Overseas NGO Law: the First Comprehensive Guiding Law for Overseas NGOs in China

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Overseas NGO Law: the First Comprehensive Guiding Law for Overseas NGOs in China

1. Introduction

 

For a long period of time when there is no comprehensive law in China regulating and guiding the activities of overseas non-governmental organizations (hereinafter referred to as “NGOs”) within the territory of China, only several specific regulations, such as Regulation on the Administration of Foundations, Interim Provisions on the Administration of Foreign Chambers of Commerce, Administrative Regulations on the Registration of Social Organizations, and Interim Regulations for the Registration of Private Non-Enterprise Entities exist. In order to protect the legitimate rights and interests of overseas NGOs, as well as to promote exchanges and cooperation, Law of the People’s Republic of China on the Administration of Domestic Activities of Overseas NGOs (hereinafter referred to as the “Overseas NGO Law”) was promulgated by the Standing Committee of the National People’s Congress on April 28, 2016 and it will come into force on January 1, 2017. The Overseas NGO Law consists of seven chapters and 54 articles which specifies systematic rules for the management of the activities of overseas NGOs within the territory of China, ranging from registration and record-filing to the activities standards, facilitation measures, supervision and administration, and legal responsibility. In this article, we would like to draw your attention to the following highlights.

 

2. Definition and Scope of Activities

 

(1) Definition of Overseas NGOs

According to the Overseas NGO Law, overseas NGOs refer to non-profit, non-governmental social organizations legitimately established overseas such as foundations, social groups, think tanks institutions and so forth.1 However, overseas schools, hospitals, research institutions of natural science and engineering technology or academic organizations shall be excluded from the definition of overseas NGOs, and they shall organize exchanges and cooperation with domestic counterparts in accordance with the relevant Chinese regulations.2

(2) Scope of Activities

Regarding the scope of activities, the Overseas NGO Law specifies that overseas NGOs may conduct activities beneficial to the development of social welfare in fields such as economics, education, sciences and technology, culture, health, sports, environmental protection and areas such as poverty alleviation and disaster relief.3 However, the overseas NGOs shall be prohibited to engage in or sponsor for profit-making activities or political activities or illegally engage in or sponsor religious activities, within the territory of China.4 In order to provide guidance to overseas NGOs carrying out activities, the Overseas NGO Law requires the public security department of State Council and the public security organs of the provincial People’s government, in conjunction with the relevant department, to formulate the directory of overseas NGOs’ areas of activity and projects.5 Such directory will be provided prior to the entry into force of the Overseas NGO Law.6

 

3. Two Methods of Overseas NGOs to Carry Out Activities in China

 

According to the Overseas NGO Law, there are only two methods available for overseas NGOs to carry out activities in the territory of China, that is, by registering a representative office (hereinafter referred to as “RO”), or by carrying out temporary activities after filing records:7

(1) Registration and Establishment of ROs

The Overseas NGO Law clarifies that a RO has no legal personality, thus, all the legal responsibilities of the RO shall be borne by the overseas NGO who establishes such RO.8 Overseas NGOs seeking to establish a RO shall satisfy key requirements, including but not limited to the following:9

  • They are legally established overseas;
  • They are able to bear civil liability independently;
  • Their purposes and business scope set forth in their articles of association are beneficial to the development of the public interest;
  • They have existed overseas for more than two consecutive years and conducted activities substantively; and
  • They fulfill other requirements provided in other laws or administrative regulations.

 

Prior to its registration, the overseas NGOs shall first obtain the approval from the competent authorities in charge of business (hereinafter referred to as “CAB”);10 Upon approval from the CAB, within 30 days, overseas NGOs shall apply to the administrative authorities for registration (hereinafter referred to as “AAR”) for their establishment registration of RO, and the following application materials are required to be submitted:11

  • Application form;
  • Supporting documents and materials in conformity with the above-mentioned key requirements of the overseas NGOs;
  • Identity certificate and resume of the chief representative of the proposed RO and supporting materials or statements stating that he/she has no criminal records;
  • Supporting materials with respect to the residence of the proposed RO;
  • Supporting materials with respect to the source of fund;
  • Approval documents of the CAB concerned; and
  • Other documents and materials as prescribed by laws and administrative regulations.

