China

9 Chapter Corporate Laws

    • Overview

        

       Since 2015, the corporate landscape of China has been undergoing the following significant changes[1]:

       

      ·         Liberalization of China's onshore capital markets

      ·         Enforcement of market-abuse regulations and improvement of business integrity

      ·         Improvement of governance reputation of domestic companies to attract overseas capital

      ·         Reduction of government involvement in listed entities and replace state supervision with a more managerial approach

       

      Significantly, foreign investors who plan on doing business in the country are still faced with the challenge of being unfamiliar with local legal and cultural contexts.

       

      In order to address this, the government has launched the China Corporate Governance Project which aims to provide[2]:

       

      1. Direct Advice for Companies

      2. Local Capacity Building

      3. Regulatory/Policy Advocacy

      4. Global Knowledge Management and Awareness Raising

    • A. Companies Law, as amended

       1. Management and Articles of Association

       

       

      2. Capital Requirements

       

      a.    New Company Law restrictions:

       

      ·         The registered capital requirement is increased to 100,000 RMB

      ·         The entire registered capital amount must be paid in a single instalment

      ·         A single investor may form only one single shareholder company, and,

      ·         If the shareholder fails to maintain adequate distance between the finances of the company and the shareholder's personal finances, the shareholder will lose the protection of limited liability and will have joint financial liability for company debts.

       

      3. Limited Liability Companies (youxian gongsi)

       

      a. Public and Shareholder Access to Company Information

       

       The New Law provides that the public has the right to access basic company information and further provides that the registration authority must provide consulting assistance in accessing that information. The public will now have access to the following information on limited liability companies:

       

      ·         name

      ·         registered address

      ·         legal representative

      ·         registered capital

      ·         business classification

      ·         scope of business

      ·         termination date

      ·         identity of shareholders

       

       

       Also under the New Law, the company must maintain the following basic records and make those records available to the shareholder at the shareholder's request:

       

      ·         articles of association

      ·         minutes of meetings of the board of directors

      ·         minutes of meetings of the board of supervisors

      ·         tax returns and financial reports

      The statute provides for shareholder access to the company's full financial records. In this case though, the company has the right to deny access if it believes such access will damage it.

       

      4. Abuse of Shareholder Rights and Piercing the Corporate Veil

       

      The New Company Law introduces this new concept which is intended to protect both the company and third party creditors. It provides that shareholders must exercise their rights in accordance with the law, the regulations and the company articles of association.  The shareholder must not abuse the independent legal person status of the company or his own limited liability rights in a manner that harms the interests of the company or its other shareholders or creditors. 

       

      Where such abuse damages the company or other shareholders, the offending shareholder are liable for such loss.  Where such abuse is used by the shareholder to escape liability for his own debts in a manner that seriously damages the interests of a creditor of the company, the shareholder is jointly liable for such debts.

                 

       

      4. Access to Corporate Information

       

      5. Piercing the Corporate Veil

       

      6. Third party loans

       

      7. Legal remedies for improper actions

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    • A. Documents required for registration of foreign-funded companies

       i. Documents required for registration of foreign-funded companies:

      1. Registration application form for companies;

      2. Branch company’s application for joining the group;

      3. Articles of association of the enterprise group;

      4. Certificate of being qualified as a legal person of the new member of the enterprise group;

      5. Parent company’s shareholding certificate or investment certificate issued by the member enterprise of the group;

      6. Approval document issued by the relevant authority;

      7. Other documents.

       

      ii. Documents and certificates required for business opening registration for foreign (Area) enterprises engaged in production and operating activities within the territory of China:

      1. Application for business opening registration for foreign (area) enterprise engaged in production and operating activities within the territory of China;

      2. Project contract;

      3. Approval documents or testimonial of the examination and approval authority;

      4. Legal business opening certificate of foreign (area) enterprise;

      5. Credit certificate of foreign (area) enterprise;

      6. Letter of appointment of principal signed by the president or general manager of foreign (area) enterprise;

      7. Capital verification report;

      8. Articles of association of the foreign (area) enterprise and list of members of its Board of Directors;

      9. Operation site (address) using certificate;

      10. Other related documents and certificates.

       

      iii. Documents for establishment registration of resident representative offices of foreign (region) enterprises:

      1. Establishment registration application form for resident representative offices of foreign (region) enterprises;

      2. Approval document issued by the relevant authority;

      3. Photocopy of the legal business certificate and the original credit certificate of the foreign enterprise;

      4. Appointment document of the (chief) representative of the resident representative office;

      5. Certificate of using the office domicile;

    • B. Documents for modification registration of foreign-funded enterprises

       i.              Modification registration of foreign-funded enterprises in China

      Documents for the modification registration of foreign-funded enterprise group

      1. Modification registration application form for enterprise groups;

      2. Modified articles of association of the enterprise group;

      3. Certificate of being qualified as a legal person of the new member of the enterprise group;

      4. Parent company’s shareholding certificate or investment certificate issued by the member enterprise of the group;

      5. Other relevant documents.

       

      ii. Documents required for the cancellation of modification registration of foreign-funded enterprises

      1. Application form for cancellation of the modification registration of foreign-funded enterprises signed by the legal representative of the company;

      2. Written judgment of the people’s court;

      3. Formal approval letter for the application of the modification registration;

      4. Photocopy of the duplicate of business license;

      5. Other relevant documents.

       

      iii. Modification of company name

      1. Modification registration application form of foreign (region) enterprise engaged in production and operating activities within the territory of China;

      2. Approval documents or letter of introduction issued by approval authority;

      3. Notification of name pre-approval;

      4. Photocopy of the duplicate of business license;

      5. Other relevant documents and certificates.

       

      iv. Modification of business domicile

      1. Modification registration application form of foreign (area) enterprise engaged in production and operating activities within the territory of China;

      2. Approval document or letter of introduction issued by the approval authority;

      3. Certificate of using the new domicile;

      4. Photocopy of the duplicate of business license;

      5. Other relevant documents and certificates.

       

      v. Modification of business scope

      1. Modification registration application form of foreign (region) enterprise engaged in production and operating activities within the territory of China;

      2. Approval document or letter of introduction issued by the relevant authority;

      3. New project contract;

       

    • C. Modification registration of resident representative offices of foreign (region) enterprises

       i. Modification of company name

      1. Modification registration application form for resident representative offices of foreign (region) enterprises;

      2. Approval document issued by the relevant authority;

      3. Name modification certificate of the foreign (region) enterprise;

      4. Certificate of representation;

      5. Photocopy of the registration certificate;

      6. Other relevant documents and certificates.

       

       

       

      ii. Modification of office domicile

      1. Modification registration application form for resident representative offices of foreign (region) enterprises;

      2. Approval document issued by the relevant authority;

      3. Certificate of using the office domicile and the certificate of foreign office premise;

      4. Certificate of representation;

      5. Photocopy of the registration certificate;

      6. Other relevant documents and certificates.

       

      iii. Modification of the representative/chief representative

      1. Modification registration application form for resident representative offices of foreign (region) enterprises;

      2. Approval document issued by the relevant authority;

      3. Appointment and dismissal documents of the representative/chief representative;

      4. Dispatch letter and labor contract of outposts;

      5. Personnel registration form of the resident representative office of the foreign (region) enterprise;

      6. Photocopy of the registration certificate;

      7. Other relevant documents and certificates.

       

      iv. Modification of the duration of stay/ validity period of the registration certificate

      1. Modification registration application form for resident representative offices of foreign (region) enterprises;

      2. Approval document issued by the relevant authority;

      3. Photocopy of the business certificate and the original credit certificate of the foreign enterprise;

      4. Business report signed by chief representative;

      5. Certificate of representation;

      6. Photocopy of the registration certificate;

      7. Other relevant documents and certificates.

    • D. Modification registration of a branch (administrative offices) of foreign-funded enterprises

       i. Modification of the duration of stay/ validity period of the registration certificate

      1. Modification registration application form for resident representative offices of foreign (region) enterprises;

      2. Approval document issued by the relevant authority;

      3. Photocopy of the business certificate and the original credit certificate of the foreign enterprise;

      4. Business report signed by chief representative;

      5. Certificate of representation;

      6. Photocopy of the registration certificate;

      7. Other relevant documents and certificates.

    • E. Filing registration for foreign-funded enterprises

       i. Filing registration application form for foreign-funded enterprises the modification of company name

