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China Company Registration

 

On October the 25th 2013, Prime Minister Li Ke Qiang has chaired a meeting with the State Council executive members on Easing Company Registration Regulations focusing on five major changes and issues for company registration, minimum registered capital and administrative bureaucracy, in order to reduce the costs associated with starting a new business in the country in a test to boost the economy after the small but concise slow-down. The Government Executive meeting concentrated on “Five Capital and Costs Reducing” policies for company formation is on the starting line for commencing, although the implementation date hasn’t been announced yet, and it should give life to the easier formation of new businesses in a diverse range of industries, with the objective that new start-ups for the younger generations be expanded ;  

1)     Lower registered capital requirements 

2)     Lower general costs of incorporation

3)     Easier registration procedures

4)     Easier regulatory and administrative bureaucracy

5)     Company credit system   

Outline

1)     Lower registered capital requirements

A few very important regulations were devised on this very important aspect.

A) The RMB ¥ 30,000 minimum registration capital for a limited liability company has been completely eliminated, giving the hope even for new graduates to start up a potentially important company.

B) The RMB ¥ 100,000 minimum registration capital for single shareholder companies has been eliminated.

C) The RMB ¥ 5 Million minimum registration capital for joint stock companies has also been eliminated. 

D) Very importantly is that, the percentage ratio for initial payment of the registered capital has been cancelled, so no longer initial cash is needed.

E) The deadline for the full payment of the registered capital will be cancelled.

F) The actual capital contributions of the newly invested company will no longer be a registration item for the incorporation.

2)     Lower general costs of incorporation

Capital Contribution for company formation and registration will be replaced by Subscribed Capital Contribution which in simple terms it means that from this new legislation it will no longer be a prerequisite of necessity to have the funds ready at the time of registration. All this cut in bureaucracy and ease of regulations and formalities will allow the shareholders of the new company to decide on the amount, system, and deadline for subscription of the needed financial contributions and will set the shareholders to be responsible for the authenticity and legitimacy of the contributions.

3)     Easier registration procedures

The requirements for “location of business” upon which a company had to have an address agreed by the authorities for its registration will be lowered, it will be at the discretion of the local authorities to determine a decisions. All other registrations for company formation will be treated with greater ease by the authorities and less bureaucracy will be in place.

4)     Easier regulatory and administrative bureaucracy

The important message is to increase the administrative efficiencies by the authorities, cut down on red tape and easier the bureaucratic paperwork for running a business not just for incorporating one. So, NEW annual compliance and audit reporting for fiscal checks will substitute the current annual inspection regime. A fair and regulated selective examination will be conducted by the government authorities to ensure the fairness and efficiency of the new regime.

5)     Company credit system

A credit system will be actively and resolutely implemented whereby all information for business registration, annual compliance reporting, and auditing shall be displayed as Credit Information of each company within a system of Credit Scoring.

Also an electronic business license registration and electronic registration management will be implemented by the authorities.

The credit system will not only be used for ease of practices for company formation and company management but also to increase the control and investigation over company mismanagement for violation of laws and regulations on fiscal, management and employment matters and issues as the companies that di violate the P.R.C. laws on business conducts rules and regulations will be “Black Listed” and made public through the credit system.

The above polices regards local Chinese enterprises ONLY for the time being, but much attention should be given to this new “Five Polices” implementation because it a further important action taken by the Central government of China to reform and improve to establish an internal market with fair competition and a contemporary, almost avant-garde, business and commercial regime with efficiency, transparency, and fairness.

There are many indications that these new five polices for easing company registration and management procedures will be accessible to foreign enterprises setting up business in the biggest market of the world.

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