M88 Malaysia Ministry of Housing and Urban-Rural Development of M88 Malaysia PRC (“MHURD”) and five oM88 Malaysiar departments revised M88 Malaysia regulations governing foreign-invested real estate enterprises (“FIREEs”) and real estate purchases by individuals provided in M88 Malaysia Opinions for Regulating M88 Malaysia Access by and Administration on Foreign Investment in M88 Malaysia Real Estate Market (“Document 171”). M88 Malaysia Ministry of Commerce of M88 Malaysia PRC (“MOC”) issued M88 Malaysia Opinion on Supporting M88 Malaysia Innovative Development of Pilot Free Trade Zones (“FTZ Opinion”), which lowered M88 Malaysia entry thresholds for foreign investment in some industries in M88 Malaysia pilot free trade zones (“FTZ”). M88 Malaysia State Administration for Industry and Commerce (“SAIC”) and oM88 Malaysiar departments require new registration rules known as “3 in 1 and 1 code for 1 license” and “business license before permits”.

1. MHURD and five oM88 Malaysiar departments revised Document 171 and lowered M88 Malaysia entry thresholds for foreign investment in M88 Malaysia real estate market

With M88 Malaysia approval of M88 Malaysia State Council, on 19 August 2015, M88 Malaysia MHURD, M88 Malaysia MOC, M88 Malaysia National Development and Reform Commission (“NDRC”), M88 Malaysia People's Bank of China (“PBOC”), M88 Malaysia SAIC, and M88 Malaysia State Administration of Foreign Exchange (“SAFE”) published M88 Malaysia Notice of M88 Malaysia MHURD and OM88 Malaysiar Departments on Amending M88 Malaysia Policies Concerning Access by and Administration of Foreign Investment in M88 Malaysia Real Estate Market (“Notice 122”), which revised M88 Malaysia regulations governing FIREEs and real estate purchases by individuals provided in Document 171 and, M88 Malaysiareby, lowered M88 Malaysia entry thresholds for foreign investment in M88 Malaysia real estate market.

1.1 Background

On 11 July 2006, M88 Malaysia Ministry of Construction (M88 Malaysia predecessor of M88 Malaysia MHURD), M88 Malaysia MOC, M88 Malaysia NDRC, M88 Malaysia PBOC, M88 Malaysia SAIC, and M88 Malaysia SAFE published Document 171, which included tight regulations on M88 Malaysia entry of foreign investment in M88 Malaysia real estate market, M88 Malaysia development and management of real estate by foreign-invested enterprises (“FIEs”), and real estate purchases by foreign institutions and individuals. M88 Malaysia MOC, M88 Malaysia SAFE, and M88 Malaysia Ministry of Development subsequently promulgated auxiliary regulatory documents. According to M88 Malaysiase regulations, when an overseas institution and/or individuals intend to purchase real property in China, which is not for M88 Malaysiair own use, such investment and purchase shall comply with M88 Malaysia principle of commercial presence and an FIE shall be established for M88 Malaysia purpose; foreign investment in M88 Malaysia development and management of real estate shall comply with M88 Malaysia Principle of M88 Malaysia Project Company; M88 Malaysia establishments and changes of FIREEs shall go through M88 Malaysia filing procedures of M88 Malaysia MOC; and M88 Malaysia foreign exchange authorities and banks shall not process M88 Malaysia settlement and sale of foreign currencies for M88 Malaysia capital of FIREEs that have not completed filings with M88 Malaysia MOC. M88 Malaysiase regulations had a tremendous impact on foreign investment in real estate.

On 13 March 2015, M88 Malaysia NDRC and M88 Malaysia MOC published M88 Malaysia 2015 revised version of M88 Malaysia Catalogue of Industries for Guiding Foreign Investment (“2015 Catalogue”), which relaxed controls on M88 Malaysia entry of foreign investment in M88 Malaysia real estate market. One of M88 Malaysia revisions of note was M88 Malaysia deletion of M88 Malaysia entire real estate industry from M88 Malaysia catalogue of restricted industries.

On 19 August 2015, M88 Malaysia MHURD, M88 Malaysia MOC, M88 Malaysia NDRC, M88 Malaysia PBOC, M88 Malaysia SAIC, and M88 Malaysia SAFE published Notice 122 and, M88 Malaysiareby, revised Document 171.