 

Within 60 days from the date of acceptance of the application, the AAR shall render a decision on approval or disapproval of the registration. If the registration application is accepted, a registration certificate will be issued and registration information will be announced available to the public. After that, an overseas NGO shall be responsible for applying for tax registration, engraving an administrative seal and opening a bank account with a domestic Chinese bank. Meanwhile, a photocopy of the tax registration certificate, seal specimen and bank account should then be submitted to the AAR for record-filling.12

(2) Carrying Out Temporary Activities after Filing Records

The Overseas NGO Law also emphasizes that overseas NGOs carrying out temporary activities within the territory of China shall make a record-filling in accordance with the law and comply with the following requirements:

  • Cooperating with Chinese partner(s) such as state authorities, civil association, public institutions, or social organization to jointly hold temporary activities in the territory of China.13
  • The Chinese partner(s) shall follow national provisions to handle approval formalities, and file with the AAR responsible for the area of the proposed activity at least 15 days before the temporary activities are carried out. Under emergency circumstances such as disaster relief, rescue and so forth, the time for filing may not be subject to the fifteen-day restrictions.14
  • The period for temporary activities shall not exceed one year, and if an extension is necessary, a new filing shall be made.15

 

Other than these two methods, overseas NGOs shall neither carry out or carry out in disguised manner activities within the territory of China, nor entrust or sponsor or entrust or sponsor in disguised manner any domestic entities or individuals to carry out activities within the territory of China.16

 

4. Regulatory Authorities

 

The Overseas NGO Law sets up a multiple administrative system consisting of the primary dual administration by CAB and AAR, and the collaborative administration by other government departments:

(1) CAB

The relevant departments and organizations of the State Council and the relevant departments and organizations of the provincial People’s governments are the CAB for overseas NGOs carrying out activities within the territory of China.17 As mentioned before, prior to any registration procedures of RO, an oversea NGO must first obtain approval from CAB, thus it is important to determine the appropriate CAB. Currently, the Oversea NGO Law does not specify the formalities for determining a CAB, however, a catalogue of CAB shall be promulgated in the future by the public security department under the State Council and the public security organs of the provincial level People’s governments, together with the relevant departments.18

(2) AAR

The public security department of the State Council and the public security organs of provincial level People’s governments are the AAR for overseas NGOs carrying out activities within the territory of China.19 It is worth noting that, in accordance with Administrative Regulations on the Registration of Social Organizations, Regulation on the Administration of Foundations and the Interim Regulations for the Registration of Private Non-Enterprise Entities, the civil affairs departments are the AAR for three types of NGOs registered in the territory of China (social organizations, foundations and private non-enterprise entities), which might lead to shift the administration from the civil affairs to the public security organs.20

(3) Other Relevant Authorities

Departments in charge of national security, foreign affairs, finance, financial supervision and administration, customs, taxation, foreign experts and other affairs shall, on the basis of their respective duties, exercise the supervision and administration over overseas NGOs and their ROs in accordance with the law. The competent anti-money laundering administrative departments under the State Council shall supervise and administrate in accordance with the law whether ROs of overseas NGOS, Chinese partners, and domestic entities and individuals receiving funds of overseas NGOs observe the legal provisions on anti-money laundering and anti-terrorism financing during their opening and use of bank accounts.21

 

5. Daily Operating Rules

 

In accordance with the Overseas NGO Law, overseas NGOs are subject to the following requirements in their daily operation:

(1) Prohibition on Fundraising

Funding for activities carried out by Overseas NGOs and their ROs shall be limited to following:22

  • funds that have been legally raised overseas;
  • interests gained from saving deposited in banks within the territory of China; and
  • other funds that have been lawfully acquired within the territory of China.

 

Neither Overseas NGOs nor their ROs can engage in fundraising within the territory of China.

