Pursuant to the Implementing Regulations for the Law Governing Land, the compensated use of state-owned land primarily consists of land assignment, land lease, as well as capital contributions or equity investment with valued land use rights. This method, including the contribution and valuation of land involved in merger and acquisition (M&A) deals, has been increasingly popular in recent commercial cases. The principal contributing parties are often state-owned enterprises (SOEs).
Types of equity investment
Equity investment with land use rights is generally divided into three types: i) the state makes equity investment with state-owned land use rights, which is defined as state shares (see article 3 of the Interim Provisions Governing the Allocation of Land Use Rights in the Reform of State-owned Enterprises); ii) enterprises as legal persons or other economic organisations make equity investment with land use rights acquired from land assignment, which is defined as corporate shares (see the Opinions of the Ministry of Land and Resources and the All-China Federation of Industry and Commerce on Further Encouraging and Guiding Private Capital to Invest in the Sector of Land and Resources); and iii) rural collective economic organisations make equity investment in setting up enterprises or joint ventures together with other units or individuals with the use rights to land for construction purposes defined in the general plan for the utilisation of land of townships. Such equity is defined as collective shares (see article 60 of the Land Administration Law).
If equity investment is made with the use rights of land authorised to operate or allocated by the state, it must be submitted to the competent land administration department for approval, and a land assignment fee must be paid. (See Certain Opinions of the Ministry of Land and Resources on Strengthening the Management of Land and Resources, and Promoting the Reform and Development of State-owned Enterprises).
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