Judicial Interpretation of Foreign-Invested Enterprise Disputes Issued

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Aug. 18 – China’s Supreme Court recently disseminated an opinion clarifying certain legal provisions of contracts during disputes between foreign-invested enterprises.

The “Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Disputes Involving Foreign-Invested Enterprises,” which came into effect August 16, states that if a contract concluded between the parties during the establishment or change of a foreign-invested enterprise becomes effective after being approved by the competent approval authorities, the contract will take effect from the date of approval.

If the contract fails to be approved by the authorities, the court will rule that it has not taken effect and reject a party’s request to recognize its validity.

The opinion also specifies the rules for determining the capital contribution obligations of shareholders of a foreign-invested enterprise. According to the provisions, if a shareholder has delivered the property contributed but has not undertaken registration formalities, the court will recognize the shareholder’s capital contribution obligations as long as the registration formalities have been completed within the period prescribed by the court.

For more information or advice for establishing and maintaining foreign-invested enterprises in China, please contact Dezan Shira & Associates at info@dezshira.com.