The State Administration for Industry and Commerce (“SAIC”) has issued a series of new regulations (the “New Rules”) governing China’s new reporting and disclosure system for businesses, which applies to all enterprises registered with SAIC or its local branches (the “AICs”) — including foreign-invested companies — operating in China. Investors should take note of the many changes brought by this new system, including new compliance requirements and potential benefits.
To spur development, the State Council has sought a more efficient, “market-oriented” approach to regulating business activities. For example, earlier this year, the new Company Law removed minimum capital requirements and replaced the paid-in capital verification system with a simple reporting system . Then, in August, it issued the Interim Regulations on Enterprise Information Disclosure, replacing the old annual inspection system with an annual reporting system.
The old system required all companies to undergo rather complicated formalities, including the submission of financial statements, to pass the AIC’s annual inspection. Such formalities, while theoretically allowing great regulatory oversight, placed a huge burden on companies in terms of both time and costs.
The new system created by the State Council and SAIC’s New Rules aims to ease this burden by reducing the amount of administrative formalities, as well as to increase transparency by making such annual reports available to the public. The New Rules, which went into effect on October 1, 2014, include:
- Interim Measures for Random Inspection of Information Published by Enterprises
- Interim Measures for the Administration of the List of Enterprises with Irregular Operations
- Interim Provisions on the Public Disclosure of Information regarding Administrative Sanctions Imposed by the Administration for Industry and Commerce
- Interim Measures for Annual Reporting by Individual Entrepreneurs
- Interim Measures for the Publication of the Annual Reports of Special Farmers’ Cooperatives
Download the PDF version below to read the newsletter in full.