Measures of Guangzhou Development District for the Administration of the Special Fund for Sino-Israel Bio Industry Incubation Center

Chapter I General Provisions

Article 1 In order to implement the Work Plan for Strengthening Cooperation between Guangzhou and Israel in the High-tech Industry to Stay Ahead of the Curve (Sui Fa Gai Gao Ji [2014] No 21), promote cooperation between Guangzhou Development District and Israel in biotechnology, strengthen the building of China-Israel cooperation platforms, establish connections with international advanced biotechnological innovation resources from Israel and other countries, give full play to the guiding role of financial funds, attract social capital, stimulate market vitality, vigorously support the development of innovation and entrepreneurship projects in the biomedical industry and facilitate the high-quality growth of international cooperation, these measures were formulated in light of the actual situations of the district.

Article 2 The measures are applicable to innovative and entrepreneurial biotechnology enterprises in the Sino-Israel Bio Industry Incubation Center (hereinafter referred to as "the center") of the Guangzhou International Bio Island (China-Israel Cooperation Zone). Unless otherwise specified in the measures, all eligible projects may enjoy the special fund for the Sino-Israel Bio Industry Incubation Center.

Article 3 The district development and reform department is the competent department of the special fund for the Sino-Israel Bio Industry Incubation Center and is responsible for organizing the implementation of the measures, including the budget preparation, submission, and application of the special fund as well as the approval, issuance, and supervision of funded projects and related funds.

Article 4 The operation and management company of the Sino-Israel Bio Industry Incubation Center (hereinafter referred to as "the center management company") is responsible for the collection of projects and the service and management of enterprises in the center, as well as the review and supervision of the funded projects and of the expenditure and return of the special funds in accordance with the measures.

Chapter II Admission of Incubation Projects

Article 5 Projects applying for admission to the center must be in the field of the biomedical industry. The specific categories shall be determined according to the classification requirements of strategic emerging industries.

Article 6 To join the center, project owners will need to make an application for admission. The center management company will review and screen the applications, and forward the approved ones to the district development and reform department.

Article 7 The center management company should strengthen the development of teams, institutions, and other conditions. Specialized professionals should be introduced to form a management team that can provide in-depth entrepreneurship counseling services. The company shall also offer sites and shared facilities for R&D, trial production, and operation, as well as incubation services in terms of policies, law, finance, industry, investment and financing, human resources, entrepreneurial counseling, and other aspects for enterprises and projects in the center. It shall endeavor to promote the implementation of projects and the transformation of technological achievements.

Article 8 The center management company shall regularly report the progress of projects in the center to the district development and reform department. Where there are any projects that have achieved substantial progress or gained market attention, the company must make a timely report to the same department and collaborate with relevant district authorities to provide such projects with in-depth services and support for industrialization and marketization.

Chapter III Application of the Special Fund

Article 9 [Application Criteria] To apply for the special fund, projects in the center must meet the following conditions:

(I) Within the validity period of the measures, the project company shall be registered and established in the center, be included in the statistics of the district, possess a sound financial system, have independent legal personality, adopt independent accounting, and comply with relevant regulations on credit management. Enterprises with a public credit rating below Grade B in Huangpu district will not be able to enjoy the special fund.

(II) The project leader or core team members shall be the main stakeholders of the project company (i.e., holding equity or options of the project company, obtaining licensed income sharing, etc.), and have a corresponding professional background in project R&D and implementation, or successful enterprise management experience in related fields. At the same time, sci-tech innovation personnel engaged in R&D and related technical innovation activities shall account for more than 50 percent of the total project team members, and the main R&D personnel shall have the right to make decisions on major matters related to R&D.

(III) Preliminary verification shall show that the project implementation content has certain feasibility of achievement transformation or the project shall have plans, engineering samples, or prototypes that can prove the feasibility of key technologies, and the project team members shall have achieved relevant basic results.

(IV) The project company shall complete the paid-in capital contribution not less than the self-raised amount of the project, and depending on the category of the project (the projects will be implemented by classification after their categories are determined at the expert review meeting), the proportion of the self-raised amount to the amount applied for from the special fund shall be consistent with the folloing requirements:

1. Innovation through original research (the first of its kind or the best of its kind): The proportion of the self-raised amount to the amount applied for from the special fund shall not be less than 1:4;

2. Innovation through improvement (improvement and upgrading of similar products): The proportion of the self-raised amount to the amount applied for from the special fund shall not be less than 1:3;

3. Innovation through domestic introduction (localized innovation of similar innovative products): The proportion of the self-raised amount to the amount applied for from the special fund shall not be less than 1:1.

