The State Council has recently issued the Administrative Regulations on Registration of Foreign Representative Offices of Foreign Enterprises, stipulating new rules on the registration of representative offices (RO) of foreign companies in China.  Set to come into effect in March 2011 and extended to ROs ofHong Kong, Macau and Taiwanese companies, the new rules may have far-reaching implications for both new foreign investors and those who already have representative offices on the mainland.

The new rules forbid ROs from conducting business in China and only allow them to carry out activities like market surveys, exhibitions and publicity activities related to the products and services of foreign parent companies; and liaison activities in connection with sales of products, provision of services and domestic procurements and onshore investments of foreign parent companies.

In addition, applications also need to be lodged to the State Administration for Industry and Commerce before companies (of at least two years of age) launch an RO on the mainland. Every year from 1 March to 30 June, ROs are also required to submit an annual report to the registration authorities, setting out the current status of their parent companies, conduct of activities by the ROs and an audited statement of the RO’s payments and receipts.

Lawyers advise foreign investors who are launching offices in the mainland to consider the pros and cons of the RO option in terms of compliance obligations and costs. For those who already have existing ROs, it is advisable to revisit the compliance status of their ROs and be prepared to make modifications to comply with the new rules. ALB

Highlights of the Administrative Regulations on Registration of Foreign Representative Offices of Foreign Enterprise rules