As for whether the transfer of equity in mining companies should be regarded as a transfer of mining rights, China’s current laws and regulations governing mineral resource management do not provide any explicit provisions on this issue. Neither the Supreme People’s Court nor the Ministry of Natural Resources has yet formed a unified and clear stance on this matter. As a direct result, in the practical implementation of mineral resource management, significant differences have emerged in the policies and handling approaches adopted by local departments of natural resources. Similarly, in judicial practice, the views of the people’s courts vary widely, and it is not uncommon to see different rulings rendered in identical cases. In response to these issues, Yu Ren Law Firm in Beijing, with years of experience providing legal services in the field of mineral and energy law, has gained a solid understanding of relevant local policies across the country. Building upon this foundation, we are preparing to analyze and interpret this issue from both a legal theoretical perspective and an objective practical standpoint, hoping thereby to contribute our modest legal expertise to the improvement of China’s mineral resource management system!
I. Several Current Views in China on the Relationship Between Equity Transfer and Mineral Rights Transfer
Viewpoint 1: Any change in the shareholders or shareholding ratios of a mining rights holder constitutes a transfer of mining rights (the principle of absolute equivalence).
The representative holding this view is the Shandong Provincial Department of Natural Resources and Planning. 2011 Year 4 Month, the Department of Natural Resources and Land of Shandong Province issued “The Department of Natural Resources and Land of Shandong Province’s Notice on Forwarding...” < Notice of the Ministry of Natural Resources on Further Improving Issues Related to the Registration and Management of Mining Rights > Notice (Lu Land and Resources Letter) [2011]508 Article [Number] stipulates: “If the holder of a mining right engages in activities such as selling the right, contributing it as equity, introducing external capital, technology, management, or other forms of cooperative operation, or undergoing enterprise restructuring and reform—any change in the shareholders or shareholding ratios of the mining right holder shall be deemed a transfer of the mining right and must be subject to the prescribed procedures for transferring the mining right. In cases where the payment for the mining right is made in installments, both the transferor and the transferee must enter into a commitment agreement on payment, which shall be explicitly stated in the transfer contract.”
Viewpoint 2: If the controlling shareholder of a mining enterprise changes, it constitutes a transfer of mining rights. If the controlling shareholder remains unchanged, the transaction should be treated as a typical equity transfer (in accordance with the principle of equivalence).
The representative holding this view is the Qinghai Provincial Department of Natural Resources and Territorial Space. 2007 In the year, the Qinghai Provincial Government issued the “Notice of the General Office of the People’s Government of Qinghai Province on the Issuance of the Management Measures for the Transfer of Mineral Rights in Qinghai Province.” Article 5 stipulates: “If any of the following circumstances involving the transfer of mineral rights occur, the holder of the mineral rights must submit an application to the original issuing authority. After review and approval, the holder shall complete the procedures for approval and registration of the transfer of mineral rights. The administration for industry and commerce shall, based on the approval document for the transfer or the registration document for the change of mineral rights issued by the mineral rights administration department, carry out the corresponding industrial and commercial registration: (1) A change occurs in the legal entity of the enterprise; (2) The legal entity of the enterprise remains unchanged, but the original controlling shareholder changes. Article 6 further stipulates: If the legal entity of the enterprise, the legal representative, and the original controlling shareholder remain unchanged, but the equity structure changes, the holder of the mineral rights shall file the relevant contract with the original issuing authority and shall also—” 30 Complete the equity change registration at the industrial and commercial administration department in your original place of registration within the day.
Viewpoint 3: If an investor in a mining enterprise transfers all or part of its equity, thereby enabling the transferee to gain control over the enterprise without obtaining prior approval from the land and resources administration department, such transfer constitutes a disguised transfer of mining rights in the form of equity transfer. (The “Enterprise Control” Argument)
The representative holding this view is the Higher People's Court of Heilongjiang Province. 2010 Year 7 In the month of [month], the Higher People's Court of Heilongjiang Province issued the “Guiding Opinions of the Higher People's Court of Heilongjiang Province on Handling Cases Involving Coal Mine Disputes.” Article 5 stipulates: “If an investor in a coal mine enterprise transfers all or part of its equity to another party, thereby enabling the transferee to gain control over the coal mine enterprise, and the transferee commences mining operations without obtaining approval from the authority responsible for mining rights approval, such conduct may be deemed as a disguised transfer of mining rights through equity transfer.”
