May 4, 2009

MOFCOM to Delegate Approval Authority of FIEs in Certain Service Industries to Provincial Counterparts

On May 4, 2009, the Ministry of Commerce ("MOFCOM") released the Circular on Relevant Issues Concerning Approval and Management of Foreign-Invested Enterprises in Certain Service Industries ("Service FIEs") by the Provincial Level Commercial Authorities ("COFTEC") and the National Economic and Technical Development Zone ("NETDZ") (the "Circular"), effective the same date.  According to the Circular, the approval authority for the establishment and change of Service FIEs with a total amount of investment lower than the statutory limits (i.e., $100 million for FIEs whose business is within the encouraged and permitted categories, and $50 million for FIEs whose business is within the restricted category) shall be delegated to COFTEC and NETDZ. Service FIEs include: (i) medical institutions owned by equity holders or through a contractual joint venture and functioning as either enterprise legal persons or non-profit organizations; (ii) enterprises engaging in the auction business; (iii) enterprises engaging in the distribution of books, papers and journals; (iv) enterprises engaging in audio-visual product wholesale and owned through a contractual joint venture; (v) enterprises engaging in non-oil-gas mineral exploration; and (vi) enterprises engaging in non-oil-gas mining.  In addition, the Circular reiterates that the approval authority for mergers and acquisitions by foreign investors with transaction values not exceeding the above-mentioned statutory limits (i.e., $100 million where the transaction parties' business is within the encouraged and permitted categories, and $50 million when all or part of such business is within the restricted category) is now delegated from MOFCOM to COFTEC and NETDZ.

Copyright ©2009 by Kaye Scholer LLP. All Rights Reserved. This publication is intended as a general guide only. It does not contain a general legal analysis or constitute an opinion of Kaye Scholer LLP or any member of the firm on the legal issues described. It is recommended that readers not rely on this general guide but that professional advice be sought in connection with individual matters.References herein to "Kaye Scholer LLP & Affiliates," "Kaye Scholer," "Kaye Scholer LLP," "the firm" and terms of similar import refer to Kaye Scholer LLP and its affiliates operating in various jurisdictions.

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