A foreign invested enterprise in China which is engaged in real estate business(“FIE”) would face the shortage of project capital. Then a real estate FIE is allowed to borrow foreign debt to ease capital shortage?
According to the latest internal rules issued by State Administration for Foreign Exchange of PRC, a real estate FIE, which was established after June 1, 2007, is not allowed to borrow foreign debt; however, for a real estate FIE which was established before June 1, 2007, it is allowed to borrow foreign debt, provided the following conditions are satisfied:
– the real estate has obtained Certificate for the Use of State-owned Land;
– the real estate FIE has made full payment to its registered capital;
– for a real estate FIE with total investment of less than 10 million USD, the project fund(项目资本金) should account for at least 35% of total investment in a project(项目投资总额), and, for a real estate FIE with total investment of more than 10 million USD (or 10 million USD), its registered capital should not less than 50% of its total investment; and
– the amount of loan should be subject to difference between FIE’s registered capital and total investment, and the sum of the aforesaid loan and FIE’s existing foreign debt(long term foreign debt, the remaining amount of short term foreign debt and overseas guarantee) should not exceed the aforesaid difference.
The FIE which satisfy the foregoing conditions should prepare the relevant documents and submit the same to local Administration for Foreign Exchange for foreign debt registration(FIE should do foreign debt registration within 15 working days after execution date of the loan agreement).
Local Administration for Foreign Exchange will, within 20 working days after receiving the aforesaid documents, make decision whether or not to grant approval. After obtaining approval from local Administration for Foreign Exchange, FIE should go to local bank to open foreign debt account to receive loan, which will take around 5 working days.
By Adam Li