The Chinese non-government and private education sector have been growing fast during the last few decades. Tremendous changes in the industry have taken place during this time, not only in the quantity and scope but also in the quality of it. As a result, these private schools play a key role and have a greater effect on the national education system.
In 2002, the Chinese government has already issued a “Non-State Education Promotion Law of the People’s Republic of China” and revised it several times to keep up with the development. Setting up a private school or training institution in China can be very lucrative since most Chinese parents are very eager to provide their child, often their only one, with a proper education. Though several requirements must be met to legally set up a private school in China, which we will introduce in this article.
Preparations for setting up a private school
Before one can set up a private training institution, a few approvals are required. Firstly, the Department of Industry and Commerce has to issue a pre-approval of the name of the enterprise before submitting a formal application to the examination and approval authority on the local level. Both authorities will work together and determine whether an approval can be granted. Certain materials must be submitted to the authorities, which will then approve or decline the application within 30 days. In case of an approval, the applicant must file another application for the formal establishment within 3 years from the date of approval. Otherwise, it will expire.
Requirement for setting up a private school
The founder of a private school can be a legal person or a natural person and there is no need for the staff of state organs to participate in the organization of the private training institutions. The requirements are usually as follows:
(A) Legal person
- Qualified as a legal person in the People’s Republic of China.
- A good credit status and not included in the list of operating anomalies or the list of serious illegal and dishonest units, no bad record.
- The legal representative is a citizen of the People’s Republic of China, lives in China, enjoys good credit status, has no criminal record, possesses political rights and complete civil capacity.
(B) Natural person
a. Nationality of the People’s Republic of China and settlement in China.
b. Good credit, and no criminal record.
c. Possesses political rights and complete civil capacity.
(C) Cooperative founders
When more than two legal entities or natural persons other than state agencies jointly organize private training institutions, they must sign a joint school-running agreement specifying the purposes of the school, the training objectives, the rights and obligations, and dispute settlement measures.
In case a joint school founder wants to contribute to the registered capital or start-up fund of a private training institution, the amount and the corresponding proportion of the capital contribution into the registered capital or the start-up fund should be made clear.
Facilities, equipment, and standards of private school
The standards for the facilities and equipment of private training institution are defined in the “Non-State Education Promotion Law”. Hardware setting standards, for instance, stipulate that no residential buildings shall be used for private training. You also should be able to provide proof of the ownership of the school premise or a legally binding leasing contract in case you rented a place. A minimum of space for the students, fire safety certificates, and other related licenses are also necessary. Software setting standards include the number of teachers and the qualification of the teachers, teaching material (which must be reported and approved by the authorities) as well as the teaching system.
Foreign participation in a private school
Foreigners can not set up a private school themselves in China, but they can invest in such an establishment. Depending on the form of education, it is either encouraged, restricted or prohibited to invest in this field. According to the “Catalogue for the Guidance of Foreign Investment Industries” vocational training institutions for non-educational system classes are encouraged. Higher educational, common high school education and preschool education institutions are restricted (limited to contractual joint ventures and lead by a Chinese partner). Education institutions of compulsory education and special education like military, policeman, politics, and party schools are prohibited.
Foreign parties, educational institutions, groups or individuals are not allowed set up a school or similar institution in China alone. Therefore, a profit-making private training school with foreign participation must comply with Chinese regulations, hold less than 50% of the shares, and be led by the Chinese partner.
Setting up a private school in China is associated with a lot of regulations and supervision by the Chinese side, If you have any more questions in this matter or have the interest to set up a private training school, please do not hesitate to ask for our advice.
Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: email@example.com
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