Hiring for your China Representative Office. It’s Complicated.

Hiring for your China Representative Office. It’s Complicated.

A Representative Office (RO) established by foreign enterprise under Chinese laws and regulations does not have the qualification of a legal person, and it shall not conduct any profit-making activities. According to Chinese laws and regulations, when an RO decides to recruit Chinese workers, it must entrust a service unit which has approved by Chinese Government to engage in labor dispatching services for employing Chinese personnel. In China, there are strict rules and complicated procedures for a service unit to apply and become a qualified labor dispatch entity. In order to use the Chinese personnel in line with laws and regulations, an RO must cooperate with the dispatching entity, like the FESCO and CIIC in China. There would be an Entrustment Agreement concluded between the RO and FESCO, and FESCO shall directly sign a labor dispatch agreement with the dispatched worker and then dispatch him/her to the RO.

According to Chinese relevant provisions on labor dispatch, the labor dispatch entity shall be responsible for paying remuneration and social insurance fee for the dispatched worker. In case that the worker is dispatched to another region, the labor dispatch entity shall obtain the social security insurance coverage for the dispatched worker at the place where the employer concerned is located, and pay the social security insurance premium in accordance with the rules at the place where the employer concerned is located. In case that the labor dispatch entity does not have any presence at the place where the employer locates, the employer will complete the formalities for obtaining social security insurance coverage and pay the social security insurance premium for the dispatched worker on behalf of the labor dispatch entity. Besides, not like the situations where the dispatched workers are employed and working in other types of companies, there is no limitation or restrictions on the proportion of dispatched workers employed for temporary, auxiliary or substitutive job positions in an RO.

Published by Crys Zheng on June 13th, 2017 tagged Uncategorized | Comment now »

Who Will Be The Qualified Candidate For Your Company’s Legal Representative?

Recently, we are requested to provide legal advice on the qualifications for the legal representative of a company. This question may not be paid enough attention of many people, however, since China has strengthened the compliance management for enterprises, and cracked down the dishonesty behaviors. While legal representative as the person who legally represents a company, is authorized with many rights of the company, and at the same time, will be personally responsible for the company’s non-compliance or illegal behaviors under some circumstances. Therefore, there are limits on the qualification of legal representative provided by law. And here, we will discuss these qualifications for legal representative of a company (non-listed company).

Subject to relevant laws, the candidates for the legal representative of a company shall be its chairman of board of directors, executive director or its manager. Therefore, the legal representative shall firstly, take such positions in the company which proposes to appoint her/him as the legal representative. Further to this, as the directors, supervisors and other senior officers of a company, they shall comply with laws, administrative regulations, and the articles of association and shall owe duties of fidelity and due diligence to the company. They are prohibited to conduct any activities which breach their duties of fidelity and due diligence to the company, as well as any activities which have conflict interests with the company.

Here, I want to invite your attention to this pre-condition of the legal representative of a company. Since I found that under some circumstances, the legal representative is removed from the position as the chairman of board of directors/executive director, or general manager, however, still serve as the legal representative. This is inconsistent with the provisions of law.

Further to the aforementioned requirements, the qualifications for the legal representative of a company are as below:

  1. Has full capacity of civil conducts;
  2. Who is not serving criminal sentence or being taken criminal compulsory measures;
  3. Who is not the person wanted by a public security organ or a state security organ;
  4. In the event of being convicted of any criminal offence in the nature of corruption, bribery, disseizin, misappropriation or disrupting the economic order of the socialist market, five years has been elapsed since any penalty imposed has been completed, or in the event of being deprived of political rights due to any crime, five years have elapsed since the penalty was completed; or in the event of being sentenced to a criminal penalty due to any other crime, with the execution period having expired for more than three years;
  5. In the event of serving as former director, factory director or manager of a company or enterprise which has been declared bankrupt and liquidated in circumstances where he was personally responsible for the bankruptcy of the company or enterprise, three years have elapsed since the bankruptcy and liquidation of the company or enterprise was completed;
  6. In the event of serving as former legal representative of a company or enterprise which has had its business license revoked and has been ordered to close its business operations due to any violation of law in circumstances where the former legal representative was personally liable for the revocation of the business license, three years have elapsed since the date of revocation; and
  7. Has no significant unpaid due debts;
  8. Who is not under any other circumstances provided by the law of China, which shall not serve as the legal representative of a company.

