The reasons why and the implications of falling foul of Chinese regulations
By Eunice Ku
Apr. 6 – The State Administration of Industry and Commerce (SAIC) is the national governmental organization directly under the State Council that coordinates local Administrations of Industry and Commerce (AICs).
Among the many SAIC and AIC functions and responsibilities, those highly relevant to the foreign investor include:
The “AIC blacklist” is part of an enterprise “credibility supervision information system” shared between AIC bureaus, but not made available to the public.
Specifically, the list categorizes enterprises into four categories (A, B, C, D) based on their creditability. If your name is listed in a key position of a company in categories B to D of this list, this may inhibit or prevent you from participating in a key position in new FIEs in the future.
Furthermore, while the directly relevant AIC policy does not state consequences for individuals beyond the legal representative, it is worth noting that during company establishment, the names of all people in key positions of an enterprise are registered with the AIC. Many people do not even know that their name is on the blacklist before applying to register a new FIE.
This article was taken from the April issue of China Briefing Magazine, titled “The China Manager’s Handbook.” Stories of expats having their name added to the Administration of Industry and Commerce “blacklist,” or being “trapped in China” for company legal proceedings, encourage a careful consideration of key positions in an FIE. This issue of China Briefing Magazine aims to shed a little light on this topic. “The China Manager’s Handbook” is temporarily available as a complimentary PDF download this month on the Asia Briefing Bookstore.
Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information on the risks and responsibilities you have as a foreign manager in China, please email firstname.lastname@example.org, visit our web site at www.dezshira.com, or download our brochure here.
Doing Business in China
Our 156-page definitive guide to the fastest growing economy in the world, providing a thorough and in-depth analysis of China, its history, key demographics and overviews of the major cities, provinces and autonomous regions highlighting business opportunities and infrastructure in place in each region. A comprehensive guide to investing in the country is also included with information on FDI trends, business establishment procedures, economic zone information, and labor and tax considerations.
Internal Control and Audit
This issue of China Briefing Magazine is devoted to understanding effective internal control systems in the Chinese context and the role of audits in detecting and preventing fraud.
Annual Compliance for FIEs
Prior to distributing and repatriating profits, foreign-invested enterprises must complete annual compliance, involving an audit, tax filing and inspection. These procedures are not only required by law, but are a good opportunity to conduct an internal financial health check. Also in this issue, we take a look at individual tax filing procedures for expatriates living and working in China.
The Foreign Corrupt Practices Act and its Impact on China Subsidiaries
This issue of China Briefing Magazine is dedicated to helping companies understand the Foreign Corrupt Practices Act and establish controls to prevent (and, if necessary) resolve FCPA noncompliance.
Previous Article « China’s Provincial Outbound Direct Investment in 2011
Next Article International Accounting Bulletin Names Dezan Shira Network Second Largest »
Dezan Shira & Associates´ brochure offers a comprehensive overview of the services provided by the firm. With its team of lawyers, tax experts, auditors and...
A firm understanding of China’s laws and regulations related to human resources and payroll management is absolutely necessary for foreign businesses in...
Doing Business in China 2022 is designed to introduce the fundamentals of investing in China. Compiled by the professionals at Dezan Shira & Associates in...
With the scope and penalties of China’s social credit system being further clarified in 2021, legal and regulatory compliance has become more important than...
As a legitimate tool for reasonable tax planning and cost saving, tax incentives play an important role. Companies also use tax incentives as a useful...
Over the last few months, China has been quickly expanding the pilot program on electronic special value-added tax (VAT) fapiao (hereafter special VAT...
Dezan Shira & Associates helps
businesses establish, maintain,
and grow their operations.
It should be noted that blacklisting can be rectified, however investors that have found themselves in such positions need to front up with the various Government departments concerned and engage in discussions to repair the damage. Typically there are usually tax and related financial issues that need to be dealt with; this of course requires additional financial commitment to China and to the specific business. Generally speaking the Chinese governments are pragmatic and will help the business re-establish itself if the investors are willing to play by the rules. Where this becomes a matter of a total write off and a decision to re-invest is a matter for the foreign investor to consider, but generally speaking being blacklisted in China, unless the matters in hand can be resolved, spells the end of an individuals China career.
so the bottom line is: no matter how bad you screw over the little guy, you can weasel your way back in if you give the right bigwigs sophisticated bribes,
Communism at Work
Comments are closed.
Stay Ahead of the curve in Emerging Asia. Our subscription service offers regular regulatory updates,
including the most recent legal, tax and accounting changes that affect your business.