Article 10 [Application Materials] The companies of projects in the center that meet the criteria specified in Article 9 can submit an application to the center management company, which shall include the following materials:

(I) Fund application form (sealed or signed by the project company);

(II) Project feasibility report (sealed or signed by the project company);

(III) Project milestone plan (including project fund use plan, sealed or signed by the project company);

(IV) For overseas cooperation projects, the description of overseas cooperation and relevant materials shall be provided (sealed or signed by the project company);

(V) List of major team members, labor contracts or consultant employment agreements, social security payment certificates, the certificates of no criminal conviction and credit reports of the legal representative of the project company and the project leader (or the applicants' nationality and legal identity certificates issued by official agencies in their habitual residence), the education backgrounds, professional titles, work experiences and other information of major team members, etc.;

(VI) Supporting materials for the paid-in registered capital and self-raised capital of the project;

(VII) Analysis reports on the feasibility and prospective benefits of the project as well as supporting materials including intellectual property certificates, patent authorization certificates, preclinical approval documents, technology cooperation contracts of the company, intention orders, and honors, awards and research results obtained by core members of the company or the team;

(VIII) Letter of credit commitment where the project company undertakes that the information provided is authentic and that it will assume responsibility for the consequences caused by false information (sealed or signed by the project company and its legal representative).

After receiving the above materials, the center management company shall conduct a preliminary review, prepare an analysis report and review opinion for each project, and submit all these materials to the district development and reform department.

Article 11 [Project Review] The qualification for the special fund shall be determined through expert review. The review contents include the project team, project technologies, prospective benefits, risk assessment, and the rationality of milestone objectives. The review will be carried out in the forms such as written reviews, on-site verification, and meeting review according to the project conditions.

After the project passes the preliminary review, the center management company shall organize an expert review meeting. The expert panel shall consist of not less than seven members, including biomedical industry experts, senior executives of biomedical enterprises, venture capital experts, financial management experts, and human resources experts. Among them, two shall be invited by the center management company, and the rest shall be invited by the district development and reform department at its own expense.

The district development and reform department may, according to the actual situation, invite relevant authorities such as the departments of investment promotion, science and technology, health, and market supervision of the district to the meeting.

Article 12 The experts shall give written review opinions on the project qualification within three working days after the expert review meeting, and the district development and reform department shall issue the final opinions within 15 working days (excluding the project review time) after receiving the expert review opinions.

Chapter IV Management of the Special Fund

Article 13 [Funding Amount] A supporting fund of up to 5 million yuan ($775,000) will be granted to the approved projects, and the classification of the projects shall be subject to the opinions of the expert review meeting.

(I) A supporting fund of up to 2 million yuan will be given to medical device projects joining the center for the first time. If such projects are qualified for a second round of incubation, they will receive another fund of up to 1 million yuan;

(II) A supporting fund of up to 3 million yuan will be given to biomedical project joining the center for the first time. If such projects are qualified for a second round of incubation, they will receive another fund of up to 2 million yuan.

Article 14 [Management Mode of Funded Projects] Funded projects will be subject to milestone management.

(I) For medical device projects, the first incubation period is two years and at least two milestones shall be set. For biomedical projects, the first incubation period is three years and at least four milestones shall be set.

(II) Projects that have been incubated for the first time can apply for a second round of incubation if they meet relevant requirements after expert evaluation. The center management company will organize an expert review meeting according to Article 11 of the measures. Experts will conduct evaluation on the funded projects to see if they are qualified for a second round of incubation, issue written evaluation opinions, and submit them to the district development and reform department for approval. Upon approval, the incubation period of medical device projects can be extended by one year and at least one more milestone shall be set; the incubation period of biomedical projects can be extended by two years and at least two more milestones shall be set.

Article 15 [Funding Mode and Provisions]

(I) After gaining the funding approval for the project, the project company may directly apply for 1 million yuan from the special fund for the first time, and the subsequent fund will be issued according to the completion of its milestones.

(II) The district development and reform department shall organize at least three relevant experts every two months based on the project situation to carry out centralized milestone assessment for the funded projects in the forms such as written reviews, on-site verification and meeting review. If necessary, expert review meetings may be convened according to the actual situation. The company of the project that has passed the assessment can apply for funding for corresponding milestones.