If a person who has not fulfilled the qualifications provided by the laws was appointed as the legal representative, the appointment for such person is invalid, such person who has been appointed to take such positions shall be removed accordingly.

What’s more, under some special circumstances, the person involved shall not serve as the legal representative of any company within the statutory period, and in the event that the appointment has been made and enforced, such person shall be removed and corresponding registration shall be changed accordingly. Any application for registering such person as the director, supervisor or any other senior officer will not be accepted by the competent authorities.

In conclusion, ask a lawyer for legal advice on the qualifications of the legal representative of your company before making the appointment.

Published by Myra Kong on June 9th, 2017 tagged Uncategorized | Comment now »

Guidance for Acquiring Class A Mapping Licence in China

We have had several inquiries from companies seeking to become a qualified enterprise operating the Class A Mapping business within China.

Such business is not rare in China, according to the latest name list published by the National Administration of Surveying, Mapping and Geoinfomation, there are 898 companies holding Class A Mapping Licence in China by 2015, wherein Beijing has 107 companies holding Class A Mapping Licence. For Class B Mapping Licensed companies, the statistic shows that there are 3122 companies in China and 138 companies in Beijing which has such licence.

There are 4 classes for mapping licence in total. The Class A Mapping Licence is supervised and approved/granted by the National Administration of Surveying, Mapping and Geoinfomation, while the other 3 classes are governed by the Administrative department of Surveying, Mapping and Geo information at provincial level. Companies should get licences for different levels in sequence, D, C, B then A. Cross level application will not be allowed.

To get a Class A Mapping Licence, the company shall meet following conditions:

1. Having the legal person status of an enterprise or institution;

2) Having the professional technical personnel compatible with the conduction of surveying and mapping; (The professional technical personnel conducting surveying and mapping shall have the corresponding practice qualification. Surveying and mapping personnel shall conduct surveying and mapping work with surveying and mapping work certificates. The ID Certificate, Graduation Certificate, Qualification Certificate, Labor Contract and Social Insurance payment certificate shall be submitted for examination during application.);

3) Having the technical equipment and facilities compatible with the conduction of surveying and mapping; (ownership certificate of equipment shall be submitted during application. It is required to have enough working place, at least 600㎡, to operate mapping business, and certificate of such working place shall also be submitted during application.);

4) Having a sound technical and quality guarantee system and the management system of surveying and mapping results and the materials and archives; (Regarding the mapping results, applicants shall submit their former performance and capability certification, which shows that the total value of mapping services completed in recent 2 years is not less than RMB 16,000,000, and there are more than 3 surveying and mapping projects are successfully passed the investigation and are qualified by Quality Agency recognized by the geoinformation administration at provincial level.)

Also, there are many mapping companies publicly traded in China. For example, Beijing Unistrong Science & Technology Co., Ltd (stock code: 002383); Beijing SuperMap Co., Ltd. (stock code: 300036);

Beijing NavInfo Science and Technology Co., Ltd. (Stock code: 002405);

Beijing Egova Science and Technology Co., Ltd. (Stock Code: 300075)

Only domestic companies and JVs in which the foreign shareholding is less than 50% are allowed to conduct mapping and conveying business after acquiring approval and licence from competent authorities. In practice, the government restricts foreign surveying and mapping business. In the December of 2016, the competent authority, i.e. the National Administration of Surveying, Mapping and Geoinfomation issued its notice on further strengthening the administration of foreign-related surveying and mapping, and it requires all the companies holding any class mapping licence to complete a survey table to report their foreign related issues including whether the percentage of the foreign shareholding, direct/indirect holding of shares by any foreign investor, any foreign actual controller, VIE mode of operation and whether the parent company is foreign related, etc.

