Huizhou Launches Enterprise Registration and Examination Reform

May 23, 2012 Posted by China Briefing Reading Time: 4 minutes

May 23 – The Huizhou government held a mobilization conference on May 17 to officially launch its enterprise registration and examination trial reform, which aims to “simplify what can be simplified; permit what can be permitted; accelerate what can be accelerated; and optimize what needs to be optimized.”

It is the first time that the Guangdong provincial government has approved the enterprise registration and examination reform to be trialed at the city-level. As a result, the Guangdong government has ordered the related departments at the provincial level to fully support and guide the trial reform in Huizhou.

According to the government website, Huizhou is trying to evolve into an investment destination offering “minimum examination items, simple procedures, quick processing times, low costs and exemplary service” during the enterprise registration and examination process. Huang Yebin, the secretary of a municipal committee, told the South China Daily that under the reform, the procedure for enterprise registration and examination at city level will be processed in less than five days, and sometimes it will take only one day.

The trial reform in Huizhou focuses on eight major areas, including removing registered capital restrictions, separating the application of business licenses and business qualifications, and establishing an online service platform for easier registration. The reform intends to solve the difficulties of enterprise registration and discover possible options for administrative examination and approval system reform, as well as the reform of the administrative system as a whole.

The Huizhou trial reform is centered on “easier access” and “stricter control.” Two significant reform measures to provide “easier access” are removing registered capital restrictions and separating the application of business licenses and business qualifications.

In the notice, “removing registered capital restrictions” refers to the requirements where investors must contribute their capital according to certain rules. Currently, foreign invested companies are subject to contribute at least 20 percent of registered capital within the first 90 days of obtaining their business license, and the rest can be injected anytime within two years. For domestic companies, they need to inject 100 percent of the registered capital upfront. The current notice appears to imply that a “zero first installment” approach would apply under the trial reform scheme, although it is not clear how this change will apply or whether the change will apply to only domestic companies, only foreign companies, or both.

Besides amending registered capital requirements, the Huizhou government will also loosen restrictions on the monetary contribution ratio, diversifying companies’ funding methods, simplifying the capital verification process, and allowing enterprises to extend the time limit of providing funds to make it easier to set up a business in the city.

The second important measure of the reform is the separation of the business license application and the business qualification application. Under the usual guidelines, special licenses are required as a prerequisite for registering an enterprise in certain industries, which can add time to the already lengthy enterprise registration process. Under Huizhou’s trial reform, it is suggested that the application of these special licenses do not have to be done at the same time as obtaining the business license. Alternatively, the enterprise can register the company and apply for business qualifications at the same time, or the business license can even be granted to the enterprise before it acquires its business qualification.

If successfully implemented, the two abovementioned measures will greatly ease the enterprise registration process in Huizhou for both foreign and domestic investors.

Under the existing framework, the trial reform in Huizhou places emphasis on innovation, systemization, and feasibility while focusing on service and supervision. The enterprise registration and examination process in Huizhou will all be conducted online. If the enterprise aptly prepares all the required documents, the registration and examination process can be completed within one work day.

“The reform of enterprise registration and examination will definitely face difficulties, as it will lead to change of power dynamics and interests redistribution. However, reform is both inevitable and necessary. There’s no way out if we don’t reform,” says Huizhou’s Mayor Chen Yiwei.

Lying in central Guangdong Province, Huizhou is one of the nine prefecture-level cities of the Pearl River Delta Economic Zone, boasting a fast-developing export-oriented economy. With the establishment of two economic and technological development zones, Huizhou has become an important manufacturer base for electronics and, in 2010, Huizhou recorded the second fastest GDP growth rate among the nine prefecture-level cities of the Pearl River Delta Economic Zone at 19.1 percent year-on-year.

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