Since China initiated its policy of 'openness' and 'reform' in 1979, regulators of the People's Republic of China (PRC) have continuously refined their approach to regulating foreign investment.2 Following China's entry into the World Trade Organization, the pace of reforms accelerated, and sectors of China's economy previously closed to foreign investment, such as logistics, telecommunications and finance, are now partially open to foreign investors. According to the Ministry of Commerce (MOFCOM), 35,652 foreign-invested enterprises (FIEs) were established in China in 2017, an increase of 27.8 per cent from the previous year, and the actual use of foreign capital amounted to 877.56 billion yuan.
Some of the more prominent foreign investment trends of recent years are as follows:
- China is opening up more of its economy to foreign investors and wants to increase foreign access to its market. In June 2018, the State Council issued the Notice of the State Council on Several Measures for Active and Effective Utilisation of Foreign Investment to Promote High-Quality Economic Growth, which emphasises that the use of foreign investment is an important part in China's basic policy of opening up to the outside world and building a new system of open economy, and calls for significant relaxation of control over market access and an improvement in investment liberalisation, among other thing.
- PRC regulators are simplifying foreign investment approval procedures. The regulatory scrutiny of foreign investment in China has been shifting from an ex ante focus to a more ex post focus. The State Council has further cancelled or adjusted downwards the number of administrative approvals in 2016 and 2017. For example, the approval process for the establishment or change of FIEs whose business is not included on the Negative List (see Section II for more details) has been greatly simplified into an online record-filing procedure since October 2016.
- Recent revisions to many PRC laws and certain PRC policy developments are facilitating foreign investment in China. In June 2017, the National Development and Reform Commission (NDRC) and MOFCOM revised the Foreign Investment Industrial Guidance Catalogue (the Catalogue) to comprehensively use a 'pre-establishment national treatment plus Negative List' management model for foreign investment nationwide (free trade zones excluded). In June 2018, the NDRC and the MOFCOM issued the Special Administrative Measures for Foreign Investment Access (the 2018 Version of the Negative List); the 2018 Negative List will replace the list of restrictions and prohibitions in the 2017 Catalogue, while the 'encouraged' section of the Catalogue will remain effective. If an industry is not on the Negative List, foreign investors can enjoy the same privileges and treatment shown to domestic investors by PRC regulators.
- Early in March 2015, the Chinese government started trying out the Negative List model in pilot free trade zones (FTZs), resulting in a blossoming of foreign investments in FTZs. For example, in 2017, the China (Shanghai) Pilot Free Trade Zone attracted actual paid foreign capital amounting to 6 billion yuan, an increase of 6.3 per cent on the previous year. The NDRC and the MOFCOM also issued Special Administrative Measures for Admission of Foreign Investments to Pilot Free Trade Zones (2018 Version) (the FTZ Negative List) in June 2018. Local governments are encouraging the establishment of high-tech parks and FTZs to attract foreign investment.
- The focus of foreign investment in China is shifting from traditional to high-tech industries. Historically, foreign investment was primarily in traditional industries such as textiles, machinery and plastics. More recently, electronics, automobiles, equipment, IT, biological sciences and pharmaceuticals have become the key target areas.
II FOREIGN INVESTMENT REGIME
Foreign investors entering the Chinese market must comply with PRC investment policies, national industrial policies and the laws and regulations governing foreign investment.
i National industrial policies
National industrial policies provide guidance to foreign investors regarding the types of industries and regions in China that are open to foreign investment and the restrictions that may accompany that investment. As such, foreign investors should ensure that they are in compliance with China's national industrial policies when investing in China.
The national industrial policies governing foreign investment include the Negative List, the Catalogue, the Catalogue of Priority Industries for Foreign Investment in the Central-Western Regions, and the Provisions on Guiding the Orientation of Foreign Investment. The most important of these is the Negative List, which sets out the industries in which foreign investment is restricted or prohibited. If an industry is not included on the Negative List, it is deemed to be in the 'permitted' category and foreign investors are welcome to invest in it. To clarify, FIEs may be established in the encouraged and permitted categories, and foreign investors may also establish FIEs in those industries on the Negative List that are not completely prohibited from foreign investment, if they are willing to abide by certain restrictions.