Therefore, if you would like to engage in mapping or conveying business, get a Chinese partner and find a professional China lawyer will be your first step to take.

Published by Crys Zheng on June 7th, 2017 tagged Uncategorized | Comment now »

China Social Insurance Policies

In China, there are basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance, maternity insurance and other social insurance systems established for employees in order to maintain their right to receive material assistance from the state and society in the case of seniority, illness, work-related injury, unemployment, maternity or other circumstances.

According to Chinese law, the social insurance premium is contributed by the employer and the employee at certain percentage of the employees’ aggregate wages and the personal wages respectively. The contribution rate of the social insurance premium borne by the employer and employee is not uniformed but varies from one place to another and may be changed or updated by local governmental authority.

Although the social insurance system may bring lots of advantages and benefits to citizens, some Chinese employees are reluctant to contribute as they bear high percentage of social insurance obligations according to Chinese laws and regulations. Once, the compensation rates of the social insurance premium paid by an employee for a month could amount to more than 28% of the monthly salary in some areas of China. In consideration of preventing the occurrence of social conflicts, the Chinese government plans in their 13rd Five-Year-Plan to gradually and adequately reduce social insurance contribution rates, and relevant changes are already implemented or will be implemented in the near future.

Below is the reference sheet indicating the current contribution rates of social insurance premium provided in the most famous cities in China:

City Pension

(%)

Medical

(%)

Unemployment

(%)

Maternity

(%)

Work-related injury  (%)
Employer Employee Employer Employee Employer Employee Employer Employee Employer Employee
Beijing 19 8 10 2 0.8 0.2 0.8 N/A 0.2-0.5 N/A
Shanghai 20 8 9.5 2 0.5 0.5 1 N/A 0.2-1.9 N/A
Guangzhou 12 8 8 2 1.5 0.5 0.85 N/A 0.5 N/A
Tianjin 19 8 11 2 1 0.5 0.5 N/A 0.5-2 N/A
Xi’an 20 8 7 2 2 1 0.5 N/A 0.5 N/A
Chengdu 19 8 6.5 2 0.6 0.4 0.5 N/A 0.4 N/A
Hangzhou 14 8 11.5 2 1 0.5 1 N/A 0.3-1 N/A
Nanjing 20 8 9 2 1 0.5 0.5 N/A 0.2-1.9 N/A

According to the new policies published and enforced by the State Council, the Ministry of Human Resources and Social Security together with the Ministry of Finance, since 2015, it has been required to reduce the average payment rate for work-related injury insurance by 0.25% and to reduce the maternity insurance payment rate by 0.5%.

Besides, as of May 1, 2016, the places where the required contribution rate for employers to the basic pension insurance of employees is more than 20%, such required rate shall be reduced to 20%; in places where such required rate is 20% and the cumulative balance of the basic pension insurance fund for employees by the end of 2015 is sufficient to pay for more than nine months of such contributions, the required employer rate may be periodically reduced to 19%. In a meanwhile, the overall unemployment insurance payment rate may be reduced periodically by 1-1.5% on the basis of the one-percentage-point reduction had been made in 2015, and the individual contribution rate shall not exceed 0.5%.

The period for the implementation of such reduced rates shall be set temporarily as two years, and the detailed implementation plan for each place will be determined by local authorities. Due to these reductions, during the 13rd Five-Year-Plan period, the costs of enterprises and employees on social insurance premiums will be reduced to some extent.

Published by Crys Zheng on May 16th, 2017 tagged Uncategorized | Comment now »

Oral Hearing is coming up for Trademark Review Cases

In accordance with the relevant provisions of the trademark review and regulations on the implementation of the Trademark Law and the Trademark Review and Adjudication Rules, the State Administration of Industry and Commerce promulgated the Measures for Oral Hearing the Trademark Review Cases on May 4, 2017, and the Measures came into force on the same day.

