Draft Measures on Contributing Equity to FIEs

Recent draft rules issued for public comment aim to clearly permit investors to inject equity as the registered capital of a foreign-invested enterprise ("FIE").

The recent draft rules circulated by the PRC Ministry of Commerce ("MOFCOM") are the Measures on the Administration of Capital Contribution with Equity Interests concerning Foreign-invested Enterprises (for public consultation) ("Draft Measures"). Comments must be received by MOFCOM by 20 May 2011.

Background

While the Company Law permitted capital contributions in the form of equity interests from 1 January 2006, it did not become a nationwide practice until after the State Administration of Industry and Commerce's implementing rules ("AIC Measures") became effective on 1 March 2009. The problem for FIEs, however, was that the AIC Measures did not expressly state that they applied to capital contributions made to FIEs.