1. Company introduction

1) Clients background

The Hong Kong internet television company was set up in January, 2015. After the establishment, the company hopes to buy over 80% of the stake of a Beijing Company, whereby providing clients with microfilm and corporate video production and the microfilm online publishing. For consistency, the Beijing Company is altering its corporate shareholding into a three individuals invested company so that the Hong Kong Co. can take over 80% stake of Beijing Company.

2) Beijing Company business scope:

Organize culture and art exchange activities (exclude performances); artistic creation; conference services, exhibition activities; business planning; computer animation design; investment consulting; enterprise management consulting; investment management (excluding items without administrative license).

3) Clients issues:

- With the takeover of the domestic Beijing Company, will there be rights only opened to domestic firm and restricted to foreign invested firm?

- Can joint venture produce microfilm and corporate videos and publish them online? What are the relevant qualifications required?  Can Shanghai Free Development Zone or other special areas obtain these qualifications?

2. RTF analysis

1) With the takeover of the domestic Beijing Company, will there be rights only opened to domestic firm and restricted to foreign invested firm?

RTF analysis: From the Beijing company business scope, the Beijing Company did not acquire any qualifications on production and distribution of advertising, micro-movies or TV shows. Thus, there is no obstacle for Hong Kong Company acquiring 80% stake of the Beijing Company. 

2) Can joint venture produce microfilm and corporate videos and publish them online? 

RTF analysis: According to the 2014 Foreign Invested Firms guidelines Article 12, Radio, television and film production is only opened to joint ventures. 

3) What are the relevant qualifications required for this business scope?

RTF analysis: Microfilm companies need the film and television production and distribution approved permit issued by the Administration of Culture, Radio, Film & TV.

4) Does online publishing need special approval?

RTF analysis: Since the company publishes the microfilm on Iqiyi or Tudou, if there is no copyright issue, the company does not need to obtain Internet Operation and Publishing permit.  For the corporate video, since advertising is involved, so it is recommendable to obtain the advertising permit.

5) Can Shanghai Free Development Zone or other special areas obtain these qualifications?

RTF analysis: Joint ventures still need the different permits even though they register in special business areas like the Shanghai Free Development Zone.  Also, WFOE are not granted these permits. 

3. Summary

RTF suggests first establishing a local domestic company and obtaining the relevant permits and approvals and then restructure the domestic company into Group Com