The main provisions of the Measures provided that upon receiving the request for oral hearing over the case submitted by the party in dispute or if it is found to be necessary for hearing the case, the Trademark Review and Adjudication Board (“TRAB”) may decide to orally hear the case. When the oral hearing is scheduled, the TRAB will inform the parties involved in writing the date, time, place and the collegial panel members for such oral hearing and will notice the parties their right and obligation during the oral hearing.

During the oral hearing, the member of the collegial panel will introduce the main fact and dispute of the case, then the applicant will state the request and the respondent will make defense. All the parties in dispute will have to present all the evidence and complete the cross-examination during the oral hearing. If necessary, witness may be invited to the hearing as well for being inquired by counter party or the collegial penal of TRAB.

Since 2014, the Trademark Review and Adjudication Rules allow the oral hearing to be used in reviewing the trademark cases. However, specific measure did not came up in time until now. The promulgation and enforcement of the Measures make up for the loophole in the regulations and make the oral hear feasible in practice. It will facilitate the parties concerned in dispute settlement regarding trademark cases.

Published by Crys Zheng on May 10th, 2017 tagged Uncategorized | Comment now »

New Opportunities in China Foreign Exchange Market

Recently, the State Administration of Foreign Exchange (“SAFE”) issued a circular concerning the foreign exchange risk management of foreign institutional investors in the interbank bond market in order to convenient the foreign investors to control risk and to promote the opening of the bond market and foreign exchange market.

The new policies and regulations in this Circular allow the foreign investors, including commercial banks, insurance companies, securities companies, fund management companies and other asset management institutions lawfully registered and incorporated outside the People’s Republic of China, as well as investment products lawfully launched by such financial institutions and other long- and medium-term institutional investors recognized by the People’s Bank of China (“PBOC”), to handle the foreign exchange derivatives business, containing forwards, foreign exchange swaps, currency swaps and options, through settlement agents qualified and approved by the SAFE in the interbank market. However, taking into account that the foreign investors involved in the domestic foreign exchange market is mainly used to hedge the foreign exchange risk exposure incurred by remitting funds from overseas for investment in the interbank bond market and currently is not the main provider of market liquidity, so their foreign exchange transactions shall be limited within the retail market, i.e. the bank counter market and shall follow the principle of actual transaction needs.

The SAFE further stated that it would continue to deepen the development of the foreign exchange market in the future, enrich the trading instruments, broaden the participation of the participants, expand the opening to the outside world, improve the infrastructure and better meet the needs of foreign institutional investors, including inter-bank bond market players on managing and controlling risks over foreign exchange, service entity economic development and support the opening of financial market.

Published by Crys Zheng on May 2nd, 2017 tagged Uncategorized | Comment now »

New requirements on leasing property for commercial use

As we all know, one company needs an office for its registration purpose and its daily operation. In most cases, such offices are rented from others, especially from individual landlords. Before, the company’s initiators just have to obtain the copy of the deed, the leasing agreement and the certificate on the usage of the property signed by the landlord for register the property as the registered office of their company and to complete the establishment registration procedures for their start-ups. However, in practices, there are many investors steal the copy of the deed and fake the signature on the lease agreement and certificate of the property in order to register it as their registered office without notifying the real landlords, or there are landlords leasing the properties which are unqualified for using on commercial purposes to company investors. Such false registrations and contract defaults lead to so many disputes between the landlord and tenants that infringe both party’s interests and legitimate rights.

In view of those mentioned above, the Chaoyang AIC formally published their notice on March 27, 2017, requesting the individual landlords to apply for record-filing before the AIC for leasing their commercial premises to any companies for commercial use. Otherwise, such premises will not be allowed for using as the registered office for any company. Also, the platform for managing the certificate on the usage of the office is adapted to the new notice, and it is required that only one platform user may be created for filing one property on the platform system.

Published by Crys Zheng on April 25th, 2017 tagged Uncategorized | Comment now »

NGOs in China, Pay Attention to the New Law

A new law named Law on Administration of Domestic Activities of Overseas Non-governmental Organizations was promulgated last year. NGOs in China shall pay attention to this, or the organization might be under risk of violating law.

