Several Companies in Shanghai Can Now Use the Same Premises as Registered Address

In the past, it was not possible in Shanghai to use the same premises as registered address of several companies. On 3 March 2015, the Shanghai People’s Government now issued the Administrative Measures on Address Registration of Companies Located in Shanghai (“Address Measures”). The Address Measures took effect retroactively on 1 March 2015 and have a validity term until 31 December 2019. We summarize below some major changes brought about by the Address Measures.

1. Several companies can share the same address for registration If either of the following conditions is met, several companies can share the same address as registered address: (1) they are equity investment companies and equity investment management companies which undertake management responsibilities; or (2) there is an investment relationship between the companies and they also share the same office. It is unclear whether the term “investment relationship” only includes subsidiaries or also other affiliated companies, such as sister companies. According to the information we received from the Shanghai Administration for Industry and Commerce (“AIC”), for the time being, only wholly owned subsidiaries are covered. However, it remains to be seen how the district level AICs will interpret this term in practice.
2. In rural areas, premises designated for residential use can be used for company address registration Under the current law, addresses of companies must be registered in premises designated for industrial or commercial use. Premises designated for residential use cannot be registered as company address. According to the Address Measures, now companies in rural areas of Shanghai, such as Fengxian and Jinshan districts etc, are allowed to register in premises for residential use. However, in such case, the concerned company shall obtain the consent of the interested parties (which might include the neighbours) and an approval certificate issued by the local village neighbourhood committee. The situation is different in downtown areas. If a company wants to register its company address in premises designated for residential use, first the nature of the premises must be changed from residential to industrial or commercial use. 
3. Stricter supervision of operation in places other than the registered address Many companies carry out business operations in places other than their registered address. Legally speaking, according to the PRC Regulations on Administration of Registration of Companies (“Registration Regulations”), the registered address of a company shall be the place where the company carries out its main business operations. If a company carries out business operations in places other than its registered address, it must register a branch office. However, in practice quite a number of companies do not comply with these regulations. The Address Measures now stress that in the coming future the competent AICs will make selective examinations according to complaints made by third parties or based on information published by a company itself, e.g. on its website. If it is found out that the company carries out business operations in an address not registered with the competent AIC, the AIC shall impose punishments according to the law. Such punishments include fines of RMB 10,000 to RMB 100,000. In serious circumstances, the business license of the company can be revoked.

Shanghai is not the first location where these changes are implemented. Guangzhou, Chengdu and Zhejiang Province have already implemented similar measures. The issuance of the Address Measures by the Shanghai Government aims at relaxing restrictions and reducing administrative burdens on companies. Another trigger might have been the huge surplus of empty residential buildings. The reform might help the struggling real estate market. On the other hand, the Address Measures are also a sign that in the future the authorities might check more closely on companies. Companies operating at premises other than their registered address are well advised to check whether they already have or need to register a branch office.