How to read and verify a Chinese business license

How to read and verify a Chinese business license

Here is (hopefully) a useful guide for how to read and verify a Chinese business license all by yourself or with help from somebody who knows Chinese. I will use a real case to explain the structure of a Chinese business license, how to read and understand and where and how to search for information that verifies the business license.

Why is it necessary?
I cannot repeat enough how important it is to request a business license copy from any Chinese company that you consider to start a business relationship with and simply walk away from companies that say no. 

The business license is issued by the local branch of State Administration for Industry and Commerce (AIC) and is an important certificate that documents a Chinese company has been incorporated and is a legal entity registered with the authorities. In a perfect world, the business license should assure that a Chinese company is legit and safe to conduct business with. However, it does not require much imagination how a shady (monkey) business easily can falsify a digital copy with some free photo editing software. 

Examples of common forgeries are:

• Use a company name that is not registered in China
• Change establishment date to hide that the company was recently established.
• Change the name of legal representative 
• Increase the amount of registered capital to appear financially stronger
• Increase the term of operation or expiry date
• Make changes to the business scope

Case study Earlier this year, I was asked to examine the background of an interior design and construction company Zhejiang Zhantu Engineering Consulting Co., Ltd. My client was looking to replace their long-term contractor that had been paying kickbacks to one of the company managers who got sacked after the scheme was discovered. Zhejiang Zhantu Engineering Consulting Co., Ltd was on the shortlist of possible candidates and the client wanted a 3rd party investigation to prevent a biased assessment made by an internal team.  

The very first survey component was verification of the business license and to confirm that Zhejiang Zhantu Engineering Consulting Co., Ltd was legit and in operation. Here is a digital image of the business license. Explanation and translation are below the image.

1. Social Credit Unit Code: 913307277045660299. (Note: Before 2016, a Chinese company should register for a separate tax license and organization code certificate. In order to streamline the business registration process and reduce the amount of paperwork, tax number, organization code and business registration number were merged into the social credit unit code.)
2. Chinese company name: Zhejiang Zhantu Engineering Consulting Co., Ltd  ( Note: A company in China is always registered with a Chinese name using Chinese characters. Foreign companies also have to adopt a Chinese name when they incorporate a company in China)
3. Legal entity: Limited Liability (Note: examples of other legal entities are wholly foreign-owned enterprise, join-venture, joint-stock company, sole proprietorship etc)
4. Registered address: Zhejiang Province, Panan County, Anwen Town, Huayue No 211, 12th Floor
5. Legal representative: Zhou Xiao Yuan (In privately owned Chinese companies, the legal representative is often the company owner or majority shareholder)
6. Registered capital: CNY 5 million
7. Incorporation date: 21st of April 2000
8. Operation term: 21st of April 2000 - 20th of April 2030
9. Registered business scope: Cost consulting for engineering construction projects, engineering consulting service, engineering bidding agent service, financial cost forecast for construction and engineering projects, audit and assessment, price evaluation, engineering and construction project evaluation and assessment (See the qualification certificate for details regarding business operation, if the business involves special approvals or licenses, a valid license should be obtained) (For projects that need other approvals, the company should apply to relevant departments before engaging in relevant activities)
10. Registration place: Panan County Administration for Market Regulation

The business license of Zhejiang Zhantu Engineering Consulting Co., Ltd is an image of the Original Business License which comes in the size of a piece of A3 paper. Some companies will send a Business License Copy which you can identify by the two characters  (副本） in brackets. The copy version has the size of a piece of A4 paper and therefore more convenient to scan, copy and carry around. The information on the copy version is precisely the same as the original and the copy version has to a wide extent the same authority a the original. For example, showing the business license copy is widely accepted when you sign a lease contract, apply for foreign staff visa etc.  

How to verify the information

Now it is time to show how to verify that the business license of Zhejiang Zhantu Engineering Consulting Co., Ltd  is genuine and the information is accurate. 

All information about registered companies in China is found in the public available database National Enterprise Credit Information Publicity System  (NECIPS)

In NECIPS, everybody can search for a company by the Chinese company name or by entering the social credit unit code number. When you start a search, the system will ask you to identify the sequence of 3 to 5 Chinese letters. The word puzzle could be a Chinese saying, a title or anything else that makes sense. This is how it looks when you select the wrong sequence.

And this is how it looks when you successfully solved the word puzzle

This is what the search result looks like. If you search with 2 or 3 characters, the search will most likely generate a much longer list of companies.

Clicking on the search result gives access to registration information on the company so you can make a comparison with the business license info. Here is what the NECIPS registry tells about Zhejiang Zhantu Engineering Consulting Co., Ltd:

1. Social Credit Code 
2. Company name  
3. Legal entity 
4. Legal Representative  
5. Registered capital  
6. Incorporation Date 
7. Start of operation  
8. End of operation 
9. Registration Bureau 
10. Inspection Date: 11th of April 2018 - Not displayed on the business license
11. Operation status - In operation - Not displayed on the business license
12. Address 
13. Business scope: Registered business scope: Cost consulting for engineering construction projects, engineering consulting service, engineering bidding agent service, financial cost forecast for construction and engineering projects, audit and assessment, price evaluation, engineering and construction project evaluation and assessment, government procurement agency (See the qualification certificate for details regarding business operation, if the business involves special approvals or licenses, a valid license should be obtained) (For projects that need other approvals, the company should apply to relevant departments before engaging in relevant activities)

The company data in the NECIPS registry corresponds to the information on the business license and there is are no indications that the business license is questionable. The only minor difference is in the business scope where government procurement agency has been added. Government procurement agency is not found on the on the business license that we saw.

There are two records in the registry which are not shown on the business license. The first record is information about inspection date (10). This refers to the last time the company was subject to inspection and verification by the AIC. The next record which is not on the business license is operation status (11). This record shows that a company is active. Other examples of operation status could be, deregistered, license has been revoked, subject to investigations etc.  

The NECIPS database contains more insight about a company which is not found on the business license but can be useful knowledge to have. Example are:

• Information about shareholders and ownership
• Paid-in capital situation
• Management
• Registration changes
• Penalties 
• Remarks by the authorities

Please share and provide constructive comments