Due Diligence
26
September 2013

Explained: China Company Business Scope

The business scope of a Chinese company lists the services that it is legally permitted to provide according to its business registration.

Inversely, a company is specifically prohibited from producing anything or offering any services not specifically described in its business scope.

This has obvious implications for assessing the legitimacy of a Chinese company you’re doing business with.

How to Check the Business Scope of a Chinese Company

You can see a China company’s business scope by viewing its business license.

Chinese Business License

A Chinese company that you’re considering doing business with should be perfectly happy to send a copy of their business license.

The business scope will be a list of categories (often with listed exceptions) that the business is legally permitted to operate in. It looks like this on the license:

The business scope might include categories such as “sale of electronic communication products”, “software development and sales” and “no trade of items subject to license approval”.

As you can see, it is very important for risk management purposes to carefully check the business scope of a Chinese company you’re considering doing business with. If the specific product or service that you’re planning to pay them for isn’t covered in their business scope, there’s no way they can legally provide that product or service.

Tip: Take a look at China Checkup’s glossary of common business scope terms to learn more about what appears here.

Any company getting registered in China must be extremely careful about the business scope it provides to the authorities.

If it tries to register too wide a business scope, the authorities are likely to reject the application. If it registers too narrow a business scope, it will encounter legal issues if it tries to operate outside them.

This means you can be fairly sure that the registered business scope will be very specific and cover exactly what a company is legally permitted to do.

Asking the company you’re considering doing business with for a copy of their business license is an initial step.

Firstly, it lets you check that the company is not obviously suspicious – if they can’t or won’t provide a copy of their business license that should set alarm bells ringing.

Further, if the business license they show you doesn’t seem to cover the product or service they’re offering, that’s another warning sign.

Once you’ve made those basic checks, it’s wise to also independently check the company’s business scope on their public registration record.

Registration Records Check

Each area of China has an AIC – an Administration Bureau of Industrial and Commercial  (工商行政管理局 – Gōngshāng Xíngzhèng Guǎnlǐjú). These are also known as AICs. These bureaus keep registration records for the companies in their area.

Each AIC also makes these registration records publicly available online so that anyone can look up the registration for a company that they’re interested in.

However, the various AICs of China vary in how frequently and carefully they maintain their public online records. It is possible (but unlikely) that the public record for a company is out of date and won’t reflect an update to the registration or even the fact that the company in question no longer holds a valid registration.

Most of the time, though, the public record is a good place to check.

The first step is to find the website for the specific AIC for the area your company is registered in. This requires knowing the company’s address and which jurisdiction it’s located in.

You then search the AIC website for the company’s registration record, which often requires the full and exact Chinese name of the company.

If a record is found, you will be shown a page listing the same information that is given on the company’s business license, including its business scope.

How China Checkup Can Help You

China Checkup’s company verification report includes a Chinese company’s public registration record with a full translation and explanation, letting you make the best use of the information.

Our reports are all convenient and cost effective, and can be ordered and paid for online and delivery times are guaranteed.

Further reading