Unirule Statement Regarding Beijing Administration for Industry and Commerce Haidian Branch’s Withdrawing the License of Beijing Unirule Consulting Co., Ltd.

Beijing Unirule Consulting Co., Ltd.

October 9th, 2018, Beijing Administration for Industry and Commerce Haidian Branch(hereafter referred to as “Haidian Industrial and Commercial Bureau”) informed us that due to the fact that we organized training classes in our business practice, according to Clause 1of Article 68 of Regulations of the People's Republic of China on Administration of Registrationof Companies which stipulates “A company which does not modify its registration when the registered items change shall be ordered by the administrative organ to modify its registration within a certain period. In the case of overdue, it shall be fined at least RMB 10,000 and no more than RMB 10,0000. If the modified businesss cope involves items that are regulated by law, regulations, or the decisions of the State Council and a company does not obtain the required permit while undertaking such business activities, if the case is very serious, its business license shall be revoked”, the Haidian Industrial and Commercial Bureau plans to revoke our license. 

Here is our statement:

1.    According to the Legislation Law, the Regulations of the People's Republic of China on Administration of Registration of Companies is an administrative regulation that should be subject to the Constitution, the Legislation Law, and the Company Law. In the Constitution, China is a “socialist market economy”, which means that maximum economic freedom should be given to enterprises as long as they are abided by market rules. For this purpose, the Administration for Industry and Commerce was created to maintain the market order and protect the economic freedom rights of the enterprises. In the execution of law by the Administration for Industry and Commerce, this benevolence of the legislators should be practiced throughout, instead of violating the spirit of the Constitution while practicing the Regulations of the People's Republic of China on Administration of Registration of Companies.

2.     The 3rd Plenary Session of the 18th CPC Central Committee promised to let “the market play a decisive role in resource allocation”, which implies further decreasing the government’s direct intervention of the business scope of enterprises, and the Administration for Industry and Commerce serving enterprises, instead of depriving or limiting the enterprises’ right to independently operate within legal scope. In the light of the principles of “socialist market economy” and “the market playing a decisive role in resource allocation”, the scope of business of the enterprises should be determined by the enterprises’ judgement of the market. In this principle, the nature of the “scope of business” in the administrative registration is first and foremost a promise to the shareholders of the enterprises, and later information to the potential transaction partners, and later again the information for the convenience of the Administration’s statistics and collection. It should not be regarded as an administrative permission which limits the business scope of the enterprises.

3.    The Haidian Industrial and Commercial Bureau informed this company that it violated Clause 1 of Article 68 of the Regulations of the People's Republic of China on Administration of Registration of Companies that stipulates “the modified business scope involves items that are regulated by law, regulations, or the decisions of the State Council and a company does not obtain the required permit while undertaking such business activities”. In education and training, the “business activities that require permits” referred to Article 12 of Non-State Education Promotion Law ofthe People's Republic of China that applies to non-state schools that “offer diploma education, pre-school education, self-taught examination, and other cultural education”and those that “offer vocational qualification trainings,vocational skill trainings”.  However, this company and its business activities have nothing to do with the aforesaid educational and training activities, neither is this company a non-state school which should subject to the articles of the Regulations of the People's Republic of China on Administration of Registration of Companies where activities that “require permits but were undertaken without permits” should be applied.

4.    Article 32 of the Regulations on Administration of Registration of Companies stipulates that “In altering the scope of business, a company shall file an application for registering the change within 30 days starting from the date when the resolution or decision on the change is taken. If the change in business scope concerns items that are required by laws or administrative decrees for examination and approval, the application for registering the change shall be filed within 30 days starting from the date of approval by relevant State departments.” This is to say only when this company decides to alter its business cope and gets the permit to carry out the business activities, shall it alter the registration of the business scope with the administrative organs.This company does not decide to alter its business scope, nor does it apply for the approval of the administrative organs regarding its business scope. Therefore, according to this Article, this company does not need to alter its business scope.

5.    However, even the alleged altered business scope according to the Haidian Industrial and Commercial Bureau applies, Clause 1of Article 68 of the Regulations on Administration of Registration of Companies should also apply, that is “A company which does not follow the regulations to modify its registration when the registered items change shall be ordered by the administrative organ to modify its registration within a certain period.” Apparently, the procedural prerequisite for administrative penalty is being “ordered by the administrative organ to modify its registration within a certain period.” This company has been undertaking annual examinations with the administrative organs in due time every year without the knowledge of any “order” from the Haidian Industrial and Commercial Bureau. Therefore, this company should not subject to administrative penalty without the procedural prerequisite, let alone “having its license revoked” because of the case being “very serious”.

6.    In the light of the pressure from the external trade war threat and the domestic economy in recession, if the Haidian District Industrial and Commercial Bureau revokes the license of this company illegally, it would not only impose serious harm to this company, but also serious harm to the administrative system. It will signal that the administrative system does not understand or abide by the spirit of the Constitution which upholds the “socialist market economy”, or the spirit of the CCP’s resolution of “rule of the Constitution”. It will also signal that the administrative system does not practice the Regulations on Administration of Registration of Companies based on basic legal logics and due process of law, and it will jeopardize the general justice of the laws and regulations, and harm the credibility of the administrative system. This also constitutes a serious blow to the market environment, because if the practice of this case applies, hundreds of thousands of enterprises will be threatened by the alleged “business scope” issue. This will be a serious defeat of the market economy in China, which will further worsen the national economy.

October 17th, 2018