Overview on the application for and use of E-Business Licenses

China

Nowadays, application formalities with the competent Market Supervision Administration (the "MSA") and other relevant authorities such as tax bureaus have been gradually simplified and partly replaced with online procedures. For more and more items the use of an E-Business License has become necessary or even a must.

Below is an overview on the definition of and application for an E-Business License under PRC law and in administrative practice.

1. What is an E-Business License?

Generally speaking, an E-Business License is the electronic business license issued by the MSA as an addition to the business license in paper form.

E-Business License is not a new concept in the PRC legislation. The concept of E-Business License was initially introduced in the Circular of the State Council on Issuing the Reform Proposals for the Registered Capital Registration System effective as of February 7, 2014. This circular requires that an E-Business License system shall be implemented as one of the measures to facilitate administrative formalities. In light of the aforesaid circular, the (former) State Administration for Industry and Commerce (now named: State Administration for Market Regulation) issued on September 8, 2015 the Opinions of the State Administration for Industry and Commerce Regarding the Further Promotion of Pilot Regime of E-Business License. According to these opinions, E-Business License was implemented as pilot regime in Hebei Province, Shanghai, Jiangsu Province, Fujian Province, Shandong Province, Henan Province, Hubei Province, Guangdong Province and Guizhou Province. Then, in 2017 such pilot regime was expended nationwide. Finally in 2018, the State Administration for Market Regulation ("SAMR") issued the Circular of the State Administration for Market Regulation on Issuing the Administrative Measures for Electronic Business Licenses (for Trial Implementation) effective as of December 17, 2018 ("Measures"). With these Measures, E-Business Licenses were officially and concretely regulated in PRC legislation.

According to Article 2 and 6 of the Measures, an E-Business License is the legal electronic certificate issued by the MSA and can be obtained, downloaded and used by the certificate holder through electronic mobile terminals (such as mobile phones) where an application for E-Business License is installed. The E-Business License has the same legal effect as a business license issued by the MSA in paper form. As further stated in Article 2 and 7 of the Measures, E-Business Licenses are issued to all types of enterprises and their branches, as well as inpidual businesses and specialized farmers' cooperatives.

2. How to obtain an E-Business License?

The Measures do not impose an obligation on the MSAs to issue E-Business Licenses. Therefore, whether or not the relevant MSAs will do so, either ex officio or upon application, is subject to their discretion. We are aware that in practice E-Business Licenses are currently already issued by the local MSAs inter alia in Shanghai, Beijing, Chongqing, Guangzhou (Guangdong Province), Suzhou (Jiangsu Province), Yantai (Shandong Province) and Yingkou (Liaoning Province).

In Shanghai, E-Business Licenses are issued ex officio by the competent MSA for newly established companies, including both foreign-invested companies and domestic-invested companies free of charge. I.e., upon establishment of a company, an E-Business License can be obtained and activated by the legal representative of such company on his/ her mobile phones via the application named "E-Business License" (in Chinese: "电子营业执照") or in mini programs such as WeChat Mini Program, Alipay Mini Program or Baidu Mini Program (jointly referred to as "E-Business License APPs"). If the legal representative is a Chinese citizen, the E-Business License can be obtained and activated by him/ her on his/her mobile phone via one of the E-Business License APPs directly by using his/ her PRC ID information as recorded at the MSA. If the legal representative is a foreigner, the competent MSA will send an email to the email address of the legal representative as stated in the MSA Application Form for Company Establishment normally within one week upon establishment of the company. Upon receipt of such email, the legal representative can obtain and activate the E-Business License on his/ her mobile phone via one of the E-Business License APPs by following the instructions as stated in the email received.

For already existing companies in Shanghai which do not yet have an E-Business License, it is possible to file an application to the competent MSA by submitting an application form signed by the legal representative and affixed with the company seal of the company. Then, upon approval of the MSA, the E-Business License can be obtained by the legal representative of the company free of charge by following the same procedures as mentioned above.

