Driven by the wave of economic globalization, more and more Chinese companies are turning their attention to overseas markets, hoping to expand their business territory, acquire resources and technology, and enhance their international competitiveness through overseas investment. As a key pre-procedure for enterprises to "go global", the importance of overseas direct investment filing (ODI) is self-evident. This article will deeply analyze various aspects of ODI filing and provide comprehensive guidance for enterprises that intend to make overseas investments.

1. What is ODI filing?

ODI filing refers to the behavior of enterprises established in accordance with the law in China to obtain ownership, control, management rights and other related rights and interests of non-financial enterprises overseas through new establishment, mergers and acquisitions, etc., which must be reported and filed with the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM) and the State Administration of Foreign Exchange (SAFE) and other departments in accordance with relevant laws and regulations, and investment activities can only be carried out after approval.

This filing system aims to regulate corporate overseas investment behavior, prevent investment risks, and provide companies with compliant investment channels and policy support, ensure the orderliness of national foreign exchange flows and cross-border capital management, and maintain national economic and financial security.

For example, when a Chinese manufacturing company plans to set up a production base overseas to take advantage of local cheap labor and raw material resources, or a technology company hopes to acquire advanced technology through mergers and acquisitions of foreign research and development companies, these investment behaviors must go through ODI filing as long as they involve direct or indirect acquisition of substantial rights and interests in overseas companies.

2. Which corporate activities require ODI filing?

All investment activities of enterprises (investment entities) within the People's Republic of China require ODI filing:

Acquisition of asset rights:

including acquisition of ownership and use rights of overseas land; natural resource exploration and development concessions; infrastructure ownership, operation and management rights, etc. For example, energy companies investing in overseas oil field exploration and development projects need to apply for ODI filing to obtain relevant resource development concessions.

Acquisition of corporate rights:

When an enterprise obtains ownership, operation and management rights and other rights of overseas enterprises or assets through investment, such as a domestic enterprise acquiring a mature sales channel enterprise abroad to expand its overseas market share, such investment behavior must be filed.

New construction/expansion:

covers the construction of new overseas enterprises, capital increase to existing overseas enterprises, construction or renovation and expansion of overseas fixed assets, etc. For example, if a chain restaurant company plans to open new stores overseas and make fixed asset investments, it needs to complete ODI filing.

Financial investment:

the establishment or participation of overseas equity investment funds is also within the scope of ODI filing. If a domestic investment institution wants to participate in the establishment of an overseas private equity investment fund, it must go through the filing procedures in accordance with the law.

Other control methods:

Investment activities that control overseas companies or assets through agreements, trusts, etc. also need to be filed.

3. Core conditions for ODI filing

Enterprise qualifications:

In principle, domestic companies should have been established for more than 1 year to reflect the stability of the company's operations. The company must have a good credit record and no major violations of laws and regulations in its past operations. This is an important consideration for regulatory authorities to assess the company's investment capabilities and compliance.

Investment project level:

Investment projects must comply with national industrial policies and development orientations, and cannot involve industries or fields prohibited or restricted by the state. For example, certain projects that are highly polluting, energy-intensive, and do not comply with national environmental protection and industrial upgrading policies will not be able to pass the filing review. The project should have a clear and definite business plan and a reasonable profit model, a detailed and reasonable investment budget, and perfect risk control measures to ensure the feasibility and security of the investment.

Source of funds requirements:

The source of funds used by the company for overseas investment must be legal and compliant, and relevant supporting materials such as bank statements, fund transfer records, audit reports, etc. can be provided to prove the legitimacy of the source of funds, and must comply with relevant regulations such as anti-money laundering.

4. List of Materials Required for ODI Filing

(I) Materials Related to the Investor

• A scanned copy of the business license of the enterprise is used to prove the legal operating status of the enterprise.
• Organization Code Certificate (if any), although some regions no longer issue it separately after the "multiple certificates in one", in some cases, relevant certification information may still be required.
• The financial statements (audited) for the last three years fully display the financial status, operating results and cash flow of the enterprise, helping the regulatory authorities to assess the investment strength and financial health of the enterprise.
• Information of shareholders and key executives, including name, ID number, shareholding ratio, position, etc., in order to understand the equity structure and management of the enterprise.
• The Articles of Association and organizational chart reflect the internal governance structure and decision-making mechanism of the enterprise.

(II) Materials Related to Investment Projects

• The feasibility study report of the investment project, which analyzes the market prospects, technical feasibility, financial feasibility, risk assessment and response measures of the project in detail, is one of the key materials for whether the project can be approved.
• The investment plan covers the investment purpose, scale, method, partners and other contents, and clearly explains the investment strategy and implementation path of the enterprise.
• The text of the investment contract or agreement. If there is cooperation with overseas partners, a detailed contract or agreement must be provided to clarify the rights and obligations of both parties.
• The relevant approval documents of the country or region where the project is located (if any). For example, some countries have pre-approval requirements for investment in specific industries. Enterprises need to obtain approval documents from relevant local departments.

