Company Formation China: Amended Company Law Lowers Threshold [2/2]

By Richard Hoffmann, ECOVIS Beijing China

For those who plan on registering a company in the galloping new year of the horse, good fortune is on your side as an amendment to the PRC Company Law (the “amendment”) has been issued on the 28^th December 2013. Having discussed the changes in the Amended Company Law in the first part of this two-part blog entry, we will now explain the implications this has for the Chinese market and subsequently, for you.

On the 7^th February 2014, the State Council of the People’s Republic of China issued the Plan on Reform Regarding Registered Capital Registration. This was a response to the amendment of Company Law, which is drastically changing the climate within the Industry and Commerce Registration, moving the Chinese market towards becoming the gold soil for all creditworthy local and overseas investment.

These reforms are expected to change the Chinese market to become better for more creditworthy investments and potentially threatening the survival of the others. It may potentially make the Chinese market more dependable and trustworthy.

So what do all these changes mean to us?

1.     To streamline market access requirement

✓ All aspects of registered capital including investment amount, means and timeframe of contributing investment, can be negotiated among shareholders.

✓  No minimum amount of registered capital required, unless otherwise stipulated by laws and regulations.

✓  There will not be capital verification or registration regarding injected capital.

✓  Corporation Annual Inspection will be cancelled.

✓  Valid documents certifying the right to use an office/ domicile, such as a leasing contract, will only be required during registered address registration.

✓  Digital Business License may be applied online, making it be more convenient.

2.     To reinforce credit supervision

✓  The investment amount, means & timeframe of the contributing investment and the capital injected shall be disclosed to the public through the Credit Publicity System.

✓  The submission of annual reports for disclosure will be required. Both companies and individuals can find the credit records concerning their target business partner through an online system.

✓  Companies who conceal facts or commit frauds will be recorded onto a governmental blacklist, which can be seen by everyone.

However, certain industries are still under restriction for the sake of market security, especially bankroll management companies and investment companies. These may include banks, insurance companies, financing guarantee companies and trust companies.

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