend
business or revoke its business license.
Chapter 10. Staff and Workers
Article 64. Wholly foreign-owned enterprises shall enter into
labor contracts with the staff and workers they employ in the
People's Republic of China, in accordance with the laws and
regulations of China. Such contracts shall specifically cover
such matters as employment, dismissal, remuneration, welfare,
labor protection, labor insurance, etc.
Wholly foreign-owned enterprises may not employ children as
laborers.
Article 65. Wholly foreign-owned enterprises shall be
responsible for the business and technical training of their
staff and workers and establish an assessment system, in order
that the production and management skills of their staff and
workers are sufficient to meet the enterprises¡¯ production
and development requirements.
Chapter 11. Labor Union
Article 66. The staff and workers of wholly foreign-owned
enterprises shall have the right to establish basic-level
labor unions and carry on labor union activities in accordance
with the Law of the People's Republic of China on Labor
Unions.
Article 67. The labor union of a wholly foreign-owned
enterprise shall represent the rights and interests of the
staff and workers. It shall have the right to enter into a
labor contract with the enterprise on behalf of the staff and
workers and to supervise the implementation thereof.
Article 68. The basic tasks of the labor union of a wholly
foreign-owned enterprise shall be to protect the lawful rights
and interests of the staff and workers in accordance with the
laws and regulations of China, to assist the enterprise in
arranging and using the bonus and welfare fund for staff and
workers in a rational way; to organize the staff and workers
to engage in political, scientific, technological and
vocational study; to organize cultural and athletic
activities; and to teach the staff and workers to observe
labor discipline and make efforts to accomplish the various
economic tasks of the enterprise.
When a wholly foreign-owned enterprise studies and decides on
matters such as rewards, punishment, the wage system, welfare
benefits, labor protection, labor insurance, etc., of staff
and workers, a representative of its labor union shall have
the right to attend the meeting. Wholly foreign-owned
enterprises shall listen to the opinions of their labor unions
and obtain their cooperation.
Article 69. Wholly foreign-owned enterprises shall actively
support the work of their labor unions and, in accordance with
the Law of the People's Republic of China on Labor Unions,
provide them with the necessary premises and equipment for
office work and meetings and for use in organizing collective
welfare, cultural and athletic activities for staff and
workers. Wholly foreign-owned enterprises shall each month
allocate labor union funds at the rate of 2 percent of the
total take-home pay of their staff and workers. Such funds
shall be used by their labor unions in accordance with the
measures for the use of labor union funds formulated by the
All-China Federation of Trade Unions.
Chapter 12. Term, Termination and Liquidation
Article 70. The term of operation of wholly foreign-owned
enterprises shall be set forth by the foreign investors in
their applications for the establishment of a wholly
foreign-owned enterprise, on the basis of the specific
circumstances of the industries and enterprises in question,
and shall be approved by the examination and approval
authorities.
Article 71. The term of operation of wholly foreign-owned
enterprises shall be reckoned from the date of issuance of
their business licenses.
If the term of operation of a wholly foreign-owned enterprise
needs to be extended upon expiry, a written application for
extension of the term of operation shall be submitted to the
examination and approval authorities 180 days prior to expiry.
The examination and approval authorities shall decide whether
to approve or reject the application within 30 days from the
date of receipt thereof.
Wholly foreign-owned enterprises which have obtained approval
to extend their term of operation shall register the change
with the administration of industry and commerce authorities
within 30 days from the date of receipt of the approval
document for such extension.
Article 72. A wholly foreign-owned enterprise shall be
terminated in any of the following circumstances:
1. its term of operation has expired;
2. it suffers heavy losses due to mismanagement and the
foreign investor decides to dissolve it;
3. it suffers heavy losses due to an event of force majeure
such as a natural disaster, war, etc.;
4. it becomes bankrupt;
5. it is lawfully closed because it has violated the laws and
regulations of China, thereby harming the public interest; or
6. another reason for dissolution as specified in the wholly
foreign-owned enterprise's articles of association has arisen.
