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How the new Company Law Affect your Business Risk in China

When you are doing business with NEW companies (registered after March, 2014) here in China, you have to be more careful these days. We received most case reports these years compared to the periods before 2015. Some reporters said that the economic crime cases had been increased nearly 18% since the implementation of new Company Law, which came into effect on March 01, 2014. 

In order to streamline the whole corporation registration process and benefit more and more small businesses, China State Council adopted a new Company Law in early 2014, the new Company Law mainly involves following three amendments: 

1.On the registered capital

New Corporation Law of China modified the “statutory capital system” with a new system combining the “subscription capital system” and “statutory capital system”, indicating that the shareholders do not have to collect full capital to complete the company registration in China. 

2.On the license examination

New Company Law of China streamlined the official approval and assessment as well. The whole company registration used to have three different permits via three different official organs, that is Business License, Organization Code Certificate, Taxation Certificate respectively, now all these certificates are replaced by ONE unified Social Credit Identifier. With less annual official inspection and supervision, there are more and more business scammers springing up this year. It's said that more than 28500 enterprises went bankrupt in 2015 only. 

3.On the least capital requirement inspection system

The new Company Law cancelled the Least Capital Requirement for some small business and also relaxed (eased) the policy on the registered capital for sharehold companies, further faciliating the market access for startups. Meanwhile, this policy also helped a lot to the crinimals as their crime cost has dropped substantially. 

All these measures dramatically facilitates the registration process and benefits lots of startups indeed, however, it also gives a hand to lot of criminals and lots of fly-by-night (shell) companies came out in 2014 and 2015. According to the statistics from STIN company, the demand for Company Verification and Supplier Auditing Service has increased 20% since late 2014. For any big business in China, a local Verification, Inspection or Auditing service plays a more and more important role in your safe business in China ! 

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