In previous years, foreign-invested enterprises (FIEs) and their branches in China had the certainty that they would need to undergo an annual inspection filing with the business registration authority between March and June each year, and if they passed they would be deemed to be in “good standing”. This year in most cities, joint ventures, wholly foreign-owned enterprises (WFOEs), and their branches faced a new uncertainty as the annual inspection exercise of the Administration for Industry and Commerce (AIC) was replaced by a new annual reporting system.
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This is all part of corporate reforms heralded by amendments to the Company Law, which took effect from 1 March 2014. The AIC’s annual reporting and public disclosure system is currently evolving across the country. The implementation varies depending on the city, and it will add to the annual compliance burden of FIEs to get up to speed with the local timing and differences that have been introduced.
What must be disclosed?
Since the announcement of annual reporting to the AIC and the information disclosure system, the major cities that have implemented the system include Beijing, Shanghai, Hangzhou, Guangzhou and Chengdu.
The graphic on the following page summarises some of the requirements based on the recently published regulations and circulars.
The AIC has upgraded its computer systems and it is anticipated that, in time, public access to some of the detailed information will be fee-based. This would be in line with other jurisdictions and will help local governments to fund the development of the system. It is interesting to note that when Shenzhen first launched the AIC reporting system in April 2014, information regarding the financial information of FIEs and their branches was made available. After complaints, the AIC modified the system so that the financial information is not publicly available.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com
