CBL’s Introduction
CBL’s translation of the Foreign Investment Information Reporting Procedures provides key insights for foreign investment regulation in China. The Procedures mandate comprehensive reporting duties, requiring foreign investors to submit initial and annual reports on their investments. Further, it establishes stringent oversight through randomized audits and inspections performed by the Ministry of Commerce.

 

Foreign Investment Information Reporting Procedures

Chapter I General Rules

Section 1 These procedures have been issued to further develop China’s internationalization, improve foreign investment attraction, protection, and administration, optimize foreign investment policies and procedures, and improve the overall business environment under the Foreign Investment Act of the People’s Republic of China and the Foreign Investment Act Administrative Regulations of the People’s Republic of China.

Section 2 All foreign investors or foreign owned entities must report their investment to the jurisdictional commerce agency if foreign investors directly or indirectly invest in China.

Section 3 The Ministry of Commerce is responsible for administrating and directing all foreign investment information reporting in China.

Commerce agencies at or above the county level, as well as those having jurisdiction over pilot free trade zones and national economic and technological development zones are responsible for all foreign investment information reporting in their respective jurisdictions.

Section 4 Foreign investors or their entities must report their investment information to their jurisdictional commerce agency via the business entity filing system and the National Business Credit Lookup System.

Market regulatory agencies will then promptly forward information reports submitted by foreign investors and foreign owned entities to the Ministry of Commerce.

The Ministry of Commerce has set up a Foreign Investment Information Reporting System in order to receive and process investment information forwarded by jurisdictional market regulatory agencies, and share information with other agencies.

Section 5 The National Administration of Market Regulation (the National Administration) is responsible for planning and guiding the implementation of the business entity filing system and National Business Credit Lookup System to ensure that foreign investment information reporting is accomplished.

Section 6 Jurisdictional commerce and market regulatory agencies at all levels should set up interagency cooperation. The jurisdictional commerce agency is responsible for providing guidance to foreign investors and entities reporting their investments.

Section 7 Foreign investors and foreign owned entities are required to report up-to-date, true, accurate, and complete investment information free of any false information or material omissions or misstatements.

Chapter 2 Reporting Party, Content, and Submission Methods

Section 8 Foreign investors or foreign owned entities are required to submit their primary, change, termination, and annual reports pursuant to these Procedures.

Section 9 Foreign investors forming entities in mainland China shall submit their primary reports via the business entity filing system during entity formation and registration.

Primary reports must also be submitted via the business entity filing system when registering changes in entities acquired by foreign investors.

Section 10 Primary reports filed by foreign investors should include a basic description of the business, investor and ultimate controller details, and investment transaction details.

Section 11 Foreign owned entities must submit change reports via the business entity filing system when registering (filing) any changes to the information included in their primary report.

Any entity changes not requiring filing may be included in a change report submitted via the business entity filing system within 20  business days of the change taking place.   Unless otherwise required by laws governing the effectiveness of such changes, any changes to matters included in an entity’s articles of incorporation shall be deemed as having taken place on the date the resolution was passed.

Any changes to investor and shareholding information for foreign owned companies listed on the National Equities Exchanges and Quotations system only need to be reported when changes are made to the company’s shareholding structure, foreign investors hold over 5% equity, or changes are made to foreign investment shareholding ratios or control.

Section 12 Change reports filed by foreign investors should include any changes to the basic description of the business, investor and ultimate controller details, and investment transaction details.

Section 13 The termination of a foreign owned entity or its conversion to a domestic entity shall only be deemed effective after the foreign investor files their termination or change report. The market regulatory agency will then forward such reports to the jurisdictional commerce agency, and foreign owned entities are not required to submit multiple reports to multiple agencies.

Section 14 Business entities that have foreign investors must submit their annual reports via the National Business Credit Lookup System between January 1 and June 30 of the following year.

Any foreign owned entities formed during the current reporting period shall submit their annual reports in the following year.

Section 15 In addition to the basic description of the business, investor and ultimate controller details, and investment transaction details, entities in industries limited by the exceptions list in the Special Administrative Procedures for Admission of Foreign Investment are also required to submit any industry approvals obtained together with their annual reports.

Section 16 The Ministry of Commerce may adjust the matters required to be reported in primary, change, and annual reports as necessary based on actual foreign investment conditions and laws governing entity registration and information disclosure, and any such changes will be publicly announced.

Chapter 3 Information Reporting, Disclosure, and Correction

Section 17 The jurisdictional commerce agency and other appropriate agencies will create and implement a foreign investment information reporting process based on information reporting requirements.

Unless otherwise provided by law or central government regulations, the above agencies must promptly report all foreign investment information obtained during the course of their work to the jurisdictional commerce agency.

Section 18 Any foreign owned entity investment information required to be publicly disclosed under the Temporary Regulations on Entity Information Reporting or that the entities agree to disclose will be disclosed to the public via the National Business Credit Lookup System and the Foreign Investment Information Reporting System.

Section 19 Foreign investors and foreign owned business entities must promptly submit additional information or make the necessary corrections if they fail to report the necessary investment information or any misstatements or omissions of reported investment information are discovered. Supplemental information or corrections to annual reports filed by foreign-invested entities must comply with Section 9 of the Provisional Regulations on Entity Information Reporting.

The jurisdictional commerce agency will notify foreign owned entities to file the necessary supplemental information or corrections within 20 business days of the discovery of any overdue reports or misstatements or omissions in reported investment information.

Where information is required to be disclosed publicly, both the initially reported information and any subsequent corrections made will be disclosed.

