Any company getting registered in China must be extremely careful about the business scope it provides to the authorities. If it tries to register too wide a business scope, the authorities are likely to reject the application. If it registers too narrow a business scope, it will encounter legal issues if it tries to operate outside them. This means you can be fairly sure that the registered business scope will be very specific and cover exactly what a company is legally permitted to do.
In China, a company’s operations are defined by its business scope, a one-sentence description of the industry(s) it is authorized to operate in. Therefore, any significant change to company operations must be preceded by a registered change of business scope.
For foreign businesses especially, it is imperative that company operations be reflected accurately in their business scope, as this connected to the “Catalog for the Guidance of Foreign Invested Enterprises” (“Catalog”) governing foreign investment into China. An enterprise’s business scope is administered by two state bodies — MOFCOM and the local Administration of Industry and Commerce (AIC) of registration — and is printed on its business license along with other registered information such as its name, registered capital, and legal representative. Foreign investors should be advised that any changes to a company’s business scope will be publicly accessible via AIC records.
Disingenuously fabricating one’s business scope, however, can carry legal consequences including fines or the revocation of one’s business license. Importantly, the business scope of a given enterprise must include or reflect the industry contained in the enterprise name. If the company operates in several industries, then the first item listed in its business scope will be considered its primary industry for naming purposes.
Often, but not always, a change of business scope will require additional investment into the company’s registered capital, which can considerably prolong the application process. Additionally, depending on the nature of the proposed change of business scope, the enterprise may be required to obtain additional approval or modify their business premises to engage in the specified industry. Lastly, the enterprise will have to renew its Certificate of Approval granted by MOFCOM, this being the distinguishing factor between FIEs and domestic enterprises. These steps must all be completed prior to applying with the AIC to change the enterprise business scope.
It should be clear that modifying the business scope of a company in China is no easy task. Given the proper planning, however, it can be done. Depending on the specific revisions to be made to one’s business scope, the overall process can carry on for months, excluding the time required for the company to prepare internal documents.
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If you have further inquiries, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Shenzhen hotline at 86-755-82143422 or Hong Kong hotline at 852-27826888, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020,Dongmen Rd South, Luohu, Shenzhen, China.
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