Company Records and Registers (China) | Practical Law

Company Records and Registers (China) | Practical Law

A Practice Note outlining the requirements to keep and maintain statutory registers and other records for limited liability companies incorporated in the People's Republic of China (PRC).

Company Records and Registers (China)

Practical Law UK Practice Note w-040-0430 (Approx. 12 pages)

Company Records and Registers (China)

by Michael Munzinger and Xiao Xiao, CMS, China
Law stated as at 19 Sep 2023 • China
A Practice Note outlining the requirements to keep and maintain statutory registers and other records for limited liability companies incorporated in the People's Republic of China (PRC).
In the People's Republic of China (PRC), a limited liability company (LLC) must generally keep and maintain certain registers and other records, such as a register of shareholders (Article 32, PRC Company Law 2018 (2018 Company Law)) as well as minutes and resolutions (Articles 41, 48 and 55, 2018 Company Law).
Additionally, relevant information regarding particulars of the PRC LLC must be recorded or registered with the competent PRC registration authority, which is the locally competent Market Supervision Administration (MSA) of the district where the PRC LLC is incorporated and registered. Failure to comply with this legal duty to record or register PRC LLC information may result in sanctions, liabilities, or both for the PRC LLC and theoretically its directors or officers. These sanctions or liabilities can be administrative, civil, or criminal. It is therefore vital for the PRC LLC and its directors and management to be aware of the PRC's requirements to avoid any consequences of non-compliance.
This Note looks at the specific requirements to keep and regularly maintain records and registrations for LLCs governed by PRC law and the consequences of non-compliance with these requirements in the PRC. It also discusses the general requirements relating to the location and inspection of company registers and records under PRC law.
This Note does not cover other records (such as tax and accounting (or financial) records) or registers required under other legislation (such as property beneficial ownership legislation) and annual financial accounts.

Records and Registration with the MSA

PRC LLCs are not required to keep (apart from an internal shareholders' register) statutory books and registers like companies in common law jurisdictions. It is a different system with company and shareholder information being registered with the local MSA. The following information regarding a PRC LLC must be registered with the competent MSA:
  • Company name.
  • Company type.
  • Business scope.
  • Address.
  • Registered capital.
  • Legal representative (who is the only person of a PRC LLC with statutory representation rights. This can be the chairperson of the board of directors, the executive director or the general manager of the PRC LLC.).
  • Shareholders.
  • Such other items as provided by laws and administrative regulations.
(Article 8, Administrative Regulations of the PRC on the Registration of Market Entities 2021 (2021 Market Entities Registration Regulations), effective as of 1 March 2022.)
In addition to the above, the following items must be recorded with the MSA:
  • Articles of association.
  • Business term.
  • Subscription amounts of the shareholders regarding the PRC LLC's registered capital.
  • Directors, supervisors, and senior management.
  • Liaison person for the MSA.
  • Authorised party for acceptance of legal documents on behalf of the shareholders of a foreign-invested enterprise.
(Article 9, 2021 Market Entities Registration Regulations.)
If there are any changes to the above-mentioned items, a PRC LLC must generally update the relevant registration or record with the MSA within 30 days from the date of making the resolution or decision on the change or the date the statutory change occurred (Articles 24 and 29, 2021 Market Entities Registration Regulations).

Register of Shareholders and Registration of Shareholder Information

A PRC LLC must maintain an (internal) register of its shareholders (Article 32, 2018 Company Law). A shareholder of a PRC LLC can be a natural person or a legal entity. Its liability is generally limited to the amount of its capital contribution to the registered capital of the PRC LLC (Article 3, 2018 Company Law).
The (internal) register of shareholders must contain the following information:
  • The name and address of each shareholder.
  • The capital contribution made by each shareholder.
  • The serial number of each capital contribution certificate (if one is used; capital contribution certificates are no longer mandatory).
(Article 32, 2018 Company Law.)
A PRC LLC must also register and record the names and other pertinent details of its shareholders, such as the shareholders' legal form, registration no. (if applicable), address and authorised signatories, and so on, with the competent MSA (and update these in case of any changes). If the PRC LLC fails to do so, the competent MSA may order it to make corrections. If it refuses, the PRC LLC may be fined up to RMB100,000. If the circumstances are serious, the PRC LLC's business licence may be revoked (Article 46, 2021 Market Entities Registration Regulations).

Rectifying the Register of Shareholders and Relevant Information of Shareholders Filed at the MSA

Rectification of internal documents and information of the PRC LLC, such as the internal register of shareholders, is possible and can be made by the shareholders of the PRC LLC. If any information relating to the shareholders of a PRC LLC as registered or recorded with the MSA is found to be incorrect, the PRC LLC should apply to the MSA for a correction or update.

