China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

Establishing a Nationwide Filing System

While the Pilot Rules only applied the filing requirement to EIEs with a capital amount of RMB 500 million or above, the Notice has removed this threshold and subjects all equity investment enterprises to filing.  Existing EIEs are required to file within three months of the promulgation of the Notice (i.e. November 23, 2011) and newly-established EIEs should file within one month of completing their registration with the Administration for Industry and Commerce, unless:

• the EIE has registered as a venture capital enterprise pursuant to the Interim Management Measures on Venture Capital Enterprises; or
• the EIE is funded and established by a single entity or natural person, or by two or more investors that are wholly-owned subsidiaries of the same entity.

The filing authority is divided into two levels depending on the scale of the EIE:

• for capital equal to or more than RMB 500 million or its equivalent in foreign currency (including paid-in capital and committed capital), filing should be made with the NDRC, which takes up to 40 working days; and
• for capital less than RMB 500 million or its equivalent in foreign currency, filing should be made with an authority appointed by the provincial government (we believe that such filing authority will usually be the provincial counterpart of the NDRC), which takes up to 20 working days.

The Notice itself does not impose substantial sanctions for failure to follow the filing requirements (the only sanction provided in the Notice is that the NDRC will publicly announce non-compliant EIEs).  However, we understand that, in practice, negative consequences may include being prohibited from investment by social security funds and possibly underlying pressure and constraints from the government during its operation and for establishment of new funds in the future.  

Regulating the Establishment, Fund Raising, and Investment Operations of EIEs
 
The Notice provides that EIEs may take the form of a limited liability company, a company limited by shares or a partnership by following the PRC Company Law or PRC Partnership Law.  The capital of an EIE may be committed capital to be paid in installments during the operation of an EIE according to its articles of association or partnership agreement. 

Fund raising of EIEs is restricted to private placement to qualified investors capable of risk assessment and tolerance.  Solicitation to unspecific investors via public channels, i.e. through media, seminars, text messages, etc., and promising a fixed return is forbidden.  EIEs investment is limited to equity of non-publicly-traded companies and unused cash should either be deposited in banks or be used to purchase investment products of fixed income such as treasury bonds.  

Improving the Risk Control System

For risk control purposes, the Notice prohibits an EIE from providing a guaranty to companies other than those it invests in and provides that affiliated parties must refrain from voting for an EIE's investment in affiliated enterprises.  The Notice further provides that assets of EIEs should be entrusted to an independent custodian institute, unless all investors agree to a waiver of such entrustment.  Where the entrusted management institute of an EIE is a foreign invested company, assets of such EIEs must be entrusted to a custodian institute with independent legal status in the PRC.

Clarifying Basic Duties of an Entrusted Management Institute

The Notice requires that, where EIEs adopt the form of entrusted management, the entrusted management institute should prepare and implement the investment plan, manage invested enterprises, provide such enterprises with value-added services, disclose to the EIE relevant operational information, and prepare accounting statements and reports to EIEs.  If the entrusted management institute acts against the interests of investors (i.e. using the EIEs' assets for the benefit of a third party), investor may request the entrusted management institute to resign.

Establishing EIEs' Information Disclosure System

The Notice requires EIEs provide investment operation information to investors as well as submit annual business reports and audited finance reports to the filing authority within four months of the end of each accounting year and report to the filing authority any of the following significant events during its operation within 10 working days from its occurrence:

• amendments to the articles of association, partnership agreement or entrusted management agreement of the EIE or entrusted management institute;

• increase or decrease of the capital or external financing of the EIE or entrusted management institute;

• division or merger of the EIE or its entrusted management institute;

• alteration of custodian institutes or entrusted management institutes including senior management changes or other material changes; or

• dissolution or bankruptcy of the EIE, or the EIE's assets having entered into receivership.

(Written By Jiang Qian)

试点企业是指经市备案办报主管市领导认定的试点股权投资管理机构和试点股权投资企业。市发展改革委召集市备案办成员单位评审符合试点要求的，由市发展改革委上报主管市领导同意后，市发展改革委通知申请企业可以参与试点。

《办法》规定，试点企业应当采用公司制、有限合伙制组织形式设立;股权投资管理机构实收(实缴)资本不少于1000万元人民币或等值外币;申请试点股权投资企业中的境外出资人，在其申请前的上一会计年度，具备自有资产规模不低于5亿美元或者管理资产规模不低于10亿美元。《办法》还要求，每个境外出资人至少在试点股权投资企业中出资1000万美元以上。香港特别行政区、澳门特别行政区、台湾地区的投资者在本市投资设立股权投资企业和股权投资管理机构参与试点的，将参照本办法执行。

对于外资PE而言，国民待遇是其获取QFLP试点资格的最终诉求。关于国民待遇，津版细则中有明显优于其他三地之处：其一，在股权投资基金资金来源方面，天津QFLP允许基金全部由境外募集的外币资金构成，或由境外募集外币资金和境内募集人民币资金共同构成。上海及重庆并未对基金资金来源提出具体要求，而北京方面则要求由境内募集人民币资金和境外募集外币资金共同构成，外资认缴金额原则上不得超过基金规模的50.0%。其二，允许外商投资基金管理企业以其部分外汇资本结汇用于对募集管理的股权投资基金的出资，并批准当外商投资基金管理企业出资金额不超过所募集资金总额度的5%，该基金享受国民待遇，不受投资领域限制。而在沪版QFLP中，此条要求需追加“且无境外LP”时方可享受国民待遇。

《通知》规定投资者为集合资金信托、合伙企业等非法人机构的，应打通核查最终的自然人和法人机构是否为合格投资者，并打通计算投资者总数，但投资者为股权投资母基金的除外。对于投资领域，《通知》规定股权投资企业的投资领域限于非公开交易的股权，闲置资金只能存放银行或用于购买国债等固定收益类投资产品；投资方向应当符合国家产业政策、投资政策和宏观调控政策。股权投资企业所投资项目必须履行固定资产投资项目的合规管理程序。

