Companies incorporated in China (including foreign-invested enterprises) are required to publish corporate information via a unified online public disclosure system. The obligation commenced on 1 October 2014.
The types of corporate information that must be disclosed by companies include capital contributions, equity transfers, and the receipt of administrative approvals. The disclosure requirements were introduced by the State Council’s Provisional Regulations on Public Disclosure of Enterprise Information (“Regulations”), which took effect on 1 October 2014. The new unified online public disclosure system (“Disclosure System”) is operated by the State Administration for Industry and Commerce (“SAIC”) and its local branches (“AICs”).
Disclosure of Corporate Information in the Annual Report
Every company established in China is required to upload its annual report for the previous year onto the Disclosure System during the first half of each calendar year.
The following information from the annual report will be disclosed automatically to the public upon being uploaded:
- contact information;
- establishment status;
- equity investment (in each subsidiary set up or acquired);
- capital contribution (subscribed contribution, actual contribution, time and means of contribution);
- change in shareholding structure; and
- company website and/or online store.
A company may also (but is not obliged to) disclose to the public the number of its employees and the financial information stated in its annual report.
Disclosure of Corporate Information Changes
Certain changes of corporate information must be disclosed via the Disclosure System within 20 working days of the change. Such information includes:
- amount of subscribed capital contribution and actual contribution, timeline of contribution and means of contribution;
- equity change of the company such as equity transfer by a shareholder;
- receipt of an administrative approval as well as the modification and extension of such administrative approval; the Regulations do not state exactly which administrative approvals must be disclosed; however, some local AICs are requiring disclosure of administrative approvals for the issuance of food production licences, food distribution licences, drug production licences, and similar approvals;
- pledge registration for the company’s intellectual property; and
- administrative penalties imposed upon the company; in practice it is likely that the AIC will upload the administrative penalties that it imposes, and that it will coordinate with other authorities for penalties to be uploaded; however, the companies themselves will still need to ensure the accuracy and completeness of the disclosed penalties.
The SAIC is yet to publish detailed guidance on the Disclosure System. However, based on guidelines published by the Shanghai Pudong AIC, companies must access the Disclosure System via the account they use for uploading their annual reports. Since the information will be uploaded via the same account, it is very likely that the Disclosure System will be similar in practice with the online submission of annual reports.
If a company fails to disclose its corporate information in a timely manner or discloses fraudulent information via the Disclosure System, then the SAIC may order it to correct its non-compliance and may further put the company on a blacklist of companies with abnormal operations, and publish such information via the Disclosure System.
If the non-compliance remains for three years, then the SAIC may further put the company into a blacklist of companies with material non-compliance, and publish such information via the Disclosure System. If a company is listed as a company with material non-compliance, then the legal representative of such company will be prohibited from acting as the legal representative of any other company.
- Each company should ensure that its corporate information (as well as the changes set out above) is disclosed via the Disclosure System in a proper and timely manner.
- Companies may also consider referring to the Disclosure System to review corporate information of trading partners, potential investment partners, and acquisition targets. Although not a substitute for proper due diligence, the Disclosure System may well provide early indications of problematic partners and deals.
- If acquiring a company incorporated in China, the buyer must ensure that the relevant equity transfer is duly filed with the competent branch of SAIC and disclosed via the Disclosure System.