(Data from the 2023 China Outward FDI Statistical Bulletin)

Today we will talk with you about the process and information related to the application for ODI filing for outbound investment by Shanghai enterprises.

Overseas Investment Filing (ODI), known in English as Overseas Direct Investment, means that domestic enterprises and organizations, after being approved by the relevant departments through theEstablishment, mergers and acquisitions, equity participationThe act of acquiring ownership, control, management and other related rights and interests outside of the country, etc.

Generally speaking, as long as the domestic enterprises involved in foreign investment directly or indirectly to obtain the ownership, control and other rights and interests of foreign companies that need to be filed overseas investment.

Commonly applicable scenarios for ODI outbound investment filings include the following two main types:

• Establishment of new companies abroad
• Offshore M&A Company

Note: If the enterprise's overseas investment involves sensitive countries and regions and sensitive industries, it also needs to implement approval management.

It is important to note that the Outbound Investment Filing (ODI) is only for established offshore enterprises. In other words.Shell companies set up by domestic enterprises in the path of offshore investment are excluded from the scope of review by the management.At the same time, the secondary investment behavior carried out by overseas enterprises is not in the scope of outward investment management and does not need to be examined by the relevant departments.

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01.The Importance of ODI Filing for Offshore Investments

1. Compliance requirements

The Chinese government has clear legal and regulatory requirements for outbound investment, and making an ODI filing is an important step to ensure that an enterprise's outbound investment behavior is in line with national laws, regulations and policy guidelines. This helps to safeguard national economic security and interests and prevent the outflow of illegal funds.

2. Avoiding the risk of non-compliance

Through filing, enterprises can ensure their compliance in the process of offshore investment and avoid the legal risks and economic losses they face due to irregular operation.

3. Financial security and liquidity

Legitimate funds leave the country:Through ODI filing, enterprises can complete the exit of domestic funds in a legal way to ensure the compliance and safety of capital flow. This helps enterprises to smoothly carry out their offshore investment activities and avoid project delays or failures caused by capital problems.

Foreign exchange management facilitation:After the filing, enterprises can enjoy the convenience of the State's foreign exchange management and improve the liquidity and efficiency of capital utilization. This helps enterprises to better utilize offshore resources and achieve their investment objectives.

4. Tax incentives and financial subsidies

Tax Benefits:In some countries and regions, enterprises can enjoy tax incentives for outbound investment. Through ODI filing, enterprises can legally enjoy these preferential policies.Reduce tax costs and increase return on investment.

Financial subsidies:Some local governments provide capital subsidies and other support policies to encourage enterprises to invest abroad. Enterprises that have completed the ODI filing are likely to receive these policy supports, further reducing investment costs.

5. Resource allocation

ODI filing helps enterprises optimize the allocation of domestic and foreign resources and achieve effective utilization and complementarity of resources. This helps to enhance the overall competitiveness and sustainable development of enterprises.

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02.Shanghai enterprises need to meet the conditions to apply for ODI filing

According to the previous ODI filing practice cases, most of the enterprises that passed the audit as the investment subject need to basically meet the following four application conditions:

1、Domestic enterprises preferably more than 1 year

2. Return on net assets higher than 5%

3. Gearing ratio below 70%

4. Audit report cannot be in the red (net assets greater than investment)

(You can also make paid-in registered capital if 1, 2, and 3 are not satisfied, but the paid-in amount > the invested capital.)

Remarks.

Return on Net Worth = Net Profit:Average Net Worth x 100%

Gearing ratio = total liabilities:total assets x 100%

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03.Processing Flow of Shanghai ODI Outbound Investment Record

The whole process will take 2-3 months, involving complicated documents and processes, if there is no professional guidance to follow up, it is very time-consuming and laborious, and it is likely that due to the information involved in the submission of documents is not compliant, the industry involved in the more sensitive reasons can not pass the audit.
The information required to be provided by Shanghai enterprises applying for ODI outbound investment filing is as follows:

