Introduction on “Rules on Approving ainland Enterprises to Invest in Enterprises In Hong Kong or Macao Special Administrative Regions”

The Ministry of Commerce and the Hong Kong and Macao Affairs Office of the State Council jointly announced on August 31 "Rules on Approving Mainland Enterprises to Invest in Enterprises in Hong Kong or Macao" (hereinafter referred as "Rules"). The content include facilitated approval procedures as well as shorten the examination and approval time and so on other measures which further allowed Mainland enterprises to invest in Hong Kong and Macao.

The Ministry of Commerce and Hong Kong and Macao Affairs Office of the State Council formulated the "Rules" for the purpose of implementing the "Mainland and Hong Kong Closer Economic Partnership Arrangement" and "Mainland and Macao Closer Economic Partnership Arrangement" (CEPA), to further encourage and support mainland enterprises from China wanting to invest in Hong Kong and Macao.

The "Rules" stated that the Mainland authorities encourage and support all types of mainland enterprises to invest in setting up enterprises in Hong Kong and Macao and provide a list of the enterprises that mainland companies may invest in, for example local legal capacity in trade, engineering contract, labor service cooperation, production and manufacture, traffic and transportation, tourism, service, research and development, investment, science and technology or the enterprises already established by mainland entepreneurs in Hong Kong or Macao or other countries and regions may also invest in Hong Kong and Macao. The modes of investing and establishing enterprises include newly establishment (including single proprietorship, joint venture, co-operation and so on), acquisition, merger, becoming a shareholder, capital injection, stockholder's rights replacement.

The Ministry of Commerce is the department that authorises mainland enterprises to establish business (excluding financial institutions trade) in Hong Kong and Macao. The relevant commercial administrations under Provincial Governments (hereinafter referred to as "provincial relevant commercial administrations") examine or approve preliminarily local enterprises' investment in Hong Kong and Macao with the authorization of the Ministry of Commerce. If it is required they will ask the advice of the Hong Kong and Macao Affairs Office of the State Council, Hong Kong and Macao Liaison Office under the Central Government. In addition, the "Rules" lay out the regulations for the mainland enterprise and the state enterprise to establish enterprises in the Hong Kong and Macao. If local enterprises invest in enterprises in Hong Kong and Macao with the intention of being listed on overseas stock exchange, or investing in other businesses, they should obtain the approval of the Ministry of Commerce. Others should be approved by provincial relevant commercial administrations authorised by the Ministry of Commerce. If state companies invest in enterprises in Hong Kong and Macao, they should seek the approval of the Ministry of Commerce.

According to the "Rules" if the application is complete and meets the statutory form or the applicants have added any missing documentation in accordance with the stated guidelines, a decision on whether the application is approved or rejected should be made within 15 working days of receipt. Moreover, after being approved, the Provincial relevant commercial administration will issue the Approval Certificate of Mainland Enterprises Investing in Hong Kong and Macao (hereinafter referred to as "Approval Certificate") for the local enterprises. The Ministry of Commerce issues the Approval Certificate to state enterprises.

Mainland enterprises investing and setting up enterprises in Hong Kong and Macao should provide the following documents.

1. The application letter (including the name, registered capital, investment funds, business scope, business term, organization structure, stockownership structure).
2. Memorandum of the enterprise and related agreements or contracts;
3. Mainland business license and the documents required by laws and regulations.
4. Examination and approval documents issued by foreign exchange authority on the source of foreign exchange (transaction must be in foreign exchange);
5. Other documents required by law, regulations and the State Council.

Reference: "Rules on Approving Mainland Enterprises to Invest in Enterprises In Hong Kong or Macao Special Administrative Regions"

This article was prepared by IPIM’s Research and Information Division.