Subjects of foreign investment include foreign natural persons, enterprises, and other organizations.
Mergers and Acquisitions (M&A) of Domestic Enterprises by Foreign Investors
Foreign investors' acquisition of the shares, equity, property shares, or other similar rights and interests of enterprises within the territory of China either by merger, acquisition, or other means is one of the cases of foreign investment stipulated in the Foreign Investment Law. Currently, mergers and acquisitions by foreign investors are mainly regulated by laws and regulations such as the Foreign Investment Law and its Implementing Regulations, Provisions on M&A of Domestic Enterprises by Foreign Investors, and Measures for the Administration of Strategic Investment in Listed Companies by Foreign Investors.
Organizational Structures of Foreign-invested Enterprises
Foreign-invested enterprises in China mainly have two organizational forms: companies and partnerships. The provisions of the Company Law of the People's Republic of China (hereinafter referred to as the “Company Law”) and the Law of the People’s Republic of China on Partnerships (hereinafter referred to as the “Law on Partnerships”) are respectively applied to the organizational form, organizational structure, and norms of conducts of foreign-invested enterprises established after January 1, 2020. Foreign-invested enterprises are no longer divided into Sino-foreign equity joint ventures, Chinese-foreign contractual joint ventures, and wholly foreign-owned enterprises.
Foreign investors are entitled to establish limited liability companies and joint-stock limited companies within the territory of China.
A limited liability company refers to an economic organization that is funded and established by fewer than 50 shareholders, each of whom bears limited liability to the company within the limit of his/her subscribed capital contribution. A limited liability company shall also bear limited liability for its debts with all its assets. A joint-stock limited company refers to an economic organization whose registered capital is composed of equal shares that are raised through the issuance of shares (or stock warrants), whose shareholders are each liable to the company within the limit of his/her subscribed shares, and that is likewise liable for its own debts with all its assets. Both a limited liability company and a joint-stock limited company shall be registered in accordance with the Regulations of the People's Republic of China on the Administration of Company Registration.
Foreign investors are entitled to set up general partnerships and limited partnerships within the territory of China.
A general partnership is composed of general partners who bear unlimited joint and several liabilities for the debts thereof. A limited partnership is composed of the general partners who bear unlimited joint and several liabilities for the debts of the partnership and the limited partners who are liable for the debts of the partnership within the limit of their subscribed capital contribution.
Resident Representative Office of Foreign Enterprise in China
The resident representative offices of foreign enterprises established in China (hereinafter referred to as the "representative offices") shall abide by Chinese laws and regulations (including the Regulations on the Administration of Registration of Resident Offices of Foreign Enterprises).
A representative office is an office set up within the territory of China engaged in non-profit activities related to the business of foreign enterprises. It does not have the status of a legal person and is not entitled to engage in profit-making activities. A representative office is only entitled to engage in the market research, exhibitions, and publicity activities related to the products or services of foreign enterprises and the liaison activities related to foreign enterprises’ product sales, service delivery, domestic sourcing, and domestic investment.