Article 44 of the PRC Contract Law specifies that “if laws or administrative regulations require approval, registration or other such procedures before a contract enters into effect, such provisions shall govern”. Article 20 of the Sino-Foreign Equity Joint Venture Law Implementing Regulations (the Implementing Regulations) specifies that any equity transfer involving foreign investment must “be submitted to the approval authority for approval”, otherwise the transfer will be invalid.
Article 3 of the Changes in Equity Interests of Investors in Foreign Investment Enterprises Several Provisions (the Equity Change Provisions) specifies that “changes in equity that have not been approved by the approval authority shall be invalid”.
Partner
Martin Hu & Partners
Thus it has long been accepted that an equity transfer contract that has not yet gained approval is invalid.
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Hansen Zhao is a partner at Martin Hu & Partners (MHP Law Firm)
8/ Floor, Kerry Parkside Office
1155 Fangdian Road, Pudong Shanghai
China, 201204
Fax: +86 21 5010 1222
Martin Hu
Tel: +86 21 5010 1666*966
E-mail: martin.hu@mhplawyer.com
Hansen Zhao
Tel: +86 (21) 5010 1666*977
E-mail: hansen.zhao@mhplawyer.com
