Warning: Use of undefined constant ‘FS_METHOD’ - assumed '‘FS_METHOD’' (this will throw an Error in a future version of PHP) in /home/btcnewspaper/public_html/rayyesfinance.com/wp-config.php on line 83

Warning: Use of undefined constant ’direct’ - assumed '’direct’' (this will throw an Error in a future version of PHP) in /home/btcnewspaper/public_html/rayyesfinance.com/wp-config.php on line 83
FAQs about lending and cross-border security in China | Dentons - Rayyes Finance and Market News
Daily Banking News
$38.13
+0.4%
$151.70
+0.17%
$56.04
-0.2%
$27.71
-0.86%
$301.98
+0.5%
$374.23
-0.16%
$68.10
+0.18%
$101.04
+0.55%
$70.30
+0.75%
$2.58
+1.98%
$18.12
+0.17%
$66.44
+0.65%
$62.41
+0.92%

FAQs about lending and cross-border security in China | Dentons


This article sets out some questions frequently asked by our clients in respect of lending and cross-border security in the People’s Republic of China (the “PRC”, and solely for the purposes of this article, we do not refer to Hong Kong Special Administrative Region, Macau Special Administrative Region as well as Taiwan when mentioning the PRC).

1. Is a license or regulatory approval required for foreign lenders to lend into the PRC or take security over assets located in the PRC?

No license or regulatory approval is required for foreign lenders to lend money to the PRC entities or take the benefit of security over assets located in the PRC.

2. What are the regulatory requirements on foreign loans / foreign debts?

(1) Foreign debt limits

The foreign debt quota system established under the PRC laws requires that the risk-weighted balance of all foreign loans borrowed by a PRC borrower (other than a bank) shall not exceed its foreign debt quota, which shall be calculated as per the following formula:

net assets of the PRC borrower × the leverage rate of cross-border financing (currently set at 2) × the macro-prudential adjustment parameters (currently set at 1.25)

If the PRC borrower is a foreign invested company (“FIE”), it may opt into the foreign debt quota system or adopt the old regime under which it is entitled to borrow foreign loans up to an amount equal to the difference between its total investment amount and its registered capital. The basis for calculation of the foreign debt limit, once determined by the FIE, shall remain consistent and shall be filed with the local administration for foreign exchange (“SAFE”). The legal requirements on the correlation between the total investment amount and the registered capital of an FIE is listed in the below table:

Total Investment Amount Registered Capital Requirement (as a percentage of the total investment)
Under US$3 million 70%
US$3 million – 10 million 50% (minimum US$2.1 million if the total investment amount is lower than US$4.2 million)
US$10 million – 30 million 40% (minimum US$5 million if the total investment amount is lower than US$12.5 million)
Above US$30 million 1/3 (minimum US$12 million if the total investment amount is lower than US$36 million)

(2) Foreign debt registration

The PRC borrower shall file for registration with SAFE at least three working days prior to the first drawdown of the foreign loan. Without the foreign debt registration, no loan can be drawn or repaid by the borrower from the PRC. If any of the term, amount, creditor(s) or other material terms under the loan agreement is amended, the PRC borrower shall update the registration accordingly. When the foreign loans are repaid in full, the PRC borrower shall cancel the foreign debt registration with SAFE.

(3) NDRC filing

If the term of foreign loans is one year or more, the PRC borrower shall also file the foreign loan with the National Development and Reform Commission (“NDRC”). It is worth noting that the NDRC filing is also required where the borrower is an offshore entity controlled by a PRC entity.

3. What are the formalities for creation and perfection of pledge over shares in a PRC company?

(1) Creation and registration of share pledge

To create a share pledge, (i) a share pledge agreement shall be executed by the pledgor and the pledgee (and usually the PRC company in which the shares are pledged because it needs to assist with the registration of the share pledge), and (ii) the share pledge agreement shall be filed and registered with (A) the local company registration authority jointly by the pledgor and the pledgee or by an agent (a representative) jointly appointed by the pledgor and the pledgee, if the PRC company in which the shares are pledged is a limited liability company, or (B) the securities depository and clearing institution (with exceptions), if such…



Read More: FAQs about lending and cross-border security in China | Dentons

Get real time updates directly on you device, subscribe now.

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

Get more stuff like this
in your inbox

Subscribe to our mailing list and get interesting stuff and updates to your email inbox.

Thank you for subscribing.

Something went wrong.