NGOs in this law refer to foundations, social organizations, think tanks, and other non-profit-making and non-governmental social organizations legally established overseas.

The key point of this law is that any NGO with an intention to conduct activities in mainland of China must go through procedures of registration or record filing. As indicated clearly in article 9 of the law,  To conduct activities within the territory of China, overseas NGOs are required to register and establish their representative offices in accordance with the law; and those failing to do so but needing to carry out temporary activities within the territory of China shall make a record-filing in accordance with the law. Overseas NGOs that fail to register and establish representative offices or that carry out temporary activities without record-filing are not allowed to carry out or carry out in disguised form activities within the territory of China, or entrust or fund or entrust or fund in disguised form any domestic entities or individuals to do so.

It is not an easy thing to establish a representative office for a NGO. Besides some procedural requirements the NGO needs to meet when filing an application, it also needs approval of business authorities. The business authorities differ from industry to industry and to determine which department is one certain NGO’s business authority is quite a professional issue.

If a NGO carries out activities in China without registration or record filing, relevant public security bureau shall ban or order the suspension of the illegal acts, confiscate illegal property and illegal gains, and give warnings to the personnel directly liable; if the circumstances are serious, detention of less than ten days shall be imposed.

Published by Mike Wang on April 21st, 2017 tagged Uncategorized | Comment now »

China and Business: Expect the Unexpected. 9 things to Know before you go to the World’s most Populous Nation

Last night, I was chatting with a former classmate, now a high-flying hedge fund manager-cum China angel investor (most of my classmates are wildly more successful than myself). This person is indirectly funding a foreign corporate client for whom our firm is helping to organize a new variable interest enterprise (VIE) to help facilitate foreign investment in the media/IT space. Foreign investment in media/IT is technically prohibited by law in China, but is actually very widespread and well known. Alibaba, Baidu, Sina, Sohu, some of China’s most well known and successful IT companies, all were foreign funded and all float on overseas bourses. I was explaining to this former classmate that in China, just like our mutual hometown of Chicago, most things are possible, it often depends upon who you know, and finding a “work-around”.

He and I inherently understood such incongruities. We had learned such things growing up, through a kind of osmosis. Yes, such incongruities were second nature to us Chicagoans (the Chicago River actually runs backwards). Our beloved, “Second City” had not been America’s second most populous city since 1956. We had our own word for “guanxi” (关系, roughly in Chinese, “connections), which Chicagoans know as “Clout”. The Chicago of our youth was essentially a “one party system” (Daley Democrats). No less than four Illinois Governor’s during our lifetime had been convicted and sentenced to prison for corruption. Governor Rod Blagojevich our last Illinois Governor was convicted for trying to ‘sell’ former President Obama’s vacated Senate seat. That was our “normal” when growing-up. We as Chicagoans and Cubs fans suffered with the dubious reputation as ‘lovable losers’, much like China was labeled so-long as a developing country. Yet, to the surprise of many, (and the joy of Chicago), the Cubs won the World Series last year (finally), and China now has the second biggest economy in the world.

My classmate, who had never been to China (too busy), was joking that my Chicagoland upbringing really prepared me for living and working in China. I pointed out to him some things I have learned while living and working in China that he might not have realized. The following is the list I assembled recalling our discussion about China:

1. Do not be surprised if you notice what appears to be a “wrestling match” before a restaurant cashier between two or more patrons who just finished dinner at an eating establishment. Eating is a big deal in China, hosting a meal and paying for a meal, unlike in the west could be a very big deal. One should always at least go through the motions of feigning who is to pay for a meal, usually both persons are clear about who is to pay based upon a series of social cues timing and hierarchy.