The number of industries on the Negative List has been cut to 48 from the 63 in the previous list of restrictions and prohibitions in the 2017 Catalogue. In addition to confirming already announced pledges to remove ownerships limited on finance and automobiles, it also eases or removes ownership caps on industries such as transportation, logistics, agriculture and mining. Furthermore, the Negative List provides schedules on easing foreign investment in certain industries for several years into the future in order to demonstrate China's determination to offer greater market access to foreign investors.
Under PRC law, foreign investment vehicles in certain sections (e.g., medical institutions) are limited to joint ventures (JVs). For some projects, the Chinese JV partner must hold the controlling equity interest in the JV (e.g., the construction and operation of nuclear power plants, the selection and breeding of new varieties of wheat and corn in seed production, the printing of publications).
ii Foreign investment-related laws and regulations
The most relevant foreign investment laws and regulations are:
- the Company Law of the People's Republic of China, revised in 2013 and effective since 1 March 2014;
- the Law of the People's Republic of China on Wholly Foreign-Owned Enterprises (the WFOE Law), revised on 3 September 2016 and effective since 1 October 2016;
- the Law of the People's Republic of China on Sino-Foreign Equity Joint Ventures (the EJV Law), revised on 3 September 2016 and effective since 1 October 2016;
- the Law of the People's Republic of China on Sino-Foreign Cooperative Joint Ventures (the CJV Law), revised on 4 November 2017 and effective since 5 November 2017;
- the Implementation Rules and Provisions of the WFOE Law, revised in 2014 and effective since 1 March 2014;
- the Implementation Rules and Provisions of the CJV Law, revised in 2017 and effective since 17 November 2017;
- the Implementation Rules and Provisions of the EJV Law, revised in 2014 and effective since 1 March 2014;
- the Provisional Regulations on the Establishment of Foreign Investment Joint Stock Companies Limited, revised in 2015 and effective since 28 October 2015; and
- the Administrative Measures for the Establishment of Partnership Enterprises within China by Foreign Enterprises or Individuals, revised in 2009 and effective since 1 March 2010.
The three major pieces of legislation regarding mergers and acquisitions (M&A) are the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the M&A Regulations), the Measures for the Administration of Strategic Investment in Listed Companies by Foreign Investors (the Measures for Strategic Investment) and the Administrative Measures for the Confirmation and Recordation of Foreign-Investment Projects.
In addition, there are regulations specifically tailored to particular industries or sectors, such as:
- the Provisions on the Administration of Foreign-Invested Telecommunications Enterprises;
- the Provisions on Foreign Investment in Civil Aviation and their supplementary provisions; and
- the Interim Provisions on the Establishment of Foreign-Invested Printing Enterprises.
A foreign investment will be subject to review if it is considered to be a threat to national security or triggers antitrust review thresholds. Regulations on national security review include the National Security Law of the People's Republic of China (the National Security Law) and the Notice of the General Office of the State Council on the Establishment of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the Security Review Notice), while regulations on antitrust review include the Anti-Monopoly Law of the People's Republic of China (the Anti-Monopoly Law).
Chinese regulations regarding state-owned enterprises apply to foreign investors wanting to acquire a Chinese state-owned enterprise. In this instance, the relevant laws include the Law of State-Owned Assets and other relevant regulations.
If foreign investors want to invest in a publicly traded company or if an FIE is listed on a PRC stock exchange, PRC regulations regarding publicly traded companies and the rules governing PRC stock exchanges, such as the Measures for Strategic Investment, shall apply.
III TYPICAL TRANSACTIONAL STRUCTURES
It is important to select a suitable transaction structure to ensure the success of a foreign investment in China.
Under PRC law, foreign investors may include foreign companies, enterprises, other types of commercial organisations and individuals. Investors from Hong Kong, Macao and Taiwan are treated as foreign investors.
i Investment vehicles
Under PRC law, foreign investors may choose, inter alia, one of the following foreign investment vehicles:
- wholly foreign-owned enterprises (WFOEs);
- Sino-foreign equity joint ventures (EJVs);
- Sino-foreign cooperative joint ventures (CJVs);
- representative offices (ROs);
- investment or holding companies;
- partnership enterprises;
- foreign investment companies limited by shares; and
- regional headquarters.
The most common forms of FIEs are ROs, WFOEs, EJVs and CJVs.
