China Company Formations

On October 25, 2013, Premier Li Keqiang announced that China is going to push forward the reform of the company registration regime. Although establishing a company in China is still a challenging experience for unwary organizations, however, with our experience and expertise we can provide assistance through the incorporation process.

Wholly Foreign Owned Enterprise (WFOE) Incorporation

Entry into the Chinese market does not require a Chinese partner. You would likely be setting up a WFOE (Wholly Owned Foreign Enterprise) instead of a local company if you wish to incorporate a company without a Chinese partner.

A Wholly Foreign Owned Enterprise (WFOE) is a limited liability company wholly owned by a foreign investor. A company can be engaged in manufacturing, trading and service sector such as consulting and management, training, software development etc.

Advantages of Wholly Foreign Owned Enterprise

The advantages of establishing a WFOE, compared with other types of enterprises, include, but not limited to:

  • Having the freedom and independence to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner
  • You will not depend on having a Chinese partner;
  • Able to issue invoices to their customers in RMB and receive revenues in RMB;
  • Capability of converting RMB profits to € for remittance to its parent company outside of China;
  • Carry out Business activity in China;
  • Allowed to hire local staff;
  • Protection of intellectual know-how and technology

One of the most important issues in WFOE application is business scope. Business scope needs to be defined and the WFOE can only conduct business within its approved business scope, which ultimately appears on the business licence. Any amendments to the business scope require further application and approval.

Documents Required

The documents needed for incorporating a Wholly Foreign Owned Enterprise for different types of business are similar. We do the paperwork for our clients and the following documents are required from the investor:

  • Copy of Business License of parent foreign company which was certificated by Chinese Embassy (if it's personal investor, then passport copy certificated by Chinese Embassy is enough)
  • The latest annual audit report from the parent foreign company.
  • 2 Credit letters from foreign company banker to declare a good credit within at least current 6 months
  • The resume, copy of the passport and 3 pieces of passport size photos of the Legal Representative of the WFOE
  • The parent company's legal representative's passport copy
  • Business scope and how long the WFOE is going to do business in China
  • Brief introduction of the foreign investor(s) including name, address and telephone number
  • Total investment and registered capital and the makeup of investment
  • Options of Chinese company name (Note: only Chinese company name is to be registered with Chinese government. We help you to translate or come up with a proper Chinese company name)
  • Two copies of original office/factory rental contract and photocopy of real estate certificate with the seal or signature of the landlord.

The above document is enough to register a Trading & Consulting WFOE. If you want to register a Manufacturing WFOE more documents will be required.

Registration Procedures

Foreign companies are not allowed to directly submit the application documents to the relevant authority. They must retain a PRC entity that is authorised or permitted by relevant authorities to act as a sponsor. The sponsor will submit all the documents to the examination and approval authority on behalf of the foreign enterprise. Generally, it will take about 2 to 3 months and the procedures to set up the Wholly Foreign Owned Enterprise are as follows:

  • Check and Register Company Name
  • Apply for Approval Certificate
  • Apply for Business licence
  • Apply for Organization Code licence
  • Tax Registration with Tax Bureau
  • Open a RMB bank account
  • Register Foreign Currency Certificate
  • Examine the registered capital
  • Obtain Import/Export licence and VAT invoice (Optional as it applies only for Trading WFOE)
  • Register in local custom (Optional as it applies only for Trading WFOE)

The registration time for a WFOE manufacture and consulting company is two months provided all the documents required are ready. It takes two and a half months to complete a WFOE trading company incorporation provided all the documents required are ready.

Share Capital for a WFOE

The minimum required capital is dependent on the businesses activity:

Types Minimum Registered Capital
In Free Trade Zone RMB 10,000
Consultancy RMB 100,000 - RMB 500,000
Servicing RMB 100,000 - RMB 500,000
Hi-Technology RMB 100,000 - RMB 500,000
Trading / FICE / Retail RMB 500,000 - RMB 1,000,000
Food & Beverage RMB 500,000 - RMB 1,000,000
Manufacturing / Production RMB 1,000,000 or USD 140,000

We recommend €100,000 Issued Share Capital- a figure which would be accepted for all types of WFOE, and easily approved by the authorities.

You need to pay up 20% on incorporation, with the rest paid within two years. - compulsory minimum share capital levels depend on the City and the activity of the company.

Company Secretary

Foreign Limited Liability Companies in China must appoint a resident company secretary.

Chinese Legal Representative

For foreign companies in China, a legal representative must be appointed. This person is to act on behalf of the company, generally regarding signing contracts and submitting reports to the regulators. This person may also be a director and/or shareholder of the company if necessary.

Annual Return

Each year an annual return must be lodged with the Company Registry and the Inland Revenue.

Private Company - Limited by Shares

For private company's having share capital, the annual return and registration fee must be lodged within 42 days after the anniversary date of the company's incorporation (except the first year).

Financial Statements

Companies in China must prepare and submit financial statements to a number of governing bodies such as the local Finance Bureau, local offices of State Administration and Industry of Commerce, State Administration of Taxation and the Foreign Exchange. These financial statements must be audited and submitted to the relevant authorities within 4-6 months of the year end - following the fiscal year from 1 January to 31 December.

Auditing

Companies in China must appoint an auditor to audit all accounting and reporting documents, who must be a Chinese registered certified public accountant

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China Advantages
  • Time - 2 to 3 months to incorporate your Chinese company
  • Cost - a Chinese company will cost £4710
  • Shareholders - 100% foreign shareholders allowed
  • Share Capital - the share capital requirement is dependent on business activity with the minimum RMB 1,000,000
  • Registered Office - your company requires a registered office in China, which we can provide
  • Company Secretary - a resident company secretary is required
  • Support - using our 20 years experience we guide you throughout every step of the company formation process