• Interim Measures for the Administration of the List of Enterprises Operating Abnormally (企业经营异常名录管理暂行办法)
• Interim Regulations on Enterprise Information Publicity (企业信息公示暂行条例)
• Interim Measures for Random Inspection on Information Publicized by Enterprises(企业公示信息抽查暂行办法)
Generally speaking, this change from annual inspecting to enterprise annual self reporting and publicity does grant enterprises more freedom in their reporting, however this does not mean enterprises can report and publicize information as and when they choose; there still are strict requirements regarding both the content of the reports and the deadlines for them. Therefore, this paper will briefly discusses the main points of the new reporting system.
There are two types of reports that enterprises are responsible for: (a) annual reports; and (b) periodic reports. Both reports are required to contain up-to-date information about capital contributions and shareholders as well as other information (see below). Annual reports must be submitted each year whereas periodic reports must be submitted as certain information is generated.
All reports must be submitted through the new “enterprise credit information publicity system.” This system contains not only these reports but also basic information about enterprises (name, address, etc…) as well as other information such as administrative penalties, intellectual property registration, etc…
Compliance with the reporting requirements is monitored through random inspections. If selected, the SAIC or local AICs will check an enterprise’s reports for both accuracy and timeliness. In addition, citizens, legal persons or other organizations can report to the SAIC or local AICs when they discover a report is false.
A failure to meet the reporting requirements will result in various sanctions from the SAIC or local AICs including placement on a public blacklist. Enterprises can be removed from the blacklist by complying with the requirements for three years, but failure to do so results in them being put on a list of serious violators and has repercussions for the legal representatives and principles of the enterprise as well as the enterprise itself.
The system of reporting is relatively robust. It includes reporting requirements, compliance monitoring and sanctions for failure to comply. As a result, one should expect the reported information to generally be accurate and up to date.
II. Reporting Requirements
Both annual reports and periodic reports must: (1) be submitted through the “enterprise credit information publicity system” to the SAIC or local AICs; (2) made pubic; and (3) made available to any individual or entity.
A. Annual Report
Enterprises are required to submit annual reports each year on the previous year information. These reports must be submitted between January 1 and June 30. Enterprises must begin reporting from the year after they are registered.
The annual report must contain the following:
(1) mailing address, postal code, phone number, email address of the enterprise;
(2) the current status information of the enterprise such as start and closure of business and liquidation;
(3) the information on investment for starting a business and equity purchase;
(4) if the enterprise is a limited liability company or company limited by shares, the information on the amount of capital contribution subscribed and paid by its shareholders or promoters, the time of capital contribution and manner of capital contribution;
(5) information on equity change of a shareholder of a limited liability company, for example, equity transfer;
(6) name and uniform resource locator of an enterprise website or an online store operating online business; and
(7) number of employees, total assets, total liabilities, externally provided guarantee/warranty, total owners' equity, total operating revenues, primary business revenue, total profit, net profit and total tax amount of the enterprise
The information in items (1) to (6) above must be disclosed to the public; however the enterprise has discretion as to which information in item (7) is disclosed to the public. Nonetheless, citizens, legal persons or organizations may, with the consent of the enterprise, obtain any information not disclosed to the public.
B. Periodic Reports
Enterprises are also required to file periodic reports containing the information listed below within 20 working days of the information being generated. These reports must contain:
(1) information on the amount of capital contribution subscribed and paid by the shareholders or promoters of a limited liability company or company limited by shares, the time of capital contribution, and manner of capital contribution;
(2) information on equity change of a shareholder of a limited liability company, for example, equity transfer;
(3) information on grant, change and renewal of administrative licensing;
(4) intellectual property pledge registration information;
(5) administrative penalty information; and
(6) other information to be legally publicized
If the SAIC or local AIC finds that the above information is not reported in a timely manner (as required by the law) the SAIC or local AIC shall order the enterprise to do within a designated period of time.
This section discusses the system of monitoring compliance with the reporting requirements.
Despite the fact that enterprises need only self-report, they should ensure that the information reported is accurate because inspections of the reports will be conducted. Indeed, the SAIC and the provincial AICs (AICs at the level of provinces, autonomous regions and municipalities directly under the central government) are required to conduct random inspections of at least 3% of the enterprises in their jurisdiction.
There are three types of inspections: (1) undirected random inspections; (2) directed random inspections; and (3) inspections of a particular enterprise. In undirected random inspections, the SAIC or local AIC randomly selects enterprises and verifies the information reported.
Directed random inspections are similar; however in these the SAIC or local AIC first specifies particular criteria such as enterprise type, scale, industry, geographic location, etc… and then randomly selects enterprises that fit these criteria. Finally, if the SAIC or local AIC finds evidence that an enterprise’s reports are fraudulent or inaccurate (through random inspections, social supervision, or otherwise), it will conduct an in-depth inspection of that enterprise.
B. Social Supervision
In addition, citizens, legal persons or other organizations can report to the SAIC or local AIC if they believe that an enterprise has filed a false report. The SAIC or local AIC shall, within 20 days of receiving this information, verify the report and inform the complaining party, in writing, of the results.
This section discussed the sanctions for false reports, in particular the “blacklisting” of enterprises.
A. General Sanctions
The most common violations of the reporting requirements are: (1) a failure to submit the reports within the time frames specified by the regulations; and (2) fraud in the reports. In either case, the enterprise can be subject to the following penalties:
• Blacklisted on the “enterprise credit information publicity system”;
• Administrative penalties;
• Compensation to any parties harmed; and
• Criminal liability (if a criminal offense was committed)
B. The Blacklist
The blacklist, mentioned above, is governed by the Interim Measures for the Administration of the List of Enterprises Operating Abnormally which came into force on October 1, 2014. It is a publicly accessible list of enterprises that have failed to meet the reporting requirements. The list is published on the “enterprise credit information publicity system”.
There are two levels of blacklisting. If an enterprise fails to meet the reporting requirements they are blacklisted but can be removed from the blacklist by meeting the requirements for three consecutive years. If, however, the enterprise fails to do so, it is (publically) moved to a list of serious violators. One consequence of this is that the legal representatives and principles of an enterprise moved to the serious violators list cannot be the legal representatives or principles for any other enterprise for three years. The SAIC or local AIC can remove an enterprise from the list of serious violators if they comply with the reporting requirements for five years.
Placement on the blacklist can be challenged by submitting a written application to the SAIC or local AIC (whichever body made the initial blacklisting decision) within 30 days of publicity. Upon receipt of the application, they shall decide within five days if they accept it or not. If the application is rejected the SAIC or local AIC shall provide a written explanation as to why. If accepted, they will decide on the application within twenty days. Enterprises can apply for administrative reconsideration if their application fails to remove them from the blacklist.
Although the system of annual inspections has been abolished, the requirements for disclosure remain. Despite allowing more flexibility, the new system can catch and punish those who fail to comply with the requirements through random inspection or by being reported by third-party. Thus, enterprises are well advised to ensure that they meet the reporting and publicity requirements.