Viewpoint 4: If a share transfer results in a change of the controlling shareholder, it may affect the mining rights holder’s business strategy. Such share transfer agreements should be filed with the original registration authority for mining rights. (Filing Requirement)
Mr. Wei Tiejun from the School of Earth and Space Sciences at Peking University holds this view. According to Professor Wei, when equity transfers result in a change of controlling shareholders, such changes may affect the mining rights holder’s business strategies. Therefore, agreements for these equity transfers should be filed with the original registration authority for mining rights. During the filing review, if it is found that the equity change adversely affects the rational utilization of mining rights, the authority shall issue recommendations for rectification and urge mining enterprises to make necessary improvements. In cases where the impact is severe, the authority shall submit appropriate regulatory recommendations to the securities regulatory authorities. Mining rights that have not been filed as required will not pass the annual inspection or be renewed.
Viewpoint 5: Equity transfer and mineral rights transfer are fundamentally different. The subjects of these two types of rights are distinct. If they are treated as equivalent, it would negate the legal personality of the company and constitute a fundamental violation of the superior law—the Company Law. (A clear-cut distinction.)
Those holding this view are predominantly legal professionals, including professors, scholars, and lawyers. It can be said that this viewpoint stems from purely legal theory; it is the conclusion reached through analyzing the legal nature of equity interests and mineral rights and employing legal concepts such as the “theory of rights holders” and the “corporate legal person theory” for argumentation. The above represents the five mainstream views currently prevailing in China regarding the legal relationship governing the transfer of mining shares. Among these views are opinions from both the land and resources administration authorities and the courts, as well as insights from experts and legal professionals. In terms of scope, these views can comprehensively cover and reflect the actual state of this issue in China.
II. Yuren’s Evaluation and Interpretation of the Above-mentioned Viewpoint
1. Regarding the “principle of absolute equivalence” and the “principle of relative equivalence,” our assessment is as follows: If these two perspectives were adopted, from a theoretical legal standpoint, it would fundamentally violate the “one object—one right” doctrine enshrined in the Property Law and the “legal person theory” stipulated in the Company Law. From an objective practical standpoint, this approach would hinder mining companies from carrying out mergers and restructuring, and would also fail to address the issue of “disguised resale of mining rights.” At the same time, it would create significant obstacles to the division of powers and coordinated operations between the land and resources administration authorities and other regulatory agencies (such as the securities regulatory authority and the tax authorities).
Specific interpretation as follows: From the perspective of legal theory:
( 1 The right holders of mining rights enjoy exclusive rights (the “one object, one right” principle). Article 6 of the Mineral Resources Law stipulates: “After a prospecting right holder has fulfilled the prescribed minimum exploration investment and obtained legal approval, it may transfer its prospecting rights to others.” The same article further provides: “Mining enterprises that have already obtained mining rights, in cases where they undergo corporate mergers or divisions, engage in joint ventures or cooperative operations with others, or experience other changes in their corporate asset ownership—including the sale of corporate assets—may, upon obtaining legal approval, transfer their mining rights to others.” Based on this provision, we believe that the Mineral Resources Law has initially established the criterion that a change in the entity holding mining rights constitutes a transfer of such rights.
From this perspective, equating the equity held by shareholders with mining rights held by mining companies represents a fundamental misperception of the nature of mining rights and constitutes a blatant violation of the “one thing, one right” principle. The underlying cause of this phenomenon, however, may also stem from a lack of clarity in society’s understanding of the legal nature of corporations. This, in turn, leads us to the next issue that we need to explore.
