Trunsiation Squire,Sanders&Dempsey L.L.P. payable for the assets shall be paid in by the investors within the time limit for the payment of consideration specified in the first paragraph of this Article.The balance of the capital contribution shall be in accordance with the relevant provisions on capital contribution for establishment of FIEs If a foreign investor acquires a domestic enterprise and establishes a FIE and its capital contribution accounts for less than twenty five percent(25%)of the registered capital of such enterprise,and if the investor is to make capital contribution in the form of cash,they shall make payment in full within three(3)months after the date of issuance of the FIE's Business License;if the investor is to make capital contribution in kind or in the form of industrial property,etc.,it shall make payment in full within six(6)months after the date of issuance of the FIE's Business License. Article 17 The method by which consideration is paid for acquisition shall comply with relevant State laws and administrative regulations.If the foreign investor is to make payment in the form of Renminbi assets that it lawfully owns,it shall require the approval of the forex control authority.If the foreign investor is to make payment in the form of stock that it has the right to dispose of,it shall comply with the requirements provided in Chapter IV hereof. Article 18 Where a foreign investor acquires the equity interests from shareholders of a Domestic Company by agreement,after the Domestic Company is converted into a FIE through such acquisition with the registered capital of such FIE remaining equal to that of the original Domestic Company,the foreign investor's proportion of contribution shall be the ratio between the equity interests it has acquired and the original registered capital. Where a foreign investor subscribes to the capital increase of a domestic limited liability company,the registered capital of the FIE after the acquisition shall be the aggregation of the original Domestic Company's registered capital and the amount of the capital increase.The foreign investor and the existing shareholders of the acquired Domestic Company shall determine the percentages of their respective contributions to the FIE's registered capital on the basis of the appraisal of the assets of the Domestic Company. Where a foreign investor subscribes to any increased capital of a domestic shareholding company,the registered capital shall be determined in accordance with the provisions of the Company Law. Article 19 When a foreign investor carries out an Equity Acquisition,unless otherwise provided in the State law,the upper limit on the total amount of investment of the FIE established after the acquisition shall be determined in accordance with the following percentages: (1) if the registered capital is less than Two Million One Hundred Thousand US Dollars (US$2,100,000),the total amount of investment may not exceed ten- seventh(10/7)of the registered capital; (2) if the registered capital is Two Million One Hundred Thousand US Dollars (US$2,100,000)or more but less than Five Million US Dollars 6
Translation Squire,Sanders Dempsey L.LP. (USS5,000,000),the total amount of investment may not exceed twice(2)the registered capital; (3) if the registered capital is Five Million US Dollars (US$5,000,000)or more but less than Twelve Million US Dollars (US$12,000,000),the total amount of investment may not exceed two and a half(2.5)times the registered capital; (4) if the registered capital is Twelve Million US Dollars (US$12,000,000)or more,the total amount of investment may not exceed three (3)times the registered capital. Article 20 When a foreign investor carries out an Asset Acquisition,the total amount of investment of the proposed FIE shall be determined in accordance with the transaction price of the assets purchased and the actual scale of production and operation.The ratio of the proposed FIE's registered capital to its total amount of investment shall comply with relevant provisions. Chapter III Examination,Approval and Registration Article 21 When a foreign investor carries out an Equity Acquisition,the investor shall submit the documents set forth below to the examination and approval authority whose competence corresponds to the total amount of investment and enterprise type of the proposed FIE and the industry it is to engage in,pursuant to laws, administrative regulations and departmental rules and regulations on the establishment of FIEs: (1) in the case of a domestic limited liability company targeted for acquisition:the unanimous shareholders'resolution in favor of the Equity Acquisition by the foreign investor;in the case of a domestic company limited by shares targeted for acquisition:the resolution of the shareholders'general meeting in favor of the Equity Acquisition by the foreign investor; (2) an application to convert the Domestic Company targeted for acquisition into a newly established FIE in accordance with the law; (3) the contract for and the articles of association of the FIE to be established after the acquisition; (4) the agreement for the purchase of the equity of the shareholder in the Domestic Company or the subscription to the Domestic Company's capital increase by the foreign investor; (5) a financial audit report for the previous fiscal year of the Domestic Company to be acquired; (6) the notarized or legally certified investor's identification documents or certificates of registration and certificates of creditworthiness;