“Haworth & Lexon Law Newsletter” is issued every month, mainly introducing, with necessary comments, the legal changes in the fields of Corporate Laws, Securities, Foreign Investment, Intellectual Property Rights, International Trade etc. None of the comments are the legal opinion of the firm and the firm does not assume any legal liability for such comments. Should you have interest in any subject or have any questions, please feel free to contact the firm. You will receive satisfactory feedback from the professional attorneys of our firm.
Guidelines
★ New Regulations standardizing the activities of dealers: auto branded sale require authorization
★ Latest Laws and Regulations:
1 Circular of Ministry of Commerce on Examining and Approving Foreign Invested Enterprises
1 Interim Measures for Filing for Record by International Freight Forwarding Agent Enterprises
1 Circular on Taxation of Enterprises whose Debts are Transformed into Equities
1 Circular on Several Issues in Implementing the Interim Regulations on Administration of Sino-foreign Equity/ Contractual Joint Ventures in Production of Radio and TV Programs
1 Transfer of State-owned Equities to Foreigners Shall be Conducted in the Exchange
New Regulation Standardizing the Activities of Dealers:
Automobile Branded
The Ministry of Commerce, the State Development Planning Commission and the State Administration for Industry and Commerce jointly issued Measure for Implementation on Administration of Automobile Branded Sale on Feb. 21, regulating that authorization from auto suppliers must be required before conducting auto branded sale. The Measure, which comes into force on April 1, 2005, mainly regulates issues concerning the targeted scope of auto models and time for branded sale, the establishment of complete service system for auto branded sale, the qualifications, the establishment procedures and the code of conduct of the auto suppliers and the branded dealers, as well as the supervision and administration by governmental agencies.
Firstly, the Measure establishes the authoritarian position of the administration of commerce of the State Council in the field of auto branded sale.
Article 7 states that the administration of commerce of the State Council is in charge of the national administration of auto branded sale, and the administration for industry and commerce of the State Council is in charge of the supervision and administration of auto branded sale within the scope of its authority, which fundamentally establishes the administration position of the administration of commerce over auto branded sale in China. Besides, the Measure also specifies the administration of the provincial level: the administration of commerce of the provincial level and the local administration for industry and commerce are, within the scope of their authorities, in charge of the administration and supervision of auto branded sale in their jurisdictions.
Secondly, general auto agency right shall replace car-dealing right.
The essence of the auto branded sale is authorized sale, which means branded sale needs to be authorized. Before conducting auto branded sale, one must obtain the authorization from either the automobile manufacturer or the general distributor authorized by the automobile manufacturer, which means the current regulation for approving and administering the car selling right is officially abolished. The Measure states that before Oct. 1, 2005, auto suppliers should verify the auto sales enterprises set up before the implementation date of this Measure, and submit the verified name list of the general auto agent and the auto branded dealers, the brand authorization and the corporate status to the State Administration for Industry and Commerce and the Ministry of Commerce respectively for record, and then the confirmed general auto agents and the auto branded sale dealers shall go to the local administration for industry and commerce to register for the change, which means unverified or unauthorized sale enterprises will have to end their selling activities by Oct.1, 2005.
Moreover, the Measure also provides that unless licensed by authorizing auto suppliers, auto branded sale dealers could only sell branded vehicles to end users.
Thirdly, if a general auto distributor or a branded sale dealers want to set up non-corporate branches to do auto branded sale, according to the Measure, they shall not only obtain the authorization and approval of the auto suppliers, but shall also register with the local administration for industry and commerce with the written materials of authorization and permission from the auto suppliers.
