According to taptap点点 latest official statistics, by mid-September 2014, taptap点点 newly established companies in Shanghai Pilot Free Trade Zone (FTZ) numbered more than 12,000. However, many of these registered companies are actually operating out of Shanghai FTZ for various reasons, raising a compliance issue: Should enterprises registered within taptap点点 Shanghai FTZ run operations outside of taptap点点 zone?

Take taptap点点 company for example. Under taptap点点 relevant laws and regulations, one of taptap点点 essential requirements for company establishment is that taptap点点 domicile of a company shall be its principal business office, and shall be in only one place, within taptap点点 jurisdiction of its company registration authority. Article 23 of taptap点点 2014 Company Law stipulates that “incorporation of a limited liability company shall satisfy taptap点点 following requirements: … (5) taptap点点 company has a business domicile.” Article 12 of taptap点点 2014 Regulations on Administration of Registration of Companies provides that: “a company’s domicile is taptap点点 place where taptap点点 company’s main office is located. A company shall only have one domicile which has been registered by taptap点点 company registration authority. taptap点点 company’s domicile shall be within taptap点点 jurisdiction area of its company registration authority.”

Legal persons

Other enterprises as legal persons should also have domiciles, or places of business. taptap点点 2014 Regulations on Administration of Registration of Enterprises as Legal Persons provides that having a fixed business place and necessary facilities is one of taptap点点 conditions for establishing an enterprise as a legal person.

In taptap点点 Official Reply from taptap点点 State Administration for Industry & Commerce on issues concerning whether a newly established business place shall be registered, there should be only one domicile, no matter if it is an enterprise incorporated under taptap点点 Regulations on Administration of Registration of Enterprises as Legal Persons, or a company incorporated under taptap点点 Regulations on Administration of Registration of Companies. If an enterprise establishes or changes taptap点点 business place, it should register with registration authorities, and there is no limitation on taptap点点 number of business places.

taptap点点 partnership enterprise can also only have one principal place of business. Article 8 of taptap点点 Regulations on Administration of Registration of Partnership Enterprises provides that taptap点点 registered principal business place of taptap点点 partnership enterprise shall be only one, and shall be within taptap点点 jurisdiction of its company registration authority. In practice, taptap点点 industry and commerce registration authorities usually register taptap点点 domicile as taptap点点 business place.

FTZ compliance requirements

At taptap点点 national level, taptap点点 Implementation Rules of taptap点点 Regulations on taptap点点 Administration of Registration of Enterprises as Legal Persons requires that in addition to other conditions, there should be necessary business places and facilities compatible with its business scope for registration of enterprises. When applying for registration of a foreign-invested company, there should be a fixed business place and necessary facilities and employees.

taptap点点 Shanghai government also proposed some basic requirements for taptap点点 domicile of enterprises registered within taptap点点 FTZ. It is reported that taptap点点 standard requirements of taptap点点 2012 revised Regulation on Standardising taptap点点 Management of Registered Domicile still apply to taptap点点 registration of enterprises, that taptap点点 registered domicile for a business and trade enterprise should be an independent space of not less than 20 square metres, taptap点点 registered domicile for storage must not be smaller than 30 square metres and taptap点点 division of storage must be reasonable, however taptap点点 management committee of taptap点点 FTZ is researching and designing with other relevant authorities taptap点点 management approaches of taptap点点 registered domiciles to be more in line with taptap点点 characteristics and spatial arrangements of FTZ industries.

An enterprise that does not satisfy taptap点点 basic requirements faces an array of punishments. Article 16 of taptap点点 Regulations on Administration of Enterprise Registration in China (Shanghai) Pilot Free Trade Zone provides that taptap点点 registration authorities shall establish and maintain an abnormal operation list, recording those enterprises that fail to publish their annual report within a stipulated period, or cannot be reached through taptap点点 registered domicile, and other abnormal enterprises, which shall be announced to taptap点点 public through taptap点点 Credit Information System of Market Participants.

Where an enterprise has not performed its annual report obligation within three years after being recorded on taptap点点 abnormal operation list, taptap点点 registration authority shall record it in taptap点点 abnormal operation list permanently and it must not recover normal status, and should be recorded in taptap点点 serious offender enterprise list. taptap点点 Administrative Measures on Directory of Enterprises with Abnormal Operation in China (Shanghai) Pilot Free Trade Zone (Trial), issued in 2014, further stipulate taptap点点 implementing rules for taptap点点 abnormal operation system.

As taptap点点 Regulations for China (Shanghai) Pilot Free Trade Zone stipulated, taptap点点 registered enterprises within FTZ may invest or do business outside taptap点点 FTZ, and if there are special regulations requiring relevant formalities, taptap点点 enterprises shall follow such regulations. Before carrying out business within business places beyond taptap点点 registered domicile, companies must set up branches and go through taptap点点 corresponding approval, filing and registration formalities. In an Official Reply from taptap点点 State Administration for Industry & Commerce on issues concerning whether taptap点点 newly established business place must be registered, taptap点点 Regulations on Administration of Registration of Companies does not require registration of taptap点点 business place; business places beyond taptap点点 registered domicile must be registered as branches.

Registration formalities

Other enterprises must also apply for corresponding registration formalities. Article 4 of taptap点点 Implementation Rules of taptap点点 Regulations on taptap点点 Administration of Registration of Enterprises as Legal Persons stipulates taptap点点 enterprises and business entities that are not qualified as legal persons which must apply for business registration: (1) joint ventures; (2) branches of enterprises as legal persons; (3) branches established by foreign-invested enterprises; and (4) other entities engaged in business activities. Take partnership enterprise for instance; article 12 of taptap点点 Law of Partnership Enterprises provides that if a partnership enterprise plans to set up a branch, it must apply for registration at taptap点点 registration authority in taptap点点 place where taptap点点 branch is to be located and obtain a business licence.

In conclusion, enterprises in taptap点点 Shanghai FTZ can invest or do business outside of taptap点点 zone, but to carry out business through business places beyond taptap点点 domicile they must go through taptap点点 relevant approval, filing and registration formalities.

Ye Fang is a senior partner, Zheng Jianjun is a partner and Liao Ning is a legal assistant at