China Releases Industrial and Commercial Administration Measures for Shanghai Free Trade Zone

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Includes details affecting foreign invested enterprises in the advertising industry

Oct. 12 – China’s State Administration of Industry and Commerce released “Several Opinions on Supporting the Construction of Shanghai Free Trade Zone (waiqizi [2013] No.147, hereinafter referred to as ‘Opinions’)” on September 26, which specify several opinions regarding the industrial and commercial registration reform in the Shanghai Free Trade Zone (Shanghai FTZ). Detailed information can be found below.

The Opinions have put forward the following three opinions to support the industrial and commercial registration reform in the Shanghai FTZ:

1. Piloting the business registration system reform to optimize the business environment in the Shanghai FTZ.

Piloting the capital registration system
All companies (excluding those subject to separate requirements for the paid-up registered capital) are covered under the capital registration system on a trial basis. Once this system is piloted, relevant industry and commerce authorities will register the subscribed capital contribution of the initiators or the total subscribed shares of the shareholders instead of the paid-up capital of the company.

Relaxing the capital registration requirements
The following capital registration requirements have been canceled in the Shanghai FTZ:

  • The minimum registered capital of limited liability companies (RMB30, 000);
  • The minimum registered capital of one-person limited liability companies (RMB100,000);
  • The minimum registered capital of joint stock limited companies (RMB5,000,000); and
  • The period within which the shareholders shall fully pay up their capital contribution.

Moreover, the restrictions on the initial capital contribution amount and proportion of all shareholders upon company incorporation, and those on the proportion of monetary contribution in the registered capital have been removed.

Piloting the “license before certificate” registration system
Enterprises in the Shanghai FTZ may only commence production and operation activities after obtaining the business license.

Piloting the record-filing system for foreign-invested advertising enterprises
According to the Opinions, the establishment of a foreign-invested advertising enterprise, the application for expanding an advertising business, and the establishment of a branch office by a foreign-invested advertising enterprise outside the Shanghai FTZ are no longer subject to the following restrictions provided under the Administration Regulations of Foreign-Invested Advertising Enterprises:

1. Establishment of a Sino-foreign joint venture advertising enterprise

  • Each party thereto shall be an enterprise engaged in the advertising business;
  • Each party thereto shall have been in operation for two years or more; and
  • The Sino-foreign joint venture advertising enterprise shall have advertising business performance.

2. Establishment of a wholly foreign-owned advertising enterprise

  • Each investor thereto shall be an enterprise that is mainly engaged in the advertising business; and
  • Each investor thereto shall have engaged in its business for three years or more.

3. Establishment of branches by foreign-invested advertising enterprises

  • The foreign-invested advertising enterprise shall have paid the registered capital in full; and
  • The foreign-invested advertising enterprise shall have an annual advertising business turnover of not less than RMB20 million.

Moreover, the examination and approval formalities for advertising projects and branch establishment by a foreign-invested advertising enterprise are replaced by the record-filing system.

In addition, the foreign-invested advertising enterprises no longer need to make a separate application for the following items and may go through relevant formalities directly:

  • Changing of operation mode;
  • Share transferring; and
  • Changing of advertising business scope or registered capital.

2. Optimizing the enterprise setting-up process and improving the registration efficiency in the Shanghai FTZ

The industrial and commercial authority in the Shanghai FTZ has been granted the authority to administrate the registration for foreign-invested enterprises. The authority shall be responsible for the registration, supervision and administration of foreign-invested enterprises established in the zone.

Moreover, applications for enterprise establishment in the Shanghai FTZ shall be handled in a unified manner, and a new type of business license will be piloted in the zone.

3.Transforming the market entity supervision mode and maintaining the market order in the Shanghai FTZ

The Shanghai FTZ will set up an information sharing system to strengthen the credit supervision of enterprises established within the zone.

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