Opinions on Duly Registering Company Mergers and Divisions so as to Support Enterprise Consolidation and Re-organisation

(Issued by the State Administration for Industry and Commerce on November 28 2011.)

Gong Shang Qi Zi [2011] No.226

Administrations for industry and commerce and market supervision administrations of the provinces, autonomous regions, municipalities directly under the central government, cities with independent development plans and sub-provincial level municipalities:

With a view to thoroughly implementing the State Council, Opinions on Promoting Enterprise Consolidation and Re-organisation (Guo Fa [2010] No.27), regulating the registration of company mergers and divisions and promoting the optimisation of the industrial structure through company consolidation and re-organisation, we set forth the following opinions:

1. Further strengthening the sense of responsibility in duly registering company mergers and divisions to support enterprise consolidation and re-organisation

In line with the decision and arrangement of the central authorities for accelerating the transformation of the method of economic development, the pace of enterprise consolidation and re-organisation in the various industries and sectors is continuously accelerating. Company mergers and divisions, as one of the important means of consolidation and re-organisation, are conducive to improving corporate governance structures, promoting the expansion in the size of companies and enhancing market competitiveness; and are conducive to strengthening resource integration and associations between the strong, eliminating outdated production capacity, giving rise to scale and intensive operation, and promoting optimisation and upgrading of the industrial structure.

Duly carrying out the registration of company mergers and divisions is not only a basic function of an administration for industry and commerce in its capacity as an enterprise registry, but is also a necessary requirement in an administration for industry and commerce's serving in the cause of economic and scientific development, and plays a very important role in supporting enterprise consolidation and re-organisation, and promoting the accelerated transformation of the method of economic development and the strategic adjustment of the economic structure. Administrations for industry and commerce at every level are required, from the perspective of national economic strategy, to treat the support of and provision of service for company mergers and divisions as an important task in the thorough instillation of a scientific development outlook, to further strengthen their sense of responsibility, to fully leverage their market entity access function, to steadfastly insist on the organic unity of lawful administration and service to enterprise development, and to more consciously and actively provide high- quality and efficient service for enterprise consolidation and re-organisation.

2. Further providing good registration service for company mergers and divisions

(1) Support companies in adopting various means of merger and division to re-organise. Company mergers may take either of the following forms: (i) merger by absorption, which means that one company survives after the absorption of (an)other company/companies and the absorbed company/companies is/are dissolved; (ii) merger by new establishment, which means that two or more companies are merged into a new company and all of the former companies are dissolved.

Company divisions may take either of the following forms: (i) division with survival, which means that one or more new companies are spun off from one company, with the original company surviving the division; (ii) division with dissolution, which means that one company is divided into two or more new companies and the original company is dissolved.

(2) Support all types of enterprise in re-organisation by merger and division. Supporting lawfully-established domestically-invested companies in carrying out merger or division registration in accordance herewith. When a foreign-invested enterprise is divided, if a surviving or newly-established company is regarded as a domestically-invested company, registration may be carried out with reference to relevant laws, administrative regulations, rules and these Opinions.

(3) Support companies in autonomously selecting the form of the re-organised company. A post-merger or division surviving or newly-established company may, provided that it satisfies the conditions specified in the Company Law, take the form of a limited liability company or a company limited by shares.

(4) Support companies in simultaneously carrying out re-organisation registrations. If an application for company registration is made as a result of a company merger or division, the applicant may simultaneously apply for company de-registration, establishment registration or amendment of registration 45 days after the date of publication of the announcement. If separate registrations fall under the jurisdiction of different registries, the relevant registries shall strengthen registration convergence. If hierarchical convergence is required, the higher-level registry is to take the initiative in coordination; if convergence between regions is required, the registry that first received inquiries and an application is to take the initiative in coordination.

(5) Support companies in autonomously specifying their registered capital amounts. The amounts of the registered capital and paid-in capital of a company surviving a merger or newly established as a result of a merger will be specified in the merger agreement, but may not be greater than the totals of the registered capital and paid-in capital of the pre-merger companies. If investment relationships existed between the parties to the merger, the amounts of registered capital and paid-in capital corresponding to the investments shall be deducted when calculating the totals of the registered capital and paid-in capital of the pre-merger companies.

The amounts of the registered capital and paid-in capital of the companies surviving a division or newly established as a result of the division shall be specified by the division resolution or division decision, but the totals of the registered capital and paid-in capital of the post-division companies may not be greater than the registered capital and paid-in capital of the pre-division company.