(III) Proof of source of funds

• The proof of fund transfer issued by the bank confirms the legal source and flow path of the funds.
• The explanation of the source of funds confirmed by the audit is that a professional auditing agency audits the source of funds of the enterprise and issues an explanation.
• The flow of funds account shows the inflow and outflow of funds of the enterprise, further proving the authenticity and legality of the source of funds.

(IV) Destination country (region) related information

• Registration information of local partners. If there are local partners, basic information such as their company registration certificate and business license should be provided to understand the qualifications and background of the partners.
• Environmental impact assessment of investment projects (if applicable). For some investment projects that may have an impact on the local environment, an environmental impact assessment report should be provided to ensure that the project meets local environmental protection requirements.

(V) Other supplementary information

• Tax registration certificate, proving the tax compliance of the enterprise in China.
• Related approval documents (such as approval from the competent industry department). If the investment project involves a specific industry, it may be necessary to obtain the approval document of the competent industry department first. For example, investment in the energy industry may require relevant approval from the Energy Bureau.
• Documents describing the project risk control measures, detailing the response strategies formulated by the enterprise for the political risks, economic risks, legal risks, etc. that the investment project may face.

5. The whole process of ODI filing

(I) Project filing with the NDRC

Core action:

The enterprise needs to submit the "Overseas Investment Project Filing Form" and fill in the basic information of the investment project in detail, such as project name, investment subject, investment destination, investment scale, investment content, etc. At the same time, attach a detailed feasibility study report to deeply analyze the necessity, feasibility, market prospects, economic benefits, etc. of the project; provide a statement of the source of funds to prove the legal source of the investment funds.

Approval cycle:

For general projects, the review cycle of the NDRC is usually 7 working days; but if it is a sensitive project, such as involving sensitive countries and regions (countries with which my country has not established diplomatic relations, countries subject to UN sanctions, etc.), sensitive industries (such as weapons and equipment manufacturing, news media, real estate, etc.), the review cycle will be extended to 20 working days.

Key output:

If the review is passed, the enterprise will obtain the "Enterprise Overseas Investment Project Filing Notice", which is an important certificate for the project to be recognized at the NDRC level.

(II) Review and filing by the Ministry of Commerce

Core actions:

The enterprise shall submit the "Overseas Investment Registration Form" and truthfully fill in the relevant information of the enterprise's overseas investment. At the same time, provide an investment agreement to clarify the rights and obligations with the overseas partner; submit the overseas company's articles of association to show the governance structure and operating rules of the overseas enterprise; and may also need to provide other relevant certification materials, such as the authenticity of the enterprise's overseas investment.

Approval cycle:

For general projects, the review time of the Ministry of Commerce is 3 working days; for sensitive projects, it takes 15 working days.

Key output:

After the review is passed, the enterprise will obtain the "Enterprise Overseas Investment Certificate", which is the key certification document for the approval of the enterprise's overseas investment behavior at the level of the Ministry of Commerce.

(III) Registration with the State Administration of Foreign Exchange

Competent authority:

The bank at the place of enterprise registration will handle the relevant procedures for foreign exchange registration on behalf of the enterprise.

Core action:

The enterprise needs to submit the filing documents of the National Development and Reform Commission and the Ministry of Commerce to prove that the investment project has been approved by the relevant departments. At the same time, provide a fund use plan, detailing the purpose and flow of investment funds; if an account is opened overseas, a certificate of overseas account opening is required.

Approval cycle:

Registration with the State Administration of Foreign Exchange is handled immediately. After the enterprise submits complete compliance materials, the bank will complete the relevant registration operations as soon as possible.

Key output:

After completing the registration, the enterprise will obtain the "Business Registration Certificate" and can open a capital project foreign exchange account to prepare for the subsequent fund remittance.

(IV) Fund remittance and tax filing

Fund remittance:

Enterprises shall go to the bank to handle the purchase and remittance of foreign exchange with the "Business Registration Certificate", and remit funds to overseas investment projects legally and compliantly in accordance with the registered investment plan.

Tax filing:

Enterprises shall submit the "Tax Filing Form for External Payments for Service Trade and Other Projects" through the electronic tax bureau, and accurately declare tax information related to overseas investment to avoid the possible 30% withholding income tax risk and ensure tax compliance.

(V) Subsequent supervision and annual inspection

Reporting obligations:

Before April 30 each year, enterprises must submit the "Annual Report on Overseas Direct Investment Statistics" to truthfully report the details of overseas investment in the previous year, including investment scale, operating conditions, and income. If major events occur during the investment process, such as capital increase, capital reduction, equity change, business scope change, etc., a special report must be submitted to the relevant departments in a timely manner.

