Memorandum by Mr. Joseph Keating of the Division of Commercial Policy
Memorandum for Use in Conversation With Dr. Soong Concerning Company Law in China
A pressing problem confronting American business in China relates to compliance by American companies with Chinese laws and regulations concerning the registration of foreign corporations.
The Chinese Ministry of Economic Affairs has twice extended the time for such compliance and American companies are now faced with the requirement that they register before June 30, 1945. There is a need for modernizing and clarifying the requirements of the registration laws. American companies are taking steps to submit their applications on or before June 30 but desire a further extension of time. They are chiefly concerned with the requirement that fees must be paid at the time of application for registration, and that these fees shall be based upon the capital allocated to branches of the company in China or, in cases where such allocations are not made, based upon half the total capital of the company. While the fees are to be on a graduated scale, the fact that they would in most cases be based upon half of the whole capital of the company (since it is not the practice of American companies to allocate capital to branches) makes the requirement so onerous that many companies would have no alternative except to discontinue their businesses. The effect would be to discourage the flow of new capital to China from the United States. In the case of some companies already in business there, the companies’ fixed investments in China are now in occupied territory and it is impossible to make any accurate appraisal of these investments for the time being.
It is requested that the Government of China waive the immediate requirement of fees based on half the capitalization of the companies, pending full discussion of this question by representatives of the two Governments. It is suggested that a provisional registration (to take care of the situation until a permanent basis for registration can be provided) might be permitted which would involve compliance by American companies with substantially all points of the present Chinese laws and regulations, but with payment of fees upon a more equitable basis.