China Strengthens Management of the Appraisal of Capital Contribution via Non-Cash Contributions
On March 30, 2009, the Ministry of Finance and
the State Administration for Industry and Commerce jointly issued the Circular
on Several Issues Concerning the Management of Appraisal of Capital
Contribution via Non-Cash Properties (the "Circular"). According to the Circular, an asset appraisal
is required in the following circumstances: (i) an investor makes a non-cash
capital contribution, e.g., in-kind, intellectual property and land use
rights, which coincide with the "permitted" forms of non-cash contributions
stipulated by the PRC Company Law ("Non-Cash Contributions"); and (ii) at the
time of capital verification or application for corporate registration, the
capital verification agency or investor detects the status of the Non-Cash
Contributions has changed significantly, or the value of such Non-Cash
Contributions may have changed significantly, compared with the appraised in
the abovementioned circumstance. The
Circular further specifies that the investor shall be liable for the
authenticity and validity of the Non-Cash Contributions, and that appraisal
agencies shall be liable for the reasonableness of their appraisals of
Non-Currency Contributions. Generally,
the Circular appears to provide for stricter regulation of Non-Cash
Contributions.
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