Practical operations on the reduction of registered capital by foreign companies in China

Practical operations on the reduction of registered capital by foreign companies (procedures and time limits)

The provisions on the foreign companies for reducing the registered capital

Can foreign company reduce the registered capital?

According to the regulations of the people's Republic of China on the implementation of the law of the people's Republic of China on foreign investment enterprises (2001 Revision), the foreign capital enterprise shall not reduce its registered capital. However, due to the total amount of investment and production and business scale changes, it may reduce the registered capital upon approval of the approval authority.

Therefore, the principle to foreign company shall not reduce its registered capital , but if it can explain the reasons to reduce and decrease productivity and operation scale and total investment, after approval by the commission or commission of Commerce, can reduce its registered capital.

Is there has limitation to reduce the amount of the registered capital？

 First, the registered capital of a foreign-funded enterprise shall not be lower than the minimum registered capital prescribed by law after the reduction of the registered capital.

The minimum amount of registered capital is varied from company to company by their formation. For example, if a limited liability company and engaged in international trade , the registered capital shall not be less than 10 million RMB ; if it is limited liability company and is engaged in the real estate development industry , the registered capital shall not be less than USD 500 million.

Secondly, the registered capital after reduction, the proportion of the total investment of the registered capital shall not be less than the minimum requirements of the law.

The procedures on foreign companies to reduce the registered capital

 Foreign companies to reduce the company's registered capital need to go through the following procedures:

 Internal resolution of company - the material required for approval

 (1) To convene a shareholders' meeting (or board meeting ) to make a resolution to reduce the registered capital of the company and to form an effective resolution through the shareholders representing more than 2/3 of the voting rights.

 (2) To convene a shareholders' meeting (or board meeting) to make a resolution to amend the articles of association of the company and to form an effective resolution document by representing more than 2/3 of the voting rights of the shareholders.

 (3) To entrust Chinese certified public accountants to carry out verification on the balance sheet, the property list, the creditor list and so on.

 Request approval to the local District Commission of Commerce for capital reduction. The following documents and materials shall be submitted for application:

 (1) The application report signed by legal representative of the enterprise on the reduction of total investment and the registered capital.

 (2) The board resolution on capital reduction.

 (3) Amendments to the contract and articles of association of the enterprise.

 (4) The recent existing capital verification report of the enterprise issued by a CPA firm.

 (5) Audit report.

 (6) Enterprises on the debt settlement process and commitments.

 (7) Other identification documents, etc..

Announcement - notice to creditors and making public notice - 45 days limitation required

After received the Commerce Committee's preliminary approval, to notify the creditors within 10 days, and making public announcement in newspaper at or above provincial level within 30 days.

4 to the business registration office for Registration of change

The following documents and materials shall be submitted for application:

 (1) The application for the registration of change (for the record) of the company with foreign investment.

 (1) The approval document of the examination and approval authority.

 (2) Resolutions of the board of directors or the shareholders' meeting (or any other resolutions or decisions made by law).

 (3) The articles of association of the legal representative of the company and the articles of association of the company which are signed by the legal representative of the company.

 (4) Capital verification certificate issued by a capital verification institution established according to law.

 (5) A copy of the business license.

 (6) The reduction of registered capital, in the newspaper published a reduction announcement.

 (7) A description of the company's debt obligations or debt obligations.

 (8) Other relevant documents.

 Return of capital - apply to Foreign exchange administration

 To the administrative Industrial and Commercial Bureau for business license, the materials are complete, can be done on the spot

 To the customs, tax and other relevant departments to apply for change of registration and issuance of the relevant certificates