(6) Support companies autonomously specifying the capital contributions of their shareholders. The capital contribution percentages of the shareholders (sponsors) of a company surviving a merger or division or newly established as a result of a merger or division and the capital contribution amounts subscribed for or actually paid in by them shall be specified in the merger agreement, or the division resolution or decision. If laws, administrative regulations or State Council decisions specify that the capital contribution percentages and the capital contribution amounts subscribed for or actually paid in that are involved in a company merger or division require submission for approval, the same should already have been approved.

If the registered capital of a company was not fully paid in before the merger or division, the registered capital of the companies surviving the merger or division or newly established as a result of the merger or division shall, in accordance with the merger agreement or the division resolution or decision, be paid in full by the capital contribution deadline specified before the merger or division.

(7) Support branches in carrying out changes in their subordination. If a company that is dissolved as a result of a merger, or that is divided, has branches, it shall specify the plan for disposing of such branches in the merger agreement or the division resolution or decision. If the disposal plan provides for the de-registration of the branches, such de-registration shall be carried out before the merger or division of the company; or if the disposal plan specifies that the branches will vest in the surviving or a newly-established company, the amendment of registration regarding the branches' subordination may be carried out in accordance with the procedure for a change in the name of a branch.

(8) Support succession to the equity of a limited liability company. If a company that is dissolved as a result of a merger, or that is divided, holds an equity interest in another limited liability company, it shall specify in the merger agreement or the division resolution or decision the plan for disposing of the equity interest that it holds. If the disposal plan provides for withdrawal by way of an equity transfer or capital reduction, the amendment of registration regarding the equity transfer by the shareholder of the limited liability company in which the equity is found or regarding the change in registered capital and paid-in capital shall be carried out before the merger or division of the company; or if the disposal plan specifies that the equity interest will vest in the surviving or a newly-established company, the registration amendment regarding the change in the shareholder of the limited liability company in which the equity is found may be carried out after the merger or division of the company.

(9) Support companies in applying for multiple registration amendments at one time. If, when a company is merged or divided, there are changes in other registered particulars, such as an increase in the number of shareholders or an increase in registered capital, so long as they comply with laws and regulations such as the Company Law and the Regulations for the Administration of Company Registration, and the company's articles of association, the relevant registration applications may all be submitted together and the application materials may be submitted in accordance with the requirements of the rules of the State Administration for Industry and Commerce (SAIC) for the registration materials of domestically-invested enterprises.

3. Further enhancing the efficiency of the services provided in support of enterprise consolidation and re-organisation

(1) Actively carry out publicity and making efforts to raise public awareness. Administrations for industry and commerce in all regions are required to make full use of various media platforms to publicise the great significance of the policies in support of the registration of company mergers and divisions to, and the positive effect of those policies on, the transformation of the method of development of the service economy and adjustment of the economic structure, and to raise the public's acceptance of the company merger and division registration rules so as to create a favourable public opinion environment and enterprise development environment.

(2) Duly organise study so as to enhance the vocational level of working personnel. Administrations for industry and commerce in every region are required to organise intensive study by enterprise registration personnel of relevant provisions on company mergers and divisions and carry out training activities in a planned and step-by-step manner. Comprehensively enhance the knowledge of theory and vocational level of enterprise registration personnel through training, so that they achieve thorough understanding and comprehensive application.

(3) Establish a coordination mechanism and meticulously organise the carrying out of the relevant work. Where company merger and division registration involves registries in more than one region or at different levels, the registries involved are to strengthen their coordination, optimise to the greatest extent possible their internal handling procedures, shorten handling times, enhance service efficiency and effectively implement the requirements of duly carrying out company merger and division registration and supporting enterprise consolidation and re-organisation.

In accordance with the requirement of standardising company merger and division registration, the SAIC has additionally supplemented and formulated the rules for the materials to be submitted for relevant registrations and the Rules for the Documents for the Registration of the Merger and Division of Domestically-invested Companies, which are issued together with these Opinions. You are asked to implement them together accordingly.

If you encounter a new circumstance or a new problem in carrying out the registration of company mergers and divisions or in the course of supporting enterprise consolidation and re-organisation, you are asked to collect and collate the same and promptly forward it to the SAIC.

