Laws of the People's Republic of China

The State Administration for Industry and Commerce

Reply of the State Administration for Industry and Commerce on Defining the Term Affiliate in Paragraph 1 of Article 35 of the Regulations of the People's Republic of China on Business Entity Registration Administration

GongShangQiZi [1997] No.222

September 2, 1997

Liaoning Administration for Industry and Commerce:

We have studied the Request of the Administration for Industry and Commerce of Benxi, Liaoning for Instructions for Defining the Term Affiliate in Paragraph 1 of Article 35 of the Regulations of the People's Republic of China on Business Entity Registration Administration (BenGongShangFa [1997] No.38). And in accordance with the provision stating "The State Administration for Industry and Commerce reserves the right to interpret the regulations." in Article 38 of the Regulations of the People's Republic of China on Business Entity Registration Administration (hereinafter referred to as the Regulations), we now reply as follows:

I.

The term "Affiliate" in Paragraph 1 of Article 35 of the Regulations refers to any commercial organization invested and established by business entities with a fixed operating location, which operates directly in its own name without corporate capacity and whose civil liabilities are borne by its holding business entity.

II.

Business entities should observe provisions set forth in Articles 17 and 35 of the Regulations and related provisions in the Implementing Rules of the Regulations of the People's Republic of China on Business Entity Registration Administration (hereinafter referred to as the Implementing Rules) for the establishment of affiliates without independent capacity to assume civil liabilities through applications by the holding business entities for registration alteration and operation registration. The affiliates should operate only after obtaining their business license. Operations in the name of affiliates without the registration approval should be punished in accordance with Paragraph 1 of Article 30 of the Regulations and Paragraph 1 of Article 66 of the Implementing Rules.

III.

In compliance with related state laws and regulations, branches, sub-branches, small local branches, business departments and savings houses legitimately established by commercial banks and credit unions all belong to the category of affiliates and should therefore complete business registration procedures and claim their business license in accordance with the above-mentioned provisions prior to their operation. For your reference and implementation, the Administration for Industry and Commerce once explicitly confirmed this principle in our reply to Guangdong Administration for Industry and Commerce dated March 5, 1997 (Reply to YueGongShangHan [1996] No.416) and our reply to Liaoning Administration for Industry and Commerce dated July 14, 1997 (Reply to LiaoGongShang [1997] No.29).