One of the basic checks you may make about a Chinese company is to look up how much capital it was registered with. Proving a substantial amount of allocated capital is a requirement for registering a business in China, with the aim of ensuring that the company will be adequately funded and able to operate as described.
(Update: Since early 2014 some companies are not required to have registered capital)
If you’re considering doing business with a Chinese company such as a manufacturer, checking the registered capital may be beneficial. However, you should note that the company may well have grown substantially since registration. A company registered with 100000 RMB could have grown much larger since then. In other words, what appears to be a low amount of registered capital isn’t necessarily a bad thing or something to be suspicious of.
You have to consider it in combination with other information before it becomes interesting. For example, you might find it odd if the company appears to have been recently founded with a small amount of registered capital, yet claims to have a large amount of employees and assets (such as a large factory).
So how can you find out about a Chinese company’s registered capital and other details of its registration? You need to see it’s business license, and compare this to its registration records.
Check the Company’s Business License
A Chinese business license will list the registered capital, the date of establishment and other official information about the company. Don’t hesitate to request a copy of a Chinese manufacturer’s business license.
This is a totally legitimate and common request when doing business with companies in China. If your manufacturer is reluctant to show their business license, makes up excuses not do so, or tries to claim it’s not necessary, be suspicious. A legitimate company should have no reason not to show you a copy of their business license.
Once you’ve got a copy of the business license, you may realise you’re at a bit of a loss to interpret it! All official documentation in China is written in Chinese, of course, so you might not be able to make sense of a Chinese business license immediately.
The section that describes the registered capital looks like this (it’s on the right hand side of the business license):
You may need to hire the services of a translator to get your specific Chinese business license explained. Another option is to use China Checkup’s company verification report, which includes full explanation of the specific company’s registration record.
Check the Company’s Public Record
As well as requesting a copy of the company’s business license, it’s a good idea to view their registration record yourself to compare it to. The registration record will show the same information, and is often available publicly online if you know where to look. You have to find the AIC (Industrial and Commercial Administration Bureau) for the area the company is in, and then search the AIC database for the company’s public registration record. There are some issues with doing this:
- The entire interface and record will of course be in Chinese, which you might find difficult to read.
- The different AIC websites for different parts of China are very inconsistent in their setup and quality.
- Public registration records may not be up-to-date with the latest version.
- Public registration records may not be removed if a company loses its business license or fails to renew it.
Those last two points are very important. In the majority of cases, the public registration records are up to date and there are no issues. The problem is that this isn’t guaranteed. To be 100% sure, you need a paper record check (see below). Once you’ve got the information from the registration record, you can confirm the information on the business license. You might consider it suspicious if there any discrepancies between the copy of the business license you’ve been given and the information on the registration record. If there is we recommend you raise the issue with your manufacturer.
A China Checkup company verification report can help you get hold of and fully understand a Chinese company’s registration record (public or paper copy, depending on the type of report you order). We’ll find the company’s registration record, translate it and explain it all for you.
Check the Company’s Paper Record
As we mentioned above, the public registration record available online is genuinely up-to-date and without problems, but the AIC will never guarantee this. They update the public records in their own time using their own systems. What they do ensure is totally up-to-date and accurate, though, is the physical paper record they have in their offices. Getting hold of this requires hiring a Chinese lawyer to go to the AIC office and request the hardcopy record. Note that only qualified Chinese lawyers (and not foreign ones) can go and make this request, so it’s essential to hire the services of one if you want the paper registration record.
Finding a reliable Chinese lawyer may be quite a daunting task for your company, but you can take the difficulty out of the equation with China Checkup's company verification Services. As well as a complete check of the public registration record, we also provide the dispatch of a Chinese lawyer to get a copy of the paper registration record for the company. There are no hidden fees for this – it’s included in the cost of the China company verification services, along with all of our translation and explanation.