Credit stain:

If the enterprise fails to file ODI in accordance with regulations or violates regulations in subsequent supervision, the relevant records will be included in the enterprise credit system, which will seriously affect the company's subsequent cross-border business approval, such as future overseas investment project filing, foreign exchange business handling, etc.

6. Benefits of ODI filing

Compliance and legality guarantee:

After completing ODI filing, the company's overseas investment behavior is recognized by the state as legal and compliant, avoiding legal risks caused by illegal operations, such as invalid investment behavior and facing administrative penalties. Unfiled investments may face investigation or penalties by foreign exchange management departments, and may even result in the inability to remit funds back to the country normally.

Convenience of funds outbound and use:

After filing, the company can go through the foreign exchange registration procedures for overseas investment at the bank, legally remit the funds required for investment, and the funds can be used flexibly. They can be used for compliant purposes such as registered capital, acquisition of equity, capital increase and expansion of shares of overseas subsidiaries. At the same time, the profits of overseas investments of enterprises can also be legally remitted back to the country through filing channels, and enjoy the benefits brought by tax agreements, such as using tax agreements signed between China and other countries to avoid double taxation.

Financing convenience and international recognition:

After completing filing, the company's reputation in the international market is improved, and it is easier to gain the trust of international financial institutions, so that it can obtain financing through overseas subsidiaries or projects, such as issuing bonds, obtaining bank loans, etc., and obtain more sources of funds. In addition, ODI filing indicates that the company's overseas investment behavior is legal and transparent, which helps to enhance the trust of the company's partners in the international market and promote international cooperation.

Policy support and green channel:

Overseas investment projects that comply with national industrial policies may receive government support, such as tax incentives, special fund subsidies, etc. After the company completes the filing, it can enjoy more efficient foreign exchange management services in the subsequent remittance of funds and profit remittance. Some regions may also provide one-stop services such as policy consultation and project docking for the registered companies to help them better carry out overseas investment business.

Risk avoidance and due diligence support:

During the filing process, companies need to conduct full due diligence on overseas investment projects, including legal, financial, and market aspects, which helps companies to discover potential risks in advance and formulate response strategies to reduce the probability of investment failure. At the same time, filing requires companies to submit detailed business plans and legal documents, prompting companies to be more rigorous and standardized in the investment decision-making process.

7. Enterprise ODI filing avoidance guide

Plan ahead to avoid "getting on the bus first and paying the ticket later":

The entire ODI filing process usually takes 1-3 months, and may even take longer in some complex cases. Therefore, it is recommended that enterprises start preparations 6 months in advance. In the preparation stage, enterprises should not only clarify the strategic goals and specific plans of the investment projects, but also simultaneously consider the derivative compliance requirements that may be brought about by special investment structures such as red chip structures, such as No. 37 registration, foreign exchange supplementary registration, etc., and make good structural design and compliance arrangements in advance to avoid difficulties and increased costs in later rectification due to insufficient early planning.

Accurately match industry policies and avoid sensitive areas:

Enterprises should carefully self-check whether the investment projects belong to sensitive industries through official channels such as the "Catalogue of Sensitive Industries for Overseas Investment" of the National Development and Reform Commission. If sensitive industries are involved, in addition to regular ODI filing, special approval documents must be submitted to the competent industry departments (such as the Energy Bureau, the Cyberspace Administration of China, etc.), and the process is more complicated and the cycle is longer. For example, a new energy enterprise made overseas mineral investments without reporting due to insufficient understanding of the policy, and was eventually revoked and fined by the National Development and Reform Commission, causing significant losses to the enterprise. Therefore, enterprises must accurately grasp the industry policies and avoid stepping into the "minefield" of sensitive areas.

Entrust professional institutions to improve the pass rate of materials:

give priority to professional institutions that have both the filing consulting qualifications of the Development and Reform Commission, accounting firm qualifications and law firm qualifications to assist in the ODI filing. These professional institutions have rich experience and professional knowledge and can provide enterprises with a full range of services, including policy interpretation, material preparation, mock defense, etc. Before submitting the filing application, professional institutions can help enterprises discover problems in the materials in advance and optimize them through simulated audits and policy interpretation meetings, reduce the probability of being returned, and improve the filing efficiency.

In short, ODI filing is a crucial part of the company's overseas investment process. Although the process is relatively complicated, as long as the company fully understands the filing requirements, plans in advance, prepares relevant materials, and strictly follows the process, it can successfully complete the filing, laying a solid foundation for the company's overseas investment path and achieving the strategic goals of global layout and sustainable development.