Annexes:

1. Rules for the Submission of Materials for the Registration of Company Mergers and Divisions (Supplemented)

2. Rules for the Documents for the Registration of the Merger and Division of Domestically-invested Companies (omitted)

Annex 1

Rules for The Submission of Materials for the Registration of Company Mergers and Divisions (Supplemented)

1. Rules for the submission of materials for the registration of company mergers

When a company applies for establishment registration, registration amendment or de-registration due to a merger, it shall, in addition to proceeding in accordance with the PRC Regulations for the Administration of Company Registration and the State Administration for Industry and Commerce, Rules for the Submission of Materials for the Registration of Domestically-invested Enterprises (Gong Shang Qi Zi [2009] No.83), submit the following materials:

(1) the merger agreement executed by the parties to the merger; the merger agreement shall include the following: the names of the parties to the merger agreement, the form of merger, the name of the post-merger company, the registered capital and paid-in capital of the post-merger company, details of the subscription for and actual payment of capital contributions by the post-merger company's shareholders (sponsors), the plan for succeeding to the claims and debts of the parties to the merger agreement, details on the disposal of the dissolved companies' branches and equity held in other companies, the date and place of execution; and other matters that the parties to the merger agreement deem necessary to specify;

(2) a sample of the announcement to be published in newspapers in accordance with the law; the merger announcement shall include the following: the names of the parties to the merger, the form of merger, and the registered capital and paid-in capital of the pre- and post-merger companies;

(3) the resolutions or decisions of the parties to the merger concerning adoption of the merger agreement;

(4) photocopies of the business licences of the parties to the merger;

(5) an account of the discharging of debts or the provision of security for such debts;

(6) if laws, administrative regulations or State Council decisions specify that submission for approval is required, a photocopy of the relevant approval document or permit; and

(7) if registration of company establishment or registration amendment of the company is being carried out due to the merger, the proof(s) of de-registration of the dissolved company/companies specifying the details of the merger.

If liquidation is not to be carried out for a company dissolved due to the merger, no liquidation report need be submitted for the de-registration, unless the merger agreement specifies that liquidation of the dissolved company needs to be carried out first.

If the scope of business of the company newly established as the result of the merger or the expanded scope of business of the surviving company contains items that, in accordance with laws or regulations, require examination and approval by the relevant department before registration, they shall be submitted to the relevant department for examination and approval before registration, and registration shall be carried out on the strength of the permission document or certificate issued by the relevant department.

2. Rules for the submission of materials for applying for the amendment of registration of a branch when a company is dissolved as a result of a merger

If, after the de-registration of a dissolved company, a branch will vest in the newly-established or surviving company, when the company applies for amendment of the registration of the branch, it shall submit the following materials:

(1) an Application for Amending the Registration of a Branch signed by the legal representative of the company;

(2) a Proof of a Designated Representative or Jointly-appointed Agent signed by the company and a photocopy of the identity document of the designated representative or appointed agent;

(3) a photocopy of the merger agreement;

(4) the articles of association (bearing the official stamp of the company) of the newly-established or surviving company;

(5) the proof of de-registration of the dissolved company specifying the details of the merger, and proof of the establishment of, or the change in, the newly-established or surviving company;

(6) a photocopy of the duplicate of the business licence of the company newly established as a result of or surviving the merger;

(7) if laws, administrative regulations or State Council decisions specify that submission for approval is required, a photocopy of the relevant approval document or permit; and

(8) the business licence of the branch.

The foregoing materials submitted by the applicant are required to comply with the provisions of the State Administration for Industry and Commerce on the materials to be submitted for enterprise registration.

3. Rules for the submission of materials for the amendment of registration of a company in which a company dissolved as a result of a merger has an equity interest

Pursuant to the merger agreement, if the equity in another limited liability company held by a dissolved company is to vest after its de-registration in the newly-established or surviving company, when the investee company applies for amendment of its registration, it shall submit the following materials:

(1) an Application for Amending the Registration of a Company signed by the legal representative of the company;

(2) a Schedule for Amendment of the Registration of a Limited Liability Company — Information on the Capital Contributions of the Shareholders signed by the company;

(3) a Proof of a Designated Representative or Jointly-appointed Agent signed by the company and a photocopy of the identity document of the designated representative or appointed agent;

(4) a photocopy of the merger agreement;

(5) the proof of de-registration of the dissolved company specifying the details of the merger, and proof of the establishment of, or the change in, the newly-established or surviving company;

(6) a photocopy of the duplicate of the business licence of the company surviving or newly established as a result of the merger;

(7) the amended articles of association of the company or the proposed amendments to the articles of association of the company;

(8) if laws, administrative regulations or State Council decisions specify that submission for approval is required, a photocopy of the relevant approval document or permit; and

(9) the duplicate of the business licence of the company.

The foregoing materials submitted by the applicant are required to comply with the provisions of the State Administration for Industry and Commerce on the materials to be submitted for enterprise registration.

