Five-year Transition is around the corner! Note for FIEs established before Jan 1 2020 in China
On January 1, 2020, the Foreign Investment Law of the People's Republic of China came into effect. The five year buffer period given to FIE's to transition is ending this year.
In brief
On January 1, 2020, the Foreign Investment Law of the People's Republic of China came into effect. Prior to this, foreign-invested enterprises established in accordance with the Law of the People's Republic of China on Sino-Foreign Joint Ventures, the Law of the People's Republic of China on Foreign-Funded Enterprises, and the Law of the People's Republic of China on Sino-Foreign Cooperative Enterprises were given a five-year buffer period for transition, and within five years (that is, before December 31, 2024), their organizational forms and structures must be adjusted according to Company law. Changes to registration must be made as well.
Change of Organizational Forms
All foreign-invested enterprises, including those without legal person status established before January 1, 2020, must apply for a change of organizational form by December 31, 2024. Considering that these enterprises do not have legal person status, they can apply to transform into partnership enterprises, and can apply for change of registration with the registration authority, according to the conditions for establishment stipulated in laws and regulations such as the Partnership Enterprises Law of the People's Republic of China and the Legal Entity Registration Administration Regulations of the People's Republic of China After the parent enterprise changes its organizational form, its branches must also apply for change of registration in a timely manner. However, foreign-invested enterprises established before January 1, 2020, including companies and partnerships, do not need to apply for change of organizational form, but they will need to change their structure.
Change of Structures
For foreign-invested enterprises established before January 1, 2020, if their highest authority, legal representative, or director appointment mechanism, decision-making mechanism, etc. are not in line with the mandatory provisions of the "Companies Law of the People's Republic of China", they should adjust their highest authority from the board of directors or joint management committee to the shareholders' meeting by resolution made by the original authority body, amend the company's articles of association, adjust the power structure to the shareholders' meeting afterward, and then form resolutions (decisions) in accordance with the procedures stipulated in the "Companies Law of the People's Republic of China" to establish new organizational structures, and apply for change registration with the registration authority in accordance with the law.
Conclusion
Starting from January 1, 2025, no other registration matters will be processed for those who fail to adjust their organizational form, organizational structure, etc. in accordance with the law and fail to make the necessary changes and update their registration. The relevant information will be publicly disclosed.
So if you miss the deadline, it is too late! Your organisation will have difficulty doing business. Therefore, it is recommended that enterprises arrange registration procedures as soon as possible and handle the registration business as soon as possible. Avoid unnecessary cost and hassle caused by failing to do it within the time.
In case of any queries, please speak to your Colin Biggers & Paisley contact, or contact lawyer He direct in China. Her details are:
Jenny He, Partner
Beijing JT&N (Zhengzhou) Law Firm
Level 25, Yu Fa Building,
238 Mingli Road, East Zhengzhou District, Zhengzhou City
Mobile: 155 158 20000
Website: www.jtn.com
The estimated fees for documenting the necessary changes are from AUD$10,000.00.