Many foreign investors choose to establish an RO when entering the Chinese market. Normally, an RO in China is not a legal person and is forbidden from undertaking any direct business activities, such as the distribution of goods manufactured by its foreign parent company. Moreover, the business scope of an RO may be limited to conducting business liaison activities (such as consultation, coordination and information collection and exchange) on behalf of its foreign parent company, which makes it unattractive as an entry vehicle in many cases.
Wholly foreign-owned enterprises
WFOEs are limited liability companies in which all the equity is owned by one or more foreign investors. The primary advantage of a WFOE is that it allows foreign investors to retain sole control over the management and financial affairs of the company. In general, for foreign companies that understand the Chinese market and wish to operate independently in the PRC without a Chinese partner, a WFOE is a common choice.
Equity joint ventures
EJVs are limited liability companies jointly invested in and managed by both Chinese and foreign investors. The investors share in the management, profits and losses of the EJV in proportion to their equity interests. The EJV is a more commonly adopted form of foreign investment than the CJV (described below) and provides investors with greater security and certainty about their investment.
Cooperative joint ventures
Unlike EJVs, CJVs can be set up either as a cooperation entity without legal personality or a limited liability company with legal personality. CJV investors may distribute profits and bear responsibility for losses through contractual terms, rather than in proportion to their equity interests. In addition, the JV contract of the CJV may contain provisions that allow foreign investors to recoup their investment before expiry of the JV term. CJVs may distribute dividends through cash, products or any other means agreed upon between the shareholders.
Foreign investors may invest in China through an equity acquisition or an asset acquisition, both of which are clearly defined under the M&A Regulations.
Equity acquisitions and asset acquisitions are subject to review by the relevant government authorities in China (e.g., MOFCOM for commercial approval and the State Administration for Industry and Commerce (SAIC) or its local branches for registration). They may also be subject to a national security review, an antitrust review, or both. More information about these detailed review procedures are provided in Section IV.
ii Strategic considerations for transactional structures
In addition to considerations such as time and costs, foreign investors seeking to invest in China via greenfield investments or through M&A should consider the following factors.
Catalogue restrictions on corporate and shareholding structures
In the 'Explanation' part of the Negative List, it is stipulated that overseas investors shall not engage in business activities in the capacity of an individually owned business, an investor in a sole proprietor enterprise or a cooperative member of a farmers' speciality cooperative. This measure puts restrictions on the type of entities that may be established by foreign investors in China (i.e., they shall, in the main, engage in business as companies or partnership enterprises). Besides, where a requirement regarding the ratio of equity of foreign capital applies, the form of partnership enterprise is not permitted.
The Negative List places restrictions on certain foreign investments, including investments in:
- medical institutions, which require the establishment of EJVs or CJVs;
- automotive manufacturing, which requires that, with the exception of special vehicles and new energy vehicles, the Chinese side's equity ratio for complete vehicle manufacturing shall not be less than 50 per cent, and one foreign company may establish two or fewer JVs for the production of similar vehicle products in China. (The foreign-investment ratio in commercial vehicle manufacturing will be eliminated in 2020, and the foreign investment ratio in passenger car manufacturing and the restriction that 'one foreign company may establish two or fewer JVs for the production of similar vehicle products in China' will be lifted in 2022.);
- pre-school, normal high school and higher educational institutes, which require the establishment of CJVs and shall be led by the Chinese party;3
- performance brokerage companies or shipping agencies, which require the Chinese partner to hold the controlling equity interest;
- public air transport companies, which require the Chinese party to hold the controlling equity interest, the legal representative to be a Chinese national, and that the investment ratio of one foreign investor and its affiliates shall not exceed 25 per cent;
- general aviation companies, which require the legal representative to be a Chinese national; among these, common airlines for agricultural, forestry and fishing industries shall be in the form of EJVs only, and the controlling equity interest of other general aviation companies shall be held by the Chinese partner;
- telecommunications companies, which must be limited to services opened up in China's World Trade Organization commitments; value-added telecommunications businesses, which require that the foreign equity interest does not exceed 50 per cent (e-commerce excluded); and basic telecommunications, which require the Chinese partner to hold the controlling equity interest; and
- securities companies, which require that the foreign share of the ratio of securities companies shall not exceed 51 per cent, and that the ratio of foreign shares in securities investment fund management companies must not exceed 51 per cent. (The foreign capital ratio limit will be lifted in 2021.)
