Jul. 29 – In an effort to better steer China’s rapidly-growing financial leasing industry, the Ministry of Commerce (MOFCOM) released the “Notice Concerning Strengthening and Improving the Examination, Approval, and Administration of Foreign-Invested Financial Leasing Companies (hereinafter referred to as the ‘Notice’),” on July 18.
The newly-promulgated Notice stipulates that all foreign invested financial leasing companies (FIFLCs) established after June 2010 in China are now required to submit the following documents to the local commerce authority on an annual basis prior to June 30 for statistical gathering and inspection purposes:
- Business report reflecting the company’s operations during the previous year; and
- Financial report of the company’s previous year as audited by a certified accounting firm.
Since the Notice was just issued this past month, the 2013 deadline is set for August 15.
The Leasing Industry Work Committee of China’s Association of Foreign Invested Enterprises will collect all of the company reports and then send them to the Department of Foreign Investment Administration (DFIA) under MOFCOM for further inspection/data organization.
It is important to hand in these reports by the prescribed annual deadline because MOFCOM also announced that the DFIA will publish a list of all FIFLCs that have submitted the relevant reports on its website, and that the local governmental authorities will not process any subsequent amendments to a company’s activities (including name change, change in business scope, etc.) if the company is not mentioned on the published list.
Further, the Notice also reiterates that FIFLCs are not allowed to engage in various specific activities such as absorbing deposits or offering loans of any kind to other companies.
After the release of the Notice, MOFCOM also released the “Guidelines for the Examination and Approval on Entry of Foreign Invested Financial Leasing Company (hereinafter referred to as the ‘Guidelines’)” – which further clarifies the qualification and approval criteria for foreign investors looking to establish an FIFLC in China.
According to the Guidelines, the foreign investor or its foreign parent company should have good financial and legal credibility, be legally registered abroad, and engaged in substantial operational activities. Further, the foreign investor should be a company, enterprise or other economic organization that has been in existence for at least one year with total assets worth at least US$5 million.
Also, the newly established FIFLC should have a registered capital of at least US$10 million, with at least 25 percent of such registered capital coming from foreign investments.
Further, if a foreign investor or its parent company intend to set up more than two FIFLCs, the Guidelines require that the foreign investor’s previously-established FIFLC(s) submit and maintain proper auditing reports, capital verification reports and an introduction to their business activities. The FIFLC to be established should also be “obviously distinct” from the pre-existing FIFLC(s) in terms of business scope.
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