The New Regulation Regarding The Overseas Investment

Abstract: On December 26, 2017, the National Development and Reform Commission ("NDRC") released the Measures for the Management of Overseas Investments in Enterprises (the "Regulations"). The regulations will come into force on March 1, 2018. Beijing Docvit Law Firm Financial and Capital Markets Team will analyze the major revisions to regulations to explain the possible impact on overseas investments. 

1. Expand the scope of the “investors”

The law stipulates that the investors shall be enterprises (including financial enterprises and non-financial enterprises) in China. Institutions, social groups and other non-enterprise organizations carrying out overseas investment shall also refer to the regulation. After the implementation of the regulation, there is no longer any doubt that the partnership shall be treated as investor.

2. Revised the scope of approval of overseas investment projects

It should be noted that, compared with the Guidance on Further Guiding and Regulating the Direction of Overseas Investment, the scope of the approval necessary projects in the regulation is not completely coincident with it.

3. Broadened the scope of investment regulation

Laws and regulations set out the types of activities covered by overseas investment:

The domestic investment entity obtains the rights of ownership and usufruct of the overseas land directly or through the overseas enterprises under its control;

To obtain overseas natural resources exploration, development of concessions and other rights;

To obtain the ownership of foreign infrastructure, management rights; new-built or expansion of overseas fixed assets;

Create new overseas enterprises or increase investment to existing overseas enterprises;

As well as new or participating overseas equity investment funds;

In addition, domestic investment entities control overseas enterprises or assets through agreements, trusts and other means.

At the same time, the regulation defines the concept of "control", that is, directly or indirectly owns more than half of the voting rights in an enterprise, or does not have more than half of the voting rights, but can dominate the business operations, finance, personnel, technology and other important issues. Therefore, even if the domestic investment entity does not actually obtain the equity interests of the overseas enterprises, it should also apply the laws and regulations to control the overseas enterprises through agreements and other means.

4. Regulation of the reinvestment of natural persons

Although this regulation explicitly excludes the application of direct overseas investment of individuals, it regulates the domestic natural persons' investment in overseas operations through its controlled overseas enterprises.

5. Strengthen the whole supervision

Regulation proposed the establishment of a coordinated regulatory mechanism, through online monitoring, interviews and other means of verification of overseas investment.

At the same time, the Regulation set a system for major adverse situation reports, project completion reports, major matters inquiries and reports in order to achieve control over overseas investments; and further improved the disciplinary measures to achieve the after-regulation of overseas investment.

Summary

In general, the statutes will be more fully regulated and at the same time facilitate foreign investment, providing better support for overseas investment for domestic enterprises and the globalization of Chinese enterprises.

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