Records of Directors, Supervisors, and Senior Management

A PRC LLC must, in principle, have a board of directors comprising three to 13 directors. However, a PRC LLC with relatively few shareholders or of a relatively small scale may choose to have one sole executive director instead of a board of directors (Articles 44 and 50, 2018 Company Law).
There is no express requirement for a PRC LLC to keep an (internal) register of its directors.
However, a PRC LLC must record (and update in case of any changes) the names and other pertinent details of the directors, the supervisors, and the senior management with the competent MSA (Articles 9 and 29, 2021 Market Entities Registration Regulations).
If a PRC LLC fails to record or to update the record with the MSA, the MSA may order it to make corrections. If it refuses, the PRC LLC may be fined up to RMB50,000 (Article 47, 2021 Market Entities Registration Regulations).

Registers Not Required Under PRC Law

The following registers are not required under PRC law for a PRC LLC:
  • Register of disclosable interests.
  • Register of directors' interests in contracts.
  • Register of directors' service contracts.
  • Register of loans for directors or connected persons.
  • Register of documents relating to purchase of own shares. The purchase of own shares by a PRC LLC is limited to certain circumstances, such as on the request of a shareholder to purchase the shares held by that shareholder in the LLC, if the LLC has not distributed profits for five consecutive years while the LLC made profits, or in the event of a merger, division or transfer of principle assets of the LLC and so on, if the shareholder voted against such resolution in the shareholders' meeting (Article 74, 2018 Company Law). After the purchase of own shares, the LLC must timely reduce its registered capital and apply for the relevant registration with the MSA regarding the capital reduction.

Registration of Instruments Creating Charges (or Other Security Rights)

A share pledge regarding a non-listed PRC LLC is subject to registration with the MSA (Article 3, PRC Measures for the Registration of Equity Pledges 2016, slightly revised in 2020 (2020 Equity Pledge Registration Measures, with effect from 1 January 2021)). The following information must be registered with the competent MSA (Article 4, PRC Measures for the Registration of Equity Pledges):
  • The names of the pledgor and pledgee.
  • The name of the PRC LLC the equity interests of which shall be pledged.
  • The amount of the pledged equity interests.
The pledgor and the pledgee make the application jointly (Article 6, 2020 Equity Pledge Registration Measures). In case of any change, they must timely update the registration (Article 8, 2020 Equity Pledge Registration Measures).
The registration of a share pledge is published by the MSA on the National Enterprise Credit Information Publicity System, which the public may access free of charge (Article 15, 2020 Equity Pledge Registration Measures).

Other Records and Registrations

Registers of Beneficial Ownership

Previously, the name and other pertinent details of the ultimate actual controller of a foreign shareholder of a foreign-invested company had to be reported to the competent Authority of Commerce. However, current practice normally no longer requires a registration or filing with the Authority of Commerce . Instead, businesses only need to disclose the relevant information in accordance with China's foreign investment information reporting regime. For detailed coverage, see Practice Note, Foreign Investment Information Reporting in China.

Minutes of Shareholders' and Directors' Meetings

The shareholders must take minutes of decisions made on matters discussed at shareholders' meetings, which the shareholders who attended the meeting must sign (Article 41, 2018 Company Law).
Additionally, the board of directors must also take minutes of decisions made on matters discussed at its meetings (Article 48, 2018 Company Law). All directors who attend the meeting must sign the minutes (Article 48, 2018 Company Law).
The PRC LLC can keep the minute books in hard copy or electronically.
The minutes typically contain the following information:
  • When and where the meeting was held.
  • Who convened and presided over the meeting.
  • The identity of the shareholder representatives, directors, and any other participants.
  • The attendees.
  • Resolutions passed at the meeting.
  • Details on the voting (approval, disapproval, or waiver).
Generally, minutes as well as resolutions are considered internal documents of the PRC LLC and do not need to be submitted to or filed with the MSA. However, certain information must be registered with the MSA; for more information, see Records and Registration with the MSA.

Location of Public Registers

The information and documents of PRC LLCs recorded and registered with the MSA are kept by the MSA in hard copy and electronically.

