Highlights of China’s Draft Regulations
on the Registration and Administration of Commercial Entities
On 15 June 2020, the State Administration for Market Regulation of the PRC published the Regulations on the Registration and Administration of Commercial Entities of the PRC (Draft) (hereinafter referred to as the Draft Regulations) on its website to seek public comments. The Draft Regulations consist of six chapters and 102 articles, including general provisions, registration items, registration procedures, supervision and administration, legal liabilities and supplementary provisions. The enactment of the said Regulations is to establish a unified registration and administration system for commercial entities in China. The Draft Regulations have summarized the reform measures implemented before and upgraded them into legal provisions. Innovations are also involved in the Draft Regulations. The following highlights in the Draft Regulations are worthy of further attention and study.
- Registration of Business Suspension
The registration of business suspension is introduced for the first time in the Draft Regulations. Commercial entities are now allowed to apply for the registration of business suspension with the registry office.
The commercial entity that applies for registration of business suspension may only provide an address for the service of legal documents during its business suspension period. Registration of domicile (operation place) is not required under this circumstance.
A commercial entity can apply for registration of business suspension for many times. But the business suspension period for each time shall not exceed 2 years. It shall apply to resume operation with the registry office upon expiration of the business suspension period or it decides to carry out business operation during its business suspension period.
The registry office will notify the tax bureau, human resources and social security bureau and other relating authorities accordingly upon completion of the business suspension registration of a commercial entity. The commercial entity should not have to file tax returns or comply with other filing obligations to other authorities during the business suspension period according to the foregoing provisions. However, the exemption of filing obligations shall still be subject to the specific regulations issued by the tax bureau and other authorities upon the Draft Regulations taking effect.
Regarding the annual reporting requirement, a commercial entity that has applied for the registration of business suspension with the registry office is still required to file an annual report for the last year to the registry office during the period from 1 January to 30 June each year in accordance with Article 78 of the Draft Regulations.
- Relaxation of Registration Requirements
According to Article 17 of the Draft Regulations, if a commercial entity plans to carry out business activities outside its domicile (principal operation place), it shall set up branches accordingly. However, if the new operation place falls within the jurisdiction of the same registration authority, it can only apply for the registration of new operation place. Setting up a branch is not required under this circumstance.
Article 17 also specifies that if an e-commerce operator only carries out business activities through internet, the online business site can be registered as its operation site when the operator applies for the registration of individual industrial and commercial households.
- Unification of Registration and Administration Rules
Once the Draft Regulations taking effect, the following regulations or measures will be repealed: the Regulations of the PRC on Administration of Company Registration, the Administrative Regulations of the PRC on Registration of Enterprise Legal Persons, the Administrative Measures of the PRC on the Registration of Partnerships, and the Administrative Regulations of the PRC on Farmer Professional Cooperatives.
All commercial entities, including individual industrial and commercial households, limited liability companies, joint stock companies, other corporate legal persons (nationally owned enterprises, collectively owned enterprises and joint ventures), other profitable legal persons and their branches, farmers?specialised cooperatives, farmers?cooperatives, other special legal persons and their unincorporated enterprises, branches, partnerships, sole proprietorships, and foreign company branches, registered in China shall be subject to the Regulations on the Registration and Administration of Commercial Entities of the PRC.
The limited liability companies, joint stock limited liability companies or partnerships invested by foreign investors shall be subject to the said Regulations as well.
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