在健全股权投资企业的风险控制机制方面，《通知》要求股权投资企业应当合理分散投资，其资金不得用于为被投资企业以外的企业提供担保；投资关联企业的，投资决策应当实行关联方回避制度；股权投资企业及其受托管理机构的公司章程或者合伙协议等法律文件，应当载明业绩激励机制、风险约束机制。《通知》进一步明确了股权投资管理机构的基本职责，并要求股权投资企业除需向投资者披露投资运作信息外，应于每个会计年度结束后4个月内，向备案管理部门提交年度业务报告和财务报告。在投资运作过程中发生重大事件的，应及时向备案管理部门报告。在对股权投资企业的备案管理方面，《通知》要求股权投资企业除两种情形外，均应当在完成工商登记后的1个月内，申请到相应管理部门备案。股权投资企业的受托管理机构应当公平对待其所管理的不同股权投资企业的财产，不得利用股权投资企业财产为股权投资企业以外的第三人牟取利益。对不同的股权投资企业应当设置不同的账户，实行分账管理。

《通知》要求备案管理部门建立健全股权投资企业备案管理信息系统、社会举报、定期与不定期检查、向社会公告等制度。
 

The SAFE has issued a series of circulars concerning round-tripping investments by SPVs since 2005. On October 21, 2005, the SAFE issued the Circular of the SAFE on Relevant Issues Concerning Foreign Exchange Administration for Financing and Round-Trip Investment Undertaken by Domestic Residents Through Overseas Special-Purpose Vehicles(2)("Circular 75"). Then, the General Affairs Department of the SAFE issued a number of circulars in 2005, 2007 and 2009 respectively, including the Circular of the General Affairs Department of the SAFE on Issuing the Operating Rules of the "Circular of the SAFE Concerning Improvement of Administration of Foreign Debt" and the "Circular of the SAFE on the Relevant Issues Concerning Foreign Exchange Administration for Financing and Round-Tripping Investment Undertaken by Domestic Residents through Overseas Special-Purpose Vehicles"(3)("Circular 124"),the Circular of the General Affairs Department of the SAFE on Printing and Distributing the Operating Rules of the "Circular of the SAFE on Relevant Issues Concerning Foreign Exchange Administration for Financing and Round-Tripping Investment Undertaken by Domestic Residents through Overseas Special-Purpose Vehicles" (4)( "Circular 106") and the Circular of the General Affairs Department of the SAFE on Printing and Distributing the Operating Rules of the "Circular of the SAFE on Foreign Exchange Administration for Capital Account 2009"(5) ("Circular 77"，with Circular 124 and Circular 106 collectively referred to as the "Old Operating Rules"). At present, foreign exchange regulations concerning financing and round-tripping investments undertaken by domestic residents through offshore SPVs are mainly governed by Circular 77.

The newly-published Circular 19 is an update and expansion of Circular 75 and the Old Operating Rules. It states that if any conflict arises between Circular 19 and the existing effective Circular 77, Circular 19 shall prevail. Circular 19, to a certain extent, reflects the trend of the SAFE gradually opening up and simplifying procedures for the foreign exchange administration of capital accounts.

This article aims to explore the trends in foreign exchange administration and regulatory guidelines provided by Circular 19 on dealing with issues arising under Circular 75, by comparing the New Operating Rules and the Old Operating Rules. Our analysis will draw on our previous experiences of dealing with the Sichuan Branch of the SAFE (Local SAFE).

II. Main Differences Between the New Operating Rules and Old Operating Rules

A. Foreign Exchange Registration for the Establishment of SPVs

a. Approval process and standards

According to Circular 77, when setting up an SPV, a letter of business plan regarding offshore financing must be submitted to the SAFE. The letter must include seven elements: (a) basic introduction to the actual controller and management; (b) legal arrangement and feasibility analysis for the procedure, control methods and follow-up financing for transferring the domestic assets of a domestic resident to the control of SPVs, illustrating the investment relationship between the domestic resident, domestic enterprise controlled by the resident and the proposed SPVs; (c) shareholding proportion of each domestic resident in the SPV (staff shareholding plan and management option incentive plan shall be disclosed, if any); (d) basic introduction to the planned financing methods, financing amount and offshore financing institutions, illustrating financing intention and memorandum of agreement with offshore financing institutions; (e) illustration of the plan to use offshore financing funds; (f) the development history of the industry of the domestic enterprise, the most recent 3 years financial status (the financial status since the establishment of the domestic enterprise shall be illustrated if such domestic enterprise has not been established for a full 3 years); (g) market prospects, market development strategies, development planning, financial forecast, and market risk analysis of the domestic enterprise.

The approval process of the SAFE is intended to focus on the reasonableness, feasibility and consistency of the financing methods, scale, conditions, capital repatriation arrangement and method mentioned in the letter of business plan regarding offshore financing. Under Circular 77, the approval process concerning the establishment of SPVs undertaken by the SAFE is substantive, and our previous relevant experience is consistent with this.

According to Circular 19, a resolution of the board of the domestic enterprise or a written statement by an individual which approves the offshore financing must be submitted to the SAFE for the establishment of a SPV. However, the letter of business plan regarding offshore financing and the items required to be listed in the aforementioned letter under Circular 77 are no longer required in Circular 19. Furthermore, examination of the commercial reasonability and feasibility is also no longer required under Circular 19. We tend to believe that, Circular 19 has simplified the SAFE approval process for the establishment of SPVs.

b. Registration

Both Circular 19 and Circular 77 provide that an SPV can be established prior to the initial registration with the SAFE. However, material changes on capital or equity by way of offshore financing, change of the shareholding structure or round-trip investment are not permitted prior to the completion of SAFE registration. In short, the application to the SAFE for registration must be made before any material change to capital or equity of the offshore SPVs is made. Rules concerning retrospective registration shall be applied if material capital or equity modifications are made before the initial application to register the SPV with the SAFE.