3. How and when to use an E-Business License?

After being activated by the legal representative, E-Business Licenses can be used by the legal representative or other person(s) (at the maximum five persons) authorized by the legal representative on their mobile phones via one of the E-Business License APPs.

An E-Business License can be used in the following occasions:

a) It can be shown directly to, e.g. a business partner, via one of the E-Business License Apps on the mobile phone.

In the scenarios where the business license is required to be checked by a counterparty as identification document of the company, instead of showing the business license in original paper form or as scan or photocopy, it is now also possible to simply show the E-Business License via mobile phone. However, in practice, it is possible that the counterparty may still request to see the business license in the original paper form or as scan or photocopy since E-Business Licenses have not yet been widely acknowledged and accepted in practice.

We also recommend caution when reviewing an E-Business License generated by an E-Business License APP. Viewers may not only need to verify the authorization of the user of the APP, but also to ensure the authenticity of the presented E-Business License. In case of any doubt and for safety, we suggest also checking the official registration information of the relevant company in the National Enterprise Credit Information Publicity System (国家企业信用信息公示系统 (gsxt.gov.cn)).

b) An E-Business License can be used to login to relevant electronic administrative platforms, e.g. by scanning the relevant QR Code using one of the E-Business License APPs in the following non-exhaustive examples.

(1) For logging into the National Enterprise Credit Information Publicity System

According to Article 8 of the Interim Regulations on Enterprise Information Publicity effective as of October 1, 2014, a company shall submit the annual report of the previous year from January 1 to June 30 of each year in the National Enterprise Credit Information Publicity System (国家企业信用信息公示系统 (gsxt.gov.cn)). In order to log into the electronic account of the company in the National Enterprise Credit Information Publicity System for submitting an annual report, an E-Business License is required. Alternatively, the company may use its "Legal Person One-Stop Pass" (in Chinese: 法人一证通) to log into this system.

(2) For obtaining MSA archived files

In the past, in order to obtain copies of physical company documents filed at the MSA, an application for obtaining such documents was required to be made at the competent MSA. For this, usually a power of attorney issued by the relevant company's legal representative was required. Such practice in Shanghai has recently been changed. Currently, the MSAs in Shanghai normally do not accept onsite applications for obtaining company documents filed at the MSAs anymore. In the current practice in Shanghai, the electronic archives of companies registered in Shanghai are, to some extent, available to be downloaded on the official website of the Shanghai MSA (本企业查阅 (sh.gov.cn)). In order to log into the electronic account of the company on the above website, an E-Business License is required.

(3) For logging into the online systems of some local tax bureau

To log into the online system of some local tax bureaus, e.g. in Shanghai (国家税务总局上海市电子税务局 (chinatax.gov.cn)) and Beijing (国家税务总局北京市电子税务局 (chinatax.gov.cn)), an E-Business License is required. Alternatively, a company can use its "Legal Person One-Stop Pass" (in Chinese: 法人一证通) or its username and password to log into the respective system.

c) E-Business Licenses may be used to open bank accounts at some commercial banks in Shanghai.

According to the official guideline published on the official website of the Shanghai MSA, it is possible for a company to use its E-Business License for opening bank accounts with Bank of Communications, Shanghai Rural Commercial Bank and Ping An Bank. How this is handled and what other documents need to be provided is subject to the practice of the respective banks which may vary on a case-by-case basis.

4. Is it recommendable to have an E-Business License?

As far as we are aware of, currently, the functions of E-Business Licenses are, nationwide, still rather limited. Although according to the current practice in Shanghai, E-Business Licenses have already become necessary in some governmental formalities, such cases are rather limited for the time being. Thus, we have not yet seen any significant advantages of having an E-Business License in practice. Nevertheless, with the further development of E-Commerce and E-Government in China, we expect that more and more functions of E-Business Licenses will be implemented to facilitate governmental formalities. Therefore, enterprises which do not yet have an E-Business License should consider applying for such a license either in a separate application or in combination with other formalities with the competent MSA.