Q1: When did the Use of Equity Interests to Make Capital Contributions to Foreign-invested Enterprises ("Tentative Provisions") take effect?
A: Tentative Provisions took effect on 22 October 2012.
Q2 Equity Interests of what types of companies are allowed to be contributed as registered capital?
1. Foreign invested enterprises ("FIEs"), including joint ventures (both co-operative and equity joint ventures) and wholly-foreign owned enterprises);
2. Companies which are wholly owned by PRC nationals or entities ("Domestic Companies"); and
3. Companies listed in the PRC
Q3: What companies can receive Equity Interests as capital contributions?
1. Newly-established FIEs;
2. existing FIE;
3. Domestic Company which is converted into an FIE as a result of the capital contribution.
4. Consideration for participation in private placements relating to PRC listed companies.
Q4: What are not provided by Tentative Provisions
l It does not provide explicit legal basis for allowing unlisted overseas shares to be used as the means for funding a China acquisition or newly established FIEs.
l The processes and documentation requirements for the underlying M&A transactions implicit in using Equity Interests in this way have not been streamlined or simplified as a result of the Tentative Provisions, which generally refer to various existing rules governing such transactions.