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At the end of 2019, the “Measure for the Reporting of Foreign Investment Information” was released. It is designed to replace “Measures for the Recordation Administration of the Formation and Modification of Foreign-funded Enterprises” which has been used from late 2016.
The direct effect is that there will be one less document to be issued when setting up the foreign invested company. The whole process will be a little bit easier.
Other than the whole new less complicated method pushed by the new regulation, this new regulation has also set the latest standard for all information disclosing requirement.
This article is aimed to the clients that want to understand more about the information disclosing system for foreign investor.
The Official Database
There are a series of official database available for checking.
These databases include:
- Business record information
- Intellectual property information
- Lawsuit information
One of the most commonly used database is called National Enterprise Credit Information Publicity System.
This database contains the basic information of every business entity registered in China. Which means, that if after typing the correct official name or the registration number of the company, the database shows no record, it can be determined that this company is not registered in Mainland China so far.
However, unlike the database for business entity information, the lawsuit database (officially known as China Judgement Online) is not always very updated.
The relevant legal documents are selected to be disclosed based on the relevant requirements to be disclosed and the privacy. Even like this, the lawsuit database has 92,003,301 legal documents, and more than 20,000 new documents are disclosed on a daily basis.
The above are the examples of official databases. Besides the official one, there are also third-party databases.
These third-party databases are using technology to extract data from various public official databases. In these databases, all public information available of certain business entity are combined to one single page, including IP rights record, relevant lawsuits, investment relationships, business record and even hiring information. Unlike free public databases, these third-party databases would charge a fee to gain full access to the relevant information.
Information to be disclosed
Once the business entity is registered in China, a series of information will be disclosed in these databases.
There is no need to panic if someone wants to see information about your company only using your company’s name in the search. There is a limit for disclosed information.
This section is aimed so that the client understand what kind of information will be disclosed.
First of all, most of the basic business information will be disclosed, including company name, registered address, type of company, founding date, registration number, registered capital, business scope.
Second, as part of the business information, the personnel related to the entity will also be disclosed. The name of the directors, legal representatives, supervisors will be disclosed. Through a third-party database, it is also possible to see if these personnel are listed in other companies’ record.
Third, another key element is the investor. The name of the investor, the investment percentage of each investor will be shown on the databases. In third-party databases, it can also show the entire investment relationship chain, including which are the investors of this company, and what the company invested.
The last part is the operation status of the entity. If there are any abnormal points in the daily operation of the entity, it will be shown on the database, once detected by the authority.
One of the most common reason for this is “Unable to contact the entity via registered address.” And if there is any administrative fine or penalty on this entity, it will also be shown on the databases. If the company is not operated carefully, it is highly possible that negative record will be disclosed to the public.
Once disclosed, it will be very difficult to take out this record from the databases. Therefore we strongly suggest our client to operate legally at all time, or choose a professional company to assist your operation.
After this introduction, we hope you will be able to have a basic understanding of the information disclosing system for companies in China. These kind of knowledge is not only helpful for client to confirm the information disclosing status of their own operation, it also enable our readers to run a basic reference check for their business partners in China.
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We are a non-state consulting firm based in Shanghai that helps foreign businesses enter the Chinese market and develop their operations. Our clients are assisted from initial stages with company formation and employment solutions, to further support-requiring stages with our business solutions such as tax & accounting and payroll & tax.