Administration of the Examination and Approval of Foreign-funded Leasing Companies Tentative Measures

Repealed on February 03 2005: http://www.chinalawandpractice.com/Article/1692497/Administration-of-Foreign-Investment-in-the-Leasing-Industry.html

(Issued by the Ministry of Foreign Trade and Economic Cooperation on August 24 2001.)

Article 1: These Procedures have been formulated pursuant to such relevant laws and regulations as the PRC, Company Law, the PRC, Sino-foreign Equity Joint Venture Law, the Sino-foreign Cooperative Joint Venture Law, etc., in order to meet the requirements of the socialist market economy, promote the healthy development of Foreign-funded Leasing Companies, regulate the operation of Foreign-funded Leasing Companies and mitigate business risk.

Article 2: These Procedures apply to Foreign-funded Leasing Companies established, in accordance with the principles of equality and mutual benefit, as equity joint ventures or cooperative joint ventures in China by foreign companies, enterprises and other economic organizations (Foreign Parties) with Chinese companies, enterprises or other economic organizations (Chinese Parties) after approval.

Article 3: For the purposes of these Procedures, the term "Foreign-funded Leasing Company" means a leasing company engaged in lease financing business (Lease Financing Company) or a leasing company engaged in leasing business other than lease financing (Other Leasing Company) established with the approval of the Ministry of Foreign Trade and Economic Cooperation of China. Foreign-funded Leasing Companies shall be established as limited liability companies.

Article 4: The establishment of Foreign-funded Leasing Companies shall introduce leasing enterprise business management experience that is advanced by international standards, promote the development of the Chinese leasing industry and produce favourable economic and social benefits.

Article 5: Foreign-funded Leasing Companies must comply with relevant State laws and regulations. The legally conducted business activities of Foreign-funded Leasing Companies and the lawful rights and interests of joint venture parties are protected by Chinese law.

Article 6: Joint venture parties applying to establish a Lease Financing Company shall have comparatively robust economic strengths and financing capabilities. In the year before the application, the Chinese Party shall have total assets valued at not less than Rmb400 million and the Foreign Party shall have total assets valued at not less than US$400 million and not less than five years' experience in the lease financing business.

Article 7: A proposed Lease Financing Company shall satisfy the following conditions:

(1) its registered capital is not less than US$20 million;

(2) the capital contribution of the Chinese Party accounts for at least 20% of the registered capital;

(3) the term of operation does not exceed 30 years; and

(4) it has the appropriate management personnel, and the senior management personnel have professional qualifications and not less than three years' experience in the business.

Article 8: Joint venture parties applying to establish Other Leasing Companies shall have comparatively robust economic strengths. In the year before the application, the Chinese Party shall have total assets valued at not less than Rmb100 million and the Foreign Party shall have total assets valued at not less than US$50 million and not less than three years' experience in the leasing business.

Article 9: A proposed Other Leasing Company shall satisfy the following conditions:

(1) its registered capital is not less than US$5 million;

(2) the capital contribution of the Chinese Party accounts for at least 20% of the registered capital;

(3) the term of operation does not exceed 20 years; and

(4) it has the appropriate management personnel, and the senior management personnel have appropriate professional qualifications and not less than three years' experience in the business.

Article 10: When applying to establish a Foreign-funded Leasing Company, the following documents shall be submitted to the Ministry of Foreign Trade and Economic Cooperation:

(1) the feasibility study and contract for, and the articles of association of, the Foreign-funded Leasing Company signed or approved by the legal representatives of the joint venture parties;

(2) (photocopies of) the joint venture parties' registration certificates and (photocopies of) their legal representatives' identification documents, bank certificates of creditworthiness and financial reports for the three years prior to application;

(3) the list of board members of the proposed Foreign-funded Leasing Company and the joint venture parties' instruments of appointment of directors;

(4) proof of the qualifications and record of service of the senior management personnel;

(5) the notice of preliminary approval of the name of the proposed Foreign-funded Leasing Company issued by the State authority for industry and commerce; and

(6) other documents that the Ministry of Foreign Trade and Economic Cooperation requires be submitted.

Article 11: A Foreign-funded Leasing Company that has been approved for establishment shall carry out enterprise registration procedures with the State authority for industry and commerce within one month after obtaining its Approval Certificate for a Foreign Investment Enterprise issued by the Ministry of Foreign Trade and Economic Cooperation.

Article 12: The scope of business of Lease Financing Companies shall conform with State industrial policy. After approval, Lease Financing Companies may engage in the business set forth below:

(1) lease financing, in Renminbi and foreign currency, of Chinese and foreign machinery and equipment such as advanced or suitable production equipment, communications equipment, medical equipment, scientific research equipment, inspection and testing equipment, engineering machinery, means of transportation (including aircraft, motorized vehicles and vessels), etc., as well as the accompanying technology, by means of direct leasing, on-leasing, lease back, leveraged leasing, entrusted leasing, joint leasing, etc.;

(2) based on the selection of the lessee, purchasing domestically or from abroad the goods and accompanying technology required for the leasing business;

(3) selling off and disposing of leased articles to realize their residual value;

(4) lease transaction consultancy and security services;

(5) other business approved by the Ministry of Foreign Trade and Economic Cooperation.

Article 13: Lease Financing Companies that engage in finance business other than the business specified in Article 12 hereof shall require the consent of the Ministry of Foreign Trade and Economic Cooperation and shall report the business to the People's Bank of China for examination and approval pursuant to the Administration of Financial Leasing Companies Procedures promulgated by the People's Bank of China.

Article 14: The scope of business of Other Leasing Companies shall conform with State industrial policy. After approval, Other Leasing Companies may engage in the business set forth below:

(1) leasing of such general Chinese and foreign equipment as advanced or suitable production equipment, communications equipment, medical equipment, scientific research equipment, inspection and testing equipment, engineering machinery, means of transportation, etc.;

(2) selling off and disposing of leased articles to realize their residual value;

(3) other business approved by the Ministry of Foreign Trade and Economic Cooperation.

Article 15: If the imported goods and their accompanying technology imported under a Lease Financing Company's leasing arrangement are subject to such special policies and control as quotas, licensing, etc., the lessee or the Lease Financing Company shall carry out the application procedures therefor in accordance with provisions. Other Leasing Companies that import equipment for leasing purposes shall themselves carry out the procedures in accordance with current provisions concerning the import of equipment by foreign investment enterprises.

Article 16: The risk assets of a Lease Financing Company, including the outstanding balance of its security liability, may not exceed 10 times its total capital, in order to mitigate risk and ensure safe operation.

Article 17: The dissolution and liquidation of a Foreign-funded Leasing Company shall be handled in accordance with relevant Chinese laws and regulations and the company's articles of association.

Article 18: The Leasing Business Committee of the China Association of Enterprises with Foreign Investment is the industry organization responsible for administering self-regulation by Foreign-funded Leasing Companies. Foreign-funded Leasing Companies are encouraged to join the said Committee.

Article 19: If a Foreign-funded Leasing Company violates Chinese laws or regulations, it shall be dealt with in accordance with relevant Chinese laws and regulations.

Article 20: The joint establishment of Foreign-funded Leasing Companies in mainland China by companies, enterprises and other economic organizations from the Hong Kong Special Administrative Region, the Macao Special Administrative Region and the Taiwan region with Chinese Parties shall be handled with reference to these Procedures.

Article 21: The Ministry of Foreign Trade and Economic Cooperation is in charge of the interpretation hereof.