( 2 ) The legal personality of the company
Before analyzing the company’s legal nature, let’s first take a look at a provision. 2006 In [year], the Department of Natural Resources of Guizhou Province issued the “Notice of the Guizhou Provincial Department of Natural Resources on Regulating the Transfer of Mineral Rights” (Qian Tu Zi Fa). [2006]46 No.), which stipulates that “the holders of prospecting rights and mining rights refer to entities and individuals who, in accordance with the law, enjoy the rights to possess, use, benefit from, and dispose of such rights, and who also bear corresponding legal obligations.” “If a limited liability company applies to the land and resources authority for prospecting rights or mining rights in its own name, all shareholders of that limited liability company shall be considered the holders of such rights.” “The review of whether there has been a change in the holders of prospecting rights or mining rights shall be based on the business license submitted by the original holder(s) of the prospecting or mining rights to the land and resources authority at the time of application.” In accordance with the Company Law ( 2013 (Revised annually) Article 3 stipulates: A company is a corporate legal person, possessing independent corporate property and enjoying corporate property rights. The company bears responsibility for its debts with all of its assets. This is how China’s Company Law defines the legal nature of a company: namely, that a company is a corporate legal person. What accounts for the remarkable vitality that the corporate legal person system endows this commercial entity with?
The reason is that, once a legal entity is established, it immediately acquires a personality and status independent of its founders, promoters, investors, or shareholders. The property and rights it acquires, as well as the obligations and responsibilities it bears, are all independent of those of its investors.
Under China’s current corporate legal system, any entity that qualifies as a legal person is necessarily an independent legal subject—or, in other words, a subject capable of independently assuming civil liability. In many of our current laws, regulations, and rules, we often encounter expressions such as “independent legal person” or “corporate legal person with the qualification to independently assume civil liability.” In fact, these phrases are redundant and unnecessary. Consider this: Is there really such a thing as a legal person that is “not independent” or “incapable of independently assuming civil liability”?
For a legal entity, investors bear liability only to the extent of their capital contributions. This is precisely why corporations are referred to as “limited liability companies” or “joint-stock companies.” It’s crucial not to interpret the terms “limited liability company” or “joint-stock company” literally, assuming that the company itself bears only “limited liability.” In fact, regarding the company’s debts, the company is liable with all of its assets—this type of liability is, in essence, unlimited. It is not the company but rather the shareholders who enjoy the benefit of “limited liability.”
Between the investors in a legal entity and its creditors, the legal entity acts like a firewall, severing the legal connection between investors and creditors. This prevents the debt crises arising from the legal entity’s production and business operations from spreading to the investors, thus freeing investors from the lingering worry of being caught in the crossfire—“when the city gate catches fire, even the fish in the pond get burned.” Even if the legal entity later accumulates massive debts or becomes insolvent, investors need not fear losing their entire fortunes due to being “caught in the crossfire.” After the legal entity fails and goes bankrupt, investors will suffer no additional losses or bear any extra burdens beyond the capital they initially invested in the entity.
The above is the prevailing theoretical framework of the corporate legal person system within the legal community. This institutional design significantly reduces investors’ risks, stimulates and encourages investment and trading activities, and thereby promotes the overall socio-economic development, prosperity, and wealth accumulation.
Therefore, once we have explained what the legal person system is, we can more clearly distinguish the relationship between mining rights and equity interests. As for the regulation issued by the Guizhou Provincial Department of Natural Resources mentioned above, we believe it is inappropriate and completely incompatible with modern corporate law systems.
In a nutshell, the criterion for determining whether a mining right has been transferred should be the change in the mining enterprise that serves as the sole entity holding the mining right. As for the equity held by shareholders, such equity cannot be equated with the mining right itself, nor can the subject of rights under the mining right be extended to individual shareholders.
From an objective practical perspective:
( 1 Treating the transfer of equity in mining companies as a transfer of mining rights is detrimental to the mergers and reorganizations of mining companies.