Foreign investors should consider licensing requirements when investing in certain sectors, such as drug manufacturing and operations, and seed manufacturing.
Foreign investors may establish a WFOE or a JV to acquire permits and licences for these operations. However, if it is difficult for the WFOE or the JV to obtain the required operations licences or permits, foreign investors may also consider M&A arrangements with companies that already hold licences and permits.
Local policies and the stance of local government authorities
Although the relevant laws and regulations are uniformly applicable throughout the entire territory of the PRC, interpretation and implementation of the regulations may differ depending on the local authority. Moreover, the attitudes of local authorities towards foreign investments vary from region to region. It is therefore essential that foreign investors conduct both market and legal research regarding the local policies and the attitude of the local government authorities before deciding to invest in China.
Tax planning and foreign exchange policies
Tax planning and foreign exchange policies are always key issues when structuring a foreign investment. Foreign investors must carefully plan the structuring of their investment to optimise their tax status and to comply with PRC law. The Chinese government has been tightening controls to slow down capital outflow and currency devaluation since the end of 2016. However, the government authorities have also been trying to reassure foreign investors about capital controls. In March 2015, the State Administration of Foreign Exchange (SAFE) issued its Notice on Reforming the Mode of Management of Settlement of Foreign Exchange Capital of Foreign Investment Enterprises, which provides for reforming the mode of management of settlement of foreign exchange capital of foreign-funded enterprises and implementing a willingness settlement regime of foreign exchange capital of foreign investment enterprises. In March 2017, SAFE said that FIEs are free to handle profit remittance through normal procedures.
IV REVIEW PROCEDURE
Foreign investment may be subject to the following review process by the PRC government authorities.
i Foreign investment review procedures
Project approval from the development and reform authority
Normally, a foreign investor who intends to invest in projects must first submit an application to the NDRC for approval. According to the Circular issued by the NDRC on Effectively Implementing the Relevant Foreign Investment Work concerning Investment Project Catalogue Approved by the Government (2016 Version), foreign investment projects will be subject to either an approval process or a record-filing process.
Generally, the NDRC approval process takes around 20 business days,4 and the projects are considered case by case, with reference to the specific circumstances of each project.
In practice, whether foreign investment projects require the approval of the NDRC and its local branches depends on the circumstances of the individual project and the different requirements of the local branches of the NDRC. Therefore, it is prudent for a foreign investor to consult the local NDRC branch regarding its specific approval process before initiating the project.
Approval of the environmental protection authority
For foreign investments in construction projects and others that may cause environmental issues (such as pollution or impact on wildlife), a foreign investor must conduct an environmental impact assessment before starting the project and submit the assessment report to the local environmental protection authority for approval of the project. The length of the environmental impact assessment process depends on the extent of the environmental impact the project may cause.
Industrial approval by the pre-registration approval authority
Certain types of foreign investment, such as investment in general aviation industry and tobacco monopoly production, may be subject to pre-registration approval by the relevant government authorities. These approvals must be obtained prior to the application being submitted to MOFCOM and before registration with SAIC or its local branch.
The approval procedures and the length of the approval process shall be subject to the different requirements of the government authorities concerned.
Approval by or filing with MOFCOM
All foreign investments included on the Negative List, including M&A transactions or the establishment of FIEs, are subject to MOFCOM approval. For foreign investment activities (including the establishment of an FIE and a change from a non-foreign-invested enterprise to an FIE by acquisition, merger or any other means) outwith the Negative List, only an online record filing on the MOFCOM website is required. According to the Interim Measures for the Recordation Administration of the Establishment and Modification of Foreign Investment Enterprises, the record filing shall be submitted when the designated representative or the agent jointly entrusted by all investors (or the board of directors of a foreign investment joint-stock limited company) conducts the registration of establishment or of modification.
The MOFCOM approval process normally takes five to 10 business days, and the record filing process normally takes around three business days to complete.
Registration with the registration authority
After obtaining NDRC approval (if applicable), MOFCOM approval (for the investment activities on the Negative List) and other applicable pre-registration approvals (depending on the industry), the FIE must register with SAIC or its local branches to obtain or renew its business licences. This registration normally takes five to 10 business days.