Inspection of Public Registers

Any member of the public can inspect free of charge the publicly available information which is indicated on the National Enterprise Credit Information Publicity System which is maintained by the locally competent MSA, except for the annual reports, which are reported annually by the PRC LLCs themselves. That publicly available information includes the following:
  • Company name.
  • Uniform social credit code (registration number).
  • Company type.
  • Company address.
  • Competent MSA.
  • Registered capital and paid-in registered capital.
  • Date of incorporation of the PRC LLC.
  • Duration of the PRC LLC (unless otherwise specified by law, shareholders of a Chinese company agree on the operation term of the company in the company's articles of association, which term is also required to be registered with the MSA in the establishment of the company. Common practice is for the shareholders to agree on a long operation term (20,30 or 50 years), and there are companies that chose to be perpetual where the local MSA allows).
  • Shareholders and shareholding ratio.
  • Identity of the directors, supervisor, and, usually, general manager.
  • Business scope of the PRC LLC.
  • Existence and name of branches and subsidiaries of the PRC LLC.
  • Annual reports. These include information of the relevant company, including telephone number, official website, number of employees, and financial information. However, the PRC LLC can also choose not to disclose this information to the public.
This is often the only information on PRC LLCs that is publicly available in the PRC.
Nowadays, third parties cannot simply obtain copies of any LLC-related documents, such as articles of association, and resolutions of the shareholders and the board of directors. A few years ago, any interested party could appoint a local lawyer or agent to inspect and obtain copies of these documents filed with the MSA.
However, in recent years, more and more MSAs have become increasingly reluctant to allow local lawyers or agents to inspect and obtain these documents, unless they had written authorisation from the PRC LLC to have its documents inspected, or a reasonable interest to do so. Some MSAs only allowed judicial authorities (such as the police, prosecutor, and courts) or administrative authorities (such as the tax bureau) to obtain the relevant documents without a reasonable interest.
According to the most recent practice of registration authorities in Shanghai, access to a PRC LLC's corporate documents, including the articles of association, can normally only be applied for online under the National Enterprise Credit Information Publicity System by using the PRC LLC's electronic business licence.

Location of Internal Records and Minute Books

The PRC LLC can keep internal records and minute books either:
  • By itself, for example, in its office.
  • At a professional service provider, such as an accounting firm or a law firm.
Internal records and minute books do not need to be submitted to and filed with any PRC authority (such as the MSA).

Inspection of Internal Records and Minute Books

Any shareholder of the relevant PRC LLC is entitled to inspect and copy the following:
  • Articles of association.
  • Minutes of shareholders' meetings.
  • Resolutions of meetings of the board of directors.
  • Resolutions of meetings of the board of supervisors.
  • Financial reports.
(Article 33, 2018 Company Law.)
This right to inspect and copy ends if the relevant party ceases to be a shareholder of the PRC LLC, for example, in case they transfer their entire equity interests in the PRC LLC.
Third parties generally cannot inspect and copy the above-mentioned documents.

Duration of Keeping Internal Registers and Minute Books

Internal registers and minute books of a PRC LLC must generally be kept permanently (Article 8, PRC Provisions on Archiving Scope and Retention Period of Enterprises' Documents and Materials 2012, effective as of 1 February 2013). Documents and materials that are not adopted after discussion must be kept for only 10 years.

Data Protection and PRC LLC Records and Registers

The PRC Personal Information Protection Law 2021 (2021 PIPL) came into effect on 1 November 2021. Under the 2021 PIPL, a PRC LLC may process personal data when required to perform a statutory responsibility or a statutory obligation (Article 13(3), 2021 PIPL). Further, if the personal information which has been recorded or registered with authorities (such as the MSA) has already been legally disclosed to the public, the PRC LLC is allowed to process that information within a reasonable scope, e.g. process relevant publicly available information to reflect a company's corporate governance structure (Article 13(6), 2021 PIPL).

Safeguarding Internal Records and Registers

A PRC LLC should take adequate precautions for guarding against unauthorised access to and falsification of internal records, registers, and other documents and information. For example, a shareholder of the PRC LLC may set up internal rules or procedures to clarify:
  • The powers and functions of the management and LLC seal holders.
  • Which persons have access to relevant internal records, registers, and other documents and information.

Consequences of Non-Compliance

Liability of the PRC LLC

If it does not comply with the above obligations, the PRC LLC may be subject to various administrative sanctions, and in extreme cases criminal sanctions (see Criminal Liability).
These sanctions include the following:
  • If a market entity fails to process an amendment of registered particulars, the registration authority can:
    • order it to make corrections;
    • fine it not less than RMB10,000 but not more than RMB100,000 if it refuses to make corrections; or
    • revoke its business licence if the circumstances are serious.
    (Article 46, 2021 Market Entities Registration Regulations.)
  • If a market entity fails to handle record filing in accordance with the ARRME, the registration authority can:
    • order it to make corrections; or
    • fine it not more than RMB50,000 if it refuses to make corrections.
    (Article 47, 2021 Market Entities Registration Regulations.)

Directors' Liability

The directors and officers of a PRC LLC can theoretically be subject to civil, administrative, and criminal liability in case of non-compliance with the obligations regarding the statutory records and registers of the PRC LLC

Civil Liability

As a basic principle, a director, supervisor, or manager of a PRC LLC is personally liable to a third party generally only for their personal actions but not for their operational activities. However, potential liabilities can occur internally (that is, to the PRC LLC and the shareholders).
For example, where any director, supervisor, or senior manager violates any law, administrative regulation, or the articles of association of the PRC LLC in the course of performing their duties, they are liable to compensate the PRC LLC for any loss caused to the PRC LLC (Article 149, 2018 Company Law).

