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Draft Guidelines Against Cyberbullying Open for Public Feedback in China

June 10, 2023

China has recently introduced a draft guideline aimed at combating cyberbullying, seeking public opinion and feedback. The legal document, jointly formulated by the Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security, has been made available online for review.

To gather input on the draft, the Supreme People’s Court has provided its postal and email addresses on its website, inviting individuals and organizations to share their ideas and suggestions. The deadline for collecting opinions is set for June 25.

Cyberbullying has become a global concern, frequently making headlines in recent years. Incidents of online misconduct have resulted in tragic consequences, capturing significant public attention and prompting various stakeholders, including cyberspace agencies and legal professionals, to take action to address this issue.

An unfortunate incident in Wuhan, Hubei province, last week further highlighted the seriousness of cyberbullying. A mother took her own life after her primary school-aged son was fatally struck by a car. Prior to her death, she had shared a video clip online where she spoke about her son’s death on the school campus. Some viewers left derogatory comments about her appearance, criticizing her for focusing on makeup despite grieving. While it is not suggested that these comments were the primary cause of the woman’s death, they ignited public outrage regarding cyberbullying.

the draft guideline emphasizes severe punishment for cyberbullying targeted at children or individuals with disabilities

Another case that garnered widespread attention was the death of Zheng Linghua, a 23-year-old woman who faced relentless online bullying due to her decision to dye her hair pink. In July of the previous year, Zheng became a target of cyberbullying after proudly sharing pictures and videos of her postgraduate admission letter with her grandfather on his hospital bed. Cyberbullies attacked her appearance, associating her with negative stereotypes and spreading fabricated rumors. Despite seeking legal assistance and initiating lawsuits against the bullies, Zheng tragically passed away on January 23, having been hospitalized for depression. Her case further fueled the urgency to address cyberbullying effectively.

China has already implemented various measures to combat online bullying. In late 2022, the Cyberspace Administration of China issued a regulation requiring online platforms and websites to prioritize cyberbullying prevention. Internet operators were urged to establish efficient channels for netizens to report evidence and enable them to block unfriendly comments from strangers through technical means.

In the latest draft guideline, the production or dissemination of rumors with the intent to defame or harm others’ reputations, leading to severe consequences, will be identified as cyberbullying. Perpetrators can be charged with the crime of defamation under the Criminal Law. The draft also addresses the crime of infringing upon residents’ personal information for those involved in organizing cybermanhunts and sharing personal data of others with a larger audience.

Furthermore, the draft emphasizes severe punishment for cyberbullying targeted at children or individuals with disabilities, as well as actions involving the falsification of sex-related topics to harm others’ dignity. Additionally, individuals utilizing “deep-fake” technology to spread illegal or harmful content that disrupts public order, customs, ethics, and morals will face tougher penalties.

The public feedback received during the consultation period will play a crucial role in refining the draft guidelines, ensuring that they effectively address the challenges posed by cyberbullying and safeguard people’s rights in the digital realm.

Understanding the Complexities of Company Formation in Mainland China

June 9, 2023

Company formation in mainland China may initially seem straightforward due to efforts to streamline and simplify the process over the past decade. However, for overseas investors, the differences in the legal system and business environment can still be confusing. As a result, many investors seek assistance from experienced consultancies or law firms specializing in corporate law. These professionals provide guidance and compile a list of required documents to facilitate the preparation process.

Here is a typical list of documents we provide to our clients, which often leads to further correspondence for clarification. Based on these correspondences, we address common client questions as follow:

1. Shareholder Information

For a company investor, provide the Certificate of Incorporation, Articles of Formation, or an equivalent document certified by the Notary Office, and then legalized by Chinese embassy. However, after China’s participation in the Hague Convention of 1961 early November of 2023, legalization of documents in Chinese embassy is not needed anymore (For more information, you may check our previous post to know more: China’s Accession to the Hague Convention of 1961 Simplifies International Document Authentication )

For an individual investor, the original passport is required (certification is unnecessary if there is a recent entry recording).

2. Passport Copies and Authorization Statements

The company formation process in China involves legal and administrative complexities that necessitate careful attention and expertise

Submit passport copies of the company’s Legal Representative, Manager, Director, and Supervisor, accompanied by related statements of authorization by the shareholders.

The Legal Representative can be either the Manager or Director, but neither the Manager nor Director can be the Supervisor.

3.Registered Capital

There is currently no threshold for the amount of registered capital, and there is no deadline for capital contribution.

