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China to Support Equity Contributions Through Scientific Results

By Dezan Shira & Associates
Posted: 10th December 2012 08:50
With the view to promote equity contributions made through scientific results and scientific innovations, China’s Securities Regulatory Commission (CSRC) and the Ministry of Science and Technology (MOST) jointly released the “Guiding Opinion regarding Capital Contributions in the Form of Scientific Results and Determination of the Relevant Equity Rights (hereinafter referred to as ‘Opinions’)” on November 15. Detailed information can be found below.
According to the Opinions, when obtaining equity contributions in the form of scientific results, enterprises are encouraged to expressly stipulate the matters concerning the scientific results (such as the ownership, evaluation and pricing, or number and proportion of converted shares) through legal documents (such as the agreement of initiators, investment agreements or articles of associations) to clearly define the property rights and avoid disputes. China’s Company Law provides that intangible assets, including scientific results, may take up 70 percent of the registered capital of a company.

Moreover, enterprises are encouraged to specify the rights and interests of the relevant technology personnel in the scientific results and determine their equity rights in accordance with the law. Rights and interests of the relevant technology personnel shall be stipulated in the service invention contracts and the equity rights of the relevant technology personnel in the enterprise shall be determined according to law.
The Opinions further suggest that the pilot policy will be implemented in the demonstration parks (including at Beijing Zhongguan Village and Shanghai Zhangjiang Demonstration Park), and various methods to determine equity rights will be taken in a reasonable manner.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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