Introduction
Doing business with a Chinese company, or in China, requires a deep understanding of the country’s business landscape and legal requirements. One important document that Chinese companies must have is a Chinese business license. This guide will provide insights into interpreting and understanding the information in this document.
What is a Chinese Business License?
In China, a business license is a legal document issued by the Chinese government that permits an entity to conduct business within its jurisdiction. This license proves that the business is registered and recognized by the Chinese government. It includes important details about the company, such as its name, registered capital, and legal representative, among other things.
Main Components of a Chinese Business License
A Chinese business license has several key elements that provide crucial details about a business. Here’s how to interpret them (See the picture above):
- Unified Social Credit Code (USCC): Introduced in 2015, the Unified Social Credit Code is a unique 18-digit code that serves as the identifier for a business. It comprises elements such as the registering authority, the code of the organization, and details about the license. It replaces the old system with separate tax registration codes, organization codes, and business licenses.
- Registered Name: This field states the legal name of the company. It’s worth noting that Chinese companies can have names only in Chinese. Therefore, any English name used is merely a translation or approximation and might not be legally registered. In general, a company name in China consists of 3 components: a custom name + the business field a company is operating in + what type of company it is
- Type of Company: According to China’s new Foreign Investment Law, which took effect on January 1, 2020, there are now two legal company structures in China: a Limited Liability Company (LLC, 责任有限公司) or a partnership as a Joint Stock Limited Company (JSLC, 股份有限公司).
- Legal Representative: This is the person who has the authority to represent and enter into binding agreements on behalf of the company.
- Business Scope: This is a required field that outlines the activities that the company is legally permitted to engage in.
- QR-code: You can scan this QR code to see an online overview of the Chinese business license with some general and basic registration information.
- Registered Capital: This shows how much the founders have contributed to the company.
- Date of Establishment: This is the date when the company was legally established.
- License Expiry Date: This is the date until which the business license remains valid.
- Registered Address: This is the legally registered office address of the company in China. It may not necessarily be where the company conducts its business operations.
How to Verify the Information
While a Chinese business license provides much information, verifying the details is important to ensure the company’s credibility. Here’s how:
- Checking the USCC: The Unified Social Credit Code can be used to verify a company’s legitimacy. You can use the National Enterprise Credit Information Publicity System to do this.
- Checking the Registered Name and Address: Compare the Chinese characters of the name and address with those on other documents to ensure consistency.
- Verify the Business Scope: Make sure the business activities the company engages in align with its registered business scope.
- Check the Status of the Company: If the company is marked as having “abnormal operations” or “canceled,” it’s a red flag.
- Get help from a company that are experts on verifying Chinese companies: The information on the business license is not so detailed. If you want to do a verification of a Chinese company, you should do a background investigation of a Chinese company by experts on investigating Chinese companies.
Conclusion
Understanding a Chinese business license and the information it provides is crucial for anyone looking to do business with Chinese companies. While the process may initially seem daunting, you can quickly and efficiently interpret these licenses with some practice. Always verify the details to ensure you deal with a legitimate and reliable business.
Frequently Asked Questions about Interpreting Chinese Business Licenses
1. What is a Chinese Business License? A Chinese business license is a legal document issued by the Chinese government that allows a company to conduct business within the jurisdiction of China. This license proves that the business is registered and recognized by the government.
2. What is the Unified Social Credit Code (USCC)? The Unified Social Credit Code is an 18-digit code that serves as a unique identifier for a business in China. It was introduced in 2015 and replaced the old system with separate tax registration codes, organization codes, and business licenses.
3. Why is the business scope important in a Chinese Business License? The business scope is important as it outlines the activities the company is legally permitted to engage in. It is crucial to verify that the business activities a company engages in align with its registered business scope.
4. How can I verify the legitimacy of a Chinese Business License? You can verify the legitimacy of a Chinese business license through the National Enterprise Credit Information Publicity System using the company’s Unified Social Credit Code. It’s also important to check the consistency of the company’s registered name and address across different documents and verify its business scope and operational status.
5. What if the status of a company on its business license is marked as “abnormal operations” or “canceled”? If the company is marked as having “abnormal operations” or “canceled,” it’s a red flag. This indicates that the company may be facing regulatory issues or it may not be in business anymore, so it’s advisable to exercise caution in dealing with such a company.
6. Does the registered address always represent the company’s operational location? No, the registered address is the legally registered office address of the company in China. It may not necessarily be where the company conducts its business operations.
7. Can a company’s English name be used to verify its legitimacy? It’s worth noting that Chinese companies can have names only in Chinese. Therefore, any English name used is merely a translation or approximation and can usually not be legally registered. So, verifying the company’s details using its Chinese name is always advisable.
Contact us if you need legal help in China, like verifying Chinese companies, checking business licenses, drafting contracts that follow Chinese law, background investigation of Chinese companies, protecting patents, trademarks, and verification of contracts to the law in China, etc.
If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Manager, Jan Erik Christensen, at janerik@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.