However, it is not advisable to claim a large capital injection without following through. Please refer to our previous post for further analysis.

Note that the registered capital amount should be in Chinese Yuan (RMB).

4.Business Scope

The business scope refers to the current and future activities of the company. It is important to clearly define this scope.

We will help our clients to choose the accurate standard expression as long as our clients provide detailed information about their intended business activities, such as selling products in China or exporting specific electronic applications from China, then we will define it as “international trade”.

It is recommended to include a broader business scope as long as it remains related to the main business, allowing for more operational flexibility.

5.Proposed Chinese Names

Prepare three to five proposed Chinese names for the China company, as the company name needs to be applied for initially.

Keep in mind that there are restrictions on company names. You may consult with us to determine what names can and cannot be used while bear in mind the following rules:

* Official company names should use standardized Chinese characters.

* Company names should consist of more than two Chinese characters.

* The industry should be indicated in accordance with the company’s main business and national economic industry classification standards.

* The organizational form should be indicated in the company name in accordance with the law.

* Company names must not violate the law, public order, good customs, mislead the public, or have other adverse effects.

6.Office Address and Documentation

Provide a physical office address, along with leasing contracts or a certificate of real estate ownership to validate the office location.

Vertical addresses are not allowed in China, and the size of the office will be a factor in approving work permit applications for employees. Shared offices are acceptable for setting up a company.

7.Articles of Association

The Articles of Association (or bylaw) are important document that outline the internal regulations and structure of the company. We will assist in preparing the Articles of Association after thoroughly understanding the shareholders’ intentions.

It is essential to note that the above list of documents is not exhaustive, and additional documents and procedures may be required based on specific circumstances and local regulations.

The company formation process involves legal and administrative complexities that necessitate careful attention and expertise to ensure successful establishment and compliance. Before starting the process, it is recommended to consult with a trustworthy consultant who can guide investors through the entire process, ensuring all legal requirements are met and facilitating a smooth and successful company formation.

company formation, company incorporation, company law

China’s Accession to the Hague Convention of 1961 Simplifies International Document Authentication

June 9, 2023

On March 8, 2023, Chinese Ambassador to the Netherlands, Tan Jian, officially deposited China’s instrument of accession with the Ministry of Foreign Affairs of the Netherlands, signifying China’s participation in the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, commonly known as the “1961 Apostille Convention.”

The Convention aims to streamline procedures for the use of public documents abroad, promoting international trade and people-to-people exchanges. It is set to enter into force in China in early November.

So, what exactly is an Apostille? An Apostille is a certification that verifies the authenticity of a public document, signature, or stamp. It is issued to documents for use in countries that are participants of the Hague Convention of 1961. The apostille ensures that public documents issued in one member country will be recognized as valid in another member country. The introduction of the apostille as a form of notarial certification has made the international transfer of documents significantly easier and faster, eliminating the need for further diplomatic or consular legalization.

China’s accession to the Convention is a significant step towards greater institutional openness in the use of public documents abroad. According to Mao, it will bring two major benefits.

China's Accession to the Hague Convention of 1961 early November of 2023 Simplifies International Document Authentication

Firstly, it will greatly reduce the time and cost required for Chinese citizens to complete relevant procedures for using documents such as health certificates, driver’s license certificates, household registry certificates, and academic degree certificates abroad.

Previously, it took around 20 days to prepare a document for international use, but with the apostille, it will only take a few days. Additionally, the cost associated with completing procedures between China and other member countries will be reduced by approximately 90 percent on average.

Secondly, China’s accession will improve the business environment. Foreign companies investing in or exporting to China will no longer need to seek consular legalization for commercial documents. Similarly, over 70 percent of China’s export-related commercial documents will enjoy similar benefits.

The participation of China in the Hague Convention of 1961 signifies a significant development in simplifying the authentication of international documents. It streamlines processes, saves time and costs, and improves the business environment for both Chinese citizens and foreign entities engaging in trade and exchanges with China.

Courts Crack Down on Noncompliant Debtors

June 8, 2023

A man in Sichuan province was fined 500 yuan ($70) by a court on Monday for violating a legal verdict and disregarding a ban that prevented him from purchasing airline and high-speed train tickets. The defaulter, identified as Wei, had been issued the ban by the Qingyang District People’s Court in Chengdu on February 20 due to his failure to repay bank loans. The court had explicitly stated that the ban would only be lifted once Wei complied with the verdict and repaid the loans.

