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Issue 36-December 2019 Veritas Update
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Issue 36-December 2019 Veritas Update


Latest Hot spot

National Free Trade Zones will Carry Out Fully Covered Pilot Reform of 'Separation of Certificates and Licenses'

New Law Express

Measures for Foreign Investment Information Report (“Draft for comments”) was Announced

The Complete Draft of Civil Code is Coming Soon

Regulations for the Implementation of Food Safety Law Came Into Effect on December 1st

Latest Hot spot

National Free Trade Zones will Carry Out Fully Covered Pilot Reform of 'Separation of Certificates and Licenses' 

From December 1, the pilot reform of 'Separation of Certificates and License' (the “Reform”) will be carried out in the national Free Trade Zones(the“FTZ”). At the same time, the relevant authorities would promote the Reform continuously, treating market subjects equally, further expand the market access, and strengthen fair supervision during the course of matters or after matters, placing the power of administration into the provision of service. 'Separation of Certificates and License' is an important part of the reform of business environment, which is related to the effectiveness of market opening. The FTZs has the space of systematic innovation and availability of pressure test to support the full-coverage pilot Reform.

It is necessary for an enterprise to obtain business license and the approval of the operational permit to enter the market. They are often called 'Zhao' and 'Zheng'. In recent years, with rapid promotion of the reform of China's commercial registration system, the time of enterprise registration has been greatly shortened. Therefore, the efficiency of obtaining the approval of the operational permit must also be enhanced. Otherwise the enterprise would face the problem of 'being allowed to have access to the market but not allowed to operate'. If there is an obstruction on the enterprise operation, it will easily lead to the failure of the enterprise to effectively carry out complete business operation after its establishment, which will affect the growth and development of the enterprise. Hence, the approval of the operational permit becomes the focus of the Reform.

The purpose of promoting the Reform is to solve the above-mentioned problems. Its idea is to classify the operational permit in four ways: canceling the operational permit, changing approval to filing, implementing the system of notification and commitment, and optimizing the service. In recent years, China has been increasing its efforts to promote this Reform. In November 2018, the first batch of 106 enterprise-related administrative examination and approval items were implemented in accordance with the Reform. On the executive meeting of the State Council, the governments decided to further expand the scope of the Reform: From December 1, the Reform will be carried out in the national FTZ. Furthermore, Among 523 enterprise-related operational permit items set by the central governments, 13 items related to filing and registration of international trade enterprises have been cancelled, 8 items related to the registration of customs declaration enterprises have been changed to filing, 60 items related to the permission of human resources service have been implemented through the system of notification and commitment, and other administrative approvals have been carried out through optimized service measures such as online application. In addition, the above-mentioned items relevant to the enterprise-related operational permits have all been regulated by including them in the administrative list and being regularly adjusted and disclosed.

This means that FTZ will promote the Reform more comprehensively. This is one of the important parts of the reform of business environment. It is not only in line with the international standards, but also reflects the change of governmental perception of administration. The transformation has been carried out from strict and demanding regulation to simple governance, further releasing the role of market and the value of market entities.

The FTZ once again plays a critical role in systematic innovation. Currently, there are 12 FTZs running through China from east to west. According to the relevant deployment of the central governments, China is also preparing to launch six new FTZs. China's FTZs have sufficient diversity and richness in terms of regional distribution, industrial categories and comprehensiveness, which can support the fully covered implementation of the pilot Reform. In order to support the implementation of the Reform, the FTZ would temporarily adjust implementing relevant administrative regulations and decisions of the State Council; if the adjustment of the laws are involved, the relevant authorities is supposed to request the Standing Committee of the National People's Congress to authorize the State Council to adjust and implement the relevant laws. According to the past experience, after the Reform is fully implemented and becomes mature in FTZ, it would be replicated and promoted to the whole country in the second half of 2020.


New Law Express

Measures for Foreign Investment Information Report (“Draft for comments”) was Announced

The Foreign Investment Law stipulates that governments shall establish a foreign investment information report system, and foreign investors or foreign-invested enterprises shall submit investment information to the competent commerce bureaus. In order to ensure the smooth implementation of laws, administer the foreign investment, and facilitate foreign investors and foreign-invested enterprises to fulfill their information report obligations, the Ministry of Commerce drafted the Measures for Foreign Investment Information Report(“Draft for comments”).