Circular of Ministry of Commerce on Examining and Approving Foreign Invested Enterprises
The Ministry of Commerce issued Circular on Examining and Approving Foreign Invested Enterprises on
According to the Circular, PRC Law on Chinese-Foreign Equity Joint Ventures, PRC Law on Chinese-Foreign Contractual Joint Ventures, PRC Law on Wholly Foreign-Owned Enterprises issued and amended by the National People's Congress, as well as the their Detailed Implementation Rules, are the basis of foreign investment system and the upper-stream laws for all the rules concerning the examination and approval of investment from foreign countries, HK, Macao and Taiwan, which shall be followed by all local or departmental regulations
The State Council clearly states as follows the main issues of foreign investment which shall be examined and approved by the Ministry of Commerce: the establishment and changes of foreign-invested enterprises (FIEs) which the previous Ministry of Foreign trade & Economic Cooperation and the Ministry of Commerce were once in charge of; the filing of the establishment and changes of FIEs approved by local governments; the formation and changes of contracts for Sino-foreign cooperative exploitation of petroleum, natural gas and coal-bed gas, of geophysical prospecting, of joint research contract, and their filing; the examining and approving of the management contracting of Chinese-foreign equity joint ventures by foreign enterprises and management through entrustment of Sino-foreign joint ventures by foreign enterprises; the examining and approving of export quota and export license of FIEs; the examining and approving of FIEs setting up non-corporate branches abroad; the examining and approving of part of the import product quota and license of the FIEs, etc.
Interim Measures for Filing of International Freight Forwarding Agent Enterprises
Recently, the Ministry of Commerce promulgated Interim Measures for Filing of
According to the Measure, all international freight forwarding agent enterprises and their branches legally registered with the State Administration for Industry & Commerce (hereinafter referred to as “international freight forwarding agent enterprises”) shall be filed with the Ministry of Commerce or the organs authorized by the Ministry of Commerce. Filing forms, copy of business license and copy of organization code should be submitted to the authority for filing, which shall complete the filing formalities within 5 days after the receipt of the above materials submitted by international freight forwarding agent enterprises.
Circular on Taxation Policy of Enterprises Transforming
from Creditors to Shareholders
The Ministry of Finance and State Administration of Taxation issued Circular on Taxation Policy of Enterprises Transforming from Creditors to Shareholders on Feb.5, 2005, which provides for the value-added tax, consumption tax and enterprise income tax that come up during the operation of transformation of enterprises whose creditors become shareholders.
According to the transformation contract between the transforming enterprise and the financial asset management company, those original transforming enterprises who put product assets as investment to the transformed new companies will be exempted from value-added tax; and those original transforming enterprises who put products which was imposed consumption tax as investment to the transformed new companies will be exempted from that tax. However, the transforming enterprises should pay for enterprise income tax in accordance with relevant rules.
The Circular also gives precise definitions to several legal terms, including the transformed new company, the original transforming enterprise and the profit gained due to the exemption of interest.
Circular on Implementing the Interim Regulations on Administration of Sino-foreign Joint Ventures in the Production of Radio and TV Plays
On
The Circular pointed out that all the foreign cooperators should be professional radio and TV broadcast enterprises, including radio, TV or professional film production institutions. The foreign investors of the cooperation corporations that have been approved for establishment and those cooperation enterprises approved by the sate administration of radio, film and television, in principle, cannot apply for the establishment a second enterprise of this type. The management and administration of the cooperation enterprises should be mainly under control of the Chinese party and the power and rights owned by the Chinese party cannot be entrusted to or conferred on the foreign party. Apart from that, the Circular also regulates that cooperation enterprises cannot participate in the managing operation of radio and television programs within
Transfer of State-owned Stock Equity to Foreigners
Should be Conducted in the Exchange
Shanghai Municipal Development and Reform Commission, Shanghai State-owned Assets Supervision and Administration Commission, Shanghai Foreign Investment Commission and Shanghai Administration for Industry and Commerce have jointly formulated the Notice on Several Issues of Further Regulating the State-owned Property Right Transfer between Chinese-Foreign Equity/Contractual Joint Ventures, further implementing Interim Measure on Administration of Transfer of State-owned property rights between enterprises and the Measure on Administration of transfer of property right within Shanghai Exchange.
The Notice clearly states that, the state-owned stock equity transfer to foreign investors in Chinese-foreign Equity/Contractual Joint Venture or the stock transfer from foreign investors to Chinese investors should be legally transacted within Shanghai United Assets and Equity Exchange. If the Chinese party of the Chinese-foreign Equity/ Contractual Joint Venture wants to transfer the stock equity, it must go through the examination and approval of the Chinese contribution supervisory organs and complete asset evaluation, which will be the reference price. Such regulations standardize the state-owned property transfer transactions.