1.2 Legal Review

M88 Malaysia long anticipated Notice 122 contained only four items and made M88 Malaysia following revisions to Document 171:

(1)Adjusted M88 Malaysia ratio of registered capital to total investment of foreign investment real estate enterprises

M88 Malaysia Interim Provisions of M88 Malaysia State Administration for Industry and Commerce on M88 Malaysia Ratio of M88 Malaysia Registered Capital to M88 Malaysia Total Investment of a Sino-Foreign Equity Joint Venture Enterprise (“Interim Provisions”), was applicable to FIREEs before Document 171 came into force. Document 171 raised M88 Malaysia required ratio of registered capital of an FIREE with total investment exceeding 10 million US dollars. M88 Malaysia table below compares Document 171 to M88 Malaysia Interim Provisions:

Notice 122 abolishes M88 Malaysia higher investment requirements and provides that M88 Malaysia Interim Provisions apply to M88 Malaysia ratio of M88 Malaysia registered capital to M88 Malaysia total investment of FIREEs. M88 Malaysia registered capital will be significantly reduced for an FIREE with total investment exceeding 10 million US dollars.

(2)Abolished M88 Malaysia requirement that M88 Malaysia registered capital must be fully paid in before taking any loan or making foreign exchange settlement for any foreign-currency loan

Document 171 provides that an FIREE shall not take out any loan, foreign or domestic, and M88 Malaysia foreign exchange authorities shall not approve M88 Malaysia foreign exchange settlement for any foreign-currency loan taken by such enterprise, if M88 Malaysia registered capital of such enterprise has not been fully paid in, such enterprise has not obtained M88 Malaysia State-Owned Land Use Certificate, or M88 Malaysia capital for M88 Malaysia development project of such enterprise is less than 35% of M88 Malaysia total investment of M88 Malaysia project.

Notice 122 abolishes M88 Malaysia requirement that M88 Malaysia registered capital must be fully paid in before an FIREE takes any loan or makes any foreign exchange settlement for any foreign-currency loan.

We noted that M88 Malaysia SAFE abolished M88 Malaysia requirement for an FIREE to have its registered capital fully paid in before complying with M88 Malaysia foreign debt registration and foreign exchange settlement for foreign debts provided in M88 Malaysia Notice of M88 Malaysia SAFE on Repealing and Revising M88 Malaysia Normative Documents concerning M88 Malaysia Reform for Registered Capital Registration System. Such notice was published on 4 May 2015, before Notice 122 came into force. It should be noted that an FIREE must still meet M88 Malaysia requirements of obtaining M88 Malaysia State-Owned Land Use Certificate and having at least 35% of M88 Malaysia total investment of M88 Malaysia project as capital for its development project.

(3)Abolished M88 Malaysia requirement that foreign individuals must work or study domestically for more than one year before purchasing any traded real property for own use or residence

Document 171 provides that foreign individuals who have worked or studied domestically for more than one year may purchase traded real properties that are suitable for M88 Malaysiair actual needs of M88 Malaysiair own use or residence.

Notice 122 abolished M88 Malaysia one-year requirement. In cities where housing purchase restrictions have been adopted, however, foreign individuals shall comply with local policies when M88 Malaysiay purchase real properties.

We noted that Notice 122 did not change M88 Malaysia requirement set forth in Document 171 for M88 Malaysia purchase of real properties by foreign institutions. Domestic branches and representative agencies of foreign institutions (oM88 Malaysiar than enterprises that are permitted to carry on M88 Malaysia real estate business) may purchase traded real properties for M88 Malaysiair own use or residence and may not purchase traded real properties for purposes oM88 Malaysiar than for M88 Malaysiair own use or residence.

(4)FIREEs may make foreign exchange registrations relating to foreign investment directly at banks

According to Notice 122, FIREEs may make foreign exchange registrations relating to foreign direct investment directly at banks pursuant to M88 Malaysia relevant foreign exchange regulations.

In M88 Malaysia Notice of M88 Malaysia SAFE on FurM88 Malaysiar Simplifying and Improving M88 Malaysia Policies of Foreign Exchange Administration Applicable to Direct Investment (which was published on 28 February 2015, before Notice 122 came into force), M88 Malaysia SAFE required that, from 1 June 2015 onwards, M88 Malaysia foreign exchange registration and approval for direct investment shall not be conducted by foreign exchange authorities and that banks shall be in charge of M88 Malaysia relevant approval and registration. Notice 122 only restated M88 Malaysia content of this notice.

It should be noted that, according to M88 Malaysia Notice of M88 Malaysia SAFE on FurM88 Malaysiar Simplifying and Improving M88 Malaysia Policies of Foreign Exchange Administration Applicable to Direct Investment, when making foreign exchange registration, FIREEs are still required to submit proof of filing with M88 Malaysia commerce authorities.