However, it was discovered that Wei had flown from Tibet to Sichuan on April 28, having purchased a ticket from a scalper, thus violating the ban. The court declared that Wei’s actions constituted a breach and warranted punishment. Considering his admission of guilt, the court decided to impose a fine on him.

Chinese courts have increasingly taken stringent measures against loan defaulters over the past decade, implementing restrictions in their daily lives to compel them to repay their debts promptly. The Supreme People’s Court, the highest judicial authority in the country, has prohibited defaulters from purchasing flight and train tickets, as well as high-value items like golf club memberships and real estate. These measures aim to inconvenience defaulters and encourage them to rectify their behavior.

The Supreme People’s Court has made it clear that defaulters who defy such bans will face detention or fines, with severe violations potentially leading to criminal charges. Last month, the top court instructed courts nationwide to conduct thorough reviews of defaulters and impose harsher penalties on those who breach bans. This directive followed the discovery that some defaulters were still able to purchase flight and train tickets through scalpers.

the top court of the PRC would issue judicial guidelines in the future to expedite the enforcement of rulings

In a separate incident at Beijing Capital International Airport, a passenger named Li was detained by the police after it was discovered that his passport information differed from the details he had provided when booking a ticket from Beijing to Wuhan. The passenger was identified as a defaulter who had violated the ban by acquiring the ticket from a scalper.

Mao Lihua, deputy head of the top court’s enforcement bureau, expressed the need for joint efforts with public security departments and prosecuting authorities to launch a special campaign against individuals failing to comply with court verdicts. Mao also revealed that the top court would issue judicial guidelines in the future to expedite the enforcement of rulings.

According to data released by the top court on May 19, a total of 3,198 defaulters were criminally punished for noncompliance with verdicts last year. More fierce actions are needed to make sure the laws are enforced.

How Can a Company to Avoid Disputes During the Probation Period?

June 7, 2023

To avoid employment disputes during the probation period, it is important for companies to understand and comply with the legal provisions related to probation. Here are some tips to consider:

1.Probation Period Duration

The duration of the probation period should be in accordance with the provisions of the Labor Contract Law of the People’s Republic of China (PRC). The law specifies that the probation period should not exceed one month for labor contracts with a term between three months and one year, not exceed two months for contracts between one and three years, and not exceed six months for contracts above three years or without a fixed period. Additionally, only one probation period can be stipulated with the same worker, and no probation period is allowed for contracts with a fixed period of less than three months.

2. Salary During Probation

The wages of employees during the probation period should not be lower than the minimum wage for the same position in the same company or 80% of the wage stipulated in the labor contract. It should also not be lower than the minimum wage standard in the location where the company is situated.

3. Termination in Compliance with the Law

If an employee is found to be ineligible for employment during the probation period, the employer may terminate the labor contract in accordance with Article 39 of the Labor Contract Law of the PRC. To legally terminate the contract during probation, the following aspects should be considered:

1. Define

Clearly define and document the recruiting conditions, ensuring compliance with non-discrimination regulations.

It is crucial for companies to adhere to the Labor Contract Law and follow these procedures strictly to avoid any employment dispute

2. Publish

Publish the recruiting conditions in advance, either by showing them to employees during recruitment, sending a letter of employment with the conditions, or including them in internal regulations or labor contracts.

3. Maintain evidence

Maintain evidence demonstrating that the employees are unqualified based on objective assessments. Establish and improve a strict evaluation system, preferably with quantifiable assessments or, if not feasible, through organized evaluation by relevant staff to ensure fairness.

4. Timely dismissal

Assess and make a final decision on the employee’s performance by the end of the probation period to enable timely dismissal if necessary.

It is crucial for companies to adhere to the Labor Contract Law and follow these procedures strictly. In employment disputes, the burden of proof often falls on the company. Therefore, it is important to keep records of all procedures and maintain appropriate evidence. These steps are essential in effectively handling disputes and ensuring compliance with the law.

employment law

What Can We Learn from a Business License?

June 7, 2023

Just like a birth certificate for an individual, a business license serves as a company’s identification certificate upon incorporation. It signifies the official establishment of the company and enables the completion of other formalities such as opening a bank account, tax registration, filing with the Ministry of Commerce (if necessary), and obtaining company seals.

