The PRC Regulations on Administration of Company Registration (“Regulations”) was a body of law that was initially implemented in 1994.Since that time, corporate registration practices have evolved and additional laws have been developed and revised (such as the PRC Company Law, which was most recently updated in 2005). Since the Regulations have become outdated, the State Council of the PRC (“State Council”) issued a decree to amend, update and standardize the 1994 Regulations.The newly-amended regulations became effective on 1 January 2006.Following are some highlights:

Jurisdiction of Registration

The 2006 Regulations have been adapted to the current regulatory system of State-owned assets and provides a clearer and more reasonable division of oversight jurisdiction between the State Administration Bureau on Industry and Commerce (SAIC) and the Administration Bureau on Industry and Commerce (AIC).Basically, these have been divided into State and provincial level responsibilities.Under the new 2006 Regulations, the SAIC shall have oversight responsibility for companies with greater than 50% state-owned assets.At the provincial level, oversight of companies with such state-owned assets (greater than 50%) will be handled by the provincial AIC.

Also, the “limited liability company with foreign investment”, currently under the jurisdiction of the SAIC, has been changed into the “company with foreign investment”, which provides a legal basis for SAIC’s administration of companies with foreign investment in various corporate forms.

The 2006 Regulations also provide the AIC branches of municipalities directly under the Central Government, as well as district AIC branches in cities divided into districts, the authority to participate in the administration of company registrations.The lowest administrative level for company registrations of a joint stock company would be the AIC of city divided into districts.

Capital Contributions

The 2006 Regulations supplement Article 27 of the Company Law in that it specifies further what can and can’t be used as a capital contribution.For example, no shareholder is allowed to make capital contributions in the form of labor service, credibility, name of natural person, good will, franchising rights, or encumbered property.Additionally, if a shareholder of limited liability company transfers non-monetary property as its initial capital contribution, the document evidencing the conveyance of such property shall be submitted when applying for the registration of the corporation.

Business Scope

In accordance with the spirit of the new Company Law, the 2006 Regulations demonstrate somewhat of a relaxation of the scope of business that a company can apply for.The 2006 Regulations provide that corporate business scope can now be regulated by the company’s articles of association and lawfully registered.Exceptions are certain pre-approvals which are required by law, administrative regulations or State Council decrees, and of course, all activities that endanger national security and/or damage social and public interest.

Registration Procedures

This chapter of the Regulation was heavily revised and updated, and is now a much more comprehensive guide for conducting administration of company registrations.In particular, the Article 52 and Article 54 specifically provide conditions, timeframe, informing duty and other related procedural requirements for company registration authority in relation to acceptance of registration application and approval of registration.

The registrant is allowed to submit the company registration application by telegraph, teletype, fax, electronic data interchange or email in accordance with the 2006 Regulations.The extension on the methods of filing application is instrumental to raise the efficiency of registration and bring more convenience for the registrant.

Legal Liability of the Intermediary

The 2006 Regulations grant the corporate registration authorities the power to impose fines, penalties, and the power to rescind licenses in instances where a company provides false materials or statements, or negligent omissions, related to assets, capital verification, or certificate verification.

Annual Inspection

The annual inspection periods for each company have been changed from “1 January to 30 April every year” to “1 March to 30 June every year”.

── Nemo Wu