Claire Gu

European-American Desk

Internet has shown buoyant momentum in China, and many companies wish to expand their markets by taking advantage of thereof. However, numerous licenses and lengthy procedures have resulted in investors, especially foreign investors, landing into sticky situations. The following article will help start-ups tease out related laws and regulations.

1. What is ICP

According to Catalogue of telecommunications services (2015 Version )《电信业务分类目录（2015年版）》, telecommunications  businesses  in China can be split into basic telecommunications and value-added telecommunications. Value-added telecommunication licenses refer to the licenses necessary for foreign companies conducting business to be classified as “value-added telecommunications businesses”. 

It is noted that there are 26 types of classifications under “value-added telecommunications business”, and the so-called ICP (Internet content provider) belongs to one of the said 26 kinds in connection with Internet content service, which means the license holder can only conduct business stated in the license with its scope being permitted by law.

2. ICP Filling VS. ICP License

In accordance with China’s laws, Internet information services are divided into two categories: profitable and non-profitable Internet information services.   

Profitable Internet information service refers to the service of charge of payment for information through Internet to web users or of web page designing, among others.

Non-profitable Internet information service refers to services free of charge concerning public, commonly-shared information through Internet to web users.

The State establishes a licensing system for profitable Internet information services [meaning companies shall obtain an ICP License] and a filing system for non-profitable Internet information services [meaning companies shall file its information for record,including but not limited to accounting data, company reputation proof, and personnel]. 

Anyone who does not obtain a license for profitable Internet information services or file for recording its non-profitable Internet information services shall not be engaged in such activities.

3. ICP Filling is the prerequisite of an ICP License

Prior to the ICP License, companies shall file their record in competent Communication Administration. Internet information service providers shall post their Operating Permit numbers or record-filing numbers in a prominent place on the homepage of their websites.

4. You Need an Access Provider

Unfortunately, in the case of applying for filling, it is first necessary to pay a fee [mandatory] to an Access Provider (接入商) in some instances because companies are not allow to apply for themselves.

5. Eligibility for the ICP License

With regard to the feasibly of a WFOE (Wholly Foreign Owned Enterprise) executing a profitable Internet information service, it is noted that WFOEs are prohibitive by law.

With regard to the feasibly of a JVC, JVs shall meet the provisions as follows:

-Only in the form of a sino-foreign equity joint venture;

-The foreign investors shall hold no more than 50% equity interest;

-Shall have a registered capital of not less than one million RMB when conducting business within a province, autonomous region and municipality directly under the Central Government;

-Shall have a registered capital of not less than ten million RMB when conducting business across China or cross-province, cross-autonomous region and cross-municipality directly under the Central Government.

Bear in mind that even where a JVC meets all the above requirements, the application of an ICP License may encounter an available-but-not-approved problem.

6. Special Approval Procedure

Whoever plans to provide Internet information services in respect of news, publication, education, medical treatment, health care, medicine, medical devices, culture, radio and television programs, etc. shall, if required by any law, administrative regulation, or any other relevant provisions of the State, to be verified and consented -to by the relevant administration department, submit relevant consenting documents on the relevant administration department to the provincial telecommunications administration at the locality of its/his domicile, in addition to going through the procedures for archiving.

Whoever plans to provide electronic bulletin services shall, when going through the procedures for archiving, submit for archiving the special materials of the electronic bulletin services to the provincial telecommunications administration at the locality of its/his domicile.

7.  Overseas Server: An exception?

Many companies wish to bypass regulations by virtue of an overseas server. It is noted that if the business scope is required to be changed to “Internet Information Service”, some authorities may first order the company to obtain an ICP/EDI and change its business scope pursuant to the concrete content stipulated in the license. 

However, some foreign-owned enterprises may not be qualified to meet the requirements for obtaining the licenses. Practically, it prevents the foreign-owned enterprise from taking a short-cut.

The government intends to utilise these strategies to ensure the healthy and orderly development of information services.

Claire Gu

European-American Desk

A&Z Law Firm

——“From the very beginning to the very end”

The information contained in the article is the opinion of the author’s alone and should be used only as a reference. This article does not constitute legal advice in any sense. Although we try to ensure accuracy, please note that the application and impact of laws vary based on contextual and circumstantial variables. Before taking any action, please ensure that you obtain professional advice specific to your circumstances. A&Z welcomes any and all questions pursuant hereto.

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