Compliance for FTZ companies operating outside the zone

According to the latest official statistics, by mid-September 2014, the 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 the Shanghai FTZ run operations outside of the zone?

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

Legal persons

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

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