2. Always refuse a compliment. My classmate is super smart and super wealthy. But I told him, when you finally manage to say 你好 (“ni-hao” or “hello” in Chinese), or  啤酒(“pi-jiu” meaning “beer”) inevitably a Chinese will say, your Chinese language is “Very Good”. Do not simply say, “Thank you,” as it’s seen as vain and selfish. Instead find a way to be humble by saying something like, “You’re very kind, but my Chinese is really very limited”. Still, I reminded him, “A compliment’s a compliment” and for most of our fellow Americans, a couple of words of Chinese could seem like fluency.

3. Eating dog is becoming increasingly unpopular. Contrary to what you might see on TV (think the drivel of Lisa Vanderpump, Real Housewives of Beverly Hills). According to CNN, the rate of dog consumption is declining and love of ‘man’s best friend’ is rapidly increasing among many Chinese. In some provinces there are regulations prohibiting restaurants from serving dog meat. There has been even talk of considering legislation passed by the National People’s Congress that would make eating cats and dogs illegal. Recently, Weibo (China’s Twitter) blew up with viral protesting against eating dogs. Most Chinese people these days prefer to keep cats and dogs as pets.

4. Breathing in Beijing air is not as bad as you might think. Although pollution in Beijing is a major issue, according to a recent study by MyHealthBeijing, breathing-in the air is only equivalent to being exposed to secondhand smoke (one-sixth of a cigarette) as opposed to smoking a pack a day, which is the popular belief.

5. Each Chinese character is not necessarily an individual word. Although some words use just one character, most words are composed of two or more characters. Chinese characters are usually morphemes, meaning a unit of language or word that cannot be further divided.

6. No one in space will be able to see you on the Great Wall. According to Universe Today, you actually cannot see the Great Wall from space with the naked eye, let alone the moon. The pictures that exist of the monument from space are usually taken with professional zoom lens cameras.

7. There is a good chance you will have to use a squat toilet at some point. Don’t be afraid. Like all men of a certain age, chat soon turned to ‘bowel movements’, one must always think about planning a dignified hasty exit to “use the facilities”. I told my classmate, using the squat toilet is of course more difficult and awkward, than the western commode. The squat toilet however, is vastly more practical and believe it or not, more hygienic (especially at crowded China tourist sites), than using a regular toilet (which are there, but usually way-more dirty). Just remember to bring your own toilet paper).

There was more, but this is enough for one blog post. If you would like to hear more China incongruities, or learn about the unique business and legal environment in China, send me an email at elehman@lehmanlaw.com.

Published by Edward E. Lehman on April 18th, 2017 tagged Uncategorized | Comment now »

NGOs in China, Pay Attention to the New Law

A new law named Law on Administration of Domestic Activities of Overseas Non-governmental Organizations was promulgated last year. NGOs in China shall pay attention to this, or the organization might be under risk of violating law.

NGOs in this law refer to foundations, social organizations, think tanks, and other non-profit-making and non-governmental social organizations legally established overseas.

The key point of this law is that any NGO with an intention to conduct activities in mainland of China must go through procedures of registration or record filing. As indicated clearly in article 9 of the law,  To conduct activities within the territory of China, overseas NGOs are required to register and establish their representative offices in accordance with the law; and those failing to do so but needing to carry out temporary activities within the territory of China shall make a record-filing in accordance with the law. Overseas NGOs that fail to register and establish representative offices or that carry out temporary activities without record-filing are not allowed to carry out or carry out in disguised form activities within the territory of China, or entrust or fund or entrust or fund in disguised form any domestic entities or individuals to do so.

It is not an easy thing to establish a representative office for a NGO. Besides some procedural requirements the NGO needs to meet when filing an application, it also needs approval of business authorities. The business authorities differ from industry to industry and to determine which department is one certain NGO’s business authority is quite a professional issue.

If a NGO carries out activities in China without registration or record filing, relevant public security bureau shall ban or order the suspension of the illegal acts, confiscate illegal property and illegal gains, and give warnings to the personnel directly liable; if the circumstances are serious, detention of less than ten days shall be imposed.

Published by Mike Wang on April 14th, 2017 tagged Uncategorized | Comment now »