Shanghai promotes Regional Headquarters
Shanghai municipal government, in order to further promote the creation of regional headquarters, issued two documents, the Several Opinions on Promotion of the Development of Multinational Companies’ Regional Headquarters in Shanghai (“Opinions”) and the Notice on Issuing the Revised Provisions on Encouraging Multinational Companies to Establish Regional Headquarters in Shanghai Municipality (Notice”) together known at the “RHQ 2019 Provisions”).
The RHQ 2019 Provisions came into force on September 1st 2019.
Regional Head Quarters and Headquarter type Institutions
The RHQ 2019 Provisions provide for two different entities (i) regional headquarters (“RHQs”) and (ii) headquarter type institutions (“HTIs”). Both entities are regional headquarters of multinational companies in a general sense however they have different requirements.
“RHQs” are defined in the RHQ 2019 Provisions, as the sole headquarters of a MNC.
Whereas, “HTIs” are defined in the RHQ 2019 Provisions as foreign-invested enterprises which, do not meet the standards set out for RHQs, however they still provide supportive services for the foreign parent company within more than one country.
Reduced Entry Requirements
The RHQ 2019 Provisions reduced the level of minimum financial and investment capacity of the foreign parent company and eased restrictions on the form of the RHQ.
RHQs:
RHQs are no longer just limited to WFOEs but can be eJVs or JVs.
The total assets the parent company of the RHQ has been reduced from $400 million to $200 million.
Parent companies are no longer obliged to contribute $10 million to the registered capital within the PRC
HTIs:
HTIs are no longer just limited to WFOEs but can be eJVs or JVs.
The total assets the parent company of the RHQ has been reduced from $200 million to $100 million.
The parent companies are no longer obliged to have established at least two foreign-invested enterprises within China.
Minimum registered capital has been reduced from $2 million to $1 million.
Intellectual Property, Logistics, Trade and R&D to be encouraged
Most notably is the launching of a pilot project which will provide for “One Business License for Several Addresses” which will promote RHQs and HTIs the opportunity to open a series of locations under the one business license enabling them to carry out business outside of their registered address without requiring another registration.