Ecovis Global > China’s new market entity regulation: What companies need to know
China’s new market entity regulation: What companies need to know
11. July 2022
Following the introduction of the new civil law at the beginning of 2022, a new regulation concerning market entities has recently come into effect. It will simplify different administrative processes for market entity registration. Although it primarily concerns Chinese companies, it may also become important for foreign investors and their subsidiaries in China.
A year ago, the “Administrative Regulation of the People’s Republic of China on the Registration of Market Entities” was published, together with the “Implementing Rule for the Administrative Regulation of the People’s Republic of China on the Registration of Market Entities”. Both regulations took effect on 1 March 2022.
The administrative regulation combines six previous regulations governing market entities which had been published since the 1970s. It is the first official document to standardise the registration and management processes for market entities in China and aims to protect the rights and interests of those entities. It also optimises their business environment and sets out guidelines for business suspension, supervision, and legal liabilities.
Who can register as a market entity in China?
Under Chinese law, the following legal entities can register as market entities:
Unincorporated organisations carrying out business activities in China
What does the new regulation mean for businesses in China?
The following is a summary of the most important questions for our clients concerning the market entity regulation.
What needs to be registered?
Most business forms, such as companies, non-corporate enterprise legal persons, sole proprietorships or branches must indicate the following:
Type of entity
Amount of registered capital
Shareholders / founders
This categorisation makes it easier for new market entities to register. The clear rules not only help the market entities/companies, they will also help the local administrative offices to more efficiently check and complete registration processes.
Together with the ECOVIS Ruide China team, we can support you in all tax and legal issues. Richard Hoffmann, Lawyer, Ecovis Heidelberg, Germany
Standardisation for the business scope
Prior to the new regulation, companies had to define and write their business scope by themselves. The registration was then sent to the respective office. As a result, it had to be revised many times by the regulation offices, as there were no defined standards. This has now changed. The standardised wordings in the new regulation make this process far more efficient and less complex and time consuming. A newly introduced computer system for prechecking the business description of the market entities provides even less place for errors.
Electronic signature / seal authentication
During the pandemic with its multiple unforeseeable lockdowns in China, getting a signature or seal for official documents can be a real challenge. Under the new regulations, it is possible to use a nationally unified license system to electronically sign the application documents (see box).
Solving administrative problems during lockdown
For further information and tips on how to solve administrative problems during the lockdown, check out this article.
Although these new regulations simplify the whole process greatly, some issues and cases have not yet been clarified. For example, if and how foreigners are affected by this law in general, as they are not specifically included. The Ecovis experts therefore recommend that companies monitor any updates.