China to Ease Company Registration Rules for Foreign Companies
Nov. 8 – Foreign-invested companies in China will see an easing of company registration requirements based on the principle of national treatment, according to Zhang Mao, head of China’s State Administration of Industry and Commerce (SAIC).
Zhang reiterated China’s new policies to ease company registration requirements at a press conference held on Thursday, and further clarified that those policies also apply to foreign businesses.
“Based on the national treatment principle, foreign companies are entitled to the same policies as their Chinese counterparts enjoy, meaning, when the Chinese government eases the setting-up requirements for Chinese companies, foreign investors should receive the same treatment,” said Zhang.
Zhang further stated that the reform of the company capital registration system includes the following areas:
- Lowering the registered capital requirements for setting up a company;
- Replacing the current annual inspection system of enterprises with an annual reporting system;
- Relaxing business premise registration requirements for market players;
- Facilitating the establishment of an enterprise credit system; and
- Promoting the subscribed capital contribution registration system.
“China will relax the thresholds of registered capital, the minimum registration capital of RMB30,000 for limited liability companies will be canceled, as well as the RMB100,000 minimum for single shareholder companies and the RMB5 million minimum for joint stock companies. Besides, the requirements for business premise registration will be simplified,” said Zhang.
Moreover, measures will be taken to reduce the costs of business set-ups, and meanwhile, efforts will be made to build an integrity system whereby enterprises that violate the law will be put on a “blacklist” and be announced to the public.
The reform aims to lower market entry requirements while reinforcing the responsibility of market players. It is also part of the central government’s commitment to move away from the current “emphasizing approval while neglecting regulation” mode to “easier market access and reinforced supervision” mode.
Before the announcement of the new policies, a trial program of the “zero registered capital rule” for domestic companies has already taken place in Shenzhen, Zhuhai, Dongguan and Shunde. Under the pilot rules, the Administration of Industry and Commerce will not verify a company’s capital injection at the time of registration. This allows companies to complete the business registration process without the need to actually inject any capital, and companies can decide on the amount, method, and deadline for subscription of contributions at their own discretion.
Contrary to what many initially feared, there have been no instances of massive fraud found in these pilot cities so far, and according to the SAIC, compared with last year, the number of newly-established entities soared by 98.5 percent in Shenzhen, 52.5 percent in Zhuhai and 20 percent in both Dongguan and Shunde.
In addition, SAIC is accelerating the reform through the following measures:
- Proposing amendments to the Company Law, Company Registration Administration Regulations and other relevant laws and regulations;
- Improving related measures and rules after the above-mentioned laws and regulations have been amended;
- Accelerating the construction of credit information platforms for market players;
- Improving the current registration administration information system; and
- Developing electronic business licensing programs.
The number of foreign companies newly established in China this year stood at 16,351 as of September 2013, representing a 9.29 percent decrease compared with the same period last year.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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