JV Compliance during the Transition Period under the New FIL
By Yuhua Yang
On 1 January 2020, the Foreign Investment Law of the People’s Republic of China (“FIL”) came into force, at the same time, the four-decades old Sino-foreign Equity Joint Venture Law of the People’s Republic of China (“EJV Law”) and the three-decades-plus old Sino-foreign Co-operative Joint Venture Law of the People’ Republic of China (“CJV Law”) and their relevant regulations were simultaneously repealed. With respect to the existing c. 125,000 joint ventures already established in accordance with the previous EJV Law or CJV Law and their regulations, the new FIL and its Implementation Regulations provided a 5-year transition period (“Transition Period”) for them to make the necessary adjustments and conversion to ensure compliance by the end of 2024.
During the Transition Period, EJV and CJV, as long established types of entity in China, will quickly fade out of people’s sight. For those existing EJVs and CJVs which have already adopted limited liability company (“LTD”) form, the Company Law of the People’s Republic of China (“Company Law”) shall universally govern them in the same way as it does domestic Chinese companies; for non-legal person CJV entities, it is necessary to conduct a legal form conversion, i.e. reincorporation as an LTD or restructuring into a limited partnership or general partnership both of which are governed by the Partnership Enterprise Law of the People’s Republic of China (“Partnership Law”).
In order to help the existing JVs and their investors better understand the impact of the new FIL and its relevant regulations, we hereby set out the main compliance issues to be attended to in the Transition Period, mainly in respect of the corporate governance, foreign exchange and foreign investment reporting obligations etc.
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Author:
Yuhua Yang Lawyer | Partner +86 139 1069 1534 +86 10 8519 1606 yuhua.yang@llinkslaw.com | |
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