Chinese Company Audit Terms Glossary

Chinese Company Audit Terms Glossary
The Nuna Network Advanced Company Report features some data points that require a deeper understanding of Chinese business practices to fully analyze. 

An advanced Nuna Network company report features 55+ data points, updated in real time - all translated into English. If this is your first time looking at a comprehensive audit of a Chinese company, some of the terms may need a little explanation in order to interpret the data correctly. Below is a glossary of some of the more interesting data points that make up the advanced report.

As a handy reference, we’ve also included the Chinese translation, which is what you would find on the original source documents. Rest assured, Nuna Network’s reports already feature the original Chinese and English translations

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A public record of companies that have not adhered to regulatory standards due to failure to submit annual reports on time, an inaccurate registered address, failure to disclose required information, or submission of falsified documents.  

Administrative penalties issued against a company included warnings, fines, revocation of certificates or business licenses due to breaches of corporate compliance.

Administrative penalty refers to the specific administrative act that the administrative subject, in accordance with the statutory functions and powers and procedures, imposes administrative sanctions on the counterpart who violates the norms of administrative law but has not yet committed a crime.

Administrative penalty is a form of administrative sanction. The administrative subject with the power of administrative penalty is to safeguard public interests and social order, protect the legitimate rights and interests of citizens, legal persons or other organizations, and impose legal sanctions on administrative counterparts who violate administrative laws and regulations but have not yet committed crimes.

Within the specific administrative jurisdiction of the law, the administrative subject shall, in accordance with the law, impose sanctions on the administrative counterpart (the organization or natural person being managed) of the general illegal administration that has not yet constituted a crime. The purpose of sanctions is to maintain public order and social order, to ensure the security of the country and the rights of citizens.

Administrative penalty refers to the specific administrative action that the administrative subject, in accordance with the statutory authority and procedure, imposes administrative sanction on the counterpart who violates the norms of administrative law and has not yet committed a crime.  This includes:

  • Warning
  • Penalty
  • Confiscation of illegal income and illegal property
  • Order to suspend production and business
  • Suspension or revocation of the license, suspension or revocation of the license
  • Administrative detention
  • Other administrative penalties prescribed by laws and administrative rules and regulations

A legal enterprise in which all or part of the shares are invested by the parent company.

Scope of work defined by company as registered with the government. A company may legally operate only within its defined business scope; it is critical to ensure the requested service is covered.

These provisions are formulated in accordance with the relevant laws and administrative regulations on the administration of enterprise registration for the purpose of standardizing the administration of enterprise business scope registration, standardizing the operation of enterprises and safeguarding the lawful rights and interests of enterprises.

The qualification certificate of an enterprise to engage in a certain business practice can only be engaged in that business practice after it has obtained or passed the qualification certificate of the relevant department.

A loan extended to an individual or company on a movable piece of property.

The customs registration number refers to the 10-digit customs registration code on the customs declaration and registration certificate of import and export goods consignee or consignor. It is the unique and lifelong business unit code of an enterprise.

Outbound investment refers to the investment made by enterprises to other units by means of cash, physical objects, intangible assets or purchase of securities such as stocks and bonds, including short-term investment and long-term investment.

If the items specified in the company’s business license are changed, the company shall go through the registration of the change according to law, and the company registration authority shall renew the business license.

The types of matters changed by the company include: company name, domicile, legal representative, registered capital, business scope, organizational form of the company, shareholder information, merger and division of the company, etc.

The business structure or the form of incorporation of the company. The main categories of enterprises are: joint venture, sole proprietorship, state-owned, private, ownership by the whole people, collective ownership, shareholding system, limited liability and so forth.

Company officers registered with the state administration.

Shareholders refer to individuals or units that have limited or unlimited liability for the debts of a joint stock company and enjoy dividends and bonuses by holding stocks.

