Starting March 1, 2021, the business name registration process in China will be digitized and based on a system of independent declaration.
Registering a business name has now been made easier, following a State Council decree signed by Premier Li Keqiang, and released by the State Administration of Market Regulation (SAMR) on January 19.
Beginning March 1, 2021, the business name registration process will take place online, and shift from a system of “pre-approval” to one of “independent declaration” – a move that is expected to vastly improve the business environment for foreign enterprises.
The latest iteration of the original 1991 regulation reflects the fast-changing and digital corporate environment in which businesses are now operating in.
The key changes introduced under the new regulation are as follows:
Traditionally, business names have been a prerequisite for applying for business license with the SAMR.
The new regulation now seeks to reverse this, meaning that the name pre-approval step required in representative office (RO) or wholly foreign-owned enterprise (WFOE) setups, which takes five to seven working days, has now been removed.
An “independent enterprise name declaration system” will be established. This will essentially transform the business registration process from a pre-approval system to a self- declaration system.
The online system will operate by enabling individuals to log in and inquire, select, and declare a name that they want to register, and the system will then automatically filter and control those names in accordance with the regulations. Enterprises are to use their independent judgement in the selection process.
The registration will take effect once it has been approved by the relevant authority.
This will make possible an instant use of business names in contrast to the original regulation that required around seven working days for the same approval.
In practice, over 90 percent of the self-declared names are approved when the enterprise is registered. Thus, these reforms are expected to drastically streamline this process and remove unnecessary red tape surrounding corporate establishment.
This self-declaration system will be complemented by an open database of all the enterprise names, which will serve as an important reference for the names that have been used by existing enterprises. Improvements will be made to the three-level enterprise name database of provinces, cities, and counties already in operation since 2017.
The basic norms, elements, and composition of an enterprise name have also been clarified, as well as the relevant rules for foreign invested enterprises. The regulation lay out nine circumstances that will disqualify a name and set strict guidelines over the use of the word “China” “Branch” and “Central”, among other words.
However, it is stated that a wholly foreign-owned or controlled foreign invested enterprise is permitted to use the word “China” within their name. The regulation also requires that sector and operational characteristics be identified, according to the company’s primary business and industrial classification standards for national economic activities.
According to the regulation, if a company believes that its legitimate interest is hurt by another company using the same or similar business name, it can file a lawsuit in court or seek help from the business name registration agency.
The revisions clarify the “one name for one business” principle and commits to strengthening the oversight mechanisms for enterprise name, both, during and after the registration process. At the same time, the investigation and punishment of the use of enterprise names to implement unfair competition will be reinforced to maintain market order.
Business names are an important part of enterprise’s general makeup – and will go on to form one’s legal entity name and brand identity.
The revised regulation will therefore afford enterprises more autonomy and flexibility within this process, and at the same time offer more transparency and uniformity across the region using a centralized digital database.
Reforms such as these are an important part of optimizing the commercial environment in China and can serve to encourage fairer competition within the market.
If you wish to set up an enterprise in China, or have further questions about the company incorporation process, please feel free to contact us at firstname.lastname@example.org.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at email@example.com.
We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, Malaysia, Thailand, United States, and Italy, in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.
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