In any of the circumstances mentioned under items (2), (3) and
(4) of the preceding paragraph, the wholly foreign-owned
enterprise shall voluntarily submit a written application for
termination to the examination and approval authorities for
approval. The date of the examination and approval
authorities¡¯ approval shall be the date of the enterprise's
termination.
Article 73. A wholly foreign-owned enterprise which has been
terminated pursuant to items (1), (2), (3) or (6) of Article
75 shall make a public announcement and notify its creditors
within 15 days from the date of termination. In addition, it
shall, within 15 days from the date of issuance of the public
announcement of termination, submit a proposal to the
examination and approval authorities concerning the procedure
and principles of liquidation and the candidates for the
liquidation committee, and implement the same upon examination
and approval by the examination and approval authorities.
Article 74. A liquidation committee shall be composed of the
legal representative of the wholly foreign-owned enterprise,
representatives of its creditors and representatives of the
relevant competent authorities. In addition, accountants,
lawyers, etc. registered in China shall be invited to serve on
the committee.
The liquidation expenses shall be paid out of the property
currently held by the foreign-owned enterprise on a priority
basis.
Article 75. A liquidation committee shall exercise the
following powers:
1. convene creditors¡¯ meetings;
2. take over the management of and sort out the enterprise's
property, and prepare a balance sheet and a property list;
3. valuate the property and state the basis for the
calculation of the values assigned;
4. prepare the liquidation plan;
5. redeem the enterprise's claims and satisfy its debts;
6. recover any amounts to be contributed by the shareholders
which have not yet been contributed;
7. distribute the balance of the property; and
8. represent the wholly foreign-owned enterprise when it sues
or is being sued.
Article 76. Prior to completion of the liquidation of a wholly foreign-owned enterprise, the foreign investor may not remit or carry the enterprise's funds out of the People's Republic of China and may not dispose of the enterprise's property on its own authority.
Upon completion of the liquidation of a wholly foreign-owned enterprise, if the sum of the net amount of its assets and the
balance of its property exceeds its registered capital, the portion in excess shall be regarded as profit, and income tax shall be paid on such portion in accordance with China's tax laws.
Article 77. Upon completion of the liquidation of a wholly foreign-owned enterprise, procedures for the cancellation of registration shall be carried out with, and its business license shall be returned for cancellation to, the administration of industry and commerce authorities.
Article 78. When wholly foreign-owned enterprises liquidate and dispose of their property, Chinese enterprises or other organizations shall have a preemptive right to purchase the same, provided that conditions are equal.
Article 79. A wholly foreign-owned enterprise which is terminated pursuant to item (4) of Article 75 shall be
liquidated by reference to the relevant laws and regulations
of China.
A wholly foreign-owned enterprise which is terminated pursuant to item (5) of Article 75 shall be liquidated in accordance with the relevant regulations of China.
Chapter 13. Supplementary Provisions
Article 80. All items of insurance of wholly foreign-owned enterprises shall be taken out from insurance companies in the People's Republic of China.
Article 81. Economic contracts between wholly foreign-owned enterprises and other companies,enterprises or other economic organizations and persons shall be governed by the Contract Law of the People's Republic of China.
Economic contracts between wholly foreign-owned enterprises and foreign companies, enterprises or individuals shall be governed by the Foreign Economic Contract Law of the People's Republic of China.
Article 82. Matters concerning wholly-owned enterprises established in Mainland China by companies, enterprises, or
other economic organizations and individuals from Hong Kong, Macao and Taiwan or by Chinese citizens resident abroad shall be handled by reference to these Detailed Implementing Rules.
Article 83. Expatriate, Hong Kong, Macao and Taiwan staff and workers of wholly foreign-owned enterprises may carry in reasonable quantities of means of transport and daily necessities for their own use. Such staff and workers shall carry out customs formalities for such goods in accordance with the regulations of China.
Article 84. These Detailed Rules shall be implemented as from
the date of promulgation. |