In the amended PRC Company Law, which took effect on 1 March 2014, the annual inspection requirement for companies has been replaced by an annual reporting obligation. On 7 August 2014, the Interim Regulations on Company Information Publicity (“Interim Regulations”) were published to provide details on the definition and content of the annual reporting. On 2 September 2014, the State Administration for Industry and Commerce (“SAIC”) further issued the Circular on Implementation of the Interim Regulations (“Implementation Circular”) to clarify the implementation of the annual reporting in practice. Since the time period during which the annual report must be filed is approaching, we summarize below the key requirements and procedures:
1. Content of the Annual Report
Under the annual reporting system, each company shall file its annual report through SAIC’s online platform, i.e. the “Enterprise Credit Information Disclosure System” (“Online Platform”). The annual report shall include the following general information of a company:
- mailing address, post code, telephone number and email address of the company;
- existence status of the company such as business commencement, closure and liquidation;
- investments by the company, such as subsidiaries or equity purchase;
- subscribed and paid-in capital, capital contribution time and method;
- equity changes such as share transfers;
- online shop name and website URL in case the company engages in online sales; and
- employee number, total assets, total indebtedness, warranties and guarantees provided for other entities, total revenue, gross profit, net profit and total tax.
Information under items (1) to (6) will be published mandatorily and is available on the Online Platform for the public. Regarding item (7), a company has the discretion to decide whether or not to disclose this information to the public.
2. Time Period
The annual report for each year shall be submitted during 1 January and 30 June of the following year. Currently, due to lack of clear legal guidance until September 2014, some companies still have not yet completed their annual reporting work for the year 2013. According to the Implementation Circular, the annual report for the year 2013 shall be filed during 1 October 2014 and 30 June 2015. The annual report for the year 2014 shall also be filed prior to 30 June 2015, but only after the annual reporting work for the year 2013 has been completed.
3. Blacklist System
The Interim Regulations have established a “blacklist system” for those companies which fail to file the annual report duly, disguise mandatory information or intentionally provide false information and refuse to rectify their behavior. Possible consequences of listing in the blacklist are that such companies will be restricted or prohibited from applying for assignment of state-owned land, project bidding and government procurement, etc. In addition, the legal representative or person-in-charge of a company listed in the blacklist are blocked for 3 years from serving in the same position in other companies.
Replacement of the annual inspection by annual reporting has reduced companies’ administrative burdens and red tape. However, in order to avoid the negative consequences following from not complying with the mandatory annual reporting requirements, those companies which have not yet completed the annual report for the year 2013 are well advised to check their internal compliance status and observe the deadline.