(2) Annual Plan and Reporting

RO of overseas NGOs shall submit an activity plan for the following year prior to December 31 each year, which includes information such as project implementation, use of funds and other such content to CAB, and within ten days upon consent of CAB, the activity plan must then be submitted to the AAR for record-filing.23> In addition, RO of overseas NGOs shall also file annual work reports (including audited financial and accounting report, the information on activities carried out and changes in personnel and organizations, etc.) for the previous year to CAB before January 31 of each year, and, after obtaining opinions issued by CAB, RO shall send the reports to the AAR before March 31 for annual review.24

Overseas NGOs who carry out temporary activities after filing records shall carry out temporary activities in the names which have been filed for the record. Within 30 days upon termination of the temporary activities, overseas NGOs and their Chinese partners shall report the status of such activities, the use of funds and other aspects to the AAR in writing.25

(3) Bank Accounts for Receiving and Paying Funds

There is strict supervision and restriction for the bank accounts used for overseas NGOs that have established ROs in the territory of China. On the one hand, oversea NGOs having RO in the territory of China shall manage funds from bank accounts within mainland China that are recorded with the AAR. On the other hand, overseas NGOs carrying out temporary activities shall manage the funds used within China through the bank account of their Chinese Partner’s and keep the account books separately with the designated funds used for designated purposes. Overseas NGOs, Chinese Partner, and individuals must not use any other arrangement to receive and to make payments of fund for activities within the territory of China.26

(4) Accounting, Audits, Taxation, Foreign Exchange and Personnel Recruitment

The RO of an overseas NGO shall implement the standard Chinese accounting system and engage Chinese certified accountants to handle its accounting. Its financial statements shall be audited by a Chinese certified accounting firm. It shall also complete the formalities for tax registration, declaration, payment and so forth, as well as deal with foreign exchange receipts and payments pursuant to Chinese related foreign exchange regulations. ROs of Overseas NGOs shall comply with laws and administrative regulation in hiring employees in the territory of China and submit the information on the employees to the CAB and AAR for record-filing.27

(5) No Membership Development

Unless otherwise provided by the State Council, overseas NGOs having ROs and overseas NGOs carrying out temporary activities must not develop membership within the territory of China.28 The exceptions refer to membership of some overseas NGOs (mainly international scientific associations), since those organizations historically recruited membership and the Chinese government encourages scientists and scholars to join foreign scientific associations.29

 

6. Supervision and Legal Liabilities

 

The Overseas NGO Law states that overseas NGOs shall be subject to the supervision of the public security organs, the related departments and CAB when they conduct activities within the territory of China.30 Public security organs performing the duties for supervision and administration may take measures such as interviewing and questioning the responsible personnel of ROs of overseas NGO’s, examining and sealing materials, sealing up or detaining the premises and so forth if finding any suspected violations of the Overseas NGO Law.31

The legal liabilities prescribed in the Overseas NGO Law are detailed in the following table:

Misconduct

Various formality violations by overseas NGOs, ROs thereof or Chinese partners:32

1. Failing to handle the matters relating to change of registration or record-filing as required;

2. Failing to conduct activities according to the registered or record-filed name, business scope or areas of activities;

3. Engaging in or sponsoring for profit-making activities, or engaging in fundraising or developing members as required;

4. Obtaining and using funds in violation of the provisions, or failing to open or use bank accounts or conduct accounting as required;

5. Failing to submit plans for annual activities, or submit or disclose annual work reports as required;

6. Refusing to accept or failing to accept the supervision and inspection as required;

7. Obtaining registration certificates for RO or filing temporary activities for record by providing false materials or other illegal means, or committing acts of forging, altering, selling, leasing or lending registration certificates and seals.

Punishment

– Issuing a warning or ordering to cease activities for a given period;

– Confiscating illegal property and unlawful income;

– If serious: revocation of registration certificate and banning on temporary activities.33

Comment

Where overseas NGOs or ROs thereof, due to any violations of relevant provisions, have their registration certificate revoked, or have their temporary activities banned, they are not allowed to set up any ROs or carry out any temporary activities within the territory of China within five years as of the date of such withdrawal, revocation and banning.34

Misconduct

Unapproved activities performed by overseas NGOs:35

1. Conducting activities in the name of a RO of an overseas NGO or an overseas NGO without requested registration or filing;

2. Conducting activities in the name of a RO of an overseas NGO after the registration certificate has been withdrawn, revoked, or deregistered;

3. Carrying out temporary activities after the expiration of the period for temporary activities of overseas NGOs or after temporary activities of overseas NGOs are banned;

4. Entrustment or sponsoring of activities to an entity within the territory of China without registering the RO or filling the temporary activities.

