Promulgation Date: 2020-12-19 Title: Foreign Investment Security Review Measures Document Number:发改委令 商务部令第37号 Expiration date: Promulgating Entities:National Development and Reform Commission, Ministry of Commerce Source of text: http://www.mofcom.gov.cn/article/zwgk/zcfb/202012/20201203024662.shtml
Article 1: These Measures are drafted on the basis of the "PRC Foreign Investment Law", the "PRC National Security Law" and related laws, so as to adapt to the requirements of promoting a the formation of a new patter of all around openness, and to effectively prevent and resolve national security risks while actively promoting foreign investment.
Article 2: Security reviews are to be conducted in accordance with these Measures for foreign investment that impacts or might impact national security.
Foreign investment" as used in this law refers to foreign investors directly or indirectly conducting investment activities in the Mainland territory of the P.R.C., including the following situations:
(1) A foreign investor investing in new projects or establishing enterprises in China, either alone or jointly with other investors;
(2) Foreign investors obtaining equity or assets of domestic enterprises through mergers and acquisitions;
(3) Foreign investors investing in China through other methods.
Article 3: The state is to establish a work mechanism for foreign investment security reviews (hereinafter "work mechanism"), responsible for organizing, coordinating, and guiding foreign investment security review efforts.
The office of the work mechanism is to be set up in the National Reform and Development Commission [NDRC], with the NDRC and Ministry of Commerce leading, and is to undertake the routine work of foreign investment security reviews.
Article 4: For foreign investment within the following scope, the foreign investors or corresponding domestic parties (hereinafter collectively referred to as "parties") shall proactively make a declaration to the Office of the Working Mechanism before carrying out the investment:
(1) Investment in military industry, military industry ancillary equipment, or other fields related to national defense security, as well as investment in military facilities and areas surrounding military industry facilities;
(2) Investments in and obtaining actual control over enterprises in important sectors such as important agricultural products, important energy sources and resources, important equipment manufacturing, important infrastructure, important transportation services, important cultural products and services, important information technology and Internet products and services, important financial services, and key technologies.
"Obtaining actual control of the enterprises" as used in the second item of the preceding paragraph includes the following circumstances:
(1) Foreign investors hold more than 50% of the company’s stock;
(2) The foreign investors possess less than 50% of the enterprise' shares, but the voting rights they enjoy are sufficient to have a major impact on decisions of the board of directors, shareholder meetings, or general shareholders meetings;
(3) Other situations leading the foreign investor to have a major impact in terms of the enterprise's business decisions, human resources, finance, technology, and so forth.
The Office of the Working Mechanism has the authority to request a declaration from the parties in foreign investment within the range provided for in the first paragraph (hereinafter "declaration range").
Article 5: Before parties declare foreign investments to the Office of the Working Mechanism, they may consult with the Office of the Working Mechanism on related issues.
Article 6: Parties declaring foreign investment to the Office of the Working Mechanism shall submit the following materials:
(1) a written declaration;
(2) Investment plan;
(3) An explanation of whether the foreign investment affects national security;
(4) Other materials as provided by the Office of the Working Mechanism.
The written declaration shall indicate the foreign investor's name, domicile, business scope, basic investment circumstances, as well as other matters prescribed by the Office of the Working Mechanism,
As needed for work, the Office of the Working Mechanism may entrust the relevant departments of people's governments for directly-governed municipalities to accept and transfer the materials provided for in the first paragraph of this Article on its behalf.
Article 7: The Office of the Working Mechanism shall make a decision on whether to conduct a security review of declared foreign investment within 15 working days of having received materials as provided for in article 6 of these Measures from the parties, or as transferred by the relevant departments of people's governments for provinces and directly-governed municipalities, and notify the parties in writing The parties must not carry out the investment before the Office of the Working Mechanism makes a decision.
Where the Office of the Working Mechanism does not need to conduct a security review, the parties may carry out the investment.
Article 8: Foreign investment security reviews include ordinary reviews and special reviews. Where the Office of the Working Mechanism decides to conduct a security review of the foreign investment, it shall complete an ordinary review within 30 days of the decision. The parties must not carry out the investment during the review period.
Where after an ordinary review it is found that the foreign investment does not impact national security, the Office of the Working Mechanism shall make a decision that it has passed the security review; but where it is found that it will impact or might impact national security, the Office of the Working Mechanims shall make a decision to initiate a special review. Written notice of the Office of the Working Mechanism's shall be given to the parties.
