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.
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.
The advantages of establishing a WFOE, compared with other types of enterprises, include, but not limited to:
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.
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:
The above document is enough to register a Trading & Consulting WFOE. If you want to register a Manufacturing WFOE more documents will be required.
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:
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.
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.
Foreign Limited Liability Companies in China are required to appoint a resident company secretary.
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.
Each year an annual return must be lodged with the Company Registry and the Inland Revenue.
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).
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.
Companies in China must appoint an auditor to audit all accounting and reporting documents, who must be a Chinese registered certified public accountant