Shanghai Relaxes Incorporation Documentation Rules

In Shanghai, formal procedures for incorporating a company have been relaxed in order to assist new Chinese market-entrants amid the ongoing restrictions brought on by the COVID-19 outbreak.

The Shanghai Administration for Market Registration (AMR) has started to loosen the requirement of authenticating several key documents, which were previously required to be executed by Chinese Embassies in foreign countries.

We discuss the nature of some of these liberalized policies below – however, the information is based on the current regulation at the time and is subject to change. For the most updated policy that applies to your company and district, please contact us at shanghai@dezshira.com for more information.

Incorporating a company in Shanghai: AMR relaxes pre-licensing procedure

In the past, there were certain documents that required, both, notarization by a public notary, and a certification of authentication (also known as legalization or certification) from the Chinese Embassy in the investor’s home country. These included but are not limited to:

• [For corporate investors] Certification of Incorporation and Detailed List of Company Information (also known as the Business File)
• [For individual investors] Individual investor’s identification
• [For appointing an authorized person] Resolution and power of attorney

Documents 1, 2, and 3 are required by the Local Administration for Market Supervision to obtain the business license for company incorporation. The legal representative (of the proposed new company)’s notarized and legalized passport is also generally required by specific banks when opening a new corporate account.

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Owing to the prolonged closures of Chinese Embassy in many countries, several branches of the Administration of Market Supervision in Shanghai have now relaxed the legalization requirements for the above documents.

For individuals or companies wishing to avail of this temporary waiver, they will need to submit a commitment letter, signed by the investors, demonstrating that they are willing to provide the necessary legalized documents in compliance with Chinese laws and regulations, once this is made possible.

Investors should be aware that while authentication requirements have been loosened, the notarization requirement remains.

Doing business in China made easier

This recent policy move is similar to a swathe of other business-friendly policies that have already been rolled out since the onset of COVID-19.

Since the travel ban was implemented on March 28, which barred the entry of foreigners in China (a policy which has since been loosened), many legal representatives, senior managers, or other decision makers from foreign enterprises have been left stranded outside of the country.

This posed considerable challenges to the normal operation of businesses, in a country which until this year, was still largely driven by the submission of physical paperwork and granting approval via physical chops.

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However, due to COVID-19, the transition from paper administrative process to wholly digitalized processes has rapidly accelerated. And, as a result, administrative rules have also been simplified or relaxed to reduce undue obstacles.

Bureaucratic reforms include streamlining administration and delegation of power, improving regulations, and upgrading services, including through innovative measures such as the “one integrated license.”

More specific examples include Beijing promoting the widespread use of electronic seals for the signing and approval of electronic business documents. Prior to this, the application process for obtaining a foreign expat’s work permit was moved online.

Separately, in September 2020, certain banks in Shanghai agreed to allow a ‘video conference confirmation check’ or a ‘virtual interview’ (with some attaching prerequisites) as an alternative to being physically present to open a corporate business account.

Consequently, foreign investors contemplating their entry or expansion into the Chinese market in 2021 can be comforted by the trend of pro-business policies being gradually introduced.

However, investors may have to move quickly to benefit from this relaxed requirement as there is no guarantee to how long this will be extended.

The policy is currently still implemented on a case-by-case basis, and may differ depending on the district, company type, and industry. For specific information as to whether this applies to you, please contact us at shanghai@dezshira.com.

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