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Unify the application of foreign investment laws

Equal protection of the legitimate rights and interests of investors

[Basic case]
Jinding Company is a limited liability company (a joint venture between Taiwan, Hong Kong and Macao and the mainland), whose business scope is real estate development. In 2013, Jinding Company held a shareholders’ meeting and formed the Minutes of the Shareholders’ Meeting of Jinding Company, which confirmed the actual shareholders and equity of Jinding Company, that is, the actual shareholders and equity ratio of Jinding Company’s industrial and commercial registration in the name of Ye Mou and Dadi Company were: Ye Mou accounted for 52.5% of the shares, Wu Mou accounted for 20% of the shares. Ye Mou agreed to transfer the equity of Jinding Company registered in his name to Wu Mou and other actual shareholders according to the proportion confirmed at the meeting. Because Ye and Jinding did not handle the equity change registration, Wu filed a lawsuit and asked Ye to register the 20% equity change of Jinding in his name.

[Judgment result]
The Nantong Intermediate People’s Court held in the first instance that the equity transfer between Ye and Wu was effective. Jinding Company is a joint venture. Although according to the revised Sino-Foreign Equity Joint Venture Law, the equity change of Jinding Company will take effect only after being approved by the examination and approval authority, according to the revised Sino-Foreign Equity Joint Venture Law, if the establishment of a joint venture does not involve the implementation of special access management measures as stipulated by the state, the filing management is applicable. The joint venture involved in the case is not in the negative list, so the equity change involved in the case only needs to be filed with the relevant departments, and will not take effect until approved by the approval authority. Ye and Jinding should change the equity held by Ye to Wu. Ye and Jinding filed an appeal against the judgment of the first instance.
The second instance of the Jiangsu Provincial Higher People’s Court held that although the Minutes of the Shareholders’ Meeting of Jinding Company was formed before the implementation of the Foreign Investment Law, Jinding Company did not involve the negative list. Under the circumstance that all shareholders have confirmed the identity of the actual contributor of Mr. Wu and agreed that Mr. Ye should cooperate with the change of registration, Mr. Ye and Jinding should change the equity held by Mr. Ye to Mr. Wu, so the judgment rejected the appeal.

[Typical significance]
With reference to the provisions of the Foreign Investment Law on “administration of pre-entry national treatment plus negative list”, as well as the provisions on “administration in accordance with the principle of consistency between domestic and foreign investment” in areas other than the negative list, the case clarifies the following rules: although the relevant investment activities occurred before the implementation of the Foreign Investment Law, foreign-invested enterprises are not within the scope of “negative list” management, The people’s court shall, in accordance with the principle of “giving national treatment” and “consistency between domestic and foreign investment”, take effect without the consent of the foreign investment examination and approval authority. This case plays a positive role in unifying the application of laws related to foreign investment, equally protecting the legitimate rights and interests of investors, and promoting the optimization of the investment environment.

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