Recent news reports regarding the alleged purchase of personal information by a corporate investigative service firm in Shanghai have raised questions about the possibility of obtaining information about domestic Chinese companies from government corporate registration agencies.
In China, the corporate registration authority is the State Administration for Industry and Commerce (the “SAIC”) and its local counterparts. These agencies maintain the official corporate files and corporate information on companies incorporated in China. The “official corporate files” of a company typically include items such as (1) copies of the original government approvals issued to the company, (2) the company’s articles of association (the corporate charter document), (3) shareholder agreements, and (4) board resolutions. A company’s “corporate information” includes its name, date of establishment, business address and the names of its shareholders, among other details. Obviously, these types of materials can provide crucial information about a company’s business operations that is highly valuable to competitors, creditors, analysts and other prospective business partners or adversaries.
Although generally this information has been made available for review by the public, the level of access has changed over time. In the past ten years, the relevant authorities have undertaken two apparently contradictory efforts in this regard: reducing access to corporate files while expanding access to certain corporate credit information (which is now published and available to the public free of charge).
Reduced Access to Corporate Files
In 1996, the SAIC issued a regulation (Measures on Inquiries of Enterprise Registration Records and Files), which spelled out the basic rules for inquiring about a company’s corporate files. According to those rules:
- Public security agencies, procuratorates (roughly equivalent to China’s public investigative and prosecutorial agencies), judicial authorities, national security agencies, disciplinary inspection and supervision authorities and audit authorities may make request a company’s written corporate files by presenting an official letter and valid identity certificate(s) to the relevant local office of the SAIC.
- A P.R.C.-admitted lawyer, when representing a company which is a party to a lawsuit, may request the company’s written corporate files from the relevant office of the SAIC. The lawyer must submit proof from the court that the case has been filed and his or her own certificate to practice law.
In reality, however, these rules were ignored for about the first ten years after they were promulgated. During that period, not only government agencies, but ordinary individuals often could obtain a company’s written corporate files if they paid a certain inquiry fee to the registration authority. As time went by, access was increasingly limited to P.R.C.-admitted lawyers – other individuals were restricted from making direct requests. They could still make indirect requests, however, by paying a P.R.C.-admitted lawyer a modest fee to file the inquiry on their behalf.
For the past year or so adherence has been strict. Now, a P.R.C.-admitted lawyer can request a company’s corporate files only when the lawyer is representing the company in a lawsuit. In May 2012, the Beijing Administration for Industry and Commerce issued a “Notice for Inquiry on Enterprise Registration Files” to restate and reaffirm the rules.
Practically speaking, the actual amount of information made available may vary between the local offices of the SAIC. In the past, availability has depended on the accuracy and diligence in record-keeping practices at each particular local office.
Disclosure of Credit Information
The Chinese government is working to create a social credit system to overcome problems arising from malicious defaults on bank loans, tax avoidance, commercial fraud, counterfeiting and other credit-damaging activities. With a goal of encouraging positive behaviors and supporting companies that maintain good credit records, the government publicly discloses credit information they obtain about companies. Such information may include:
- identity information, such as basic registration information, information on qualifications, approvals or permits granted by authorities, resulting in special or annual inspections, etc.;
- disciplinary records, such as information on whether the company had been fined, forfeited or suspended from business operations due to an unlawful activity, or did not pass a special or annual inspection;
- records of violations, such as information that the business license of the company was revoked or withdrawn due to serious unlawful activities, where the company has been fined, forfeited or suspended from business operations two or more times due to the same unlawful activity, or has committed a crime and is subject to criminal liabilities; and
- records of achievements, such as information that the company or its legal representative or other chief executives have been honored by high-level government authorities, that the trademark of the company has been designated as a “well-known trademark,” or that the credit rating of the company has been ranked “AAA” by financial institutions.
In summary, the volume and type of publicly-available information about privately-held companies in China has been subject to increasing restrictions in recent years, but a significant amount of information remains openly available.
Further developments on personal information protection law in China have the potential to affect the amount and type of publicly-available corporate information. We will continue to monitor developments in this field as they arise.