China to Implement New Regulations on Representative Offices on 1 March 2011

The new regulations in respect of the registration and administration of representative offices of foreign enterprises "Regulations on the Registration and Administration of Resident Representative Offices of Foreign Enterprises" (the "new Regulations"), was passed by the State Council on 10 November 2010 and set to become effective on 1 March 2011. The existing regulations “Measures for Administration and Registration of Resident Offices of Foreign Enterprises?(the "existing Measures"), is to be repealed on the same day.

The new Regulations are formulated for the purpose of regulating the establishment and business activities of representative offices of foreign enterprises. Compared with the existing Measures, the new regulations mainly fix and introduce the following contents:

Definition and Nature of Representative Office

The term "representative offices of foreign enterprises" (hereinafter referred to as "representative offices") stated in new Regulations refers to establishments set up by foreign enterprises within the territory of the People's Republic of China for the purpose of carrying out non-profit-making activities that related to the operation of the foreign enterprises. They do not have a separate legal entity and should not engage in direct profit-making business activities. (Article 2)

Scope of Business of Representative Office

Representative offices could carry out activities in respect of market research, exhibition and promotion activities related to the products and services of the foreign enterprises; liaison activities related to the sales of products, provision of services, procurement and investment within the territory of People’s Republic of China of the foreign enterprises; any other activities approved by laws, administrative regulations or the State Council. (Article 14)

Establishment and Registration of Representative Office

1. The name and registered office of the foreign enterprise will become one of the particulars to be registered. (Article 9)
2. More detailed requirements on the name of the representative office whereas it should not contain any content prohibited by the laws, administrative regulations and the State Council. (Article 10)
3. Specified in details the materials required to be submitted for the registration of representative offices. (Article 22)
4. Specified that the registration authority should decide whether to approve a registration application or not within 15 days after acceptance of application materials. (Article 24)

Deregistration of Representative Office

A foreign enterprises should apply to the registration authority to have its representative office officially deregistered within 60 days after it decides to shut down the representative office, or upon the term of residence of the representative office expires, or the foreign enterprise decides not to continue the operation, or the foreign enterprise terminates its operation or the registration and establishment is revoked or the representative office is rescinded or ordered to shut down in accordance with laws. (Article 32)

Annual Report of Representative Office

Representative offices are required to submit an annual report to the registration authority during the period from 1 March to 30 June every year so as to report the legal existence and continuance of the foreign enterprises, the commencement and performance of business operation of the representative offices and the audited statement of receipts and expenditures of the representative offices together with other relevant information with explanations. (Article 6)

Changes of Particulars of Representative Office

1. Foreign enterprises are required to apply to register any change of registered particulars of the representative office within 60 days after such change. (Article 27)
2. Foreign enterprises are required to apply to renew the registration of the representative office upon expiration of terms of residence should it decides to continue the operation of the representative office. (Article 28)
3. Foreign enterprises should file with the registration authority any change to its authorized signatories, provisions in respect of the organizational type, registered capital and scope of business contained in the memorandum or by-laws of association or contractual constitutional agreement, and its representative within 60 days after such a change occurs. (Article 31)

Operation of the Representative Offices

1. Representative offices should not be engaged in profit-making activities unless otherwise allowed by the international treaties or agreements to which China is a party. (Article 13)
2. The foreign enterprises are free to decide the business address for its representative. (Article 15)
3. The term of residence of a representative office should not exceed that of the foreign enterprise. (Article 16)

Penalties

The "Regulations on the Registration and Administration of Resident Representative Offices of Foreign Enterprises" clearly sets out guidelines as to the powers that the registration authority has in carrying out investigations of suspected illegal acts or violations of the regulations and the subsequent imposition of penalties for violations of the regulations. (Article 21, Chapter 6)

Full text of the "Regulations on the Registration and Administration of Resident Representative Offices of Foreign Enterprises" in the Chinese Language

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