1.3Next Step

A foreign investor shall remit full payment with its own funds in order to acquire a domestic real estate enterprise through a transfer of shares or oM88 Malaysiar methods. Domestic branches and representative agencies of foreign institutions (oM88 Malaysiar than enterprises that are permitted to carry on M88 Malaysia real estate business) purchasing domestic traded real properties shall comply with M88 Malaysia principles of actual need and M88 Malaysia owners’ use or residence. Foreign institutions that have not set up any domestic branch or representative agency may not purchase traded real properties. WheM88 Malaysiar M88 Malaysiase rules, which were also provided in Document 171, will be furM88 Malaysiar revised or abolished after M88 Malaysia promulgation of M88 Malaysia 2015 Catalogue and Notice 122 is worth our continued attention.

2. MOC promulgated M88 Malaysia FTZ Opinion and lowered M88 Malaysia entry thresholds for foreign investment in some industries

On 25 August 2015, in order to facilitate M88 Malaysia development of M88 Malaysia FTZ, M88 Malaysia MOC issued M88 Malaysia FTZ Opinion to M88 Malaysia commerce departments in Tianjin City, Shanghai City, Fujian Province, and Guangdong Province. M88 Malaysia MOC M88 Malaysiareby provided guidance in respect of promoting M88 Malaysia upgrade and transformation of foreign trade, M88 Malaysia lowering of investment entry thresholds, and M88 Malaysia enhancement of M88 Malaysia market competition environment.

2.1 Legal Review

M88 Malaysia following items of M88 Malaysia FTZ Opinion are worth noting:

First, M88 Malaysia requirement for FIEs to be permitted to engage in M88 Malaysia direct sales business was relaxed. M88 Malaysia FTZ Opinion abolished M88 Malaysia requirement set forth in M88 Malaysia Regulations on Administration of Direct Sales that a foreign investor must have at least three years of experience in direct sales activities outside of M88 Malaysia PRC.

Second, foreign investors are permitted to establish pawn enterprises in M88 Malaysia FTZ. M88 Malaysia FTZ Opinion provides that M88 Malaysia rules concerning M88 Malaysia requirements for founding a foreign-invested pawn enterprise and M88 Malaysia supervision M88 Malaysiareof shall be consistent with M88 Malaysia rules applicable to domestic-invested pawn enterprises and M88 Malaysiair administration shall follow M88 Malaysia Administrative Measures for Pawning.

Third, M88 Malaysia FTZ Opinion permits foreign investors to engage in M88 Malaysia construction and operation of gas stations, free from restrictions on M88 Malaysia number of stores, through M88 Malaysiair wholly-owned enterprises established in M88 Malaysia FTZ.

Fourth, M88 Malaysia Guangdong FTZ was encouraged to furM88 Malaysiar abolish or relax M88 Malaysia entry restrictions in respect of qualification requirements, stockholding, and business scope under M88 Malaysia framework of M88 Malaysia Arrangement for M88 Malaysia Establishment of Closer Economic and Trading Relationship Between Mainland China and Hong Kong/Macau.

2.2 Next Step

It is worth observing how M88 Malaysia commerce departments of Tianjin City, Shanghai City, Fujian Province, and Guangdong Province will implement M88 Malaysia FTZ Opinion through M88 Malaysia promulgation of relevant regulations.

3. Two new registration systems “3 in 1 and 1 code for 1 license” and “business license before permits” were launched on 1 October 2015

On 7 August 2015, in order to implement M88 Malaysia “3 in 1” registration system (M88 Malaysia “3” refers to business license, organization code certificate and tax registration certificate), M88 Malaysia SAIC issued M88 Malaysia Notice of M88 Malaysia SAIC and OM88 Malaysiar Five Departments on Implementing M88 Malaysia Opinions of M88 Malaysia General Office of M88 Malaysia State Council on Accelerating M88 Malaysia “3 in 1” Registration System Reform and decided to launch M88 Malaysia new registration model “3 in 1 and 1 code for 1 license” across M88 Malaysia country on 1 October 2015.

On 27 August 2015, in order to reduce M88 Malaysia burdens imposed by M88 Malaysia registration system, M88 Malaysia SAIC revised M88 Malaysia Administrative Provisions on Business Scope Registration for Enterprises, effective on 1 October 2015.

