WFOE Company Registration in China - Business Starting & Setup

WFOE is usually established as a limited company. Generally, the procedure of registering a WFOE company in China is as follows:

1. Submit a business plan to a local people’s government for approval (30 days);

2. Apply for preliminary approval of a company name in administration for industry and commerce;

3. Apply for company incorporation approval in the local office of Ministry of Commerce

Required documents:

• Application form (including application form, list of foreign investors, registration form of legal representatives, certificate of appointment of members of Board of directors and supervisors, certificate of registered address, etc.).
• Articles of association.
• Copy of company incorporation approval.
• Documents confirming legal status of investors (copies of passports or legal entity registration certificate, notarized in the host country and certified at the Chinese Embassy or Consulate).
• Preliminary approval of a company name note.
• Power of attorney.
• Registration form of a secretary (contact person ) of a company.
• Power of attorney for legal documents delivery and a copy of a passport of an authorized person or a copy of legal entity registration certificate.
• Other required documents.

All the documents shall be submitted in Chinese.

The competent authority should make a decision on approval of application within 90 days since receipt.

4. A foreign investor should within 30 days after receipt of approval certificate apply for registration in the administration for industry and commerce and obtain Registration certificate. The date of issue is the date of establishment;

5. Post registration procedures, including registration with a tax authority, police, quality control administration, statistics administration, currency control authority, labor and social protection authority, as well as seal production, opening of bank accounts, application for work permit and residence permit in PRC for foreign employees.

Unlike in Russia where profit organizations can carry on any form of business activities and make any necessary business transactions, in China registration of legal entity means registration of form of its business activity, which is indicated in the major registration document. Going above the registered activity is considered administrative violation. It means that companies cannot carry on any form of business activities.

Scope of business may include ordinary forms of activities and licensed forms. Ordinary forms are included at will, licensed forms – only after obtaining a license.

Some forms of activity are forbidden for foreign investment companies. Nowadays, there is a “List of fields for foreign investments” (2011). It includes allowed, restricted and forbidden forms of activities for foreign investors in PRC. Those forms which are not in the list are considered allowed for foreign business men to invest.

Company name should meet requirements of Chinese law: a company can have only one name; the name registered in accordance with established procedure is protected by law. Company name should not contain information or words which:

• cause damage to state and social interests;
• can mislead population or cause misunderstanding;
• are the names of foreign countries (regions), international organizations;
• the names of parties, departments of parties, government or military organs, people’s organizations;
• contain letters of Chinese transcription “pinyin” (except form those that are used in foreign names), digitals.

Chinese law requires to register a local office for companies with foreign capital. Therefore, every company should have a registered address in China.

Having obtained a Business Registration Certificate, company should be registered at the police where it gets its seals:

• company seal (oval-shaped, with 5 cm diameter, without 5-point star unlike Chinese companies, with logo engraving possible and red ink compulsory to use);
• account seal;
• contract seal;
• legal representative seal.

Chinese law does not allow companies to redomicile.

All companies with foreign capital are established for a definite term (most often for 15-30 years), which is indicated in the application for company incorporation. This term can be prolonged up to 50 years for projects with large investments, in case of production of complex products which can be competitive at the international market, as well as some other cases. Application for prolongation should be submitted 180day s beforehand the end of the term. The competent authorities should make decision on prolongation within 30 days after application receipt.

WFOE should at least have one director who can be a foreigner and a corporate, and one supervisor.

Board of Directors should consist of 3 to 30 members elected for 3 years. If the company is very small, instead of board of directors a company can appoint an executive director.

The chairman of the Board or executive director normally functions as a legal representative of a company.

Secretary is not required.

WFOE can be incorporated by one shareholder. The highest body of limited WFOE is Shareholder meeting (or Shareholder if there is only one of them). Shareholder meetings are divided into regular and interim meetings. Regular meetings are held according to the Articles of Association. Shareholder meeting decides on all major issued of the company, including profit distribution, merger, acquisition, etc.

The information on beneficiary is not disclosed.

Share capital is nominated in RMB. It can be issued and distributed only among foreign investors.

Minimum capital for limited companies is 30.000 RMB. In the meantime, registration rules require for proportionality of share capital with business scale. It means that registration authorities have wide powers to determine the right amount of capital for legal entity. For example, in Beijing for a trade company with foreign capital minimum share capital is 300.000 RMB, for consulting company is 200.000 RMB.

Capital amount may vary depending on form of activity of a company and its place of incorporation. Capital must be paid in full at China’s Bank and after incorporation can be used for equipment purchase, lease payment and other business expenses.

WFOE must pay investments within a term set by a competent authority. In case of expiration administration for industry and commerce may withdraw Registration certificate.

There is no open roster of companies in China yet.

Data on all registered companies are kept in administrations for industry and commerce and access to them is limited. In order to obtain these data you will need help of local agent. The volume of information obtained will depend on the policy of specific administration.