Punishment

– putting a ban or ordering to cease illegal activities;

– Confiscating illegal property and unlawful income;

– Issuing a warning to the personnel directly liable, and if the circumstances are serious, detaining liable individuals for up to ten days.36

Comment

Where an oversea NGO carries out activities without registering a RO or carries out temporary activities without record-filing, it shall not be allowed to set up any ROs or carry out any temporary activities within the territory of China within five years as of the date when the activities are banned.37

Misconduct

Violation of State integrity, national security or national unity by overseas NGOs or ROs thereof:38

1. Inciting the resistance against the enforcement of laws and regulations;

2. Illegally obtaining state secrets;

3. Spreading a rumor or slandering or releasing or spreading other harmful information, endangering national security or harming national interests;

4. Engaging in or sponsoring political activities, or illegally engaging in or funding religious activities;

5. Other circumstances endangering national security or harming national interests or public interests;

6. Commitment of criminal acts such as dividing the country, undermining national unity or subverting state power.

Punishment

– Revocation of registration certificate and putting a ban on temporary activities;

– Where a crime is not constituted, detaining liable individuals for up to ten days;

– Where a crime is constituted, prosecuting the persons directly liable for their criminal liability in accordance with the law.39

Comment

Overseas NGOs falling under any of the circumstances hereof will be included in the “unwelcome list” and they may no longer establish any ROs again or carry out any temporary activities within the territory of China.40

Misconduct

Overseas individuals who violate the Overseas NGO Law.41

Punishment

ordering to leave China within a specific of time;
Or being deported or expelled.42

Comment

Conclusion

 

The promulgation of the Overseas NGO Law will certainly have significant influence on regulating the activities of the overseas NGOs in the territory of China. As it is just been issued, many potential practical issues might require further explanation. One example of the practical issues is that the time limit for the CAB to make a decision upon receipt of the application of registration of a RO is unclear. Another example is that the Overseas NGO Law does not provide any clear guidance to the definition of “other funds that have been lawfully acquired within the territory of China”. We will keep an eye on the legislative process as well as upcoming relevant interpretations and guidance.

If you are interested in carrying out NGO activities in China, and/or have any inquiries regarding the New Overseas NGO Law, please do not hesitate to contact us at asiallians@asiallians.com.

 

1 Article 2 of the Overseas NGO Law
2 Article 53 of the Overseas NGO Law
3 Article 3 of the Overseas NGO Law
4 Article 5 of the Overseas NGO Law
5 Article 34 of the Overseas NGO Law
6 Answers at the Press Conference of National People’s Congress Standing Committee Office for the Overseas NGO Law, see here
7 Article 9 of the Overseas NGO Law
8 Article 15 of the Overseas NGO Law
9 Article 10 of the Overseas NGO Law
10 Article 11 of the Overseas NGO Law
11 Article 12 of the Overseas NGO Law
12 Article 12 and 13 of the Overseas NGO Law
13 Article 16 of the Overseas NGO Law
14 Article 17 of the Overseas NGO Law
15 Article 17 of the Overseas NGO Law
16 Article 9 of the Overseas NGO Law
17 Article 6 of the Overseas NGO Law
18 Article 11 of the Overseas NGO Law
19 Article 6 of the Overseas NGO Law
20 Answers at the Press Conference of National People’s Congress Standing Committee Office for the Overseas NGO Law, see here
21 Article 43 and 44 of the Overseas NGO Law
22 Article 21 of the Overseas NGO Law
23 Article 19 of the Overseas NGO Law
24 Article 31 of the Overseas NGO Law
25 Article 30 of the Overseas NGO Law
26 Article 22 of the Overseas NGO Law
27 Article 24-27 of the Overseas NGO Law
28 Article 28 of the Overseas NGO Law
29 Answers at the Press Conference of National People’s Congress Standing Committee Office for the Overseas NGO Law, see here
30 Article 39 of the Overseas NGO Law
31 Article 41 of the Overseas NGO Law
32 Article 45 of the Overseas NGO Law
33 Article 45 of the Overseas NGO Law
34 Article 48 of the Overseas NGO Law
35 Article 46 of the Overseas NGO Law
36 Article 46 of the Overseas NGO Law
37 Article 48 of the Overseas NGO Law
38 Article 47 of the Overseas NGO Law
39 Article 48 of the Overseas NGO Law
40 Article 47 of the Overseas NGO Law
41 Article 50 of the Overseas NGO Law
42 Article 50 of the Overseas NGO Law

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