China Laws and Regulations Update in February 2022

1. Cyber Security Inspection Rules

Promulgated by Cyberspace Administration, etc.

Promulgation date: 4 January 2022

Implementation date: 15 February 2022

Rules adds activities of online platform operators processing data that affect or might affect national security, etc. to circumstances where cyber security inspection shall be conducted, clearly stating that online platform operators with over one million users’ personal information must apply for cyber security inspection to the cyber security inspection office before going listed abroad. For the purpose of the inspection, CSRC is added to members of the work mechanism for cyber security inspection and national security risk evaluation criteria, etc. are improved. Accordingly, three possible results of the cyber security inspection application are no inspection required, no effect on national security and approval for going listed abroad after the inspection and adverse effect on national security and refusal to grant approval for going listed abroad.

(Source: Cyberspace Administration website)

2. Regulations of Algorithm Based Recommendations for Internet Information Services

Promulgated by Cyberspace Administration

Promulgation date: 4 January 2022

Implementation date: 1 March 2022

The Regulations specifies rules on providing information services of algorithm based recommendation service providers and requires them protect users’ interests. In the Regulations algorithm based recommendation service providers should fulfill the obligations of algorithm security entities, establish and improve management policies and technical measures for algorithm mechanism review, ethical inspection of technology and science, user information registration, information publication and review, data security, personal information protection, fight against telecommunication and internet fraud, security evaluation and monitoring, emergency security issue handling, formulate and publish algorithm based recommendation service related rules and give professional staff and technical support that are appropriate to the amount of algorithm based recommendation services. The Regulations also notes that algorithm based recommendation service providers with the characteristics of public opinions or the ability to mobilize the society should complete and file registered information through the internet based information service algorithm filing system and go through the filing formalities within ten working days from the date of providing the services.

(Source: Cyberspace Administration website)

3. Interpretation of Several Issues Concerning Law Application to Food Safety Related Crimes

Promulgated by the Supreme People’s Court and the Supreme People’s Procuratorate

Promulgation date: 31 December 2022

Implementation date: 1 January 2022

Document number: LI [2021] 24

The Interpretation consists of 26 articles with amendments, mainly in six aspects, including food safety of children under 18, the elderly, etc. and legal attacks on healthcare product fraud, food contamination caused by food products, food production with food materials after its best-before date, use of banned drugs in pesticides, animal medicine or fodder and water or drug injection in animal slaughter. Additionally, it defines “poisonous and harmful non-food materials” and “knowledge” in the crime of selling poisonous and harmful food, etc.

(Source: SPC Website)

4. Corporate Cancellation Guide (Revised in 2021)

Promulgated by the State Administration for Market Regulation, the Ministry of Human Resources and Social Security, the Ministry of Commerce, the General Administration of Customs and the General Administration of Taxation

Promulgation date: 29 December 2021

According to the Guide, the simplified cancellation procedures apply to market entities that have no or fully paid their debts owed (except listed companies). Market entities should not have any unpaid amounts, salaries, social insurance premiums, statutory compensations, taxes (including delay penalties and fines) at the time of filing a simplified cancellation application. In addition, the Guide deals with issues in five special circumstances where the shareholder is missing, uncooperative, etc. If the shareholder of a limited liability company is missing, uncooperative, etc., causing difficulty in cancellation of the company, all the shareholders should be notified by a written announcement made on a newspaper (or the national corporate credit information publication system), a resolution should be made on a shareholders’ meeting with the number of votes needed to adopt the resolution in law and the articles of association, a liquidation panel should be formed and the cancellation application should be filed with the corporate registration authority.

(Source: Shanghai Government Website)

5. Independent Directors of Listed Companies Rules

Promulgated by China Securities Regulatory Commission

Promulgation date: 7 January 2022

Implementation date: 7 January 2022

Document number: [2022] 14 Announcement by China Securities Regulatory Commission

The main part of the Rules involves:

1.Layout and alterations. Its main part is based on the Guidelines for Independent Directors and incorporates independent director related provisions in the Shareholders’ Interests Protection Regulations. Article 1 describes the purpose of the rules and adds the Company Law, the Securities Law and other laws at a higher level to the basis for making the rules.

2.Modification of inconsistent rules. The Guidelines for Independent Directors and the Shareholders’ Interests Protection Regulations provide that independent directors shall not be dismissed without a good reason before their tenure expires. As new law precedes old law, provisions relating to early dismissal of independent director in Article 17 of the Independent Director Rules are modified to be consistent with the Guide to Articles of Association of Listed Companies that took effect in 2019. The modified article states that listed companies can dismiss independent directors from their position by following the statutory process before their tenure expires. The item (1) of the 5th point of the Guidelines for Independent Directors that sets out special powers that listed companies should grant to independent directors without stating that appointment or dismissal of an accounting firm, etc. proposed by an independent director to the board of directors may or may not be submitted to the board of directors without approval of independent directors is inconsistent with the item (3) of the 2nd point of the Shareholders’ Interests Protection Regulations providing that “major deals between affiliates and employment or dismissal of an accounting firm may not submitted to the board of directors for discussion without approval of over one second independent directors”. The latter provision which was published at a later time is used in Article 22 of the Independent Director Rules.

Incorporation of a few related provisions in different documents. Articles 3, 21 and 22 incorporate provisions about improvement of the independent director policies and the role of independent directors in the 2nd point of the Shareholders’ Interests Protection Regulations.

(Source: Website of China Securities Regulatory Commission)

6. Cosmetics Production Quality Management Standards

Promulgated by China Drug Administration

Promulgation date: 6 January 2022

Implementation date: 1 July 2022

Document number: No.1 in 2022

According to the Standards, businesses should establish and implement a traceability management system, formulate approval management rules for raw materials, internal package materials, semi-products and finished products, link all records connected with each shipment of products and ensure that all activities such as procurement, manufacturing, quality control, storage, sale and recall are traceable. It is announced that from 1 July cosmetic product registration, filing and production should meet requirements of the Standards. Businesses that obtained the permit for production of cosmetic products before July 1st should finish upgrading and transforming their physical conditions such as factory facilities and machines to meet requirements of the Standards before 1 July 2023.

(Source: Website of China Drug Administration)

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