Corporate Compliance Requirements for Companies in China

Introduction

Running a company in China means keeping up with a set of compliance requirements set by the government. Meeting them keeps a company on the right side of the law and helps it avoid penalties.

This guide covers what a company needs at setup, what it must keep doing afterward, and the tax, employment, and immigration rules that come with operating in China.

Company Setup Requirements

1. Company name

A company name in China must include four parts:

• The registered region
• The brand name
• The business term
• The type of entity, such as Co., Ltd, LLC, or Limited Company

A representative office uses a different format instead: nationality, followed by the parent company's Chinese name, the city where the office is based, and the words representative office.

Company names are registered with the Administration of Industry and Commerce (AIC), which reviews the application within 10 days. Approval results in a Notice of Pre-approval of Company Names.

2. Articles of association

The articles of association must spell out:

• The company's name and address
• Its business scope
• Its registered capital
• The shareholders' names and titles
• The amount, date, and form of each shareholder's capital contribution
• The company's legal representative
• Its accounting, auditing, and finance principles
• Any other item the shareholders' assembly wants included

3. Directors

A company can be run by a board of directors of 3 to 13 people, or by a single executive director. Directors must be at least 18 years old and can be either Chinese or foreign nationals.

4. Shareholders

Every company needs between one and 50 shareholders, who must be at least 18 years old and can be Chinese or foreign nationals.

5. Chief representative (representative offices only)

A representative office's foreign parent company must name a chief representative through its board of directors. This person can be:

• A foreign national with a valid passport
• A Chinese national with permanent residency abroad
• A citizen of Hong Kong, Macau, or Taiwan with valid documents
• A Chinese national

6. Legal representative

Every company needs a legal representative to act on its behalf. This role can be filled by:

• The chairman of the board
• The executive director, for joint ventures or WFOEs
• The general manager, for WFOEs

There is no nationality restriction for this role.

7. Supervisor

A company needs either one to two supervisors, or a board of supervisors with at least three members.

8. General manager (WFOEs only)

A WFOE must appoint a general manager to run daily operations. This person can be a Chinese citizen or a foreigner.

9. Promoters (companies limited by shares)

A company limited by shares needs between two and 200 promoters, and more than half of them must be based in China.

10. Data protection

Under Article 111 of the General Provisions of the Civil Law of the People's Republic of China, any organization or person collecting personal data must do so lawfully and keep that data secure.

A dedicated data protection officer is not required by law, but the Cybersecurity Law does require a cybersecurity officer to safeguard personal data.

Data subjects hold several rights under Chinese law:

• Privacy notice: consent is needed before collecting personal data, and the purpose, method, and scope of collection must be disclosed. Data cannot be used beyond its stated purpose.
• Right to access: individuals can request a copy of their own data from the data controller.
• Right to data portability: individuals can ask for their data to be transferred to a third party, where technically possible.
• Right to be forgotten: individuals can ask a network operator to correct, block, or delete their data.
• Objection to direct marketing: personal data can only be used for marketing with the individual's consent.

Ongoing Business Compliance

1. Annual shareholders' meeting

Companies must hold a shareholders' meeting at least once a year, though the law does not fix an exact date. Notice must go out 15 to 20 days ahead, or as set in the articles of association.

Topics typically covered include:

• Changes to the articles of association
• Pay for directors and supervisors
• Mergers, divisions, dissolution, or liquidation
• Increases or reductions to registered capital
• Reports from the board of directors
• Reports from the supervisor or board of supervisors
• The annual financial budget and financial plans

2. Business license

Operating in China requires a business license from the Administration of Industry and Commerce (AIC). The license records:

• An 18-digit business registration number
• The business scope
• The company name
• The date of establishment
• The license expiry date
• The legal representative
• The registered address
• The registration bureau
• The registered capital
• The registration number
• The entity type

Accounting and Tax Compliance

1. Financial year-end

A company's financial year follows the calendar year, running from January 1 to December 31.

2. Recordkeeping

Companies must keep accounting records that follow the standards set by the Ministry of Finance. All books, records, and financial statements must be in Chinese and kept for 15 years.

Three types of records are required:

• General ledger and sub-ledgers
• Journals
• Supplementary memorandum records

3. Auditor appointment

The board of directors appoints the auditor. Financial statements must be audited by a Chinese-registered certified public accounting (CPA) firm.

4. Income tax filing

Companies file and pay income tax monthly or quarterly, within 15 days after the period ends. An annual tax return is also due within five months of the tax year's close.

Employment Law

Foreign investors doing business in China should be familiar with these employment laws:

• 1995 Labour Law of the People's Republic of China
• 2008 Labour Contract Law of the People's Republic of China
• Law of the People's Republic of China on Labour Dispute Mediation and Arbitration
• Employment Promotion Law of the People's Republic of China
• Law of the People's Republic of China on Work Safety
• Social Security Law

Social security contributions

Employee Leave Entitlements

Paid annual leave grows with an employee's years of service:

Sick leave

China requires paid sick leave for illness or a non-work injury, for both local and foreign employees. Pay ranges from 60% to 100% of normal salary, and the exact rate depends on seniority and local city rules:

Sick leave of six months or less

Sick leave of more than six months

The shortest sick leave period is three months for staff with under 10 years of service. Staff with 20 years of service can receive unlimited paid sick leave.

Immigration

China offers several visa categories, and the right one depends on the purpose of the visit. Each visa comes with its own restrictions on what activities are allowed.

Conclusion

Every company operating in China must meet a defined set of compliance requirements. Falling short can create problems that carry real costs down the road.

To make sure your company meets every requirement, Signum can support you with the process from start to finish.