Article 16 [Fund Purpose] The special fund shall be used for relevant expenses incurred during the implementation of project R&D, mainly including direct expenditures such as equipment cost, material cost, testing and processing fee, clinical experiment fee, expert consultation fee, contract research organization (CRO) fee and contract development and manufacturing organization (CDMO) fee.

Article 17 [Milestone Management] After being reviewed and confirmed by the expert review meeting, the project milestone plan shall not be changed at will without special reasons. If due to necessary reasons, it cannot be completed after positive measures are taken, the project company may adjust the milestones after passing the expert review in accordance with Article 11 of the measures, but each project shall not be adjusted more than twice.

Article 18 [Fund Custody] The special fund shall be managed as per fund custody.

(I) After a project is approved for the special fund, a bank shall be selected as the custodian bank of the fund. The district development and reform department, the center management company, the project company, and the custodian bank shall sign an agreement on the conditions of transferring from the special account for the special fund.

(II) When applying for the special fund for a milestone, the project company shall provide payment vouchers or invoices of the expenses incurred in reaching the milestone to the center management company. If the milestone is confirmed to be completed, the remaining fund of the period can be carried over to the next milestone.

(III) The center management company will review the applications and bills submitted by the project company according to the use scope of the fund, and issue a review opinion to approve the use of the fund if it is within the use scope. After receiving the review opinion of approving the use of the fund from the center management company, the custodian bank shall allocate the approved amount of the special fund to the basic account of the project company.

Article 19 [Funding Agreement] The district development and reform department, the center management company, and the project company shall sign an agreement on the use of the special fund as well as their respective rights and obligations. When returning the special fund, the project company shall first consider returning it to the account of the district finance department as agreed in the agreement.

Chapter V Return of the Special Fund

Article 20 [Return Conditions of the Special Fund] The funded projects shall return the special fund obtained to the district development and reform department in accordance with the following provisions:

(I) If the accumulative operating income of the project company reaches more than yuan 3 million, 10 percent of the previous year's operating income shall be returned annually from March 31 of the following year until all the special fund obtained is paid off;

(II) When the equity investment obtained by the project company reaches more than 5 times and less than 10 times the special fund obtained, the project company shall return 50 percent of the fund in one lump sum within measures working days from the date when all the equity investment is in place; when the equity investment reaches more than 10 times the special fund obtained, the remaining 50 percent of the fund shall be returned within measures working days from the date when all the current investment amount is in place;

(III) When the project company receives an equity investment of more than 10 times the special fund obtained at one time, it shall return the fund in full within measures working days from the date when all the equity investment is in place;

(IV) If the project company sells or authorizes the use of intellectual property rights to a third party and obtains income, it shall return the special fund obtained with the amount being 10 percent of the proceeds generated within measures working days after signing relevant agreements and obtaining the income from the sale or authorization until all the special fund obtained is paid off;

(V) If the project company successfully makes an initial public offering (IPO) at home or abroad, it shall return the special fund obtained in one lump sum within measures working days from the date of official listing;

The amount returned shall not exceed the amount appropriated by the government from the special fund, and the return period shall be within 10 years from the date when the special fund is obtained for the first time. The project company shall return the special fund according to the preceding provisions. However, if the special fund obtained has not been paid off after 10 years, there is no need to return the unpaid part, except for malicious concealment, fraud, and other acts.

The project company shall submit relevant materials to the district development and reform department within 10 working days from the date when the special fund is returned to the account designated by the department.

Article 21 [Preferential Conditions for Return of the Special Fund] For projects that has been successfully industrialized in the district, if more than 50 percent of the special fund needs to be returned in a lump sum, a deferred return agreement can be signed to adjust the specific return method upon the verification of the center management company and the approval of the district development and reform department. In principle, the fund can be returned by installment in three years.

Chapter VI Confirmation of Suspension and Termination of Funded Projects

Article 22 [Suspension and Termination of Funded Projects]

(I) Conditions for Project Suspension

When normal project R&D activities cannot proceed due to internal and external reasons, such as changes in the leader or core members of the project and other force majeure, and needs to be suspended, the project company may apply for suspending the incubation of the project. The suspension will only be effective after being reviewed and approved by the district development and reform department. In principle, the project suspension time shall not exceed six months from the date of review and approval. (The suspension time will not be included in the incubation time.)