For those interacting with a company, the business license holds significant importance as it provides essential information about the company. Let’s explore what we can learn from a business license:

1. Unified Social Credit Code:

The Unified Social Credit Code is a unique identification code for a company, comparable to an individual’s ID number. It consists of 18 letters or numbers and remains associated with the company from its incorporation until official deregistration. It should not be confused with the Taxpayer Identification Number (Tax No.), as their purposes differ. The Unified Social Credit Code primarily serves as an identity code for a company.

a business license serves as a company's identification certificate upon incorporation. It signifies the official establishment of the company

2. Company Name

While many Chinese companies have an English name, particularly those oriented towards export, it is crucial to remember that all official government documents are issued in Chinese. The business license, except for the name of the legal representative (if foreign), contains all company information in Chinese. Therefore, the official name of a Chinese company is the Chinese name stated on its business license. Knowing a company’s Chinese name is vital to truly claim familiarity with the company.

3. Type of Company

In general, there are two types of business entities in China: corporations and partnerships. Since January 1, 2020, the terms “WFOE” (Wholly Foreign-Owned Enterprise) and “JV” (Joint Venture) are no longer used. Foreign-invested companies are classified as either corporations or partnerships and enjoy the same treatment as Chinese citizens, as long as their business activities do not fall under the negative list for investments.

4. Legal Representative

Further information about the legal representative can be found in our more detailed post: “XXX.”

5. Scope of Business

The business scope specifies the operations and services in which a company can engage. Different types of operations are associated with different types of fapiao (official invoices) that a company can issue. It’s important to note that for certain operations, such as training, education, and catering services, an additional administrative permission is required to engage in these activities legally.

6. QR Code

The QR code allows individuals to access the National Entity Credit Information Publicity system, providing more detailed information about a company, including its registration date, filings, authorizations, and supervision.

7. Registered Capital

For detailed information on registered capital, please refer to our more comprehensive post: “XXX.”

8. Date of Incorporation

The date of incorporation is the day on which the company’s business license is granted, signifying its official establishment.

9. Term

The term refers to the current duration of the company’s existence, usually indefinite.

10. Address

The address listed on the business license corresponds to the company’s headquarters or main office.

All the information on the business license must accurately reflect the company’s ongoing operations and actual situation. In the event of any changes, the company is required to file these changes with the Administration of Industry and Commerce, and an updated business license will be issued accordingly.

Have you ever checked the business license of your supplier or business partner?

Why a Competent Accountant is Crucial for Your Business

June 7, 2023

Small and medium-sized companies often opt to hire an accounting firm to assist them in maintaining accurate financial records. This decision is a wise one because bookkeeping is far from a simple task. It requires not only procedural expertise but also a thorough understanding of national tax laws, regulations, and local tax policies. In essence, it is a professional job that necessitates experience and meticulous attention to detail.

This is the primary reason why hiring a reputable accounting firm is so important.

According to Chinese law, individuals who wish to practice accounting must establish a company and obtain an accounting agency license. Additionally, the following requirements must be met:

Employ a minimum of three full-time employees who possess a solid understanding of basic accounting principles and possess the necessary skills to independently handle routine accounting tasks.
Maintain a reasonable staff configuration that adheres to regulations, ensuring the presence of field accountants, bookkeeping accountants, audit accountants, tax accountants, etc.
The staff responsible for bookkeeping must be qualified accountants or above and should have a minimum of three years’ experience in the field.
The accounting firm should have well-established internal operational norms.

Unfortunately, many mediocre accounting firms fail to meet these requirements. They often rely on extensive sales teams to secure business and attract clients with lower prices. Consequently, they cannot afford to hire qualified and experienced accountants to perform the work. Instead, they rely on inexperienced graduates or unqualified staff who have received only brief training.

Hiring a reputable accounting firm is important as it is a professional job that necessitates experience and meticulous attention to detail

These employees lack the necessary expertise to handle accounting matters effectively. Moreover, the high turnover rate within such firms often leads to unfavorable outcomes for their clients. Different employees working on the same accounting matter may handle it in entirely different ways due to knowledge gaps, poor management, insufficient training, or the absence of internal guidelines.

One often overlooked fact about accounting is that ordinary individuals often struggle to discern whether it is being performed properly and in accordance with industry standards. This means that people typically only realize their accountants’ grave mistakes when it is already too late. Business owners often have to invest additional time and money to rectify these errors.

Occasionally, we hear complaints from businesses that have been blacklisted by their local Administration for Industry and Commerce (AIC) because their accounting agency neglected to conduct the annual compliance check on their behalf. Others discover that their books are in disarray when seeking investors or pursuing mergers, despite initially hiring a “cheap” accounting firm.