As is well known, equity acquisitions are an important means of corporate mergers and restructuring, as well as a significant form of capital flow. Equity changes based on equal and mutually agreed-upon negotiations reflect market forces, a principle that has been explicitly affirmed by central government policies. The “Opinions of the State Council on Promoting Corporate Mergers and Restructuring” (Guofa [ 2010 ] 27 No.) pointed out: “In recent years, enterprises across various industries and sectors have actively engaged in integration through diverse forms such as mergers and acquisitions of equity and assets, accelerating the pace of mergers and restructuring, continuously optimizing industrial organizational structures, and achieving remarkable results.” The “Notice from the General Office of the State Council Forwarding the National Development and Reform Commission’s Opinions on Accelerating the Promotion of Mergers and Reorganizations of Coal Mining Enterprises” (Guobanfa [ 2010 ] 46 No.) “Support qualified merger and reorganization entities in going public for financing and refinancing, and encourage these entities to raise development funds through financing methods such as bond issuance and equity transfers.” Moreover, local governments have introduced a variety of measures in implementing the central government’s policies aimed at encouraging corporate mergers and reorganizations. For example, the “Notice from the General Office of the People’s Government of Liaoning Province Forwarding the Provincial Coal Administration’s Work Plan on Accelerating the Merger and Reorganization of Coal Mining Enterprises” (Liao Zheng Ban Fa [ 2012 ] 29 No.) stipulates: “The merging and restructuring entity and the entity being merged shall, in accordance with the relevant provisions of the Contract Law of the People’s Republic of China and the Company Law of the People’s Republic of China, sign a merger and restructuring agreement that clearly defines the rights and obligations of both parties as well as the handling of claims and debts, and shall formulate or amend the articles of association of the company.” The “Notice of the General Office of the Jiangxi Provincial Government on Issuing the Work Plan for Promoting the Merger and Restructuring of Coal Mining Enterprises in Jiangxi Province” (Ganfu Tingzi) [2012]50 Article [number] stipulates: “The joint-stock system shall serve as the primary form for the merger and restructuring of coal mining enterprises, with mergers and restructuring carried out through various means such as enterprise acquisitions, transfers, joint ventures, and controlling interests.”
It is worth noting that when Wang Zhongming, Chief Judge of the Second Civil Division of the Heilongjiang Provincial Higher People's Court, interpreted the "Guiding Opinions of the Heilongjiang Provincial Higher People's Court on Handling Disputes Involving Coal Mining Enterprises," he narrowed the scope of application of Article 5. According to the Company Law of the People's Republic of China, shareholders are permitted to transfer their equity interests in accordance with the law. If the parties to a contract have only agreed upon a portion of the shares and the agreement does not involve the transfer of property or related certificates pertaining to the coal mining enterprise, and if, in actual operations, there has been no change in the holder of mining rights or the corresponding management personnel, with the transferee or shareholder merely sharing investment dividends according to their equity proportion and partnership share, then—during the trial—the court cannot deem this as a disguised transfer of mining rights through the transfer of equity or partnership interests. Under such circumstances, the contract can be deemed valid.
If the transfer of equity in a normal mining company is linked to changes in its management and operational leadership as well as to the replacement of custodians of warrant documents, this will artificially expand the power of certain departments, leading to reduced transaction efficiency, higher transaction costs, increased transaction risks, more complex approval procedures, and greater opportunities for rent-seeking. All of these factors will pose significant challenges to the company’s institutional framework and make it exceedingly difficult to realize the vision of mergers and restructuring through equity acquisitions in the mining industry.
( 2 Treating the transfer of equity in mining companies as a transfer of mining rights does not necessarily effectively address the issue of “disguised reselling of exploration and mining rights.”