Pursuant to Circular 77, one precondition of the initial SAFE registration of SPVs is that the domestic enterprises and domestic natural persons must have definite financing intentions and have executed memoranda of offshore financing institutions. In our experience, the local SAFE may still accept applications for the initial registration of SPVs even if no memoranda on offshore financing are executed, or even if an offshore financing institution has not been ascertained, if the SAFE believes there is an urgent need for accepting the application. Under Circular 19, this precondition has been deleted.

We consider that, under Circular 19, an application of initial registration of SPVs could be accepted for the initial registration of an SPV prior to reaching definite financing intentions and execution of memoranda between the domestic enterprises and/or persons and offshore financing institutions. This change will enrich financing models and make offshore financing more flexible.

B. SAFE Registration of the Establishment of a SPV with Acquisition of a Domestic Enterprise

a. Injection of domestic assets

On August 8, 2006, six PRC governmental and regulatory authorities, including Ministry of Commerce ("MOFCOM") and SAFE, jointly promulgated the Regulations on the Acquisition of Domestic Enterprises by Foreign Investors ("Acquisition Regulation")(6). Under the Acquisition Regulation, MOFCOM approval is required if any domestic enterprise merges its affiliated domestic company in the name of a company legally established or controlled by the aforesaid party in a foreign country or region. In a situation where a domestic resident (including an enterprise or person) establishes under Circular 75 an offshore SPV and conducts a reverse acquisition of domestic companies owned by the domestic resident via the offshore SPV, the Acquisition Regulation shall govern. In short, the party shall obtain the MOFCOM approval.As we know, many domestic enterprises with plans to conduct an offshore IPO at that hoped to obtain an acquisition approval from the local MOFCOM branches before the Acquisition Regulation came into effect in order to avoid the uncertainty of obtaining the MOFCOM approval after the effectiveness of acquisition regulation. Therefore, the time when the domestic assets were injected into the offshore SPV became a key point. The governing Circular 124 did not provide clear provisions regarding the time of injection of domestic assets into an offshore SPV before the promulgation of Circular 106. Thus, prior to May 2007, the MOFCOM approval to the acquisition of an offshore company by a domestic company was generally deemed as a condition of recognizing the injection of domestic assets into the offshore SPV. However, Circular 106 and Circular 77 promulgated later stipulate the completion of SAFE registration of a domestic enterprise to be the time of asset injection.

Circular 19 is silent on the above issue. Whether the SAFE recognizes that the time of injection of domestic assets into an offshore SPV is the date of MOFCOM acquisition approval needs further clarification from the SAFE.

b. 3-year consecutive operation requirement

Both Circular 106 and Circular 77 provided that "… if a foreign investor which is an offshore enterprise, has completed the SAFE registration concerning overseas investment, but does not operate in compliance with the permitted business scope for three consecutive years, the application of such foreign investor for SAFE registration regarding its establishment or acquisition of domestic enterprises shall not be accepted." In our experience, when Circulars 106 and 77 were effective, the 3-year consecutive operation requirement was not strictly implemented by the local SAFE in practice and there is no provision in Circular 19 in this regard. We therefore consider that there is probably no longer a requirement to have maintained the business for three consecutive years.

c. SAFE registration of equity acquisition

Pursuant to the Acquisition Regulation, if the MOFCOM approves a foreign investor to acquire a domestic company by equity merger, the foreign exchange administrative authority shall issue a foreign exchange registration certificate to the domestic company which indicates that the certificate shall be "valid for eight months from its issuance". If the MOFCOM approves a special purpose company(7) to acquiring a domestic company by equity merger, the foreign exchange administrative authority's certificate shall be "valid for fourteen months from its issuance".

As to a foreign investor's equity merger with a domestic company, Circulars 106 and 77 only generally state that the wording of the foreign exchange registration certificate given to the domestic company must be consistent with the wording of the approval certificate for the establishment of a foreign investment enterprise and its business license. Under Circular 19, the rules covering the SAFE registration of a foreign investor's acquisition of a domestic company by equity merger are different from those governing an SPV's acquisition of a domestic company by equity merger. Circular 19 contains a detailed distinction between these two kinds of mergers. For equity merger by foreign investors with a domestic company, Circular 19 provides that before a foreign exchange registration certificate is cancelled, the foreign exchange payments made by the domestic company will be restricted.For example, the domestic company shall not pay dividends, or provide security guarantees for its related companies or make any foreign exchange payments on capital account by equity transfer, capital reduction, liquidation.

The New Operating Rules are more consistent with the Acquisition Rules, and are clearer and more explicit to avoid any confusion.

C. Retrospective Registration of SPV's Round-tripping Investment

a. Punishment before retrospective registration

Pursuant to Circular 106, a written application was required to be submitted for the retrospective registration of an SPV's round-trip investment. The background information about the domestic enterprise and actual controller, the shareholding structure of offshore SPVs, the offshore financing and round-trip investment of the SPV must be clearly stated in the application. The SAFE was mainly concerned with whether the domestic enterprise had paid to the SPV any profits, dividends, liquidation dividends, transfers of equity, capital reduction proceeds, principal and interest on shareholder loans, etc ("Foreign Exchange Payment") when such application is examined. If a foreign exchange payment occurred, the retrospective registration will only be permitted after the foreign exchange evasion of the domestic enterprise and its actual controllers are investigated and dealt with. If the actual controller fraudulently obtained foreign exchange registration by providing false statement when an SPV merged with a domestic enterprise, then retrospective registration shall only be permitted after the fraudulent act is punished.

The principle of "punishment before retrospective registration" was firstly set out in Circular 106, but the later issued Circular 77 did not provide relevant operating rules concerning retrospective registration of SPVs. Therefore, during the intervening period between the promulgation of the Circular 77 and the Operating Guidance on the Circular of the SAFE on Relevant Issues concerning Strengthening the Administration of the Foreign Exchange Business(8)("Operating Guidance of Circular 59") on November 22, 2010 which restated the principle of punishment before retrospective registration, there was no unanimous view and practice among different levels of foreign exchange administrative authorities on the enforceability and operation of the retrospective registration of the SPV. The process of retrospective registration was filled with uncertainty.