(II) Conditions for Project Termination

1. The project cannot continue because the capital chain of the project company is broken and financing becomes impossible;

2. The center management company, the district development and reform department, or other parties find that the project company has performed no business operation for six consecutive months without consent, or the project cannot be started after being suspended for more than six months;

3. The project company fails to complete the promised milestone as per the timeline, or the completion of the milestones is not up to standard after review;

4. The project, in principle, has not generated any target products or operating income after the agreed incubation period ends;

5. The project company does not have the ability to continue project development due to changes in the core members of the technical team or the management team;

6. The project company is included in the list of companies with abnormal operations and fails to make a repair within half a year;

7. The project company is declared bankrupt according to law due to the breakage of the capital chain, insolvency, and other circumstances stipulated in Article 180 of the Company Law of the People's Republic of China;

8. The district development and reform department or the center management company finds that the project company violates the regulations on the use and management of the special fund which seriously affects the progress of the project, etc. and requires the project company to rectify the situation but the project company refuses to do so or fails to meet the rectification requirements.

Article 23 [Confirmation Process for Suspension and Termination of Funded Projects]

(I) Project suspension and termination review: The center management company shall conduct a comprehensive evaluation of the funded project according to its actual situation, and investigate the project company through a combination of on-site investigation and written review. If the project that passes the investigation, the center management company will issue an opinion on suspension or termination of the project, and submit a written application to the district development and reform department. According to the investigation opinions given by the center management company, the district development and reform department shall issue the final review opinion within 15 working days. If necessary, a third-party agency can be hired to conduct a review and assessment. The time for review and assessment will not included in the review time limit of the district development and reform department.

(II) When the project is suspended, the special fund that has not been appropriated shall also be suspended.

(III) When the project is terminated, the special fund that has not been appropriated shall also be terminated, and the project company shall return the special fund obtained within 30 working days from the date of confirmation of termination. In case of any circumstance specified in Article 180 of the Company Law of the People's Republic of China, liquidation shall be carried out according to relevant regulations and procedures and the special fund obtained shall be returned as agreed.

Chapter VII Supervision and Administration

Article 24 In case of any commercial change in the project company that has obtained the special fund, it shall promptly notify the center management company and the district development and reform department. At the beginning of each year, the district development and reform department shall organize the audit of the special fund used by the funded projects in the previous year. The department will also carry out a special assessment of the work performance of the center management company in the current year, strictly review the center management company’s performance in service, operation and the expenditure management of the special fund, and put forward relevant opinions and suggestions.

Article 25 The special fund shall be supervised by the district development and reform department, and subject to the inspection and supervision of the district finance department, the district audit department, and other departments. In case of violation of credit commitments, the project company shall return the supporting fund obtained within three months from the date when the district development and reform department issues a notice. If the supporting fund is not returned on time or false materials are provided to maliciously extract the fund, the district development and reform department shall have the right to recover the supporting fund that has been issued and publicize the the project company's violation of credit commitments according to the law. If a crime is constituted, criminal responsibility shall be investigated according to the law.

Chapter VIII Supplementary Provisions

Article 26 Within the validity period of the measures, after being reviewed and recommended by the center management company and approved by the district development and reform department, entities that meet all of the following conditions can be regarded as pilot entities. These pilot entitites will be suject to supervision and administration in accordance with the measures and its member enterprises will have the opportunity to enjoy the special fund.

(I) Relevant enterprises or institutions whose registration places, tax administration relationships, and statistical relationships are in Guangzhou Huangpu district and Guangzhou Development District and which possess a sound financial system, have independent legal personality, adopt independent accounting, and comply with relevant regulations on credit management of the district;

(II) Have an independently operated professional bio-industry incubation base in Guangzhou International Bio Island (China-Israel Cooperation Zone), with a construction area of not less than 50,000 square meters;

(III) Independently establish private equity investment funds in Huangpu district and Guangzhou Development District;

(IV) Have more than three years of experience in bio-industry incubation.

Article 27 If the project has environmental pollution, biosafety, and other hazards and fails to pass the reviews of relevant departments, no supporting fund be given.

Article 28 For enterprises that comply with the provisions of the measures, if the same project or matter of them is qualified for other supporting policies in the district, the policy that provide the strongest support will be adopted, unless otherwise specified.

Article 29 The term "more than" in the measures includes the number itself, and "less than" does not include the number itself.

Article 30 The measures shall enter into force on the date of issuance and shall be valid for three years. Matters that have received the special fund during the validity period of the original measures of Guangzhou Development District for the Administration of the Special Fund for Sino-Israel Bio Industry Incubation center (Sui Pu Fa Gai [2017] No 8) but are not completed shall be handled according to the provisions of the original document.