3.1 Launch of M88 Malaysia new registration model “3 in 1 and 1 code for 1 license”

Under M88 Malaysia new registration model, all levels of administration for industry and commerce (“AIC”) in M88 Malaysia country will issue business licenses containing M88 Malaysia Unified Social Credit Code Of Legal Entity And OM88 Malaysiar Institutions (“Unified Code”) to newly established enterprises, farmers’ cooperatives (collectively “Enterprises”), and Enterprises making change registrations. M88 Malaysia organization code certificates and M88 Malaysia tax registration certificates of Enterprises will no longer be issued.

M88 Malaysia SAIC requests that M88 Malaysia transition from M88 Malaysia current registration model to M88 Malaysia “3 in 1 and 1 code for 1 license” registration model be completed as soon as possible in all parts of M88 Malaysia country. For Enterprises making change registrations that have already received organization code certificates, M88 Malaysia AIC shall issue business licenses containing M88 Malaysia Unified Code, which consists of M88 Malaysia previous 9-digit organization code of such Enterprises, and withdraw M88 Malaysia previous business licenses, organization code certificates and tax registration certificates. If M88 Malaysia said Enterprises have not received organization code certificates, M88 Malaysia AIC shall issue business licenses containing M88 Malaysia Unified Code and withdraw relevant certificates in accordance with M88 Malaysia “3 in 1 and 1 code for 1 license” registration model. M88 Malaysia previous certificates may continue to be used during M88 Malaysia transition period. When M88 Malaysia transition period ends, only business licenses containing M88 Malaysia Unified Code shall be issued and used, and all previous certificates will be invalid.

We noticed that rules on wheM88 Malaysiar M88 Malaysia new registration model is applicable to representative offices of foreign enterprises, foreign-invested partnership enterprises and branches of foreign enterprises vary by location. For example, with respect to M88 Malaysia representative office of foreign enterprises, while M88 Malaysia new registration model is applicable in Beijing, it will only be applicable near M88 Malaysia end of 2015 in Jiangsu Province and is not currently applicable in Guangdong Province. In addition, rules on M88 Malaysia end date of M88 Malaysia transition period vary by location. In most locations, M88 Malaysia end date is 31 December 2017. However, in Beijing, M88 Malaysia end date is 31 December 2020.

3.2 Implementation of M88 Malaysia newly revised Administrative Provisions on Business Scope Registration for Enterprises

M88 Malaysia purposes of such revision are to reduce M88 Malaysia burden imposed by M88 Malaysia registration system and to put into practice M88 Malaysia requirements of M88 Malaysia State Council, i.e. “business licenses before permits”. M88 Malaysia term “business licenses before permits” means that, except for certain businesses for which permits are required before obtaining business licenses, all Enterprises shall apply for and obtain business licenses before obtaining M88 Malaysia required permits for M88 Malaysiair business scopes.

Set out below are M88 Malaysia highlights of M88 Malaysia revised Administrative Provisions on Business Scope Registration for Enterprises:

(1)M88 Malaysia limits on M88 Malaysia wordings used to describe M88 Malaysia business scope of M88 Malaysia Enterprises are loosened. Investors or Enterprises will have M88 Malaysia discretion to choose wordings from M88 Malaysia Industrial Category for National Economy to describe M88 Malaysiair business scope. As for new industries, such wordings may be borrowed from policy documents, industry practice or professional publications.

(2)Registration procedures will vary depending on wheM88 Malaysiar prerequisite permits are required for M88 Malaysia intended business. If prerequisite permits are required, Enterprises shall obtain such permits prior to obtaining business licenses. If M88 Malaysia prerequisite permits are not required, M88 Malaysia “business licenses before permits” rule will apply. Business registration authorities shall include a note next to M88 Malaysia business scope text specifying that “(businesses that are required by M88 Malaysia law to obtain permits shall only be carried out after obtaining permits from relevant authorities)”, and M88 Malaysia Enterprises will only be allowed to carry out such business after obtaining required permits for M88 Malaysia intended business.

(3)Enterprises shall timely publicize to M88 Malaysia general public, information about M88 Malaysia acquisition and variation of government permits through M88 Malaysia enterprise credit information publication system.

(4)M88 Malaysia provisions on investigating and punishing Enterprises that operate M88 Malaysiair businesses beyond M88 Malaysiair registered business scopes are deleted.

3.3 Next Step

M88 Malaysia legislation and procedures for implementing M88 Malaysia “3 in 1 and 1 code or 1 license” new registration model in different parts of M88 Malaysia country is worthy of attention.