While it is understandable for start-ups to seek cost control measures, compromising on professional services is not a viable long-term solution.

Relevant Regulations:

Article 36 of Accounting Law of the People’s Republic of China: Organizations that are not equipped to establish an accounting organization must entrust an approved intermediary to provide bookkeeping services and handle their accounting matters.

company law, foreign investment law

Mastering Sourcing in China: Top Three Tips for Success

June 1, 2023

For foreigners running startups in China’s trade industry, achieving success can be challenging, with some even facing bankruptcy. To help you navigate the complexities of sourcing in China, we’ve compiled the top three tips based on our analysis of various cases we’ve handled. By following these recommendations, you can mitigate risks and improve your chances of a prosperous venture.

1. Conduct Thorough Due Diligence

Performing due diligence is paramount before engaging with sellers or brokers in China. Don’t rely solely on their self-presentation; instead, dig deeper. Request copies of their business license or Chinese company name and verify their authenticity on the government database ( http://www.gsxt.gov.cn/index.html ). Additionally, leverage apps like qichacha (企查查) and Tianyancha (天眼查) to gather further company information. These apps provide valuable insights, and their VIP services offer more detailed data. Consider hiring a local Chinese lawyer or consulting with Chinese friends for assistance. The primary objective is to ensure you’re dealing with a legitimate company rather than falling victim to fraudulent practices.

due diligence, enforceable purchase contract, and quality control before shipping—you can mitigate risks while sourcing in China

2. Establish an Enforceable Purchase Contract

While China courts are reluctant to enforce judgments from other jurisdictions, selecting China as the jurisdiction for potential disputes can increase the chances of favorable outcomes. Engage an English-speaking Chinese lawyer to assist in preparing a bilingual purchase agreement. Local lawyers possess practical knowledge, keeping them up to date with court procedures and changes. Their expertise ensures the contract’s enforceability and provides invaluable insights that overseas lawyers may overlook. By involving a Chinese lawyer, you strengthen your position and safeguard your interests (For more related information, you may check: How to prepare an enforceable contract while sourcing in China?).

3. Prioritize Quality Control Before Shipping

Despite taking precautionary measures, you must diligently undertake quality inspections to minimize the risk of disputes. More than one-third of trade conflicts arise due to quality issues. Instead of conducting inspections after the goods arrive at the destination, we recommend performing quality control checks before shipment. This approach allows you to address any concerns or discrepancies more efficiently, as solving issues before making payments is easier than doing so afterward. Whenever possible, conduct inspections during the manufacturing process and again before shipping, especially when the quality of raw materials significantly impacts the final product. By ensuring compliance with required standards before shipment, you avoid last-minute surprises and uphold product quality and functionality.

Sourcing in China offers tremendous opportunities, but success requires careful planning and execution. By adhering to these top three tips—conducting thorough due diligence, establishing an enforceable purchase contract, and prioritizing quality control before shipping—you can mitigate risks, enhance business relationships, and set the stage for a prosperous venture. Remember, acquiring local expertise and leveraging reliable resources are key to navigating the unique dynamics of China’s trade industry.

due diligence, enforceable contract, quality inspection

Draft Guidelines Against Cyberbullying Open for Public Feedback in China

Understanding the Complexities of Company Formation in Mainland China

1. Shareholder Information

2. Passport Copies and Authorization Statements

3.Registered Capital

4.Business Scope

5.Proposed Chinese Names

6.Office Address and Documentation

7.Articles of Association

China’s Accession to the Hague Convention of 1961 Simplifies International Document Authentication

Courts Crack Down on Noncompliant Debtors

How Can a Company to Avoid Disputes During the Probation Period?

1.Probation Period Duration

2. Salary During Probation

3. Termination in Compliance with the Law

1. Define

2. Publish

3. Maintain evidence

4. Timely dismissal

What Can We Learn from a Business License?

1. Unified Social Credit Code:

2. Company Name

3. Type of Company

4. Legal Representative

5. Scope of Business

6. QR Code

7. Registered Capital

8. Date of Incorporation

9. Term

10. Address

Why a Competent Accountant is Crucial for Your Business

Mastering Sourcing in China: Top Three Tips for Success

1. Conduct Thorough Due Diligence

2. Establish an Enforceable Purchase Contract

3. Prioritize Quality Control Before Shipping

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