- Administrative Regulations on the Registration of Permanent Representative Offices of Foreign Enterprises (SAIC Order 584)
- December 17, 2010
- Law Firm: Troutman Sanders LLP - Atlanta Office
The State Council of the PRC issued the Administrative Regulations on the Registration of Permanent Representative Offices of Foreign Enterprises ("Regulation") on November 10, 2010. The Regulation will take effect on March 1, 2011. The current Administrative Regulations on the Registration of Permanent Representative Offices of Foreign Enterprises that were previously issued by the State Administration of Industry and Commerce ("SAIC") on Mar 5, 1983 will be repealed on March 1, 2011.
On Jan 15, 2010, SAIC issued a Circular on Further Strengthening Administration of Foreign Enterprises' Permanent Representative Offices (“Circular”) which imposes some new requirements with respect to the registration and operation of representative offices, including additional documents required for the establishment of a representative office, maximum number of registered representatives of a representative office and others. For more details, please refer to our China Alert dated February 3, 2010.
The Regulation includes not only these requirements set forth in the Circular but also some other new requirements with respect to the registration and operation of representative offices:
1. Annual Reporting
The Regulation requires that a representative office must submit an annual report to the relevant local SAIC. The annual report must include information on the continued existence of the representative office's head office, the representative office's business operation and its audited accounts. Previously in some places in China such as Shanghai, a representative office's business registration was issued a business registration certificate with a term of three years and therefore is only required to submit a report to the relevant SAIC every three years.
2. Requirements on the Chief Representative
Under the Regulation, the following persons are not allowed to serve as the Chief Representative of a representative office:
Persons that have been prosecuted for criminal liabilities for harming PRC's national security or public interests;
Persons that served as a Chief Representative or a representative of a representative office whose license has been revoked or canceled for no more than five years for harming PRC's national security or public interests or for other unlawful activities; or
Other persons as provided in regulations issued by the SAIC.
The Regulation provides that relevant authorities in China may require a representative office to relocate at any time on the grounds of national security or public interests.
4. Filings with SAIC
Under the Regulation, where there is any change of a representative office's registration particulars, including the name, Chief Representative, business scope, registered address and business term of the representative office or where the authorized representative, form of incorporation, capital or business scope of a representative office's head office is changed, the representative office is required to file such change with competent local SAIC branch within 60 days after such change occurs.
5. Public Notice
The Regulation requires that upon establishment or change of the registration particulars of a representative office, the representative office or its head office must publish a notice through media designed by the SAIC.
Under the Regulation, a representative office will be subject to more severe administrative penalties than those provided in the current laws and regulations for non-compliance. The penalties under the Regulation include fine (up to RMB 500,000), confiscation of unlawful gain, confiscation of tools, equipment, materials, product other assets used in unlawful operations, revocation of business license. Where a representative office obtains its business registration by submitting fake documents or by other fraudulent means or a representative office forges business registration certificates or representative certificates, or lend its business registration certificate or representative certificates to third parties, the individuals in charge of the representative office who are directly responsible for such unlawful acts or other responsible persons may also be subject to a fine between RMB 1,000 and RMB 10,000.
It is expected that the additional requirements imposed under the Regulation and the Circular will increase foreign companies’ costs and exposure for operating a representative office in China.