Loosening Current Restrictions, While Implementing New Ones--Notice on Further Improving the Administrative Measures for Foreign-Funded Investment Companies Issued

The Ministry of Commerce and the State Administration of Foreign Exchange jointly released the Notice on Further Improving the Administrative Measures for Foreign-Funded Investment Companies (“the Notice”) on Dec 8, 2011. While amending some of the current regulations on foreign-invested investment companies, the Notice also sets some new restrictions.

1. Foreign-invested investment companies must be designated as “investment company”.

The Notice imposes a heightened requirement on the verification and management of the statistical information required in the review and approval of foreign-invested investment companies. Once a foreign-invested investment company is approved, it must be clearly designated as an "investment company" in the Basic Information Form of the Foreign-Invested Enterprises. Other types of foreign-invested companies shall not be designated as "investment company", "investment holding" or other similar designations.

2. Domestic loans shall not be used for domestic reinvestment purposes.

Article 2 of the Notice prohibits that domestic loans obtained by foreign-invested investment companies be used for domestic reinvestment purposes. However, concepts such as “domestic loans” and “domestic reinvestment” still need to be further defined and clarified...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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