Haworth & Lexon Law Newsletter
No.5, 2003 (Total:No.21) June20th, 2003
Edited by Haworth & Lexon
Guidelines
Notice on IPO Stock Exchange Conditions of Corporation being purchased when involved in Takeover bid.
Temporary Regulation on the Establishment of Foreign Holding or Solely Foreign Funding Travel Agency.
Ministry of Commerce promulgated the Regulations on the Establishment Of Foreign Funding Investment Corporation.
General Bureau of Taxation promulgated
Notice on Income Tax Settlement for foreign investment corporation for business investment.
Notice on Tax Settlement for Foreign Investors on Merger & Acquisition of Domestic Stock.
Notice on IPO Stock Exchange Conditions of Corporation being purchased when involved in Takeover bid
According to the Law of Corporation, Securities Law as well as the Governing Regulation on listed corporations Takeover，China Securities Regulatory Commission has promulgated the Notice on Stock Exchange Conditions of Corporation being purchased when involved in Takeover bid on May 20,2003. The Notice made out regulations mainly on the related IPO stock trade conditions of the company being purchased when involved in takeover bid as follows:
1) Termination of IPO. When the takeover bid term expires, the stock of the company being purchased should terminate its IPO trade, if the stock distribution of the company still dose not accord with the IPO conditions prescribed by the Law of Corporation, and the purchaser also treats the termination of listed corporation trade as its purpose.
2) Settling the problems respectively in different cases. If the takeover bid term expires, and the purchaser doesn't want to terminate the IPO trade of the purchased company, the stock trade of the company will be settled in the following four ways:
a) The IPO standing of the company purchased will not been influenced if its stock distribution accords with the Law of Corporation.
b) If the stock distribution does not go by with the IPO condition prescribed in the Law of Corporation, the purchaser should bring out the detailed scheme to maintain the IPO standing of the corporation being purchased, and this scheme should be put into practice to make the stock distribution accord with the regulation again in the seventh month since the expiration of takeover bid;
Stock Exchange should apply the 'Special Settlement for Caution of IPO Termination Risk" till the end of the practice of the scheme.
c) If the purchaser holds more than 90% of the total stock of the corporation being purchased, the purchaser should bring out detailed scheme to maintain the IPO standing of the corporation purchased and carry it out in regulated period as described in b);
The corporation being purchased should submit Temporary Termination Application to Stock Exchange, and decisions by Stock Exchange will be made according to the stock distribution and actual situations;
d) After the purchaser has carried out the scheme mentioned above, Stock Exchange will make decision on repeal of Risk Caution or resume IPO trade；the corporation purchased will terminate IPO if the purchaser does not finish the practice of the scheme in provision terms.
3) Information disclosure. The purchaser should fully disclose the scheme required by this Notice in its takeover bid report as well as the related risks. At the same time, the purchaser should carry out the scheme in the prescribed term, and should implement the obligation of information disclosure in time.
According to this Notice, the purchaser should also obey other law and regulations if they have any stipulation on listed company takeover bid by foreign investors.
Temporary Regulation on the Establishment of Foreign Holding or Solely Foreign Funding Travel Agency
The Regulation has been promulgated in June, 12th, 2003 by Ministry of Commerce and State Bureau of Tourism, and will become enforceable in July, 1st. During the transition period before China carries out the obligation prescribed under WTO, the establishment of foreign holding travel or solely Foreign Funding agency in China should go by this Regulation. According to this regulation:
1) The foreign investor should be in line with the following conditions:
a) Should be a travel agency or an enterprise mainly dealing with travel business;
b) Annual travel business amount should be more than 40 million US dollars;
c) Should be the member of the travel guild in the country or area where it stays;
d) Have good international reputations and advanced governing experience about travel agency;
e) Comply with China's law and regulations on tourism.
2) The establishment of foreign holding or solely foreign funding travel agency should comply with the following conditions"
a) Comply with the development scheme of tourism industry;
b) Comply with the demand of tourism market;
c) The investor should go by the conditions described in 1);
d) Has a registered capital of no less than 4 million RMB.
3) Area Limitation. The foreign investor complying with the above conditions can establish foreign holding travel agency in the travel areas authorized by the State Council and other five cities as Beijing, Shanghai, Guangzhou, Shenzheng and Xi'an.
4) Quantity Limitation: Usually each foreign investor can only set one foreign holding or solely foreign funding travel agency.
5) Operation Limitation: Foreign holding or solely foreign funding travel agencies could touch neither the go-abroad tourism business for Chinese citizens, nor the business for Chinese citizens going to Hong Kong, Macau and Taiwan.
Ministry of Commerce promulgated the Regulations on the Establishment Of Foreign Funding Investment Corporation
Ministry of Commerce promulgated the Regulations on the Establishment of Foreign Funding Investment Corporation on June 10th, 2003, and will become enforceable in July 10th, 2003. This Regulation is a combination and unification of the following regulations (these regulations will become invalid after 30 days of the promulgation of this Regulation):
1) Temporary Regulations on the establishment of foreign funding investment corporations.
2) Interpretation on the Temporary Regulations on the establishment of investment corporations invested by foreign investor.
3) Complementary Regulation on the Temporary Regulations on the establishment of foreign funding investment corporations.
4) Complementary Regulation II on the Temporary Regulations on the establishment of foreign funding investment corporations.
5) Decision on the Modification of Temporary Regulations on the establishment of foreign funding investment corporations and its Complementary Regulation.
Notice on Income Tax Settlement for Foreign Funding Investment Corporation
The Notice has been promulgated on June, 4th, 2003 by General Bureau of Taxation. The Notice mainly prescribes the following aspects:
1) The investment companies, whose business scale includes stock investment and transfer, or other managing and consulting service for the enterprises in investment, are not in the classification of manufacturing enterprises, and can not enjoy the preferential taxation given to foreign investment manufacturing enterprises by the Law of Taxation.
2) Those investment corporation should pay for its own income tax according to the Law of Taxation.
3) Those investment enterprise which does not have the qualification of a legal person, should pay its income tax through each investor, and its tax can also pay by itself after its application is confirmed by local taxation bureau.
4) For those foreign investors who pay for the enterprise income tax of the investment, the taxation should be calculated and paid on the standard of foreign corporation who set office in main land of China.
Notice on Tax Settlement for Foreign Investors on Merger & Acquisition of Domestic Stock
The Notice was promulgated by the General Bureau of Taxation, and mainly regulates on the following aspects:
1. Foreign investors should pay for the tax according to the regulations on foreign investment enterprises, if they take merger and acquisition of a domestic enterprise or purchase more than 25% stocks of the domestic enterprise who increases its assets.
2. Foreign investor setting foreign investment enterprise through mergers and acquisition can enjoy preferential taxation according to the Law of Taxation and other related regulations if all its conditions accords with the Law of Income Tax for Foreign Invested Enterprise and Foreign Enterprise and other related detailed rules.
The Notice also makes detailed regulations on the calculation of preferential income taxation.
Haworth & Lexon News:
The Case, in which Hong Kong Nipsea International Limited represented by our firm suing Wuhan Libang Paint Co. Ltd for trademark infringement and unfair competition has been reported by CHINA TRADEMARK REPORT (2003,1ST). The case has been ruled by Wuhan First Intermediate Court, and got its final decision by Hubei Higher People's Court.