Chapter 4 Oversight and Administration

Section 20 The jurisdictional commerce agency is responsible for foreign owned entity oversight and inspection to ensure compliance with these Procedures.

The jurisdictional commerce agency and other appropriate agencies may achieve oversight through randomized inspections, based on either reports received or referrals and reports from other appropriate agencies or justice agencies, or may take appropriate action at their own initiative.

Section 21 The jurisdictional commerce agency shall oversee foreign owned entities’ compliance with their reporting obligations through randomized audits, where both the entity and auditor selection shall be randomized. The audit and their results will then be disclosed via the foreign investment information reporting system’s public portal.

Citizens, legal entities, or other organizations may report any violations of these Procedures to the jurisdictional commerce agency.     The jurisdictional commerce agency will then promptly resolve any written reports that clearly includes the names of the violators, facts, and evidence pursuant to law.

Other appropriate agencies and justice agencies shall report any violations of these Procedures by foreign owned entities discovered during the course of their work to the jurisdictional commerce agency, who will then promptly resolve such violations pursuant to law.

The jurisdictional commerce agency shall also be entitled to audit foreign investors and foreign owned business entities who fail to fulfill their reporting obligations under these Procedures, report false or misleading information, refuse to cooperate with general oversight and inspections, or refuse to comply with any administrative penalties imposed.

Section 22 The jurisdictional commerce agency may achieve oversight and inspection either through on-site inspections or through written interrogatories, and is entitled to obtain any information necessary to verify the authenticity, accuracy, and integrity of investment information reported by foreign investors to other agencies. The jurisdictional commerce agency is also entitled to require entities being inspected to provide additional information pursuant to law, and such entities shall cooperate with such requirements and provide truthful information.

Section 23 Oversight and inspection by the jurisdictional commerce agency may not interfere with an entity’s routine business operations, and the commerce agency shall not accept any money or services offered by such entities or solicit any other improper benefits.

Section 24 The jurisdictional commerce and market regulatory agency shall maintain the confidentiality of any foreign owned entity trade secrets obtained during the course of their work pursuant to law.

Chapter V Liability

Section 25 The jurisdictional commerce agency will notify foreign investors and foreign owned entities who fail to report investment information under these Procedures or fail to provide corrections or supplemental information pursuant to Section 19 of these Procedures to provide such within 20 business days or face a penalty of 100,000 to 300,000 Yuan. Those who do not make the necessary corrections or provide the additional information required within the time limit and fall under any of the following circumstances are subject to a penalty of 300,000 to 500,000 Yuan:

(I) Foreign investors or business entities that have foreign investors intentionally violate their reporting obligations, conceal the truth, or provide false or misleading information when reporting information;

(II) Foreign investors or their entities intentionally submit incorrect industry information, regardless of whether the industry in question is governed by the Special Administrative Regulations for Admission of Foreign Investments, or submit incorrect investor or ultimate controller information;

(III) Foreign investors or their entities violate the requirements of these Procedures within 2 years of receiving administrative penalties for failing to report investment information pursuant to the same requirements;

(IV) Other major circumstances specified by the jurisdictional commerce agency.

Section 26 Any failures by foreign investors or foreign owned entities to fulfill legally required reporting obligations will also be recorded in the foreign investment information reporting system to improve credit oversight pursuant to law.

The jurisdictional commerce agency may also publish instances of foreign investors or foreign owned entities receiving administrative penalties for failing to fulfill reporting obligations on the foreign investment information reporting system and add it to the entity’s record in the National Business Entity Credit Lookup System pursuant to law.

Data on foreign investors or foreign owned entities’ fulfillment of information reporting obligations and any administrative penalties imposed, may be shared from jurisdictional commerce agency, to other interested agencies, including those for market oversight, foreign exchange, customs, and tax.

Section 27 Foreign investors and foreign owned entities who discover incorrect or incomplete investment information submitted to the foreign investment information reporting system may report any corrections or provide additional information to the jurisdictional commerce agency. Any such corrections or additional information will then be verified and added.

Foreign investors and foreign owned business entities may request the jurisdictional commerce agency remove any records of violations from the foreign investment information reporting system’s public portal when such violations have been cured and all reporting obligations are fulfilled in the year following the violation. Any such violations will be removed following verification.

Chapter VI  Miscellaneous

Section 28 Entities that have foreign investors or those investing in Chinese companies (including investments made through intermediaries) are not required to submit separate annual reports following formation and registration with the market regulatory agency, and the market regulatory agency will share all necessary information directly with the jurisdictional commerce agency.

Section 29 Investment information must be disclosed pursuant to Chapter 2 of these Procedures for any foreign investment held by an investment company or partnership, or where a partnership is formed in Mainland China primarily for investment purposes.

Section 30 Unless their information is obtainable through interagency sharing, foreign investment made without an entity must disclose investment information pursuant to Chapter 2 of these Procedures.

Section 31 Foreign investors and foreign owned entities forming entities whose registration, modification, or termination is governed by law or central government regulations must submit the appropriate approval documents to the market regulatory agency when applying for registration.

Article 32 These Procedures shall also govern any foreign investment in banking, securities, insurance, and other financial industries in China.

Section 33 Investments by investors from Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan, and Chinese citizens resident overseas shall also be reported pursuant to these Procedures.

Section 34 These Procedures shall be subject to the interpretation of the Ministry of Commerce and the National Administration for Market Regulation.

Section 35 The Procedures shall take effect on January 1, 2020.   The Temporary Procedures for Filing for the Formation and Changes of Foreign Invested Entities will be repealed as of the date these Procedures take effect.