Circular 19 reconfirms the principle of "punishment before retrospective registration". Furthermore, Circular 19 introduces two more examination elements in addition to the examination of the foreign exchange payment history of the domestic company required by Circular 106. The two new elements are: (1) whether there was a material change of capital or equity in the offshore SPV before the retrospective registration; and (2) whether there was a fraudulent act in the application for the foreign exchange registration conducted by the foreign-invested enterprise which was established through round-trip investment.

We think that Circular 19 confirms the feasibility of obtaining a retrospective registration, at the same time it strengthens the examination towards possible illegal conduct by the actual controllers in respect of compliance of the relevant foreign exchange laws and regulations. In addition, penalizing such conduct is emphasized.

b. Special audit report

Based on our previous experience, when Circular 106 was effective, during the process of granting retrospective registration, the investigation of the existence of offshore foreign exchange payments by the domestic enterprise existed was mainly dependent on the written undertaking of the domestic natural person. Pursuant to Operating Guidance of Circular 59, a special audit report issued by a professional audit institution shall be submitted. Circular 19 restates this requirement. We tend to believe that SAFE has enhanced the examination of offshore foreign exchange payments to check for foreign exchange evasion.

D. Round-trip Investment of Non-SPVs

a. Definition of a non-SPV

Compared with the Old Operating Rules, Circular 19 puts forward a new concept, namely, the non-SPV, but does not provide a definition of a non-SPV. Based on the definition of a SPV in Circular 75(9), we consider that a SPV should meet two requirements concurrently: first, it must conduct financing activity by equity transfer; second, the equity financing must be based upon the domestic assets or interests. In practice, it should be noted that, in practice, under the presently effective Circular 77, the local SAFE has a broader understanding of the definition of a SPV.In practice SPVs have often successfully obtained the foreign exchange registration even though they did not meet the strict definition of a SPV.

Accordingly, we consider that, non-SPVs referred to in Circular 19 mean offshore companies which do not simultaneously satisfy the two requirements of SPVs. This understanding, however, does not rule out the possibility that different levels of foreign exchange administrative authorities will interpret it differently.

b. The approval process for round-trip investment of non-SPVs

Circular 19 does not require a non-SPV offshore enterprise to obtain foreign exchange registration for a round-trip investment as would be required by a SPV. The domestic enterprise controlled by such offshore enterprise will be identified as "round-trip investment of non-SPV" by local SAFE in the foreign exchange management information system directly and the compliance investigation will be carried out based on the following principles:

i. The domestic resident natural person shall provide evidence that in the formation of his offshore rights and interests does not involve any acts of foreign exchange evasion, illegal procurement, changing the use of foreign exchange without authorization and other acts that violate the foreign exchange administration regulations;

ii. The SAFE shall ensure that there is no false undertaking being made by the foreign-invested enterprise being set up via round-trip investment when applying for foreign exchange registration;

iii. Between November 1, 2005 and the date of application, whether the foreign invested enterprise established via round-trip investment made any offshore payments for profits, liquidation dividends, consideration of equity transfer, capital reduction proceeds, retrieved investment in advance, principle and interest of shareholder loan and other payments (including offshore payments of profits to be used for domestic re-investment and capital expansion).

Should any acts of violation be found, the principle of punishment before registration of round-trip investment shall be applied before the non-SPV is recorded with the SAFE. In short although registration is not required for round-trip investment of by a non-SPV, the SAFE imposes stringent supervision on non-SPVs as on SPVs.

c. Offshore investment by domestic natural persons

Applicable laws do not forbid offshore investments by domestic natural persons. However, in practice, since the relevant authorities, such as SAFE have not promulgated operating rules (except such operating rules concerning round-trip investment and employee incentive plans) in this regard, domestic natural persons often find it impossible to obtain foreign exchange registration for the purpose of offshore investments. As a result, the parties are unable to remit legitimate income obtained through such investments back to the country. Although the Circular 19 does not provide any specific provision regarding foreign exchange registration procedures for domestic natural persons investing overseas, it provides guidelines where offshore entities, directly or indirectly controlled by domestic natural persons, engage in domestic direct investments in China. Circular 19 provides that, under such circumstances, the legitimacy of the offshore rights and interests of the domestic natural persons shall be examined, furthermore, such investments shall be deemed and recorded as "round-trip investment of non-SPVs".

We are of the view that "round-trip investment of non-SPVs" provides a legitimate basis for the domestic natural persons to remit profits from offshore investments into China. Although the SAFE continues to restrict foreign exchange registration for domestic natural persons investing overseas, it has established procedure for foreign exchange registration, if it is evident that an offshore investment made by a domestic natural person into an offshore entity is conducted for the purpose of direct round-trip investment back to domestic enterprises. This provides a legitimate channel for profits obtained by domestic natural persons through offshore investments to be remitted back to China via "round-trip investment of non-SPVs."

E. Foreign Exchange Deregistration

Attachment 1.5 of Circular 19 sets out operating rules concerning deregistration of SPV's round-trip investment. Deregistration of SPV's round-trip investment is required when a domestic enterprise or natural person who has actual control over the SPV transfers the equity of the SPV to other domestic or offshore entities or offshore natural persons. Attachment 1.5, however, does not cover the circumstances when a domestic natural person takes over the SPV. We consider that this indicates foreign exchange registration for domestic natural persons in offshore investments can not be obtained currently, except for investments made through round-trip investments in SPVs or employee incentive plans. This is in line with the current practices of the SAFE.

The above is a brief analysis of the main differences between Circular 19 and Old Operating Rules. Because Circular 19 has only been promulgated for a short time, it is still vague regarding interpretation and application by different levels of foreign exchange administrative authorities in practice. Further study is needed when subsequent cases and opinions from the SAFE can be obtained.

