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China (Shanghai) Pilot Free Trade Zone: Company Registration System Reform

Business Regulation and Tax Newsflash

Issue 9 - 31 October 2013

Immediately before the launch of the China (Shanghai) Pilot Free Trade Zone ("Pilot FTZ"), the State Administration for Industry and Commerce ("SAIC"), which is the national authority responsible for the company registration system, outlined measures to reform the company registration system in the Pilot FTZ. The measures outlined are summarized below; and you may follow this link to read Deloitte unofficial English translation of the SAIC circular concerning these reform measures.

Following the announcements made after the State Council general meeting on 25 October, it is now anticipated that portions of these reform measures, in particular, the introduction of "subscribed capital registration" mechanism, and the removal of restrictions in respect of capital contributions, will also be rolled out nationwide in the near future.

Subscribed capital registration mechanism

  • This mechanism applies to all companies in the Pilot FTZ except for bankssecurities companiesfutures companiesfund management companiesinsurance companies,direct selling companiesoutbound labor service cooperation companies, and joint-stock limited companies which are incorporated by offering shares to general public or particular investors.
  • Unlike the existing mechanism outside the Pilot FTZ, only the amount of subscribed capital will be registered as "registered capital". Currently, investors are required to commit to pre-approved amounts of "registered capital", and such are required to be paid up within the stipulated time period.
  • Shareholders may, at their discretion, determine the amount of capital to be contributed, the form in which such capital may be contributed, and the timing of the contribution thereof. Details thereof are to be set out in the applicable Articles of Association, which will be made publicly available.  

Removal of restrictions in respect of capital contribution

The restrictions below imposed under Company Law will be suspended, except in cases in which a "minimum capital requirement" is stipulated under other laws and regulations:

  A Limited Liability
Company
A Joint-stock Limited Company
Minimum amount of capital RMB 30,000
(RMB 100,000 if only one investor)
RMB 5,000,000
Minimum amount of initial capital contribution RMB 30,000, or 20% of total registered capital, whichever higher 20% of total registered capital*
Maximum period
for full capital contribution
Two years (or five years if the company is an investment company)*
Minimum ratio of capital in monetary form to total capital 30%

*For a joint-stock limited company, these restrictions will apply if the shares are all subscribed by initiators.

Business license granted before other special permissions

  • Unlike most existing cases outside the Pilot FTZ, in cases in which additional special permits are required, unless specifically stipulated otherwise, applicants may generally be granted a business license before, or whilst they apply for those special permits.
  • Once the business license is granted, the company may commence operations, albeit not the portion thereof in respect of which the additional special permits are required.

Annual report and public disclosure

  • Pilot FTZ enterprises are required to lodge annual reports with the responsible registrar within the period from 1 March to 30 June of the following year.
  • The annual reports will be publicly accessible through the proposed information disclosure system.
  • Enterprises that fail to submit annual reports on time will be listed in a "name-and-shame" list.

 

Deloitte unofficial English translations of other significant regulations are provided via the dedicated portal page. You may also follow the link of the government website for the whole texts of the above regulation in Chinese.

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