Measures for the Administration of Overseas Investment of Enterprises (Mainland China)

Joline Chen

The National Development and Reform Commission (the “NDRC”) amended the Measures for the Administration of Approval and Recordation of Overseas Investment Projects, which came into effect in May 2014, by promulgating the Measures for the Administration of Overseas Investment of Enterprises (the “New Measures”) on December 26, 2017.  The New Measures will go into effect on March 1, 2018, and the old measures will be abolished at the same time.  The New Measures, which introduce eight key reform measures in three aspects – namely, “streamlining administration, delegating power, strengthening regulation and optimizing services” – are highlighted below:

1. Cancellation of the project information reporting system: The New Measures further streamline ex ante administrative stages and reduce the institutional trading costs of enterprises by cancelling the requirement under the old measures for a Chinese investor(s) to submit a project information report to the NDRC before engaging in an overseas acquisition or price competition project involving at least US$300 million, after which the NDRC would issue a confirmation letter on whether the project that meets overseas investment policies before the investing entity may commence any substantive external work.

2. Streamlined approval and recordation application formalities: The New Measures eliminate the local preliminary review and referral stage by specifically stipulating that for projects within the scope of approval or recordation by the NDRC, a local enterprise may directly submit the relevant application materials to the NDRC.

3. Eased approval and recordation deadlines: The New Measures ease the ultimate deadline for the investing entity to proceed with the approval or recordation formalities from before the execution or effective date of an agreement to before the implementation of the project. For projects within the scope of approval or recordation administration, the investing entity is required to obtain the project approval documentation or recordation notice before the project is implemented in order to facilitate the progress of an enterprise’s independent deal arrangements.

4. Improved administrative thought process: The New Measures include overseas investments developed by an overseas enterprise controlled by a domestic enterprise in the administration framework and implement approval administration over sensitive projects in such category. For non-sensitive projects in the above category with at least US$300 million invested by the Chinese investor(s), the investing entity shall submit relevant information to the NDRC; if less than US$300 million is invested by the Chinese investor(s), the investing entity is only required to make recordation submission to the provincial development and reform department in the area where the investing entity is registered.

5. Innovative regulatory tools: The New Measures also introduce concerted regulatory mechanisms to conduct supervision and inspection of overseas investment through online monitoring, interview sessions, written correspondences, or random inspections. In addition, systems such as the project completion status report and the material adverse situation report are introduced to enhance comprehensive supervision over overseas investment.

6. Improved disciplinary measures: The New Measures specifically stipulate disciplinary measures, intensify penalties and establish a record of violations concerning overseas investment, with all relevant information to be publicly disclosed in websites such as the National Credit Information Platform, the National Enterprise Credit Information Disclosure System and Credit China, as well as impose joint penalties in conjunction with relevant departments and units.

7. Improved service contents: The New Measures specifically stipulate that the NDRC’s main mission is to provide information to investing entities, create a fair operation environment, and develop and implement a protection system for overseas interests are the main missions of the NDRC. This will institutionalize investment facilitation and services as well as protect the lawful rights and interests of enterprises.

8. Creation of a network system: The New Measures create an overseas investment management and service network.  An investing entity may proceed with the approval and recordation formalities and report the relevant information through the network system.  From now on, most administrative stages will be implemented through the network system to enhance the convenience and transparency of overseas investment management and services.