Currently, the Draft for comments contains 5 chapters and 34 articles, which stipulates the reporting subject, content and method of the report, information sharing, publicity and correction, supervision and administration, etc. Specifically, foreign investors or foreign-invested enterprises shall submit investment information to the competent commerce bureaus through the online enterprise registration system and the national enterprise credit information publicity system. The initial report includes the basic information of enterprises, the information of investors and actual controllers, the basic information of M & A transactions (except those not involved M & A transactions) and other information as required by the competent commercial bureaus. Where the merger, division or termination of a foreign-invested enterprise involves the cancellation of the enterprise, a cancellation report shall be submitted at the time of the cancellation registration.

From January 1 to June 30 of each year, foreign-invested enterprises shall submit the annual report of the previous year on the national enterprise credit information publicity system. After the establishment of a foreign-invested enterprise, the annual report shall be submitted from the next year. The annual report includes the information of business operation, assets and liabilities, domestic investment by enterprises, branch information of the enterprises, relevant industry license obtained by enterprises  (if the business scopes is within the special administrative measures for foreign investment access), and other information as required by the competent commercial bureaus.

According to the draft, when the relevant information of a foreign-invested enterprise has changed, if it needs to go through the change registration, it shall submit the report of change during the course of the registration; if it does not need to go through the change registration, it shall submit the report of change within 15 days after the change occurs.


The Complete Draft of Civil Code is Coming Soon

The 15th Standing Committee’s meeting of the 13th National People's Congress will be held in Beijing from 23 to 28, December. The complete draft of Civil Code of the People's Republic of China (the “Draft”) will be submitted for deliberation in this meeting.

Pursuant to suggestions in the deliberation opinions of the Standing Committee and opinions from all aspects, the Legal Working Committee revised and improved each sub part of the Draft, compiled the General Principles of the Civil Law of the People's Republic of China been issued and implemented in 2017 into the Draft, rearranged the article numbers and formed the Draft. The Draft shall be submitted to the Standing Committee meeting in December for deliberation. After the deliberation of the Standing Committee meeting, the Draft will be open to the public through the People's Congress of China’s online channel. According to the work arrangement, the Draft will be decided by the Standing Committee of the National People's Congress and submitted to the third session of the 13th National People's Congress next year for deliberation.

The first part of the Draft is the general part, which basically keeps the structure and content of the general principles of the civil code unchanged. The Draft modifies some articles and moves the 'Supplementary Provisions' to the last part of the Civil Code. The second part is for property rights, which mainly improves the system of the right of residence and the relevant provisions of the pledge and fluidity. The third part is for the contract, which mainly deletes the provisions of the defaulting party's application for rescission of the contract and forbids the loan with high interest rate. The Draft also improves the relevant provisions of factoring contract and construction project contract; Part IV is for personality rights, it mainly improve s the relevant provisions of sexual harassment and the definition of privacy; Part V is for marriage and family, it is mainly to further clarify the scope of close relatives, determine the situation of invalid marriage, and clearly identify the revocation administration of marriage concealing major diseases; Part VI is for inheritance and revised some wording; Part VII is for tort liability, it is mainly to improve the relevant provisions of tort on network and the liability rules of throwing objects at high altitude.

Regulations for the Implementation of Food Safety Law Came Into Effect on December 1st

As the supplemental regulations of the most stringent Food Safety Law in history, the Implementation Regulations of the Food Safety Law (the “Regulations”) will formally come into force on December 1 after revision. The new 'Implementation Regulations' for the first time established the 'double punishment system', which not only punishes illegal enterprises, but also provides for individual punishment in case of enterprise’s illegal acts.

The Regulations emphasize the four 'strictest', the most severe punishment, the most serious accountability, the strictest supervision and the strictest standards. The Regulations strengthen the punishment of illegal acts. For example, increasing the cost of breaking the law, setting up a 'punishment to person' system, and imposing a fine which is up to 10 times of the annual income of the legal representative and the relevant responsible person; establishing a 'blacklist' system for serious illegal food producers and operators, implementing joint credit punishment; improving the linkage mechanism between administrative enforcement of food safety laws and administrative detention by public security departments, etc. At the same time, the most rigorous standards (the food produced and operated by the food producers and operators must meet the food safety standards as well as the food safety indicators specified in the enterprise standards) are also formally written into the laws for the first time, which helps to improve the development of the whole industry. Therefore, based on emphasizing food safety, the legislation further puts forward and formulates some requirements on nutrition. In addition, the Regulations for the first time strengthened the risk control measures of imported food, as well as the responsibility and obligation of importers, strengthened the source control of food safety to prevent unqualified imported food from entering the domestic market.

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