Notes:

1、Hui Fa [2011] No.19, effective as of July 1, 2011.
2、Hui Fa [2005] No.75, effective as of November 1,2005.
3、Hui Zong Fa [2005] No. 124, effective as of November 24,2005.
4、Hui Zong Fa [2007] No. 106, effective as of May 29, 2007.
5、Hui Zong Fa [2007] No. 77, effective as of May 6, 2009.
6、Effective as of September 8, 2006.
7、The definition of a special purpose company is different from the definition of an SPV in the Circular 75. Pursuant to the Acquisition Regulation, a special purpose company refers to an offshore company directly or indirectly controlled by a domestic company or Chinese natural person realizing the interests of a domestic company actually owned by the aforesaid domestic company or Chinese natural person by means of offshore listing.
8、Hui Fa [2010] No. 59, effective as of November 22, 2010.
9、Pursuit to Circular 75, a special purpose company refers to an offshore company directly established or indirectly controlled by a domestic company or Chinese natural person realizing the assets or interests of a domestic company holding by the aforesaid domestic company or Chinese natural person by means of equity financing(including convertible bond financing).

此次新颁布的19号文是75号文及旧操作规程的又一次更新和延伸，明确了如在19号文中与现行有效的77号文规定不一致的地方，以19号文为准。新颁布的19号文在一定程度上体现了资本项目外汇管制逐步开放、简化流程的趋势。本文旨在通过对新旧操作规程内容的对比，结合我们之前在四川省外汇管理局（“地方外管局”）办理相关业务的经验，理解有关75号文下外汇监管的发展趋势，指导我们在19号文下办理涉及75号文的相关业务。

二、新旧操作规程的主要区别和简要分析

1、特殊目的公司设立的外汇登记

(1) 审核标准

根据77号文，在办理特殊目的公司设立时，需要提供境外融资商业计划书，其内容包括了（i）实际控制人与管理层的基本情况介绍；（ii）将境内居民的境内资产转移由特殊目的公司控制的过程、控制方式及后续融资的法律安排及可行性分析，境内居民与其控制的境内企业、计划设立或控制的特殊目的公司之间的投资关系说明；（iii）各境内居民在特殊目的公司的持股比例（若有员工持股计划和管理层期权激励计划，应予以披露）；（iv）计划融资方式、融资金额以及境外融资机构的基本情况介绍、与境外融资机构达成的融资意向及备忘录情况说明；（v）境外融资资金使用计划说明；（vi）境内企业所属行业发展历程、近三年财务基本状况（境内企业成立未满三年，说明其成立以来的财务状况）；（vii）境内企业所在市场前景、市场开发策略、发展规划和财务预测、市场风险分析等七个方面。审核原则为“重点审核境外融资商业计划书、书面申请有关融资方式、规模、条件、资金调回安排及方式的合理性与可行性、一致性”。可见在77号文下，外管局对特殊目的公司的设立是实质性的审查。我们之前的相关实践经验也验证了这一点。

根据19号文，在办理特殊目的公司设立时，需提供境内企业权力机构同意境外融资的决议书或个人同意境外融资的书面说明，未要求提供境外融资商业计划书及77号文中要求在境外融资商业计划书中列明的信息。19号文在审核原则上也未要求对商业上的“合理性”和“可行性”进行审查。我们倾向于认为，在19号文下，外管局对特殊目的公司的设立相对来说是一种形式审查，与19号文简化相关操作的主旨一致。

(2) 登记受理条件

19号文与77号文一致规定，在办理登记之前，可在境外先行设立特殊目的公司，但在登记完成前，该特殊目的公司不得发生境外融资、股权变动或返程投资等实质性资本或股权变动，即一般提交登记申请的时间应为境外特殊目的公司境外融资等实质性资本或股权变动以前。若在申请登记之前特殊目的公司已发生实质性资本或股权变动的，则应适用补办登记的相关规定。

根据77号文，特殊目的公司设立的登记受理条件之一为境内企业和/或境内自然人与境外融资机构已达成明确的融资意向并签署备忘录。根据我们以往项目的经验，有时在申请特殊目的公司设立登记时，境内企业和/或境内自然人与境外融资机构并未签署备忘录，甚至尚未确定境外融资机构，地方外管局经考虑项目的紧迫性和特殊性仍然受理了申请，予以办理登记。19号文并未设置上述受理条件。我们倾向于认为，19号文允许境内企业和/或境内自然人在与境外融资机构达成明确的融资意向或签署备忘录以前，申请设立特殊目的公司的登记，这将丰富融资结构的设计，使境外融资更为灵活。

2、特殊目的公司设立、并购境内企业的外汇登记

(1) 境内资产注入的认定

2006年8月8日中华人民共和国商务部、国家外汇管理局等六部委联合颁布《关于外国投资者并购境内企业的规定》（6）（“并购规定”），规定境内公司、企业或自然人以其在境外合法设立或控制的公司名义并购与其有关联关系的境内的公司，应报商务部审批。75号文下的境内居民（包括境内企业或自然人）在境外设立特殊目的公司，并以境外特殊目的公司返程收购境内居民持有的境内公司的股权适用并购规定的上述规定，即需要报商务部审批。据我们了解，当时为避免相关并购交易在并购规定生效后提交商务部审批所带来的不确定性，有很多计划境外上市的境内企业希望赶在并购规定生效前取得有权地方商务部门对相关并购交易的批复。所以判断境内资产于何时注入境外特殊目的公司显得尤为重要。当时有效的124号文中并未明确境内资产注入境外特殊目的公司的认定条件。故在106号文颁布之前，普遍以有权商务部门出具同意外国投资者并购境内企业的批复为境内资产注入境外特殊目的公司的认定条件。但随后颁布的106号文和77号文中均规定“以办理完毕境内企业外资外汇登记为境内资产注入境外特殊目的公司的认定条件”。

19号文中并无106号文和77号文中的表述。19号文的这一变动是否从侧面反映了外管局默认境内资产注入境外特殊目的公司的时间为境内企业取得有权商务部门的并购批复之日还有待外管局作出进一步解释。

(2) 持续经营三年的要求

106号文和77号文中均规定“……，或外国投资者为已办理境外投资外汇登记的境外企业，但未按照批准的经营范围持续经营三年，应不予受理该企业设立、并购境内企业外汇登记的申请”。根据以往我们的项目经验，在106号文和77号文适用时，地方外管局在具体操作中亦并未严格执行“三年持续经营”的要求。19号文并无有关特殊目的公司需要满足三年持续经营要求的表述。我们倾向于认为，在特殊目的公司设立、并购境内企业外汇登记时，19号文对特殊目的公司的持续经营时间并无要求。

