The business license, together with the company chops, is one of the most important elements any company in China. Every company has a business license, from local Chinese companies to Joint Ventures and Wholly Foreign Owned Enterprises (WFOE).
We realise that not every country has these kind of licenses and therefore it is not always clear what the use of the license is. In this article we would like to inform you what is stated on the Chinese business license and why it is such a useful document, even for foreigners.
Information contained on the Chinese business license
To get an idea what the business license is, please find an example business license below.
On this document there is a treasure trove of information. As almost everything on the document is in Chinese, it might be difficult for many readers to use this information. The most important information on a business license, going from left to right and top to bottom, is:
统一社会信用代码 Unified social credit code
USCC is a unique, 18-digit national business registration number issued to all businesses and other entities in China, it is an official indication that a company is registered and verified with the Chinese government to operate legally in Mainland China.
名称 Company name
The company name is the first item on the Chinese business license. Chinese company names are all quite similar. They are usually composed by “city” – “name” – “company type”. In our case this is “Shenzhen” – “Acclime China” –“Consulting Company”, which is very similar to our official company name.
类型 Enterprise type
The enterprise type indicates the type of entity.
法定代表人 Legal representative
Here will find the name of the person who is the legal representative or the representative director. This person has the primary authorisation of the company and is also responsible for that the company operates legally. This person is often in charge of the company chops, bank accounts and other company licenses.
经营范围 Business scope
The business scope of a company lists the services that it is legally permitted to operate in.
There is a QR code indicated on the business license. By scanning the QR code, you can see more detailed information about the company on the local government website. Please note that the specific information is different for every local government. Generally speaking, additional information is visible, such as business scope, performed audits and potential blacklisting.
注册资本 Registered capital
Registered Capital of a foreign-invested enterprise can be expressed in RMB or in freely convertible currencies. It is used to make a quickfire assessment of the size of the company.
成立日期 Incorporation date
The incorporation date gives an idea how long the specific location of a company has been active.
营业期限 Term of Operation
The term of operation is a time frame in which company can legally operate, and there are usually two types, limited term and long term.
The address should correspond to where the majority of the business activities are performed. Important to note is that if you change address, the business license also needs to be updated, to be in line with the new address.
How to use a Chinese business license
Now that we have an idea what kind of information is on the business license, it is good to think about how a license can be used. Requesting a business license for a company in China before doing business is standard practice, since all companies have to have this license. With the license you can then check whether the information given to you in previous communications overlaps with the license. Then, if something does not add up, you know this beforehand.
Examples of discrepancies of a business license are:
- The company name is different than the company name on other items like the import license or the bank account. This should be a red flag that there is something seriously wrong in the communication.
- The company says they can do the export of a certain product, but the company scope lists marketing agency. This can be a red flag that the company is and will be unable to perform the export operation, since Chinese companies must stick to their business scope.
- The address noted on the license is in a different location, or even in a different city, than the company you are doing business with is located. Companies can have multiple locations, so it would be wise to investigate the link between the entities and ask for the other location’s license.
- The legal representative name is not the same as the person who signs the contracts. This might mean someone goes around their boss’ back or accidentally makes a contract invalid, since only the authorised legal representative is allowed to sign documents.
- The registered capital is low. This can be a warning that if you do business in products with large quantities and want to be guaranteed that the company you are dealing with can handle this volume.
Knowing is half the battle, especially in China. If you are going to set up your company in China, the Chinese business license is one of your most important documents. Keep it safe. If you are going to do business with a partner in China, request a scan of the license. Should their license give you a hunch or you are unsure what you are dealing with, then a small background check can be of much assistance.