In our continuous monitoring of the policies concerning the newly established Shanghai Free Trade Zone (FTZ), we would like to report the following two notices:

Companies engaged in cultural/entertainment activities

The Ministry of Culture issued a notice clearly allowing the establishment in the FTZ of foreign invested companies engaged in organizing cultural events, or producing and distributing games, in the terrfitory of Shanghai municipality. Further, foreign invested enterprises are allowed to manage entertainment venues in the area. The Notice also sets time limits for the local Ministry of Culture to issue the approval (or reject the application) to 20 days from the moment of application. For the requirements so to be eligible to apply for approval, specific laws and regulation in force at the moment of the application shall be taken in consideration.

Registered Capital Limitation for companies in the FTZ suspended

The State Administration of Industry and Commerce issued a notice that, among all, is aimed to suspend the provision concerning the minimum requirements of registered capital for companies to be established in the FTZ. According to PRC Company Law, the minimum level of registered capital for a company having two or more shareholders is currently at Chinese Yuan 30.000, for companied having a sole shareholder is at Chinese Yuan 100,000, and for joint stock limited companies is at Chinese Yuan 5 millions.

Of course, even if not specified by any law, in practice for foreign funded enterprises  (either JVs or WFOEs), the minimum requirements set by local authorities were in general way higher than the one stipulated by the law: for this reason it is our opinion that such new policy will likely apply to Chinese – funded enterprises only. However, in consideration to the fact that the notice doesn’t officially discriminate between Chinese and foreign funded enterprises, we will monitor its practical implementation and post further updates.

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