(3) 股权并购的外汇登记

根据并购规定，若商务部批准外国投资者以股权作为支付手段并购境内公司的，外汇管理机关向境内公司颁发加注“自颁发之日起8个月内有效”字样的外汇登记证；若商务部批准特殊目的公司（7）以股权并购境内公司的，外汇管理机关向境内公司颁发加注“自颁发之日起14个月内有效”字样的外汇登记证。

针对外国投资者以股权作为支付手段并购境内公司，106号文和77号文仅笼统地规定被并购境内企业取得的外汇登记证的加注情况应与批准证书和营业执照上的加注情况一致。19号文对外国投资者股权并购境内公司和特殊目的公司股权并购境内公司的外汇登记情况进行了区分并加以具体描述。特别是针对外国投资者股权并购境内公司，明确规定在外汇登记取消加注前，被并购境内企业的外汇支付受到限制，如不得向股东分配红利，不得向有关联关系的公司提供担保，不得对外支付转股、减资、清算等资本项目款项。新操作规程更好地与并购规定的相关规定进行了衔接，且更加清晰、明确，避免造成适用中的混乱。

3、特殊目的公司返程投资补登记

(1) 先处罚，后补办登记

根据106号文，在办理特殊目的公司返程投资补登记时，需提供书面申请，详细说明境内企业和实际控制人基本情况、境外特殊目的公司的股权结构以及境外融资、特殊目的公司对境内投资的详细情况。在审核上，外管局主要关注境内企业是否向特殊目的公司支付过利润、红利、清算、转股、减资、股东贷款本息等款项（“对外支付”），若发生过对外支付，应按照有关规定在发生额度内追究境内企业和实际控制人的逃汇责任后予以补办登记。特殊目的公司并购境内企业，实际控制人以虚假声明方式骗取外商投资企业外汇登记的，申请补办特殊目的公司外汇登记时，应对境内企业骗取外汇登记的行为进行处罚后再补办登记。

106号文首次明确了“先处罚，后补办登记”的原则，但其后颁布的77号文未对特殊目的公司补办登记的操作规程进行规定。鉴于此，在77号文颁布之后至2010年11月22日颁布的《国家外汇管理局关于加强外汇业务管理有关问题的通知》（“59号文操作指引”）（8）所涉资本项目业务的操作指引中重申“先处罚，后补办登记”原则之前的一段时间内，各个地方外汇管理部门对于特殊目的公司能否补办登记、如何补办登记的态度和操作并不统一，补办登记存在极大的不确定性。

19号文再次明确且强调了“先处罚，后补办登记”原则。同时，在补办登记时，除审核106号文中提及的境内企业的对外支付情况外，还明确了两条审核内容，其一，办理特殊目的公司登记之前，境外特殊目的公司是否已经发生实质性资本或股权变动；其二，返程投资设立的外资企业在办理外汇登记时，是否存在虚假承诺。我们倾向于认为，19号文进一步明确了补办登记的可行性，但同时也加强了在补办登记时对实际控制人是否存在违反外汇管理法规行为的审查力度，强调了处罚的前置性。

(2) 专项审计报告

根据我们以往的项目经验，在106号文适用时，就办理境内自然人特殊目的公司外汇补登记时对境内企业是否存在对外支付行为的审查主要是依赖于境内自然人的书面承诺。根据59号文操作指引，境内自然人特殊目的公司外汇补登记时需要提交专业机构出具的专项审计报告。19号文再次明确了上述要求。我们倾向于认为，外管局加强了补办登记时对境内企业对外支付和是否存在逃汇行为的审查力度。

4、非特殊目的公司返程投资

(1) 非特殊目的公司定义

相较于旧操作规程，19号文提出了一个新的概念，即非特殊目的公司。但在19号文中并未对非特殊目的公司进行明确定义。根据75号文中特殊目的公司的定义（9），我们认为75号文下的特殊目的公司需要同时满足两个条件，其一，进行股权融资，其二，股权融资的基础是境内资产或权益。但须提请注意的是，实践中，在目前适用的77号文操作规程下，地方外管局对特殊目的公司的理解更为宽泛。据我们了解，实践中存在并非真正意义上的特殊目的公司最终办理了特殊目的公司外汇登记的情况。

对于19号文中的“非特殊目的公司”，我们理解，严格来说未能同时满足上述特殊目的公司的两个条件的境外公司将被认定为19号文下的非特殊目的公司。但不排除19号文生效后，外汇管理部门对非特殊目的公司的定义进行不同解释。

(2) 针对非特殊目的公司返程投资的审核

根据19号文规定，针对非特殊目的公司返程投资，无需为该非特殊目的公司的境外企业办理特殊目的公司登记。该境外企业控制的境内企业所在地外汇局应在直接投资外汇管理信息系统中将其标识为“非特殊目的公司返程投资”并按以下原则审核其合规性：

(i) 境内居民个人应提供其境外权益形成过程中不存在逃汇、非法套汇、擅自改变外汇用途等违反外汇管理法规的证明材料；

(ii) 返程投资设立的外资企业在办理外汇登记时是否存在虚假承诺；

(iii) 2005年11月1日至申请日之间，返程投资设立的外资企业是否向境外支付利润、清算、转股、减资、先行回收投资、股东贷款本息等款项（含向境外支付利润用于境内再投资、转增资等）。

对于存在违规行为的，遵循先处罚再办理“非特殊目的公司返程投资”标识的原则。简言之，虽然对于非特殊目的公司返程投资无需像特殊目的公司返程投资那样办理登记，但外汇管理部门对其监管的力度并未放松。

