China’s State Council disseminated Order No. 648 (“Order 648”) last Friday in a move towards further implementing the recently revealed business registration reform scheme. The Order, signed by Premier Li Keqiang, abolished two administrative regulations pertaining to capital contribution requirements for Sino-foreign joint ventures, and revised eight regulations regarding capital contributions upon incorporation.
The revisions were made in order to bring these regulations in line with the new Company Law of China, which removed the registered capital requirements for company establishment and replaced the paid-up capital registration regime with a subscribed capital registration regime. Both the Company Law and Order 648 came into force on March 1, 2014.
Under Order 648 several regulations concerning the capital contribution of Sino-foreign joint ventures were abolished, while administrative measures for company registration and implementation regulations for foreign-invested enterprises were amended.
The major changes set forth in the Order are relaxed registered capital requirements, a more transparent information disclosure system for companies and the introduction of an annual reporting system and electronic business licenses. The new business license will also utilise a QR code, which will, with one swipe of a cellphone, link directly to the enterprise’s information page on the online information system supervised by the government.
The amended regulations under Order 648 stipulates that to complete the business registration process at a local Administration of Industry and Commerce, a company is no longer required to provide proof that a certain amount of capital has actually been paid into the company, nor obtain the capital verification certificate issued by a certified public accounting firm.
Further, the 2-year limit (5-years for foreign-invested holding companies) for foreign-invested companies to pay up the registered capital since incorporation has also been removed. Foreign investors should, however, specify the time limit of actual payment of capital in the investment plan or articles of association.