If the foreign investment only requires a record filing with MOFCOM, according to the Notice of the General Office of MOFCOM and the General Office of SAIC on Implementing the Work concerning 'Single Window and Single Form' Acceptance for Commercial Recordation and Industrial and Commercial Registration of Foreign Investment Enterprises, a system of 'single window and single form' acceptance for commercial recordation and industrial and commercial registration of foreign investment enterprises across the country will be implemented, aiming to optimise the business environment and liberate market dynamism to attract foreign investment.
Post-registration filing or registration with the relevant authorities
After obtaining its business licence, an FIE must complete the filing or registration procedures (i.e., registering with the tax authorities, opening a foreign currency account and registering for social insurance) with the relevant authorities. It normally takes around 30 business days to complete all these procedures.
ii Other review procedures
National security review
In accordance with both the National Security Law and the Security Review Notice, certain foreign investments with national security implications will be subject to a national security review. The new Cybersecurity Law also emphasises the importance of national security.
A joint committee led by MOFCOM and the NDRC is responsible for security reviews. When conducting a security review, regulators will analyse the potential effects of any proposed merger or acquisition on China's national defence, economic stability, social order and key technologies, and will focus on the issue of control. M&A transactions resulting in more than 50 per cent foreign ownership or de facto control of a domestic enterprise in the above-mentioned sensitive sectors will attract the attention of security review regulators.
MOFCOM's Anti-Monopoly Bureau will be notified about transactions in which the foreign investment is, inter alia, deemed to cause a 'concentration' under the Anti-Monopoly Law and meets the statutory turnover thresholds. Details of the thresholds can be found in the Anti-Monopoly Law and other relevant laws and regulations.
Review of foreign investment involving state-owned assets
Under the Interim Measures for State-Owned Assets, a transfer of state-owned assets shall be within the designated equity or property exchange rate. Before any assets are transferred to foreign investors, a certified asset evaluation agency must issue a valuation report providing the value of the assets. The transfer price shall not be less than 90 per cent of the valuation value unless expressly approved by the relevant authorities.
Review of foreign investment in listed companies
Based on the Measures for Strategic Investment, foreign investment in listed companies will be subject to the supervision of the securities regulatory authorities.
The above-mentioned foreign investment review procedures are general practice in accordance with PRC laws and regulations. The procedure may vary slightly depending on different factors, such as the type of foreign investment, the amount of the investment, the location of the project and the different requirements of the relevant local governmental authorities.
In addition to the above, FIEs are subject to regulations regarding annual reporting to or inspection by (if applicable) SAIC or its local branches, the administration for foreign exchange or its local branches, and other relevant government authorities once established.
iii Interface with other authorities
The approval and registration procedures of each government authority follow a general sequence with respect to the approval of a foreign investment, and inter-government and intra-government consultations are very common during the approval process. Some industrial approvals are prerequisites to approval by MOFCOM and therefore must be obtained before applying for MOFCOM approval. The PRC government has started to relax the precondition requirements.
It is very rare for the PRC approval authorities to directly communicate with foreign government authorities regarding foreign investment reviews. However, in certain circumstances, application materials prepared outside China to obtain relevant approvals will be considered by PRC regulators as valid supporting documentation for a foreign investment in China.
V FOREIGN INVESTOR PROTECTION
i Protection by multilateral and bilateral treaties
The PRC has signed several regional and multilateral treaties and international trade agreements that govern matters including intellectual property (IP) protection, customs, civil aviation and dispute resolution.
According to the State Administration of Taxation, as at 6 August 2018, the PRC has officially signed 103 agreements on the avoidance of double taxation (100 agreements are in effect). Furthermore, as at 6 August 2018, the PRC has signed 16 free trade agreements (FTAs) with 24 countries or regions based on the information listed on China FTA Network. These will benefit more than a dozen fields (including goods, services and investments), create more business opportunities for investors and further promote the economic development of both parties to the agreement.
ii Protection under PRC law
The legal rights and interests of foreign investors are protected under the WFOE Law, the EJV Law and the CJV Law. In addition, as clearly stipulated under the WFOE Law and the EJV Law, the PRC government will generally not impose nationalisation or expropriation measures on WFOEs and EJVs.
