Action Item: The recently implemented Administrative Measures show the Shanghai government's intention to relax and simplify the requirements for company domicile registration. However, the precise scope of the Administrative Measures is not entirely clear, due to the lack of implementation provisions and definitions for certain terms, such as "investment relationship." Therefore, it is advisable for companies to first inquire with the local AIC branch.

The China Administration for Industry of Commerce ("AIC") has strict requirements regarding a company's registered domicile. According to these requirements, each company must have a distinct address, and one address can only be used as the registered domicile for one company. If a company operates outside of its registered domicile, a registered branch office is required. Residential property is normally not permitted to be used as a company domicile. To encourage the development of small companies and to reduce start-up costs, some local governments have issued regulations relaxing the requirements for company domiciles (see the attached summary of domicile registration requirements by region). The Shanghai municipal government followed suit by promulgating the Shanghai Municipal Administrative Measures for Domicile Registration (the "Administrative Measures"), which came into effect on March 1, 2015.

Following is a summary of the key provisions of the Administrative Measures:

  1. Most non-residential property may be used as a company domicile. The Administrative Measures relax the requirements for the use of non-residential property as a company domicile, by providing that any non-residential property can be used as the registered address of a company, unless such property is an illegal building or is dedicated to certain public purposes.

    The Administrative Measures do not make any changes to the prohibition against using residential property for a company domicile. If a company wishes to use a residential property as its domicile, it must apply to the Bureau of Real Estate Management where the property is located to first change the designation of the property from residential to commercial property. The change must also be approved by all interested property owners and certain members of the community where the property is located.
  2. Certain related companies may share the same domicile.
    The Administrative Measures provide that the following companies may share the same domicile:
    • investment companies and their management company, provided that the management company undertakes management responsibility for the investment companies
    • companies that have an investment relationship
    The Administrative Measures do not provide any definition or explanation of "investment relationship." Branches of the AIC in different districts of Shanghai appear to apply different interpretations, and it remains uncertain as to what ownership percentage the parent company must own of its subsidiary in order to qualify as an "investment relationship."
  3. Operations outside the registered address.

    The AIC generally requires that a branch office must first be registered before a company is permitted to operate outside its registered domicile. The Administrative Measures reiterate this requirement and provide that the AIC will penalize companies if they are found to conduct business in places other than their registered domiciles. The Administrative Measures do not specify the amount of the penalty. However, to encourage investment and economic development, some local governments have issued regulations only requiring a record-filing for a branch office or otherwise simplifying branch office registration formalities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.