In March 2013, Shenzhen officially began implementing a commercial registration system reform with "loose entry and strict supervision" as the core, comprehensively streamlining the existing enterprise establishment registration system.

This Shenzhen commercial system reform has the following main highlights: implementing the registered capital subscription system, where company registered capital, contribution methods, contribution amount, and contribution time can all be freely agreed upon by shareholders, and verification certificates need not be submitted during commercial registration; canceling the registration and approval of business scope, changing business scope to filing matters; canceling the statutory annual inspection system for industry and commerce, changing to companies independently submitting annual reports to registration authorities; promoting the integration of business license, organization code certificate, and tax registration certificate into one registration system; creating a unified commercial subject registration, licensing and credit information disclosure platform, implementing the business anomaly list system, and strengthening market, credit and social supervision.

Compared with the previous time-consuming and complicated industrial and commercial registration system, Shenzhen's commercial registration system reform has solved many problems for entrepreneurs with insufficient funds and slow business license processing, simplifying the complex into the simple, improving the efficiency of government approval and commercial registration, greatly lowering the registration threshold for commercial subjects, and providing entrepreneurs with an excellent investment environment.

On July 3, 2013, the State Council executive meeting approved the Overall Plan for the China (Shanghai) Pilot Free Trade Zone ("the Plan"). According to the Plan, the Shanghai Pilot Free Trade Zone will implement reforms in many areas such as RMB capital account, taxation, and foreign exchange. We believe that in this context, Shanghai should follow Shenzhen's example, promote commercial registration system reform, lower the market access threshold for commercial subjects, and further promote market vitality and prosperity.

In Shanghai's future commercial system reform, the following issues deserve our attention:

1. Improve the legality and constitutionality foundation of commercial registration system reform

Shenzhen's commercial registration system reform has made great breakthroughs in the existing industrial and commercial registration system. For example: the registered capital system stipulated in Articles 26 and 29 of the Company Law, where commercial subjects must submit capital verification reports when conducting industrial and commercial registration; the Company Law and Foreign Investment Enterprise Law stipulate that business scope is a statutory registration matter, and according to the Company Registration Regulations, annual inspection of enterprises is a statutory system, and enterprises that fail to conduct annual inspection as required will be subject to administrative penalties.

Shenzhen is a special economic zone. According to the authorization of the Standing Committee of the National People's Congress, the Shenzhen Municipal People's Congress and its Standing Committee may independently formulate and implement regulations. However, even so, the authorization of the Standing Committee of the National People's Congress clearly stipulates that regulations formulated by Shenzhen's People's Congress and its Standing Committee must "comply with constitutional provisions and the basic principles of laws and administrative regulations". Shenzhen's commercial registration reform this time has substantially broken through many principled provisions of the Company Law regarding commercial registration, and its legality and constitutionality foundation still has deficiencies. Given Shenzhen's situation, as Shanghai is not a special economic zone, it should pay more attention to and improve this aspect.

2. Properly handle the connection issues with other departmental regulations and local regulations

Since many departmental regulations and local regulations are issued based on the Company Law and other laws and regulations. After Shenzhen implemented commercial registration system reform, there are disputes and confusions about whether the relevant regulations and rules still apply. Therefore, if Shanghai implements commercial registration system reform, it also needs to pay attention to properly handling the connection between new regulations and departmental regulations and local regulations, to avoid confusion and conflicts in operation.

[1]Decision of the Standing Committee of the National People's Congress on Authorizing Shenzhen Municipal People's Congress and Its Standing Committee and Shenzhen Municipal People's Government to Formulate Regulations and Rules Separately for Implementation in the Shenzhen Special Economic Zone