Article 6, paragraph 3 of the Mineral Resources Law stipulates: “The resale of prospecting rights and mining rights for profit is prohibited.” Article 42, paragraph 2 provides: “Anyone who violates the provisions of Article 6 of this Law by reselling prospecting rights or mining rights for profit shall have their exploration license and mining license revoked, their illegal gains confiscated, and be fined.” It is worth noting that, in accordance with the provisions of Article 6, paragraph 2, the State Council has promulgated the “Administrative Measures for the Transfer of Prospecting Rights and Mining Rights.” Article 3 of this administrative regulation literally reproduces Article 6, paragraph 1 of the Mineral Resources Law; however, it does not reiterate the prohibition on reselling prospecting rights and mining rights for profit, nor does it provide further detailed regulations on this issue. How should we understand the concept of reselling prospecting rights and mining rights? Given that Article 6, paragraph 3 of the Mineral Resources Law permits the transfer of prospecting rights and mining rights under conditions prescribed by law, the author believes that so-called “reselling” refers to the unauthorized transfer of prospecting rights and mining rights that fails to meet the conditions set forth in Articles 5 and 6 of the “Administrative Measures for the Transfer of Prospecting Rights and Mining Rights,” and which is carried out without obtaining approval from the competent authority. The prohibition on reselling prospecting rights and mining rights for profit is a mandatory provision directed at mineral rights holders, with the primary target being the transferor. Article 8 of the “Administrative Measures for the Transfer of Prospecting Rights and Mining Rights” requires that the transferor of prospecting rights or mining rights submit “proof that the transferor meets the transfer conditions stipulated in Article 5 or Article 6 of these Measures,” thereby providing clear evidence. Moreover, this requirement distinguishes between two different transaction models: the transfer of property rights under the name of a legal entity by the mineral rights holder, and the transfer of equity interests in the mineral rights holder by its shareholders. These are two distinct types of transactions.
In practice, some mining companies have highly complex equity structures, featuring not only apparent shareholders but also hidden shareholders. Moreover, relationships among shareholders extend beyond mere nominee arrangements to include entrusted management agreements. In some cases, shareholders may even entrust management to individuals who are not themselves shareholders. Under such circumstances, rather than expending considerable effort managing investors whose capital contributions frequently change, it would be more effective to intensify regulatory oversight of the mining right holders themselves. This should involve conducting law-based enforcement inspections of their qualifications, registered capital, personnel and equipment, minimum investment requirements, land reclamation efforts, and the three major resource utilization rates. Furthermore, the inspection results should be linked to the annual inspections, renewals, and modifications of exploration licenses and mining permits. Indeed, if a change occurs in the shareholders of a prospecting right holder or mining right holder—particularly when such changes affect matters like the company’s name or registered address—legal procedures for making the necessary amendments must be followed accordingly. According to Article 22 of the “Administrative Measures for the Registration of Mineral Resource Exploration Blocks” and Article 15 of the “Administrative Measures for the Registration of Mineral Resource Exploitation,” mining right holders are required to carry out the corresponding amendment registrations as mandated by law. However, these two administrative regulations do not stipulate that a change in the controlling shareholder of a prospecting right holder or mining right holder necessitates filing an amendment registration.
( 3 Treating the transfer of equity in mining companies as a transfer of mining rights will pose significant challenges for the authorities responsible for land and resource management.
The main challenges faced are as follows: First, the transfer of exploration rights and mining rights by mining companies requires approval from the land and resources authorities vested with approval powers; similarly, the transfer of equity in mining companies also necessitates such approval. This poses a significant test to the efficiency and integrity of the approval personnel at the land and resources authorities. Second, it is challenging for the land and resources authorities to coordinate the approval process for equity transfers with the change-of-registration procedures handled by the company registration authorities. Third, mining companies listed on the stock exchange have a large number of shareholders, and given the approval processes involved in equity transfers among state-owned mining enterprises, the land and resources authorities will face difficulties in coordinating with both the state-owned asset management departments and the securities regulatory authorities, as well as in defining the division of powers—a problem that does not seem likely to be resolved through departmental normative documents alone. Fourth, if the equity transfer of a mining company is deemed to constitute a transfer of mining rights, it could lead to conflicts in tax enforcement. If the tax authorities treat the equity transfer as a transfer of mining rights as determined by the land and resources authorities and impose business tax on the equity transfer, this would conflict with the “Notice of the Ministry of Finance and the State Administration of Taxation on Issues Concerning Business Tax on Equity Transfers” (Cai Shui [2002]191 Number) “Self 2003 Year 1 Moon 1 This contradicts the provision that “share transfers are not subject to business tax” effective from the date of implementation. If the tax authorities were to impose taxes on share transfers, it would mean levying personal income tax—a situation that again conflicts with the type of tax that the competent department for land and resources has determined should be paid for the transfer of mining rights.
Our assessment is that the concept of corporate control originates in economics, and the legal community has never offered a legal definition or generalization of it within the realm of law. Consequently, this viewpoint itself is inherently conceptually ambiguous. The specific interpretation is as follows:
( 1 ) There is no legal definition of corporate control, so its delineation is vague.
