The Electronic Business License

All enterprises operating in Mainland China should be officially registered and have a business license. The license is the official proof of incorporation of the company and therefore companies must present the license when handling official company affairs, such as applying for corporate structural changes or other operational procedures with the authorities, tax bureau or the bank. In an effort to improve the business environment, and the company registration process in particular, the Chinese authorities have started implementing the Electronic Business License (or Digital Business License). The electronic version of the business license can be downloaded to any smartphone and will thus eliminate the need to bring the original copy of the business license when handling the aforementioned company affairs. In this article we discuss how the electronic business license works, what the license can be used for and how foreign companies can apply for a digital business license.
 
Background
The business license is a certificate issued by the State Administration for Market Regulation (AMR, formerly known as State Administration of Industry and Commerce (AIC)). The license is the official proof of registration of the company and includes the company name, the company’s unified social credit code, the company type, name of the legal representative, business scope, amount of registered capital, establishment date, legal term of operation and the registered address of the company. After incorporation, the AMR issues the original business license (A3 size), as well as an official duplicate business license (A4 size). Since 2014 all business licenses include a QR-code that can be scanned to obtain more information about the company.
 
As the license is the proof of incorporation, the company is required to provide the business license in person in order to handle corporate structural changes or perform numerous operational procedures with the authorities, tax bureau or the bank. Additionally, potential business partners may require the review of a company’s business license before commencing commercial relations.
 
To improve the business environment and most notably the company incorporation registration process, the AMR issued the “Administrative Measures for electronic Business Licenses (for Trial Implementation)” in December 2018. After trial periods in several cities across Mainland China, the electronic business license was officially launched in the mobile application of the AMR in July 2020. In Shanghai electronic licenses and company chops were already implemented in April 2020 and from August 2020 it is possible to open corporate bank accounts with the electronic business license with the Bank of Communications in Shanghai.
 
Largely stimulated by the need to avoid physical contact due to COVID-19, the electronic business license has been quickly implemented, particularly in Shanghai. Based on our observations, in several districts in Shanghai the authorities have ceased to accept applications relying on the physical business license or enquiries whereby the official paper version is presented and started to solely accept applications with the digital business license either online or in person.
 
What is an electronic business licence?
An electronic business licence is a legal electronic document containing the registration information of market entities issued by the AMR in accordance with the relevant national laws and regulations. The electronic business license has the same legal authority as the paper business license and is therefore a legal certificate proofing the company’s incorporation.
 
The electronic business license is generated digitally and can be downloaded to a smartphone or tablet. When a company representative visits an authority office or bank to handle company affairs, it is no longer required to bring the paper version of a business license. Instead, the licensee can download and open the digital business license via a smartphone application process and show this to relevant Chinese authorities or officials. The official will scan the barcode or QR code presented and will receive the company’s electronic business license information, which will serve as the official identification of the company.
 
An important feature to note is that it is possible to authorize other individuals or third parties to handle applications or procedures requiring an electronic business license. The legal representative can authorize up to five license administrators in the smartphone application system. This authorization can be freely extended, as well as modified or withdrawn. This feature makes it easier for foreign companies to appoint employees or third parties to handle company affairs on their behalf.
 
What is the electronic business licence for?
As highlighted above, the electronic business license can be used as a legal and effective means of identification and electronic signature for enterprises to handle company affairs. Currently, the electronic business license can be used for the following procedures:
 
  • Using the business license to proof the identity of the company;
  • Handling registration procedures with various authorities such as the AMR, Tax Bureau and bank;
  • Logging in to the online AMR system to extract and review company records such as previously submitted official documents;
  • Logging in to the national enterprise credit information publicity system to submit annual reports and other information;
  • Electronic signing of electronic documents.
 
How to apply for an electronic business license?
The electronic business license can be applied for through the mobile phone application or WeChat/Alipay application if the legal representative has the Chinese nationality. This is because the system will only issue the electronic business license after the real name verification including facial recognition is passed. However, this method can not be used by legal representatives of foreign nationalities as well as residents from Hong Kong, Macao and Taiwan.
 
If the legal representative does not hold the Chinese nationality, there are two options to apply for the electronic business license:
  • The legal representative will visit the AMR carrying valid identification to physically apply for the electronic business license. After approval, the legal representative can scan the QR code to download the digital business license on-site.
  • The legal representative authorizes a third-party to submit the application physically at the AMR. Subsequently, the AMR will send the QR code to download the license in the form of an email to the designated email address of the legal representative, and subsequently the legal representative can download the electronic business license.
 
Conclusion
As mentioned, the Chinese authorities are increasingly making use of new technologies to improve the business environment and company incorporation registration procedures. Two of most significant developments in the use of technology in China in this regard are the implementation of electronic company chops and the electronic business license.
 
At this moment the issuance and use of electronic business license is already being implemented across Mainland China and we expect that in the near future every company will be required to present a digital business license in order to handle official company affairs with the Chinese authorities, Tax Bureau or bank, where the paper version of the business license will no longer be accepted. Therefore, we advise companies to apply for the electronic business license at the earliest convenience, to avoid potential delays in dealing with future company affairs.
 
The process to apply for an electronic business license is fairly straightforward and if the legal representative of the company holds the Chinese nationality, the application for the electronic business license can be done in the mobile application system and the electronic business license will be issued instantaneously. For all companies where the legal representative holds a foreign nationality, as well as companies of which the legal representative is a resident from Hong Kong, Macao and Taiwan, the legal representative must physically apply at the AMR or appoint a third-party to handle the application on their behalf. At Moore – MS Advisory we can support foreign companies with the application of the electronic business license on their behalf. Please contact us through “Contact us” on our website or by email via info@msadvisory.com.