Article 9: Where the Office of the Working Mechanism decides to initiate a special review of declared foreign investments, they shall make a decision in accordance with the provisions below after the review, and notify the parties in writing:
(1) Where the declared foreign investment does not impact national security, a decision is to be made that it passed the security review;
(2) Where the declared foreign investment impacts national security, a decision to prohibit the investment is to be made;
Where the impact on national security can be eliminated by attaching conditions and the parties promise to accept the conditions, a decision may be made that it has conditionally passed security review, and the conditions are to be listed in the decision.
The special review shall be completed within 60 working days of its initiation, but this period may be extended in special circumstances. The parties shall be notified of extensions in writing. The parties must not carry out the investment during the review period.
Article 10: In the period during which the Office for the Working Mechanism is conducting a security review of foreign investments, it may request that the parties provide supplemental materials, and make inquiries to the parties on related matters.
The parties shall cooperate.
The time in which the parties provide supplementary materials is not included in the period for review.
Article 11: The parties may revise their investment plans or withdraw investments during the period in which the Office of the Working Mechanism conducts a security review of declared foreign investments.
Where parties revise their investment plans, the review period is to be newly calculated from the date on which the Office of the Working Mechanism receives the revised investment plan; and where the parties withdraw the investment, the Office of the Working Mechanism is to conclude the review.
Article 12: Where the Office of the Working Mechanism make a decision that declared foreign investments pass security review, the parties may carry out the investment; where the decision is to prohibit the investment, the parties must not carry out the investment, and where it is already carried out shall dispose of the shares or assets in a set period of time and employ other necessary measures to restore the state prior to the investment and eliminate impact on national security; where a decision is made that it has conditionally passed security review, the parties shall conduct the investment in accordance with the conditions.
Article 13: Foreign investment security review decisons are to be overseen and implemented by the Office of the Working Mechanism together with relevant departments and local governments; verification of the implementation of conditions for foreign investments that conditionally passed security review may be conducted by requesting proofs be provided, on-site inspections, or other methods.
Article 14: Where after the Office of the Working Mechanism makes a decision that a security review is not necessary for a declared foreign investment or that it has passed security review, the parties change the investment plant so that it will or might impact national security, a new declaration shall be made to the Office for the Working Mechanism in accordance with these Measures.
Article 15: Where relevant organs, enterprises, social groups, or the public feel that foreign investment will or might impact national security, they may submit a recommendation to conduct a security review to the Office of the Working Mechanism.
Article 16: Where parties to foreign investment that is within the scope for declarations fail to make a declaration in accordance with these Measures and implement the investment, the Office of the Working Mechanism is to order that a declaration be made within a set time; where they refuse to make a declaration, dispose of the assets and property in a set period of time and employ other necessary measures to restore the state prior to the investment and eliminate the impact on national security.
Article 17: Where parties provide false materials to the Office of the Working Mechanism or conceal relevant information, the Office of the Working Mechanism is to order corrections; where false materials are provided or relevant information was concealed in order to deceitfully pass security review, the corresponding decisions are to be revoked; where the investment has already been carried out, order that the stocks and assets be disposed of in a set period of time and employ necessary measures to restore the state prior to carrying out the investment and eliminate the impact on national security.
Article 18: Where parties to foreign investments that conditionally passed security review carry out the investment without following the conditions, the Office of the Working Mechanism is to order corrections; where the corrections are refused, order that stocks or property be disposed of within a set period of time and employ necessary measures to restore the state before the investment was carried out and eliminate the impact on national security.
Article 19: Where the parties have the circumstances provided for in Articles 16, 17, or 18 of these Measures, it shall be included as a negative credit record in the relevant national credit information systems, and joint punishments are to be carried out in accordance with relevant national provisions.
Article 20: Where in the course of security review work the staff of state organs abuse their authority, derelict their duties, twist the law for personal gain, or leak state secrets or commercial secrets they learn of, they are to be punished in accordance with law, and where a crime is constituted, criminal responsibility is to be pursued in accordance with law.
Article 21: Where investors from Hong Kong Special Administrative Region, Macao Special Administrative Region, or Taiwan region carry out investments that will or might impact national security, the provisions of these Measures are to be applied by reference.
Article 22: Where foreign investors purchase domestic enterprise stocks through securities exchanges or other securities trading venues approved by the State Council, and it will or might impact national security, the specific measures for applying these Measures are to be formulated by the State Council’s securities regulatory body in conjunction with the Office of the Working Mechanism.
Article 23: These Measures are to take effect 30 days after the date of their promulgation.