1932 In that year, Berle and Means published their seminal work, “The Modern Corporation and Private Property.” In this book, the authors introduced what is known as the “Berle-Means Thesis”: The development of modern corporations has led to a shift in control—from owner control to manager control, resulting in a separation between ownership and control within corporations. This phenomenon came to be referred to as the “managerial revolution,” and with it emerged corporate governance.
Therefore, the economic definition of corporate control is as follows: With the modern trend toward dispersed equity in joint-stock companies and the resulting separation between ownership and control, corporate control has effectively fallen into the hands of company managers. In other words, the holders of corporate control are the company’s managers—a situation that clearly has absolutely no connection whatsoever with equity or mining rights as understood in legal scholarship.
( 2 If corporate control is understood as the concept of a controlling shareholder, then it is essentially no different from the “principle of relative equivalence.”
To put it another way, if we link the economic concept of corporate control with the legal concept of a controlling shareholder, we’ll arrive at conclusions that are strikingly similar. We’ll find that this interpretative approach is essentially indistinguishable from the “principle of relative equivalence.” Therefore, we will not dwell further on this point here.
3. Regarding the “filing-based approach,” our assessment is that this viewpoint is still worth learning from and referencing. The specific interpretation is as follows:
( 1 The terms “equity” and “mining rights” were distinguished.
This view fails to address the identity between equity transfer and mineral rights transfer, thereby removing an obstacle from the perspective of legal theory interpretation. However, this view does distinguish between changes and continuance of the controlling shareholder: If the controlling shareholder changes, such a change could significantly affect the company’s business strategy and thus would require filing with the original mineral rights registration authority; conversely, if the controlling shareholder remains unchanged, only the standard equity transfer procedures need to be followed. The difference between this view and the “principle of relative equivalence” lies in the substitution of “treated as a mineral rights transfer” with “filing.” Although both are administrative actions, the ingenuity of this administrative act lies precisely in its successful avoidance of the issue of the relationship between mineral rights transfers and equity transfers.
( 2 How to further refine the filing system and ensure it truly plays a role in regulating the transfer of mining rights still requires efforts at the level of institutional design.
The purpose of the filing system is to exercise necessary oversight over the transfer and circulation of mining rights. We believe that such oversight is not only essential but also indispensable. Therefore, how to establish a comprehensive filing system that truly enables this system to fulfill its intended role requires deeper discussions and research involving all sectors of society.
4. Regarding the “clear-cut distinction” argument, our assessment is that this viewpoint stems solely from legal theory itself and fails to take into account China’s actual situation (i.e., practice). As a result, it merely puts forward a perspective without identifying any concrete paths for resolving the issue.
III. Yu Ren’s Perspective
We believe that the criterion for determining whether a mineral rights transfer has occurred is whether there has been a change in the entity holding the mineral rights. Whether the entity holding the mineral rights changes is not directly related to whether the equity interests of the mineral rights holder have changed. Mineral rights and equity interests are distinct, and mineral rights transfers and equity transfers are also different. Therefore, changes in the shareholders of the mineral rights holder, alterations in shareholding ratios, or shifts in actual control cannot be considered as mineral rights transfers, nor can they serve as grounds for claiming that approval or filing procedures must be carried out.
However, strengthening supervision over mining right holders is feasible within the current legal framework. Moreover, by intensifying regulatory oversight, we can effectively convey clear signals to the investors, shareholders, and de facto controllers of mining right holders, guiding them to make lawful investments and operate in compliance with the law. There is no need to adopt measures such as requiring approval or filing of equity transfer agreements involving mining right holders—such measures are suspected of amounting to disguised administrative approvals. In light of this, we hereby offer the following recommendations:
1. The authorities issuing exploration licenses and mining licenses shall establish an information-sharing mechanism with the registration authorities for prospecting right holders and mining right holders. This requires a joint document issued by the Ministry of Natural Resources and the State Administration for Industry and Commerce.
