Last month, this column compared the two methods of domicile switch available to foreign investment enterprises (FIEs) within China: direct domicile relocation and relocation of domicile by re-establishment. This month, we will outline the government approvals and procedures required for these two methods.
Direct domicile relocation
The PRC Company Law and other relevant legislation set out only general principles governing the change of registered address by enterprises, but do not provide specific operational guidelines. Approval authorities in different locations have, therefore, adopted various different requirements and practices.
Generally speaking, if an enterprise wishes to relocate without liquidating itself and re-establishing anew in another location, it must obtain the consent of, and register with, the approval authorities and company registries at the places of origin and the destination, and carry out an array of other procedures. These procedures are outlined below.
Approval of application for domicile relocation
As the first step in a domicile relocation plan, an enterprise is generally required to file an application directly with the competent branches of the Ministry of Commerce and the Administration of Industry and Commerce at the destination, and submit documents as required.
The documents required may include a resolution passed by the decision-making body of the enterprise approving the relocation, corporate documents such as revised articles of association, evidential documents on the use of a new office address (such as a property title certificate or a lease contract) at the destination and other standard-form documents such as an application form.
Upon the review and approval of these documents by the competent departments, the bureau of industry and commerce at the destination will issue an “enterprise relocation notice” approving the relocation of the enterprise.
Reconfirmation of name
Any enterprise planning to relocate from one city to another should first confirm with the bureau of industry and commerce at the destination whether its original name, and in particular its trade name, coincides with that of an existing enterprise at the destination. If so, it will be necessary to change the name, and go through the procedures for the pre-approval of a new name.
In addition, as the full name of an enterprise usually includes the name of the place in which it is domiciled, this place name will have to be changed accordingly.
Transfer of corporate records
After obtaining a certificate approving its relocation from the competent departments at the destination, an enterprise may complete formalities at the bureau of industry and commerce at the place of origin the transfer of its corporate records. That bureau will issue the enterprise with a “notice of approval of relocation”, and transfer the enterprise’s existing corporate records to the bureau of industry and commerce at the destination.
Once this transfer has been completed, the enterprise can proceed to submit relevant documents to register its change of address and to obtain a new business licence.
Taxation settlement and handover
According to the Tax Registration Administrative Measures, Chinese enterprises are taxed on a territorial basis. Thus when the place of registration of an enterprise is changed, the competent tax authorities will change accordingly unless the relocation occurs between different districts in the same city (in which case the local tax departments should still be consulted). The enterprise will need to cancel its existing tax registration certificate and apply for the termination and handover of its existing tax relationships.
The tax authorities at the place of origin will examine and settle the tax affairs of the enterprise during its entire period of operation in that location. As the tax registration of the enterprise at the destination will not yet have been completed, the tax operation of the enterprise may be affected to the extent that it may not, for example, be able to issue invoices for a period of time.
In addition, the tax authorities in the place of origin may request the return of any special local tax concessions, subsidies or relief which were previously granted to the enterprise.
Relocation of domicile by re-establishment
The relocation of domicile by re-establishment of an FIE involves two steps: the liquidation and closure of an enterprise in the place of origin, and the establishment of a new FIE in the destination.
Liquidation and closure
The straightforward closure of an enterprise will follow a resolution passed by the decision-making body of the enterprise.
A liquidation committee should take charge of the liquidation which will involve numerous matters including the disposal of the property of the enterprise, the preparation of financial statements, the issuance of notices and announcements to creditors, dealing with outstanding liquidation-related business, the settlement of all outstanding taxes and taxes incurred during the liquidation process, the settlement of claims and debts, and dealing with any property that remains after the enterprise has settled all of its debts.
The dissolution and liquidation of an FIE must be approved by the competent foreign investment authorities. The liquidation committee should compile a liquidation report upon completion of liquidation and should, after such report is confirmed by the decision-making body of the enterprise, apply to the company registry and other government departments for the cancellation of the registration of the enterprise.
Establishment of a new enterprise
The new FIE must be established in the destination in accordance with the normal procedures applicable to the type of enterprise it is, and the sector in which it operates.
Martin Hu is a senior partner at Martin Hu & Partners.
Kenneth Kong is a senior associate at Martin Hu & Partners.
胡光律师事务所
上海市龙阳路2277号永达国际大厦19楼
19/F Yongda International Tower
2277 Longyang Road
Shanghai, China
邮编 Postal code: 201204
传真 Fax: +86 21 5010 1222
www.mhplawyer.com
胡光 Martin Hu
电话 Tel: +86 21 5010 1666*966
电子信箱 E-mail: martin.hu@mhplawyer.com
孔焕志 Kenneth Kong
电话 Tel: +86 (21) 5010 1666*922
电子信箱 E-mail: kenneth.kong@mhplawyer.com