(3) 境内自然人境外投资

虽然目前相关法律法规并未禁止境内自然人境外投资，但在实践操作中，相关主管部门，如外汇管理部门并未出台配套的操作规程（针对返程投资及员工期权计划的操作规程除外），导致境内自然人进行境外投资无法办理外汇登记，并进而导致境内自然人通过上述投资取得的收益无法合法汇回境内。19号文虽然仍未对境内自然人境外投资的外汇登记操作规程进行明确规定，但是，针对境内自然人以其直接或间接控制的境外实体于境内直接投资的情况，19号文规定，其一，审查境内自然人境外权益形成的合法性，其二，在办理新设外商投资企业外汇登记时标识“非特殊目的公司返程投资”。我们理解“非特殊目的公司返程投资”的标识使得境内自然人将其境外投资取得的收益最终汇回境内有了依据，也即是说，虽然外管局仍然没有完全放开境内自然人境外投资的外汇登记，但若境内自然人境外投资后通过境外实体对境内进行直接投资，则该直接投资的外汇登记是有相应的操作规程的，进而使得境内自然人境外投资取得的收益能通过“非特殊目的公司返程投资”这一渠道合法汇回境内。

5、外汇注销登记

19号文单列附表1.5就注销特殊目的公司返程投资外汇登记进行了规定。明确实际控制特殊目的公司的境内企业或自然人将特殊目的公司的股权转让给其他境内外机构或境外自然人时应办理特殊目的公司返程投资外汇注销登记。需要提请注意的是，附表1.5未对境内自然人并购特殊目的公司的情形进行相应规定。我们理解这正与目前外汇管理实践相符，即除特殊目的公司返程投资及员工期权计划外，境内自然人境外投资的外汇登记尚无法办理。

以上是我们就19号文相较于旧操作规程的主要区别的简要叙述和分析。由于19号文颁布不久且尚未正式实施，各级外汇管理部门对19号文内容的理解和适用及具体实务中的核查标准和尺度均存在不确定性。本文的上述分析是否准确、适当，还有待在19号文正式实施后结合相关案例及/或相关外汇主管部门的意见进一步研究。

注释：

1、汇发[2011]19 号，自2011年7月1日起实施。
2、汇发[2005]75号，自2005年11月1日起实施。
3、汇综发[2005]124号，自2005年11月24日起实施。
4、汇综发[2007]106号，自2007年5月29日起实施。
5、汇综发[2009]77号，自2009年5月9号起实施。
6、自2006年9月8日起施行。
7、并购规定中特殊目的公司的定义不同于75号文中特殊目的公司的定义。并购规定中的特殊目的公司系指中国境内公司或自然人为实现以其实际拥有的境内公司权益在境外上市而直接或间接控制的境外公司。
8、汇发[2010]59号, 自2010年11月22 日起实施。
9、根据75号文，特殊目的公司是指境内居民法人或境内居民自然人以其持有的境内企业资产或权益在境外进行股权融资（包括可转换债融资）为目的而直接设立或间接控制的境外企业。

 To test the water, Shanghai will first implement the Pilot Program among the private equity investment funds ("PE funds") registered in Pudong New Area of Shanghai. One of the highlights of the Pilot Program is the introduction of QFLP into the current foreign exchange administration system to encourage foreign investment in China-based PE funds.

I. Foreign Exchange Control

Commonly, the general partners ("GPs") of a PE fund subscribe capital contribution equal to 1%-3% or more of the total capitalization of the fund. In the past, some foreign PE funds carried out PE investment in China by setting up a foreign-invested enterprise ("FIEs") which would then establish a PE fund in the form of limited liability partnership and would serve as the GP of the fund. However, these GPs often faced practical barriers when making capital contribution. According to the Notice of the General Affairs Department of the State Administration of Foreign Exchange on Relevant Operating Issues Concerning the Improvement of Administration of Payment and Settlement of Foreign Capital by Foreign-invested Enterprises ("Circular No. 142"), unless otherwise provided by the law, non-investment FIEs shall not make any PE investments within the People's Republic of China with their registered capital in RMB. The FIEs that foreign PE funds established in China as investment vehicles are usually regarded as non-investment FIEs, as they often conduct investment management or consulting services. Due to the said restriction of Circular No. 142, these FIEs face substantive obstacles if they want to carry out PE investment with RMB settled from their registered capital in foreign currency.

Circular No.142 also establishes that FIEs, which are approved by the Ministry of Commerce or its branch offices and primarily engages investment, shall get the approval of SAFE or its branches before transferring their registered capital within China. The Reply of the General Affairs Department of the State Administration of Foreign Exchange on Issues Relating to Equity Investment by Foreign-invested Venture Capital Enterprise upon Settlement of Their Capital in Foreign Currency ("Circular No. 125") also provides that a foreign invested venture capital ("FIVC") may conduct equity investment in China with its capital in foreign currency and such investment shall be within its business scope. To get the approval of SAFE, the FIVC shall perform the approval procedures for an investment project. Moreover, the FIVC shall transfer its registered capital in foreign currency to the investee company, which shall settle the capital in RMB.

Clearly, Circular No.125 targets the FIVCs. At present, it remains unclear what foreign exchange administration rules a foreign invested partnership ("FIP") shall follow. A number of foreign-invested PE funds have been approved and established as FIPs since the implementation of the Administrative Regulation on the Establishment of Partnerships by Foreign Enterprises or Individuals within China and the Administrative Regulation on the Registration of Foreign Invested Partnerships on March 1, 2010. Before the official introduction of QFLP, it is likely that FIPs might be required to settle foreign currency in compliance with the rules for FIVC. This means that PE funds structured as FIVCs or FIPs may engage in PE investment in China, but their investments are subject to foreign exchange approval procedures. As the investees are required to be responsible for foreign exchange settlement when receiving PE investment, PE funds structured as FIVCs or FIPs may be in a precarious position when competing with other types of PE funds on PE investment projects.

