Strengthening the Legal and Regulatory Framework

The draft measures are formulated in accordance with several foundational laws, including the Company Law of the People’s Republic of China, the Provisions of the State Council on the Registered Capital Registration Management System, and the Regulations on the Registration and Administration of Market Entities. The overarching goal is to standardize the procedures for company registration, alterations, and cancellations while ensuring the authenticity, legality, and validity of submitted materials.

Emphasis on Legal Compliance 

The measures place significant emphasis on the accuracy and compliance of all documents submitted during the registration process. This is crucial for maintaining the integrity of the market and preventing fraudulent activities that could undermine business operations and investor confidence. Companies will need to be diligent in ensuring that all submitted materials are accurate, legally sound, and reflective of their true operational status.

Modernizing the Enterprise System

These draft measures are part of a broader initiative to modernize China’s enterprise system. By tightening regulations and enhancing oversight, the Chinese government aims to create a more robust and resilient business environment that can support the country’s high-quality economic development goals.

Key Provisions in Company Registration

The draft measures introduce several key provisions that will impact the way companies register, alter, and manage their business operations. These provisions are designed to increase transparency, enhance accountability, and ensure that companies operate within the legal framework established by the Chinese government.

1. Detailed Business License Requirements

One of the most significant changes proposed in the draft measures is the detailed requirements for business licenses. A company’s business license must now include comprehensive information, such as: The company’s name, Domicile, Legal representative, Registered capital, Company type, – Scope of business, Registration authorities, Date of establishment and Uniform social credit code

Additionally, if a company has established an audit committee, it must also record the details of the directors who are members of this committee. This level of detail ensures that all relevant information about a company is readily available, which can enhance transparency and facilitate better regulatory oversight.

Introduction of the Liaison Officer Role

The draft measures introduce a new role within companies—the liaison officer. This individual will serve as the primary point of contact between the company and registration authorities. The liaison officer can be a legal representative, shareholder, director, supervisor, or senior management member, or any other employee with a labor relationship with the company. The company must ensure that the liaison officer’s contact information, including phone number and email address, is registered and up to date to guarantee smooth communication with regulatory bodies.

The introduction of this role underscores the importance of maintaining effective and open channels of communication with the government, which is critical for compliance and regulatory purposes.

Tightened Capital Contribution Regulations

Capital contribution—the amount of capital that shareholders commit to invest in a company—has always been a critical aspect of business operations. The draft measures propose stricter regulations on how and when these contributions must be made.

Capital Contribution Deadlines

For limited liability companies, all shareholders must ensure that their subscribed capital is paid in full within five years from the company’s establishment. Companies that were registered before July 1, 2024, must adjust their remaining capital contribution periods to meet this new five-year requirement by June 30, 2027. Similarly, companies limited by shares must also comply with these stricter capital contribution deadlines.

These new deadlines are intended to prevent companies from delaying their financial commitments, thereby ensuring that they are adequately capitalized to support their operations. This move is expected to enhance the financial stability of businesses and reduce the risk of defaults that could negatively impact creditors and other stakeholders.

Monitoring Abnormal Capital Registration Practices

The draft measures also empower registration authorities to closely monitor and address any abnormal practices related to capital registration. Specifically, if a company’s capital contribution period exceeds 30 years or its registered capital surpasses RMB 1 billion, the authorities may require the company to make adjustments. This provision is designed to prevent companies from exploiting registration loopholes that could result in financial instability or misrepresentation of a company’s financial health.

Authorities are also granted the ability to assess the company’s business scope, operating conditions, and shareholders’ ability to make capital contributions. If these factors are found to be inconsistent with the principles of authenticity and reasonableness, the company may be required to adjust its registration in a timely manner.

Alignment with National Interests

Recognizing the strategic importance of certain industries and companies, the draft measures provide flexibility for businesses involved in critical national projects. Companies engaged in major national strategic tasks, or those whose operations are crucial to national security or the national economy, may adhere to their original capital contribution timelines with the approval of the State Administration for Market Regulation.

This provision reflects the Chinese government’s broader strategy of balancing strict regulatory oversight with the need to support and protect industries that are vital to national interests.

Enhanced Supervision and Separate Register Management

The draft measures also introduce stricter supervision for companies that have had their business licenses revoked, have been ordered to close down, or have been included in the list of abnormal business operations. These companies will be managed within a separate register and can only restore their registration status if they meet specific conditions set by the authorities.

Separate Register for Non-Compliant Companies

Companies that fall into the category of non-compliance will have their information concealed on the national enterprise credit information publicity system, with their names replaced by a unified social credit code. This ensures that while the company is not erased from the record, it is not actively managed or considered a part of the regular business community. This approach allows for continued monitoring and the possibility of rectification while ensuring that non-compliant companies do not negatively impact the broader market.

Accountability for Intermediaries

Intermediary agencies that assist in company registration are also subject to increased scrutiny under the draft measures. Any fraudulent activity, such as submitting false materials or using another person’s identity, will result in penalties for both the intermediary agency and the responsible individuals. This move is part of a broader effort to ensure that all parties involved in the registration process are held to the highest standards of integrity and accountability.

Simplification and Inter-Departmental Collaboration

To improve the efficiency of the registration process, the draft measures propose several simplifications, particularly concerning the verification of a company’s domicile or business premises. Through enhanced data sharing between departments, registration authorities can reduce the administrative burden on businesses, making it easier for companies to comply with registration requirements.

Streamlined Domicile Verification

When a company applies for registration of its domicile or business premises, it must submit proof of its use. However, if the registration authority can verify the objective existence of the domicile or premises through inter-departmental data sharing, it may exempt the company from providing additional proof. This provision aims to reduce redundant paperwork and streamline the registration process, thereby enhancing the overall business environment.

Coordination with Legal Compliance

The draft measures also stress the importance of adhering to effective legal documents. Companies must apply for the removal of shareholders, legal representatives, directors, and other senior management personnel if required by legal rulings. Failure to comply with these legal requirements may result in enforcement actions by the registration authority, further emphasizing the importance of legal compliance in business operations.

Conclusion: Preparing for the Future

The “Measures for the Implementation of Company Registration Management” represent a significant step forward in China’s efforts to modernize its business regulatory framework. For companies, these measures signal a renewed focus on compliance, transparency, and accountability. As these draft measures are finalized, businesses operating in China must prepare to align their practices with the new requirements, ensuring that they remain competitive and compliant in an increasingly stringent regulatory environment. By proactively adjusting to these new measures, companies can not only avoid potential legal pitfalls but also position themselves to thrive in China’s dynamic and rapidly evolving market.