Are you having trouble with China’s business registration system? China’s legal system is known for its complexity, with legal registration being a key component. To operate a business in China, it is essential to comply with the numerous laws and regulations related to legal registration. This article provides a comprehensive guide to the statutes and case law about legal registration in China.

The Company Law of China is the primary statute governing legal registration. Enacted in 1993, it has undergone multiple amendments. The law sets out the types of companies that can be registered, the required documentation, and the procedures for registration.

Another important statute is the Foreign Investment Law, enacted in 2019, which outlines the requirements for foreign investors who want to establish a presence in China.

Business Registration Framework in China

Important cases in China have touched on legal registration, such as the dispute between Chongqing Changan Automobile Co., Ltd. and Changan Ford Automobile Co., Ltd. over the name “Changan”.

The court ruled in favour of Chongqing Changan Automobile Co., Ltd., which had registered the name first. Another case involved the tax deductibility of fees paid by Shenzhen Huitongda Communication Co., Ltd., which the court ruled were tax deductible.

Despite the legal framework for registration in China, businesses still face challenges when registering. One major challenge is the bureaucracy involved in the process, with different agencies having their requirements and procedures. Additionally, the language barrier can be difficult for foreign businesses unfamiliar with Chinese.

Despite the challenges, legal registration is crucial for businesses operating in China. Registered companies can access various legal protections and benefits, including government services and protection under the law. Customers, suppliers, and other stakeholders view properly registered businesses as trustworthy and reliable.

According to a report by the World Bank, China ranks 31st in the world for ease of doing business, considering factors such as starting a business, registering property, and obtaining permits. Legal registration takes an average of 18 days in China, slightly longer than the global average of 12 days.

China’s legal framework

Various statutes and landmark cases govern China’s legal framework for business registration. The Company Law of the People’s Republic of China is a fundamental statute laying out the prerequisites for establishing a business there.

This law recognizes three types of companies in China: limited liability companies, joint stock companies, and partnerships. Each company type has its legal guidelines that must be followed for proper registration.

Apart from the Company Law, the Foreign Investment Law of the People’s Republic of China is another significant statute that governs business registration in China. The Foreign Investment Law was enacted in 2019, and its primary objective is to provide foreign investors with a level playing field in China.

It offers guidance on registering, establishing, and operating foreign-invested enterprises, replacing earlier laws such as the Sino-Foreign Equity Joint Venture Law, the Wholly Foreign-Owned Enterprise Law, and the Sino-Foreign Cooperative Joint Venture Law.

China’s Business Registration System

Landmark cases have played a vital role in shaping China’s legal framework for business registration. For instance, the 2006 case of Teco Electric & Machinery Co. Ltd. v. Hainan Machinery Import & Export Corp highlighted the importance of registering joint venture agreements with relevant authorities to validate them. The court emphasized the need to adhere to the legal requirements for registering joint ventures in China.

The 2016 case of Beijing Lantian Hotel Ltd. v. Shanghai Zhengke Real Estate Development Co. Ltd. involved a dispute over the ownership of a hotel property in Beijing.

The Supreme People’s Court of China ruled that contracts between two companies must be registered with the relevant authorities to be legally enforceable. The court also highlighted the significance of adhering to the legal requirements for registering contracts in China.

If you are struggling with China’s business registration system, speak to a business law firm in China.