On 1 September 2008, the State Administration for Industry and Commerce ("SAIC") and the administrative authorities for industry and commerce issued the Measures on Registration of Equity Pledges, effective as of 1 October 2008.
The issuance of the measures may be regarded as a form of implementing the new PRC Property Law, effective as of 1 October 2007. The PRC Property Law provides that transferable equity may be pledged.
Although various SAIC circulars addressed the registration of equity pledges for Foreign-Invested Enterprises ("FIEs"), the measures now provide defi nitive guidelines and systematic rules that apply to both domestic companies and FIEs.
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Pledged equity
Equity of limited liability companies and shares of joint stock limited companies that are legally transferable may be pledged.
The equity pledge of an FIE should be registered upon prior approval by competent examination and approval authorities.
In addition, a pledge can not be registered for equity that is subject to an injunction by a PRC court.
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Registration items of an equity pledge
Registration items of an equity pledge include the names of the pledgor (who provides the pledged equity) and the pledgee (who holds the pledged equity), the name of the company in which the equity is pledged and the amount of the pledged equity.
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Registration, modification, cancellation and revocation of an equity pledge
The pledgor and pledgee should jointly apply to register the equity pledge.
Where the amount of the pledged equity is modified, or the name of the pledgor and the pledgee or the company in which the equity is pledged is modified, an application for modification registration should be filed.
Where a pledge is extinguished as a result of the extinguishment of the principal creditor's right, the realisation of the pledge, the waiver of pledge by the pledgee or any other circumstance prescribed by law, an application for cancellation registration should be filed.
Where a pledge contract is legally determined as void or is revoked, an application for revocation registration should be filed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
