By Tang Zhengyu, Partner and Chen Ling, PRC Consultant, Sidley Austin Brown & Wood, Shanghai

On November 12 2003, one month after the promulgation of the Administration of Auto Finance Companies Procedures (the Procedures), the China Banking Regulatory Commission (the CBRC) unveiled the Administration of Auto Finance Companies Procedures Implementing Rules (the Implementing Rules). The Implementing Rules, with five chapters and 58 articles, spell out the approval procedures in detail, the particulars of personnel management, financial control and supervision of the auto finance companies (AFCs). They also clarify certain major issues that were left ambiguous in the Procedures.¹

Approval Procedure

The approval procedures for the establishment of AFCs can be summarized as "two stages, two levels of review and two certificates".

The establishment of an AFC is divided into the preparation stage and the business commencement stage. The Implementing Rules clarify that both the CBRC and local banking regulatory bureaux will be involved in the approval procedures for the establishment of an AFC. Specifically, the local bureaux will be responsible for the collection and preliminary review of the application documents, while the CBRC will give the final review and approval for an AFC's establishment and its business scope. While not mentioned in the Procedures, the Implementing Rules stipulate that if an application for establishing an AFC is rejected by the CBRC, the investor(s) are not allowed to submit the same application within six months of the date of the rejection.