      1. Application for modifications (filing) of registration items of foreign-funded enterprise;

      2. Resolution or decision made in accordance with laws;

      3. Photocopy of the duplicate of business license;

      4. Notification of name pre-approval;

      5. Amendment to the articles of association or the revised articles of association signed by the legal representative;

      6. Other relevant documents.

       

      ii. Modification of company domicile

      1. Application for modifications (filing) of registration items of foreign-funded enterprise;

      2. Resolution or decision made in accordance with laws;

      3. Amendment of articles of association or the revised articles of association signed by the legal representative;

      4. Certificate of using the new domicile;

      5. Photocopy of the duplicate of the business license;

      6. Other relevant documents.

       

      iii. Modification of legal representative

      1. Application for modifications (filing) of registration items of foreign-funded enterprise;

      2. Resolution or decision made according to the law;

      3. Appointment document of the new legal representative and the dismissal document of the former legal representative;

      4. Registration form of the new legal representative;

      5. Photocopy of the duplicate of the business license;

      6. Approval document issued by the approval authority;

      7. Other relevant documents.

       

      iv. Modification of total investment and registered capital

      1. Application for modifications (filing) of registration items of foreign-funded enterprise;

      2. Approval document and certificate issued by the approval authority (Written reply by the governing authority and certification of approval (duplicate 1);

      3. Resolution or decision made in accordance with laws;

      4. Modification agreement for contract and articles of association;

      5. Amendment of articles of association or the revised articles of association signed by the legal representative;      

    • F. Other filing items of foreign-funded enterprise

       i. Equity pledge

      a. Application for modifications (filing) of registration items of foreign-funded enterprise;

      b. Approval document of the approval authority;

      c. Resolution or decision made according to the law;

      d. Pledge contract agreed by other investors according to law;

      e. Photocopy of the duplicate of the business license.

       

      ii. Branch

      a. Application for modifications (filing) of registration items of foreign-funded enterprise;

      b. Photocopy of the duplicate of the branch company’s business license;

      c. Photocopy of the duplicate of the company’s business license;

      d. Other documents.

       

      iii. Liquidation of group and person in charge of liquidation

      a. Application for Modifications (filing) of registration items of foreign-funded enterprise”; signed by the person in charge of liquidation group;

      b. Resolution or decision made according to laws;

      c. Photocopy of the duplicate of business license;

      d. Other documents.

       

      iv. Amendment to articles without registration items involved

      a. Application for modifications (filing) of registration items of foreign-funded enterprise;

      b. Approval document issued by the relevant authority;

      c. Amendment to the articles of association or the revised articles of association signed by the legal representative of the company;

      c. Photocopy of the duplicate of the business license.

       

      v. Overseas shareholder/founder recipient of legal documents:

      a. Application for modifications (filing) of registration items of foreign-funded enterprise;

      b. Power of attorney for legal documents delivery service;

      c. Photocopy of subject qualification of the authorized person.

       

      vi. Liaison person for industrial & commercial registration

      a. Modification (for record) registration application form for foreign invested enterprises;

      b. Basic information of the liaison person for industrial and commercial registration.

    • G. Documents on cancellation of foreign-funded enterprise

       Documents for cancellation of a foreign-, Hong Kong-, Macao- or Taiwan-funded enterprise (one copy of each)

       

      i. For cancellation of a foreign-funded enterprise

      1.Cancellation registration application form for foreign invested enterprises signed by the responsible person of the liquidation team. Approval document issued by the original approval authority agreeing the cancellation;

      2.Resolution or decision made in accordance with laws;

      3.Liquidation report that has been recorded and confirmed in accordance with laws;

      4.Certificate for registration of cancellation issued by taxation and customs authorities;

      5.Certificate for registration of cancellation of branches;

      6.The original and the duplicate business license;

      7.Other relevant documents and certificates.

       

      ii. For registration of cancellation of a foreign-funded enterprise (non-company)

      1. Cancellation registration application form for foreign-funded enterprises;

      2. Approval document issued by the original approval authority agreeing the cancellation;

      3. Resolution or decision made in accordance with laws;

      4. Reports confirming the settlement of credits and liabilities or documents formulated by liquidation team that are responsible for settlement of credits and liabilities;

      5. Duty-paid certificates issued by taxation authority and customs;

      6. Certificates showing cancellation of its branches (administrative offices);

      7. Original and the duplicate business license, as well as the official stamp;

      8. Other relevant documents and certificates.

       

      iii. Documents (one copy for each) for cancellation of foreign-funded companies

      1. Cancellation registration application form for corporate group;

      2. Other relevant documents and certificates.