In recent years, overseas investment has been very hot, and ODI (Overseas Investment Record) has attracted widespread attention as the most important channel for domestic enterprises to invest abroad, which is the most traditional and widely used way of overseas investment by enterprises. This article will introduce you from the aspects of policies and procedures, hoping to help partners who are interested in overseas investment.
NO.1、什么是境外投资备案(ODI)
ODI, the full name of Overseas Direct Investment in English, refers to the investment activities in which enterprises within the territory of the People's Republic of China directly or through overseas enterprises controlled by the People's Republic of China obtain overseas ownership, control, operation and management rights and other relevant rights and interests by investing assets, rights and interests or providing financing and guarantees.
There are two types usually:
Newly established overseas company: A new company must be established in Hong Kong or other overseas countries in the form of wholly or partially controlled by a mainland company as a shareholder;
Overseas M&A company: A mainland company as a shareholder of the acquirer and holding a company overseas is required to issue due diligence.
NO.2、ODI备案的申请流程
The filing of overseas investment (ODI) involves three departments: the Ministry of Commerce, the National Development and Reform Commission (NDRC) and the State Administration of Foreign Exchange.
NDRC project approval: Apply for the project to the NDRC and the committee department, submit the project information, the domestic investor signs the required legal documents, and issues the approval documents or filing notice to the NDRC for approval or filing.
Approval and issuance of certificates by the Ministry of Commerce: The Ministry of Commerce shall approve or file and issue the Certificate of Overseas Investment of Enterprises, and the enterprises shall carry out overseas investment within 2 years of receiving the certificate.
Filing with the State Administration of Foreign Exchange: Banks release foreign exchange, and the State Administration of Foreign Exchange supervises. If the investment amount is more than 5 million US dollars, it is necessary to report to the foreign exchange department. After examination and approval, the foreign exchange department will issue the Foreign Exchange Registration Certificate for Overseas Direct Investment to the domestic enterprise.
The whole process takes nearly 2~3 months, and after the successful processing, you will get two certificates issued by the Ministry of Commerce and the National Development and Reform Commission respectively: "Enterprise Overseas Investment Certificate" and "Overseas Investment Project Filing Notice".
It should be noted that ODI is divided into filing system and approval system according to factors such as the size of the investment amount, industry, and country. If it involves sensitive industries, regardless of the size of the project investment, it will be submitted to the Ministry of Commerce and the National Development and Reform Commission for approval. For the definition of sensitive areas and sensitive industries, please refer to the following chart:
NO.3. The conditions to be met for handling the ODI of the territory
Based on our practical experience in handling overseas investment (ODI) filings, most enterprises can basically successfully apply for overseas investment filings as long as they meet the following application conditions:
Meets the definition of "overseas investment": the act of a domestic enterprise owning or acquiring the ownership, control, operation and management rights and other rights and interests of a non-financial enterprise overseas through new establishment, mergers and acquisitions or other means.
The entity and establishment time meet the requirements: the entity needs to be an enterprise established in accordance with the law in the mainland. However, if an enterprise that has been established for less than one year and is unable to provide complete audited financial statements, it will generally not be able to pass the approval or filing of the examination and approval department.
Authenticity requirements for shareholder background, source of funds, and investment requirements: It is difficult to pass the review if it is not possible to specify the background of domestic shareholders or partners, the source of funds (e.g., self-owned funds, bank loans, funds obtained through compliance methods such as raised funds), and the authenticity of overseas investment projects.
Financial requirements: The audit report issued by an independent third-party accounting firm in the most recent year must not show losses; It is desirable that the return on equity should be higher than 5% and the debt-to-asset ratio should be less than 70%.
NO.4. Under what circumstances does an enterprise need to apply for ODI filing?
- Domestic companies need to enter overseas markets, and it is necessary to create overseas companies to handle business;
- Enterprises need to remit money to foreign investment projects, and banks need to require enterprises to provide relevant filing documents in accordance with regulations before they can carry out remittance operations;
- If a domestic company sets up a subsidiary overseas and then returns to China to set up a foreign-funded enterprise, it is necessary to open a bank foreign exchange account;
- Domestic enterprises have cooperative projects or businesses with foreign companies;
- Mainland companies are required to pay activation funds for the bank accounts of their overseas subsidiaries.
NO.5. What happens if I don't do ODI filing?
1. Violation of laws and regulations
Different countries or regions have certain regulatory requirements for overseas investment, and failure to file and register in accordance with the regulations will violate relevant laws and regulations. This can lead to legal liabilities and penalties, including fines, administrative penalties and even criminal liability, which vary depending on the laws of the country or region.
2. Funding constraints and remittance challenges
Some countries or regions require overseas investment to be filed and registered before funds can be remitted or transferred. If you do not file for the record, you may face capital restrictions and remittance difficulties, and you may not be able to smoothly transfer and manage funds.
3. May be subject to restrictions in the country or region of investment
Some countries or regions may adopt restrictive measures against overseas investments that have not been filed, such as restricting investors' business activities in the country or region, restricting the flow of funds, etc., which will adversely affect the operation and development of investors.
4. Difficulty in obtaining support and protection
Filing and registration can enable investors to enjoy the support and protection provided by relevant government departments, such as policy support, preferential treatment, legal protection, etc. If you do not file for the record, you may not be able to enjoy these supports and protections, increasing the risk of your investment.