Recognition of Foreign Legal Persons
As discussed above,most common law countries regard legal persons created in foreign jurisdictions under foreign laws as “foreign legal persons”,whereas most civil law countries treat as “foreign” those legal persons which have their center of management in a foreign jurisdiction.However,under both systems the foreign corporations need recognition of its existence.Such recognition signifies that the authorities of a state affirm a foreign-created legal person as existent which does not mean the creation of a new person.That is to say,recognition of a foreign legal person does not transform it into a domestic legal person.It means nothing more than that the legal person is regarded as having personality in the recognizing country.
Analytically,the process of recognizing a foreign legal person usually concerns two steps.First,the recognizing country should determine whether the foreign legal person has been validly established under the relevant foreign law,i.e.,its personal law.Generally speaking,a legal person that has not been validly established under its personal law will not be recognized by other countries.Second,the recognizing country would determine whether the legal person validly established under the relevant foreign law should be allowed to engage in civil and commercial activities within the territory of its own.As a general rule,the recognizing country would make a decision pursuant to its own law in this step.
Recognition of foreign legal persons is of considerable importance in international exchanges which is the prerequisite for a foreign legal person to conduct civil and commercial activities within the recognizing country.Basically speaking,there are two means to recognize foreign legal persons.
The first means is the recognition via international legislation.The Hague Convention concerning the Recognition of the Legal Personality of Foreign Companies,Associations and Institutions of June 1,1956 and Convention on the Mutual Recognition of Companies and Bodies Corporate signed at Brussels on February 29,1968 are,inter alia,the international instruments regulating the recognition of foreign legal persons.
The second means is the recognition via national legislation.To be more specific,this means can be further divided into three categories: (1) unconditional recognition,or universal recognition,which means recognition of foreign legal persons,regardless of their nationalities,become operative without any particular administrative act of the recognizing country,such as filing for registration,paying of fees,or applying for a decree.This is the most liberal approach to recognizing foreign legal persons,adopted by most common law countries.(2) general recognition,which connotes the legal persons of a particular country will be recognized without any particular administrative act of the recognizing country.This kind of recognition is usually based on the principle of reciprocity.For instance,in the mid-19th century,France and Belgium reciprocally recognized each other’s companies.14 (3) special recognition,which indicates that all foreign legal persons need special authorization through special administrative act for being able to avail themselves for their existence in the recognizing country.For example,Germany demands in the case of associations of a non-commercial character special recognition by administrative act; until this is granted the association has no personality in Germany.15(https://www.daowen.com)
A foreign legal person has to be recognized by the Chinese authority before it can conduct activities within the territory of China.So far,China has not acceded to or concluded any international conventions on the recognition of foreign legal persons; pursuant to the existing Chinese law,China follows an approach of special recognition,which is reflected in the following provisions.
Article 2 of “Administrative Measures for the Registration of Production and Business Operation Conducted by Enterprises of Foreign Countries (Regions) within the Territory of China” revised in 2020 provides that:16
In accordance with the provisions of relevant laws and regulations of the state,with the approval of the State Council and the competent authority authorized by the State Council (hereinafter referred to as the “approval authority”),a foreign enterprise that conducts production and business operation within the territory of China shall apply for registration to the provincial administrative department for industry and commerce (hereinafter referred to as the “competent registration authority”).The foreign enterprise may conduct production and business operation only after it has registered with the confirmation of the competent registration authority and obtains the business license.Without the approval of the approval authority and the registration confirmation of the competent registration authority,no foreign enterprise shall conduct production and business operation within the territory of China.
Article 192 of the Company Law goes on to stipulate as follows:17
In order to establish a branch within China,a foreign company must submit an application to the Chinese authority in charge,together with the relevant documents such as its articles of association,the company registration certificate issued in its home country,etc.Upon approval,it shall carry out registration with the company registration authority and be issued a business license.