Something to keep in mind:During the filing process in Shanghai, the NDRC will need evidence of the use of specific funds by the enterprise, such as corresponding contract documents, while the Commerce Commission will need to see the NDRC's approval before making the final approval.The process for Shanghai enterprises to apply for ODI outbound investment filing:
Example: Shanghai to foreign investment of 300 million U.S. dollars or less in non-sensitive industries ODI filing process details
1. Project formulation--The shareholders of the domestic enterprise apply for the project to the Shanghai Municipal Development and Reform Commission, submit the project information, and the domestic investor signs all the required legal documents to be approved or filed by the Shanghai Municipal Development and Reform Department, and issue the approval document or filing notice.
2. Licensing--Approval or filing by Shanghai Municipal Commission of Commerce, issuance of "Certificate of Enterprise Overseas Investment", and the enterprise shall carry out investment abroad within 2 years after receiving the certificate.
3. Final filing--Banks release foreign exchange, and the Foreign Exchange Administration supervises. For investment amount of more than 5 million dollars, it is necessary to report to the foreign control department. The foreign exchange control department will issue the Foreign Exchange Registration Certificate for Overseas Direct Investment to the domestic enterprise after examination and approval.
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04.When is an ODI filing required?

1. Establishment of overseas subsidiaries to conduct business and capital injection

When a company plans to make direct investment, merger and acquisition projects or expand existing business overseas, when a Shanghai company establishes a subsidiary overseas, in order to open a local bank account or carry out remittance from the mainland to overseas, the domestic parent company is required to provide an ODI filing certificate. Banks will require this supporting document when reviewing the relevant remittance application.

In addition, when an overseas subsidiary generates profits from its operations and wishes to repatriate the funds to China, the filing document can be used as a proof of legality to help the company successfully complete the procedures for repatriation of funds.

2. Overseas listing (red chip/VIE structure construction)

Many Shanghai-based companies prepare for overseas listings by usingRed chip structure or VIE structure.The construction of these structures often involves complex cross-border capital flows and shareholding arrangements. Making an ODI filing can help companies complete their pre-listing preparations more smoothly, while also facilitating future capital operations and investment exits.

3. Cross-border e-commerce business development

For cross-border e-commerce companies with large capital inbound and outbound needs, in order to ensure business compliance and stability, ODI filing isTransformation into a legitimate cross-border trading entity is a must.

Cross-border e-commerce companies that fail to pass the ODI filing when making large outbound payments may beIt will be subject to refusal by the bank to transfer money or strict scrutiny by the foreign exchange authorities.

And through ODI filing, enterprises can obtain approvals from the Ministry of Commerce and the Development and Reform Commission, thus ensuring the legitimacy of outbound funds. This not only helps enterprises to complete cross-border payments smoothly, but also avoids all kinds of troubles caused by non-compliance of fund flow.

4. Establishment of foreign-invested enterprises

When a Shanghai enterprise first establishes a subsidiary overseas and then repatriates funds through that subsidiary to set up a Wholly Foreign Owned Enterprise (WFOE) or other form of foreign enterprise in China, when opening a capital account, theIf the bank requires equity penetration to a natural person and involves a mainland enterprise, the mainland enterprise will need to apply for an ODI filing certificate.This helps to ensure compliance and clarity of the source of funding for foreign-invested enterprises.

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05.What industries can't do ODI filings?

The State Council issued the Circular of the General Office of the State Council Transmitting the Guidance Opinions of the Ministry of Foreign Affairs of the People's Bank of China of the National Development and Reform Commission of the Ministry of Commerce on Further Guiding and Regulating the Direction of Overseas Investments on August 18, 2017, which classified the overseas investment projects into encouraging, restricting and prohibiting categories to further guide and regulate the direction of the enterprises' overseas investments. The specific list is as follows:

1. Categories of encouragement
Infrastructure sector; capacity and equipment sector; high-tech and advanced manufacturing; energy resources; agriculture; and Belt and Road investments;
2. Restricted categories
(1) Overseas investment with sensitive countries and regions with which China has not established diplomatic relations, where wars have occurred, or where restrictions are required under bilateral and multilateral treaties or agreements concluded by China; (2) Overseas investment in the real estate industry; hotel industry; cinema; entertainment industry; sports clubs, etc.; and (3) Establishment of equity investment funds or investment platforms with no specific industrial projects abroad.
3. Prohibited categories
(1) Involving the export of core technologies and products of the military industry that have not been approved by the State; (2) Utilizing technologies, techniques and products that are prohibited for export in China; (3) Gambling and pornography industries, etc.; (4) Explicitly prohibited by international treaties concluded by China or to which it has acceded; and (5) Endangering the interests of the State and public security;
If an enterprise's overseas investment involves sensitive countries and regions or sensitive industries, it also needs to implement approval management.

If your business has registered overseas companies and ODI offshore investment filing needs, welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and the whole process of one-on-one service, to arrange for the professional manager to answer queries, to provide professional advice andFull one-on-one service ↓↓↓