To attract foreign investment, some local governments may offer support for foreign investors through the granting of land use rights, providing financial subsidies, etc., and certain sectors, such as high-tech, research and development, and others encouraged by the government, may be eligible for preferential tax policies.
iii Legal remedies
Foreign investors who engage in business or conduct activities in the PRC have the right to protect their legal interests via litigation or arbitration. Generally, litigation allows for appeals, and arbitration is final. Foreign investors tend to prefer arbitration over litigation because it is more international and less time-consuming. Moreover, arbitration commissions in China are becoming more familiar with dealing with complex domestic and international commercial disputes.
Recognition and enforcement
Under certain circumstances, in addition to direct involvement in litigation or arbitration proceedings in China, foreign investors may request that the People's Court system recognise and enforce a foreign arbitral award or judgment.
On 22 April 1987, China became a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). As such, China applies the principles of the New York Convention on a reciprocal basis to enforce foreign arbitral awards from other signatory countries for disputes that are regarded as commercial disputes under PRC law. China has also entered into agreements with Hong Kong, Macao and Taiwan on the mutual recognition and enforcement of civil and commercial judgments.
VI OTHER STRATEGIC CONSIDERATIONS
In addition to the foregoing, it is imperative that foreign investors focus on the following:
- labour issues regarding, inter alia, employment contracts, non-compete agreements, occupational safety, social insurance, labour law compliance, labour litigation and arbitration;
- IP protection regarding, inter alia, IP audits and strategic IP, IP portfolio management, commercial IP transactions and IP due diligence;
- exit mechanisms;
- corporate governance and the management of FIEs;
- profit distribution and remittance;
- communication with the relevant government authorities; and
- any amendment or update of foreign investment-related laws and regulations.
In addition, foreign investors should consult a local PRC law firm to assist them with their investments in China. Local attorneys are very familiar with PRC laws, have extensive experience in dealing with foreign investment issues and generally have a good working relationship with local government officials, who can assist foreign investors to navigate through complex PRC laws and regulations.
VII CURRENT DEVELOPMENTS
On 8 August 2017, the State Council issued the Notice of the State Council on Several Measures for Promoting Growth of Foreign Investment, which provides for further reducing restrictions on foreign investment access, improving the comprehensive investment environment of national development zones, facilitating entry and exit of talents, and optimising the business environment for foreign investors.
The WFOE Law, the EJV Law and the CJV Law (collectively the Three Laws) propelled China's economy during the early years of its development, since the reforms launched by Deng Xiaoping in 1979. However, though the Three Laws have been revised in recent years, the market environment is now substantially different from when the Three Laws were first published. To keep pace with the new market environment and to align with the principles introduced by the revised Company Law in 2013, MOFCOM circulated a draft of the Foreign Investment Law (the Draft Law) on 19 January 2015 to solicit public opinion. The highlights of the Draft Law include:
- requiring existing FIEs to change their organisational form or structure to be consistent with the Company Law, the Partnership Enterprise Law and the Law on Individual Proprietorship Enterprises;
- introducing the foreign investment administrative policy of granting national treatment prior to granting market access (only businesses on the Negative List will need prior approval by the foreign investment authority); and
- introducing the concept of 'ultimate control', which means that a domestic company ultimately controlled by foreign nationals will be treated as a foreign investor.
Although it is currently unknown when it will come into effect, the Draft Law demonstrates the PRC government's commitment to encouraging foreign investment to further open up and stimulate the economy. The Draft Law aims to clear away many of the administrative barriers for foreign investment (e.g., eliminating redundant administrative requirements) and promotes greater foreign participation and investment to facilitate economic development. Given the recent regulatory proposals put forward by the PRC government, China is likely to be more open towards foreign investment in the future.
1 Jianwen Huang is a partner at King & Wood Mallesons.
2 In this chapter, 'China' and 'PRC' refer to mainland China and do not include Hong Kong, Macao or Taiwan.
3 'Led by the Chinese party' shall mean that the principal or key administration officer in charge is a Chinese national, and Chinese party personnel shall make up no fewer than half the members of the council, board of directors or joint administration committee of a CJV educational institution.
4 The estimated lengths of the approval processes by the authorities quoted in this section are based on when all the required application documents are agreed upon and accepted by the relevant authorities and no further modification is required.