According to the Pilot Program, the QFLP might be able to remove the foreign exchange control barriers that PE funds and their GPs may encounter. The QFLP is similar to the Qualified Foreign Institutional Investors ("QFII"), under which the foreign investors meeting certain qualifications may invest in PE funds provided that the dollar amount of their investments do not exceed the limit approved by SAFE. The investments by QFLP may be in foreign currency but the investees shall settle the investments in RMB. However, the total dollar amount that each PE fund (which has QFLPs) settles in RMB shall not exceed USD 100 million or 50% of the total capitalization of the PE fund. The dollar amount of foreign currency that the GP of the PE fund settles shall not be more than 5% of the total capitalization of the PE fund. If the QFLP is implemented, GPs of foreign invested PE funds will no longer face substantive practical barriers when settling their capital from foreign currency to RMB to conduct PE investments in China

II. Eligibility of National Treatment

According to the existing PRC laws and regulations and the interpretation by relevant authorities, a FIVC or FIP established in China is generally treated as foreign investors when conducting investment projects. In essence, their investment projects are required to follow the filing or approval procedures applicable to foreign investment projects. In addition, the domestic company that a FIVC or FIP invests in will be regarded as a FIE. Compared with these procedures, the administrative procedures applied to domestic PE funds are much simpler. Moreover, the investees of Chinese PE funds remain to be treated as domestic companies so that they will face less obstacles if they plan to go public or enter into the reorganization proceeding. This is another disadvantage that FIVCs and FIPs experience when competing on investment projects with domestic PE funds.

It is possible that the Pilot Program is adopting a more lenient approach towards the national treatment for foreign invested PE funds. For example, the Pilot Program might grant national treatment to the PE funds with only one foreign general partner (possibly a FIE). In other words, a PE fund will be regarded as a Chinese PE fund, if one of its GPs is a FIE and the rest of its GPs are domestic entities. However, if any of the limited partners ("LPs") of a PE fund is a FIE, such a PE fund might not be entitled to national treatment under the Pilot Program.

Under the current PRC law, if all partners (LPs and GPs) of a PE fund are domestic entities (including FIEs), they may structure the PE fund as a domestic partnership, instead of a FIP. In practice, a PE fund may adopt a structure that is subject to the discretion of the competent local branch of SAIC and may be applicable only in some areas of China. PE funds structured as domestic partnerships might be deemed as domestic PE funds and entitled to national treatment when making investments, since the relevant authorities cannot legally require them to perform the administrative procedures applicable for foreign investors. However, this will remain a concern for FIEs that overseas PE funds establish in China as investment vehicles, before the legislation approves such national treatment to PE funds and their partners.

Relevant government authorities will be extremely careful when formulating the policies regarding the eligibility of national treatment. Where FIEs are the GPs of a PE fund, the percentage of their capital contribution to the total capitalization of the fund is relatively small. Therefore, these FIEs are less likely to circumvent the Chinese government's industrial restriction on foreign investment, even if such a fund is given national treatment. Conversely, if FIEs are the LPs of a PE fund, the percentage of their capital contribution to the total capitalization of the fund will be large. In this case, these FIEs may by pass the industrial restriction on foreign investment by becoming LPs of a PE fund, (as there is no legal basis to require such PE fund to get approval) if they are granted national treatment. Due to the restriction of foreign exchange settlement established by Circular No. 142, the newly established FIEs face difficulty to obtain sufficient capital in RMB to make capital contribution to PE funds as LPs, unless they have generated RMB income in China. Essentially, QFLP may be only applicable to foreign LPs. In other words, QFLP might not be applicable to LPs that are FIEs to clear the foreign exchange administration barriers FIEs may encounter when they invest in China.

Although the Pilot Program has not yet been officially announced, it has already attracted wide attention and sparked extensive discussion in China's private equity industry. If the Pilot Program launches a major policy breakthrough, it is very likely that we will see another boom of PE funds. In the past, although the relevant authorities in Beijing, Tianjin, and Shanghai introduced a series of policies to support the development of PE funds, these policies were unable to effectively motivate the investors as none of them provided solutions to foreign exchange control and national treatment restriction, two major roadblocks that PE funds involving foreign partners face in China. Upon the launch of the Pilot Program, the Pudong New Area of Shanghai could become a new venue for foreign investors to invest in China-based PE funds.

According to Circular Hui Zong Fa [2008] 142 (“Circular 142”), unless otherwise provided for under law, the capital of a foreign invested enterprise (“FIE”) shall not be used for equity investment. If an FIE intends to act as a GP of a RMB PE fund, it will find it difficult to satisfy the GP’s RMB commitment (often 1% of the total commitment of the fund) because the FIE cannot convert its capital into RMB. This further effectively blocks the means by which an FIE is able to act as an LP because it is much more difficult for it to satisfy the LP’s RMB commitment, which is typically substantially higher than a GP’s commitment.

The Trial Plan is intended to establish a Qualified Foreign Limited Partner (“QFLP”) mechanism by adopting the approach similar to the QFII (Qualified Foreign Institutional Investor) system, and allows foreign funded GPs and LPs to convert foreign exchange capital into RMB. The aggregate quota for foreign exchange convertible into RMB shall not exceed 50% of the size of the fund, and the quota for a GP shall not exceed 5% of the fund size.

It is unclear if foreign funded GPs and LPs refers to foreign investors only or both foreign investors and FIEs, which are Chinese entities partly or wholly owned by foreign investors. Also, as is known by veterans of the Chinese PE industry, a domestic partnership’s partners shall all be Chinese individuals or Chinese entities, which may include FIEs. This allows indirect foreign investment (with difficulties arising from foreign exchange conversion). On the other hand, a foreign invested partnership may directly accommodate a foreign GP or LP. Therefore, either a domestic partnership and a foreign invested partnership both allow the participation of foreign investment. However, it is unclear if the Trial Plan will apply to both domestic partnerships and foreign invested partnerships.

Though not crystal clear, a domestic partnership with indirect foreign investment is likely to be treated equally as other pure domestic funds in terms of portfolio investment, but a foreign invested partnership will be treated as a foreign investor and subject to industrial restrictions and cumbersome approvals. If the Trial Plan does apply to domestic partnerships, that will be a real breakthrough and Pudong will be better positioned to attract RMB PE funds than its competitors in China. Further details will be publicized in April.