The “Administrative Measures for Examination and Registration of Medium and Long-term Foreign Debts of Enterprises” will be implemented from February 10, 2023

On January 5, 2023, the NDRC issued the “Administrative Measures for Examination and Registration of Medium and Long-term Foreign Debts of Enterprises” (hereinafter referred to as the “Decree No.56 “), which will be implemented on February 10, 2023. The “NDRC Notice on Promoting the Reform for Filing and Registration-based System for Issuance of Foreign Debts by Enterprises” (FGWZ [2015] No. 2044, hereinafter referred to as the “Notice No.2044”) will be abolished accordingly. Here is a brief introduction of some key contents of the “Decree No.56 ” compared with the “Notice No.2044”.

1.To specify the definition of the foreign debts.

The “Notice No.2044” stipulates that foreign debts shall mean debt instruments borrowed by domestic enterprises and overseas enterprises or branches controlled by them from overseas, denominated in Renminbi or a foreign currency, with a maturity term of one year or longer, including bonds issued overseas, mid to long-term international commercial loans etc. The “Decree No.56 ” specifies the definition of “enterprise”, “control” and “debt instruments”, such as, “control” refers to direct or indirect ownership of more than half of an enterprise’s voting rights, or the ability to dominate important matters such as operation, finance, human resources and technologies of an enterprise even without more than half of the enterprise’s voting rights; and “debt instruments” include but are not limited to senior bonds, perpetual bonds, capital bonds, medium-term notes, convertible bonds, exchangeable bonds, finance leases and commercial loans, etc

2. The filing and registration formalities are changed into examination and registration formalities.

The “Notice No.2044” stipulates that enterprises issuing foreign debt shall apply beforehand to the NDRC to complete. However, the “Decree No.56 ” stipulates that enterprises borrowing foreign debts shall complete formalities for examination and registration of foreign debts pursuant to the provisions of these Measures, report and disclose the relevant information, optimize use of foreign debts, carry out risk management properly, and cooperate in supervision and inspection. In view of the amended provision, the registration of foreign debts becomes stricter.

3. To add a basic criteria for enterprises issuing foreign debt.

The “Notice No.2044” stipulates that enterprises issuing foreign debt shall satisfy the following basic criteria: good creditworthiness records, the issued bonds or other debt are not in default. Good corporate governance and foreign debt risks control mechanism. The “Decree No.56 ” adds a criterion which is, “The enterprise and its controlling shareholders and actual controllers have not committed, in the latest three years, criminal crimes such as corruption, bribery, embezzlement of property, misappropriation of property, or disruption of the order of socialist market economy, and have not been investigated in accordance with the law for being suspected of committing a crime or committing a major violation of laws and regulations.” In the era of comprehensive credit management, companies’ credit has a significant impact on all kinds of business activities, including borrowing foreign debt and etc.

In addition, the “Decree No.56 ” has also made more detailed provisions on the methods, process, materials, time limit of examination and registration (including change of registration), as well as the supervision during and after the external debt.