4. Rules for the submission of materials for the registration of company divisions

When a company applies for establishment registration, registration amendment or de-registration due to a division, it shall, in addition to proceeding in accordance with the PRC Regulations for the Administration of Company Registration and the State Administration for Industry and Commerce, Rules for the Submission of Materials for the Registration of Domestically-invested Enterprises (Gong Shang Qi Zi [2009] No.83), submit the following materials:

(1) the resolution or decision on the division of the company; the division resolution or decision shall include the following: the form of division, the names of the pre- and post-division companies, the registered capital and paid-in capital of the post-division companies, details of the subscription for and actual payment of capital contributions by the post-division companies' shareholders (sponsors), the plan for succeeding to the claims and debts of the former company after the division and details on the disposal of the company's branches and the equity held in other companies;

(2) a sample of the announcement to be published in newspapers in accordance with the law; the division announcement shall include the following: the names of the parties to the division, the form of division, and the registered capital and paid-in capital of the pre- and post-division companies;

(3) photocopies of the business licences of the parties to the division¹;

(4) an account of the discharging of debts or the provision of security for such debts;

(5) if laws, administrative regulations or State Council decisions specify that submission for approval is required, a photocopy of the relevant approval document or permit; and

(6) if an application for registration of company establishment is made due to the division, the proof of amendment of the registration of the surviving company or the proof of de-registration of the dissolved company specifying the details of the division.

If liquidation is not to be carried out for a company dissolved due to the division, no liquidation report need be submitted for the de-registration, unless the division resolution or decision specifies that liquidation of the dissolved company needs to be carried out first.

If the scope of business of a company newly established as the result of a division contains items that, in accordance with laws or regulations, require examination and approval by the relevant department before registration, they shall be submitted to the relevant department for examination and approval before registration, and registration shall be carried out on the strength of the permission document or certificate issued by the relevant department.

5. Rules for the submission of materials for the amendment of registration of a branch as a result of the division of a company

Pursuant to the division resolution or decision, if a branch of the pre-division company will vest in a newly-established company, when the company carries out the amendment of the registration of the branch, it shall submit the following materials:

(1) an Application for Amending the Registration of a Branch signed by the legal representative of the company;

(2) a Proof of a Designated Representative or Jointly-appointed Agent signed by the company and a photocopy of the identity document of the designated representative or appointed agent;

(3) a photocopy of the division resolution or decision;

(4) the articles of association (bearing the official stamp of the company) of the company newly established as a result of the division;

(5) the proof of amendment of the registration or of the de-registration of the surviving or dissolved company specifying the details of the division, and proof of the establishment of the newly-established company;

(6) a photocopy of the duplicate of the business licence of the company newly established as a result of the division;

(7) if laws, administrative regulations or State Council decisions specify that submission for approval is required, a photocopy of the relevant approval document or permit; and

(8) the business licence of the branch.

The foregoing materials submitted by the applicant are required to comply with the provisions of the State Administration for Industry and Commerce on the materials to be submitted for enterprise registration.

6. Rules for the submission of materials for the amendment of registration of a company in which a company that is divided has an equity interest

Pursuant to the division resolution or decision², if the equity in another limited liability company held by the pre-division company is to vest in a newly-established company, when the investee company applies for amendment of its registration, it shall submit the following materials:

(1) an Application for Amending the Registration of a Company signed by the legal representative of the company;

(2) a Schedule for Amendment of the Registration of a Limited Liability Company — Information on the Capital Contributions of the Shareholders signed by the company;

(3) a Proof of a Designated Representative or Jointly-appointed Agent signed by the company and a photocopy of the identity document of the designated representative or appointed agent;

(4) a photocopy of the division resolution or decision;

(5) the proof of amendment of the registration or of the de-registration of the surviving or dissolved company specifying the details of the division, and proof of the establishment of the newly-established company;

(6) a photocopy of the duplicate of the business licence of the company newly established as a result of the division;

(7) the amended articles of association of the company or the proposed amendments to the articles of association of the company;

(8) if laws, administrative regulations or State Council decisions specify that submission for approval is required, a photocopy of the relevant approval document or permit; and

(9) the duplicate of the business licence of the company.

The foregoing materials submitted by the applicant are required to comply with the provisions of the State Administration for Industry and Commerce on the materials to be submitted for enterprise registration.

Translator's notes:

1. The numbering has been re-ordered as the original Chinese does not contain (3).

2. Although the Chinese reads “merger agreement”, we believe there is a typographical error.