Shareholders are the people who make up and enjoy rights in a corporation. Any person who holds a share of the capital of a company and enjoys the shareholders’ rights on the basis of an investment in the company or for other legitimate reasons is a shareholder of the company. However, due to the different types of companies, the time when investors invest in the company and the way to acquire equity, there are different expressions for the meaning of shareholders. Generally speaking, the shareholder of a limited liability company refers to the person who has rights and obligations to the company because he has subscribed the capital of the company at the time of the company’s establishment or acquired the equity according to law during the period of the company’s existence; The shareholder of a joint stock limited company refers to the person who legally obtains the shares of the company and enjoys the rights and obligations to the company after the establishment of the company or after the establishment of the company.

The date the company’s business license expires. Business term refers to the effective duration of the company’s existence, which can be categorized into two types: with term and without term. There are three types of time limit:

Self-designed time limit: The shareholders or the sponsors upload the business term in the articles of association

Statutory time limit: refers to the time limit required by the administrative organ to be indicated in the articles of association

Open-ended: attitude that the law does not force companies to state

A list of enterprises with serious illegal and dishonest acts includes companies identified to have violated administrative laws and regulations and is made public through the Enterprise Credit Information Publicity System.  This includes:

  • Failing to perform the relevant obligations after 3 years of being listed in the list of abnormal operations.
  • Submitting false materials or concealing important facts by other fraudulent means, obtaining alteration or deregistration of the company, and being deregistered
  • Organizing and planning pyramid retail, or receiving three or more times of administrative penalty for providing convenience for pyramid retail within two years
  • Receiving more than three times of administrative penalty for illegal ACTS of direct selling within two years
  • Being subjected to three or more administrative punishments within two years for ACTS of unfair competition
  • Receiving more than three times of administrative penalty within two years because the commodities or services provided do not meet the requirements for ensuring the safety of the person or property, causing personal injury or other illegal ACTS that seriously infringe upon the rights and interests of consumers
  • Those who have been subjected to administrative punishment for three or more times within two years for publishing false advertisements, or for publishing false advertisements for commodities or services that affect the life and health of consumers, causing personal injury or other serious adverse social effects
  • Having been subjected to administrative penalty twice or more within five years for trademark infringement
  • It is decided to stop accepting trademark agency business
  • Other serious violations of the laws and regulations on the administration of industry and commerce stipulated by the state administration for industry and commerce
  • An enterprise that violates the laws and regulations governing the administration of industry and commerce and commits any of the ACTS prescribed in items (3) to (8) of the preceding paragraph, and is subject to three or more administrative punishments within two years, shall be included in the list of enterprises that have seriously violated laws and regulations and broken their promises.

Environmental penalties are given in response to a company failing to follow government issued environmental regulations, penalty may lead to temporary closing of factories.

If a citizen, a legal person or any other organization violates the provisions of the environmental protection laws, regulations or rules and should impose administrative penalties on the environment, it shall be subject to the procedures prescribed in the law of the People’s Republic of China on administrative penalties and these measures.

Environmental penalty refers to the behavior that the administrative subject punishes the counterpart who violates the environmental protection law according to the statutory authority and procedure.  This includes:

  • Warning
  • A fine
  • To order it to stop production for rectification
  • Order to stop production, stop business or close down
  • To suspend or revoke a license or any other certificate of a permissive nature
  • Confiscation of illegal gains and confiscation of illegal property
  • Administrative detention
  • Other types of administrative penalties prescribed by laws and administrative regulations

The national industry classification system used in China. Industry classification refers to the detailed division of the organizational structure system of business units or individuals engaged in homogeneous production or other economic society in the national economy, such as forestry, automobile industry, banking industry, etc..

Legal judgments include any involvement the company has had with the legal system, including but not limited to the legal acts of a citizen, legal person, or other organization that sues, files complaints, charges, or uses other judicial means to investigate others for legal responsibilities.

