On 26 July 2024, China’s State Administration for Market Regulation (“SAMR”) published a draft Implementation Measures on Company Registration Administration (“Draft Measures”) for public comment until 26 August 2024. To implement the requirements on the formulation of specific measures for company registration by the Company Law of the People’s Republic of China (“Company Law”) and the Provisions of the State Council on Implementing the Registration Management System for Registered Capital under the Company Law of the People’s Republic of China (“Provisions”), the Draft Measures formulate specific implementation rules for the registration and management appliable to all Chinese market entities, including foreign-invested enterprises. It has five chapters and 27 articles, mainly including requirements for company registration matters and standardized management of company registration to cultivate a high-quality national unified market.
First of all, the Draft Measures clarify the specific requirements for company registration matters, including foreign investment, audit committee, adjustments to the company’s contribution period, and the assessment of abnormal registered capital. It points out that the business scope of foreign-invested companies and companies directly invested by foreign-invested enterprises must not only comply with the negative list of market access but also comply with the special management measures for foreign investment access.
According to Articles 69 and 121 of the Company Law, a limited liability company and a joint stock company may set up an audit committee composed of directors in the board of directors by the provisions of the company’s articles of association to exercise the powers of the board of supervisors. The Draft Measures require that when a company sets up an audit committee, it shall indicate the information that the director serves as a member of the audit committee when filing the director. In addition, it requires that when registering the company’s liaison officer, responsible for liaison between the company and the company registration authority, the liaison officer’s usual contact information shall be submitted to ensure smooth communication.
Article 2 of the Provisions stipulates that for companies registered and established before 30 June 2024, the limited liability companies whose remaining subscribed capital contribution period exceeds 5 years from 1 July 2027 shall adjust their remaining subscribed capital contribution period to within 5 years before 30 June 2027, and their shareholders shall also pay the subscribed capital contribution in full within the adjusted subscribed capital contribution period; and the promoters of joint-stock companies shall pay the full amount of shares subscribed by them before 30 June 2027. In response to this provision, the Draft Measures made the following adjustments and supplements: 1. For limited liability companies registered and established before 1 July 2024, from 1 July 2027, if their remaining subscription period exceeds 5 years, they shall adjust their remaining subscription period to within 5 years before 30 June 2027; if their remaining subscription period is less than 5 years or their registered capital have been paid in full, there is no need to adjust their subscription period.2. For joint stock companies registered and established before 1 July 2024, they shall pay up their remaining subscribed registered capital before 30 June 2027.3. For the companies registered and established before 1 July 2024 whose production and operation involve major national strategic tasks, national economy, people’s livelihood, national security, and other national interests or major public interests, and with the approval of the SAMR, they may make capital contributions according to the capital contribution period determined before 1 July 2024. It applies to private enterprises, foreign-invested enterprises, and state-owned enterprises,
According to Article 3 of the Provisions, the company registration authority may require companies with obviously abnormal registered capital to adjust their registered capital promptly. Factors considered in determining the obvious abnormality include the company’s business scope, operating conditions, shareholders’ investment capacity, main business projects, and asset scale. To increase the operability and enforceability of the assessment of the obvious abnormality, the Draft Measures further list three types of companies such as companies with a subscribed capital period of more than 30 years, with a registered capital of more than RMB 1 billion, or with abnormal performance, that may be judged to have abnormal registered capital.
Furthermore, the Draft Measures stipulate several registration standards to promote the healthy development of companies and improve the efficiency of company registration. Firstly, it requires agents and their staff to indicate their agency identity and submit the power of attorney when registering companies on behalf of others. Secondly, it requires that the company registration authority shall promptly share the business suspension filing information submitted by the companies with the tax, human resources, and social security departments; and shall, based on the notice of assistance in execution served by the court and the effective legal documents involving the removal of shareholders, legal representatives, directors, supervisors and/or other senior managers, publicize the removal information in the National Enterprise Credit Information Publicity System (“NECIP System”). Thirdly, the Draft Measures list six situations where registration is not granted, including the company name does not meet the statutory conditions, the shareholder's capital contribution period or capital contribution amount is determined as abnormal and refuses to adjust, and the pre-registration approval matters are not approved. Fourthly, the Draft Measures allow the company registration authority to exempt the companies from submitting proof of use of their residences or business premises. The prerequisite is that through inter-departmental data sharing and other means, it can be verified that the residences or business premises submitted by the companies objectively exist and have ownership or use rights.
Moreover, the Draft Measures stipulate a separate management system and a social credit code system. According to the Draft Measures, the separate management system applies to the companies registered and established before 1 July 2024, which are included in the list of abnormal operations or fail to adjust the capital contribution period before 30 June 2027 as required by the Company Law. According to this system, the company registration authority will replace the company names of the companies included in the separate management system with their unified social credit code, hide their other information on the NECIP System, and no longer count and manage them as registered companies. In addition, according to the social credit code system, a company can only have one unified social credit code. After the company is revoked or canceled, its unified social credit code will still be kept for a long time to ensure that it can be traced and queried.
In conclusion, the specific provisions on company registration in the Draft Measures will help to promote the high-quality development of Chinese companies and build a unified national market that upholds honesty and trustworthiness.