Administrative Liability

There are many administrative laws and regulations according to which the PRC LLC or the "responsible person," "directly responsible person," or "main person in charge" can be liable for breach of relevant provisions. There is no general legal definition for responsible person or directly responsible person under PRC law. In a commercial context, the responsible person of a company often refers to the chair of the board of directors, the general manager, and other senior management personnel.
For example, if a market entity's registration is cancelled due to a false market entity registration, such as by using incorrect information or concealing relevant information, the entity's directly responsible person cannot apply for market entity registration again within three years from the date of cancellation of the market entity registration (Article 40, 2021 Market Entities Registration Regulations).

Criminal Liability

The directors, supervisors, and senior management of a PRC LLC may in extreme cases also be subject to criminal liability under the PRC Criminal Law.
For example, serious sanctions apply if, when applying for PRC LLC registration, a person misleads or deceives the competent company registration authority through falsely declaring the capital to be registered with falsified certificates or by other deceptive means. These sanctions include:
  • Fixed-term imprisonment of not more than three years or criminal detention.
  • A fine of not less than 1% but not more than 5% of the PRC LLC's capital.
(Article 158, PRC Criminal Law 2020 (2020 Criminal Law).)
If the PRC LLC commits the crime (see Liability of the PRC LLC), in addition to it being fined, the persons directly in charge and the other persons directly responsible for the crime may be sentenced to fixed-term imprisonment of not more than three years or criminal detention (Article 158, 2020 Criminal Law) .
The following offences are treated very seriously in the PRC:
  • Falsifying or providing misleading financial statements or information.
  • Concealing important facts.
  • Failing to disclose other important information that is required to be disclosed according to law.
If convicted, the person directly in charge and the other person directly responsible may at the discretion of the court be:
  • Sentenced to fixed-term imprisonment of not more than five years or criminal detention. However, in particularly serious cases, a term of imprisonment of up to ten years can be imposed.
  • Fined an amount at the discretion of the court..
(Article 161, 2020 Criminal Law.)
However, criminal liability of directors, supervisors, and senior management generally requires that:
  • The criminal act was committed within the area of responsibility of the relevant person.
  • The relevant person was at fault and acted at least with gross negligence.
Criminal prosecution of individual company organs of PRC LLCs is still rather rare in practice. Although that liability risk cannot be completely avoided, it is relatively low if a PRC LLC is operated properly and in compliance with the law.
All these potential civil, administrative, and criminal liabilities generally require that the respective person was involved in the wrongdoing. A person's liability risk for the PRC LLC not complying with filing requirements is relatively low if the PRC LLC is operated normally.

Annual Compliance Obligations

At the end of each financial year, a PRC LLC must prepare annual financial statements (Article 164, 2018 Company Law). The board of directors of a PRC LLC is responsible for preparing the annual financial statements, which are then generally approved by the shareholders' meeting or by the sole shareholder (Article 165, 2018 Company Law).
The annual financial statements should normally be drafted (upon the delegation by the Board of Directors) and audited by an accounting firm located and registered in the PRC (Article 164, 2018 Company Law), by the end of March each year. This is because they are required, for example, for the annual tax declaration which must be filed by 31 May of each year. If a PRC LLC fails to properly keep its financial records, it may be fined up to RMB50,000 and the direct responsible person may be fined up to RMB20,000 (Article 39, Regulations on Business Enterprise Financial Reporting 2000, effective as of 1 January 2001).
The PRC LLC must also make an annual report of the preceding year, including the (audited) annual financial statements (figures), before 30 June of the current year on the National Enterprise Credit Information Publicity System (Article 8, Interim Regulations on Enterprise Information Publicity 2014). If a PRC LLC fails to make the annual report, it is listed in the List of Enterprises Operating Abnormally according to the Interim Measures for the Administration of the List of Enterprises Operating Abnormally 2014. Such list is accessible on the National Enterprise Credit Information Publicity System .
Other annual filing requirements are as follows:
  • Routine tax declarations must normally be filed by the 15th day following either:
    • the month end (for routine declarations of indirect taxes and Individual Income Tax); or
    • the quarter end (for provisional Corporate Income Tax (CIT) declarations).
  • Annual CIT declarations must be filed by 31 May each year.
  • Reporting forms of related party transactions (including a country-by-country report, if applicable) must be filed together with the annual CIT declaration by 31 May each year.
  • Local files and specific issue files (addressing the thin capitalisation issues and cost sharing issues, if any) of the transfer pricing documents (if any) must be prepared by 30 June each year and submitted within 30 days on request from the tax authorities.
  • Master files of the transfer pricing documents (if applicable) must be prepared by the group headquarters and translated into Mandarin Chinese within 12 months from the end of the fiscal year of the ultimate holding company and submitted within 30 days on request from the tax authorities.