The legal representative refers to the person in charge who exercises civil rights and performs civil obligations on behalf of the legal person according to law (eg the director of a factory, the President of a company, etc.).

OFFICIAL COMPANY NAME (in Chinese) 企业名称 (中文)
The legal name of the company as registered with the government.

A patent is an invention-creation protected by laws and regulations. It refers to an invention-creation that applies to the state examination and approval authority for a patent, and grants the patent applicant the exclusive right to enjoy the invention-creation within a specified period of time after passing the examination according to law.

REGISTERED ADDRESS (in Chinese) 住 所地址(中文)
The registered address of the company is the “address” registered on the company’s business license. Generally speaking, the company shall take the place of its main office as its domicile. The requirements for registered addresses in different cities may vary.

Amount of money shareholders are legally required to initially invest in the company.

Registered capital, Also known as forehead capital, refers to the total amount of capital registered when the company is established. The word “registered capital” is seldom seen in the company law of various countries. China is one of the few countries with a strict definition of registered capital. In some other countries, the company law also stipulates that capital is an important matter of registration, but it does not explicitly use the term registered capital. In essence, the registered capital is registered capital.

REGISTERED NUMBER - USCC 统一社 会信用代码/工商注册号
Registered Number, also known as Unified Social Credit Code, is an 18-digit identification number assigned to each company by the Chinese government.

Enterprises use the 18-digit unified social credit code as the “digital identity card” of legal persons and other organizations, and it becomes the means of identification of legal persons and other organizations in the process of management and operation. It contains the organization code, and no other organization code certificate will be issued.

REGISTRATION BUREAU (in English) 登记机关名称(英文)
Local agency responsible for registering companies.

The legal status of the company. The operating state includes types of operation, preparation, closure and bankruptcy.

Nuna Network provides 8 different status types:

  • Regular (in business)
  • Regular (company exists)
  • Irregular (revocation of license)
  • Irregular (business closure)
  • Irregular (business relocated)
  • Irregular (suspension of business)
  • Irregular (liquidation of business)

Enterprises who engage in tax collection in violation of the national tax law.  This includes:

  • Taxpayer forged or altered, concealing, destroying without books, proof of charge to an account, defray of much on books or does not list income row, less, or notification by the taxation authority to declare and refuses to declare or false tax returns, does not pay or pay less tax payable, mending tax amount is 1 million yuan of above, and any annual mending tax accounting for the more than 10% of the total tax taxable
  • The taxpayer who fails to pay the tax payable, by means of transferring or concealing the property, obstructs the tax authorities from recovering the overdue tax amount of more than RMB 1 million
  • Defrauding the state of export tax refund by false export reports or other fraudulent means
  • Refusal to pay taxes by violence or threat
  • Falsely issuing special invoices for value-added tax or other invoices used for defrauding export tax refund or tax deduction
  • Falsely writing 100 copies of ordinary invoices or an amount of more than 400,000 yuan
  • Privately printing, forging or altering invoices, illegally manufacturing special anti-counterfeiting products for invoices, or forging the supervision seal for invoices

If the case fails to meet the above standards, but the violation is serious and has great social influence

Trademarks listed are the company’s authorized trademarks. Others may have been submitted for authorization or are under review.

The ultimate beneficiary is the person(s) who legally own or control the business either directly or indirectly and ultimately receives the profits. This may be any person(s) with sufficient influence over the company.

Natural persons who directly or indirectly own more than 25% of the company’s equity or voting rights.

The ICP (Internet Content Provider) license is a permit issued by the Chinese Ministry of Industry and Information Technology to allow China-based websites to operate in Mainland China.

An enterprise shall, within the prescribed time limit, submit an annual report to the state administration for industry and commerce through the credit information publicity system for market entities, and make it publicly available to the public.

The main contents of the “annual report” of an enterprise shall include the capital contribution paid by the shareholders (sponsors) and the assets, etc. The enterprise shall be responsible for the authenticity and legality of the annual report.

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