国际律师事务所实习生Memo撰写作业及参考答案

ASSIGNMENT:

Research and Drafting of Memorandum

Our client, a real estate investment fund incorporated in BVI (the “Client”) indirectly owns 50% equity interest of a real estate development company incorporated in Shanghai, China (the “Project Company”) through a special purpose vehicle (the “SPV”) incorporated in Hong Kong. The Project Company owns the title of an office building in Shanghai (the “Building”) as well as the land use right of the land associated with the Building, evidenced by a title certificate duly issued under the name of the Project Company. Please refer to Schedule 1 for an ownership structure chart and Schedule 2 for basic information of the Project Company.

The Project Company completed the development of the Building in March 2015, and needs to pay RMB80,000,000 to a Chinese contractor for the renovation expect to be started in November 2015. Meanwhile, the shareholders of the Project Company have fully contributed the registered capital they committed to the Project Company. The Project Company’s only outstanding debt is a shareholder loan with the principal amount of RMB100,000,000 in equivalent USD owed to the SPV payable in 2018 (the “Existing Loan”). The Existing Loan has been fully drawn down and utilized in 2008. As the Project Company is not able to pay the renovation cost, the Client plans to provide funding directly to the Project Company, or in the alternative, arrange bank loans to be provided to the Project Company. The Client has sufficient capital reserve and is able to obtain facility for the Project Company from banks both in Hong Kong and Shanghai.

The Client would like you to prepare a summary of the funding options

available and identify any specific legal issues to complete the funding, including not limited to the requisite approvals or licenses which need to be obtained from governmental authorities.

NOTE: When you are preparing the memo, please take into account the regulations and restrictions applicable to foreign invested real estate companies issued by various PRC government authorities. For this assignment, you are required to work independently - teaming up or otherwise consulting anyone else is strictly prohibited.

This memorandum summarizes our comments regarding the options for the

Client to fund the Project Company. Four ways are available for the financing: (i) direct equity investment, (ii) direct debt investment, (iii) loan from Hong Kong banks, and (iv) loan from Shanghai banks.

In summary, direct equity investment requires unanimous consent of the board, and approval, filing, and registration by the government authorities; debt investment requires filing and registration by the SAFE, and preferential tax policy may be applied for loan from the SPV; loan from Hong Kong banks is just similar to debt investment; and loan from Shanghai banks requires no filing or registration unless foreign guarantee is provided, but the financial may be difficult as a result of tight policy.

The Project Company is an equity joint venture (“EJV”) incorporated under laws of the People’s Republic of China (the “PRC”), whose registered capital is RMB 500 million yuan. It also has a “total investment”, namely the sum of the amount of registered capital and the amount of loans

required for its business scale, which is RMB 750 million yuan.

1.Direct Equity Investment

The Project Company can get an equity investment from the SPV through the following steps: (i) resolution of the board’s meeting, (ii) approval of provincial commercial authorities, (iii) filing in the Ministry of Commerce, and (iv) registration in The State Administration of Foreign Exchange (“SAFE”).

Equity investment means the investment an enterprise accepts for which it does not have to repay the principal and pay the interest and of which the investor holds ownership over the net assets of the enterprise in question. In this case, the Project Company can get financial through an increase of registered capital from the SPV.

1.1Resolution of the Company