WFOE Compliance during the Transition Period under the New FIL

On 1 January 2020, the Foreign Investment Law of the People’s Republic of China (“FIL”) came into force, and at the same time, the three-decades-old-plus Wholly Foreign-owned Enterprises Law of the People’s Republic of China (“WFOE Law”) and its relevant regulations were simultaneously repealed. With respect to the existing c.375,000 WFOEs already established in accordance with the previous WFOE Law and regulations, the new FIL and its Implementation Regulations provide a 5-year transition period (“Transition Period”) for them to make the necessary adjustments and conversion to ensure compliance by the end of 2024. The Company Law of the People’s Republic of China (“Company Law”) shall universally govern the WFOEs in the same way as it does domestic Chinese companies.
In order to help existing WFOEs and their foreign shareholders better understand the impact of the new FIL and its relevant regulations, we hereby set out the main compliance issues to be attended to in the Transition Period, mainly in respect of the corporate governance, foreign exchange and foreign investment reporting obligations etc.