By establishing an information-sharing mechanism, the mining rights licensing authority will regulate companies holding exploration and mining rights as mining enterprises. The licensing authority will send information on mining rights acquired by these companies to the provincial Administration for Industry and Commerce, which will then promptly forward such information to the Administration for Industry and Commerce in the registration location of the mining rights holder. The Administration for Industry and Commerce at the registration location will promptly report to the provincial Administration for Industry and Commerce any changes in equity, shifts in shareholding ratios, or changes in the legal representative of the mining enterprise. The provincial Administration for Industry and Commerce will then transmit this information to the competent department of natural resources responsible for issuing exploration and mining licenses. Upon receiving information about changes in equity, shifts in shareholding ratios, or changes in the legal representative of a mining enterprise, the licensing authority will send a supervisory letter to the competent department of natural resources in the area where the exploration site or mine is located. In this way, the licensing authority and the competent departments of natural resources in both the exploration area and the mine’s location will be fully informed of any changes in the equity structure, shareholding ratios, or legal representatives of mining rights holders. After gaining awareness of significant changes such as alterations in the mining rights holder’s investors, the competent department of natural resources can focus its supervision on ensuring that the mining enterprise fulfills its relevant legal obligations—for instance, whether the newly appointed exploration rights holder has completed the minimum exploration investment on time after the equity change, and whether it is carrying out exploration activities according to the approved exploration implementation plan. If the mining enterprise fails to meet these obligations on time, it will be subject to penalties in accordance with applicable laws and regulations.
Strengthening targeted supervision of mining companies following equity changes can fully achieve and even replace the management objective of requiring prior approval for equity transfers. This approach is also consistent with Document No. [Guofa] 2012 ] 52 Numbered document and 18 The essential spirit of the administrative approval system reform emphasized in the major report.
2. The State Administration of Taxation and the Ministry of Natural Resources have established a mechanism for sharing information on changes in mining rights transfers.
Notice of the State Administration of Taxation on Strengthening the Administration of Individual Income Tax Collection on Gains from Equity Transfers (Guo Shui Han) [2009]285 Article [number] stipulates: “The competent tax authority shall, in accordance with the provisions of the Individual Income Tax Law and the Tax Collection and Administration Law, obtain information on equity transfers by individuals, manage, assess, and inspect tax-related matters arising from such equity transfers, and impose lawful penalties on any tax violations involved.” To promote information sharing between tax authorities and administration for industry and commerce departments, strengthen tax collection and administration over equity transfers, enhance the capacity of enterprise registration management information services to support national tax collection and administration, and leverage taxation’s role in regulating income distribution, the State Administration of Taxation and the State Administration for Industry and Commerce have issued the “Notice on Strengthening Tax-Industry Cooperation and Achieving Information Sharing on Equity Transfers” (Guo Shui Fa [number]). [2011]126 No.). Accordingly, the view that the so-called equity transfer is actually a mineral rights transfer aimed at evading relevant taxes and fees is not scientifically sound, because, as required, shareholders are also obligated to pay either individual income tax or corporate income tax during an equity transfer.
Notice on the Business Tax Policy for the Transfer of Rights to Use Natural Resources (Cai Shui) [2012]6 No.) stipulates: “In the ‘Notice of the State Administration of Taxation on Issuing’” < Notes on Business Tax Categories > Notice on the (Draft for Trial Implementation) (Guoshui Fa) [1993]149 Article 8: Add a sub-item titled “Transfer of Rights to Use Natural Resources” to the annotation under the tax item “Transfer of Intangible Assets.” The transfer of rights to use natural resources refers to the act by which the rights holder transfers the rights to explore, exploit, and use natural resources. Rights to use natural resources include rights to use maritime areas, prospecting rights, mining rights, water withdrawal rights, and other rights to use natural resources (excluding land-use rights). Accordingly, during the transfer of mining rights, business tax and enterprise income tax are required to be paid. To strengthen the collection of business tax on the transfer of mining rights, the State Administration of Taxation and the Ministry of Natural Resources may jointly issue a document establishing an information-sharing mechanism, under which the authorities responsible for approving the transfer of mining rights and the tax authorities will conduct regular exchanges of information.