Please note that the procedures set out below for establishing a WFOE may differ depending on the location of the WFOE. Once the location of the WFOE is finally settled, we can review this advice and highlight any differences to the procedures set out below.
The whole process for the registration of a Wholly Foreign Owned Enterprise (in the form of Limited Liability Company) could in general divided into three stages, namely registration preparation stage, registration stage and post registration stage. Each of the stages is explained in detail below.
Registration Preparation Stage (Stage 1): Preparation of Application Documents
In the preparation stage, the investor should arrange the following:
(1) Lease of Office Space
Firstly, the investor will have located the office in China for the WFOE and enter into a tenancy agreement in relation to the office space to be used by the WFOE for a term of not less than 12 months. The office must be located in a commercial building.
(2) Legalisation of Identity Documents of the Shareholder/Member of the WFOE
The investor is also required to arrange to have the identity documents of the shareholder legalised by the Chinese Embassy in the country where the shareholder/member is registered/resided. If the shareholder/member is a corporation, the identity documents required to be legalised are its incorporation documents. In the case the shareholder/member is an individual, the identity document required to be legalised is his passport (foreigner or identity card and home return permit for Hong Kong resident). We could also arrange the legalisation for you and our fees are shown in the table in Section 5.
(3) Bankers’ Reference Letter
Also, the investor needs to arrange with its banker to issue a bankers’ reference letter. The bankers’ reference letter should state the name of the shareholder of the WFOE and the banking relationship and the bank’s comments as to the credibility of the shareholder/member. Each shareholder/member needs a reference letter. The bankers’ reference letter is one of the documents to be submitted to the business registration authority in China for the purpose of registration.
(4) Other Documentation
The investor at the same time needs to prepare other documents, such as photocopy of passports/Hong Kong Identity card/Home Returning Card of the directors, supervisor, legal Representative and General Manager.
Registration Stage (Stage 2) – Application for Registration with the Business Registration Authority
Step 1: Name Available Search and Reservation
The registration process of a FICE starts with name availability search. We suggest that you create 3 to 4 names (in Chinese) in case that the preferred one is gone. We will then perform a name availability search with the local industry and commerce administration bureau and confirm with you their availability. Should the search results indicate that the preferred company names are available for registration, we then apply for and on your behalf for the reservation of the preferred name with the local Administrative Bureau for Industry and Commerce (“AIC”). This is called “Name Pre-registration” in China. The reservation is valid for a term of 6 months and further reservation is possible.
The name of the FICE should follow the format:
Administration Region + Business Name + Industry + Limited or
Business Name + Industry + (Administration Region) + Limited
For example: ABC Technology (Shenzhen) Limited, if the company will be in the technology industry and is to be registered in Shenzhen or
ABC Trading (Shanghai) Limited, if the company is to be engaged in trading business and is to be registered in Shanghai
Important: the name of the WFOE could only be in Chinese.
Step 2: Examination and Approval
Once the name is cleared and reserved, the next step is to get the approval of the investment project from the local bureau of the Ministry of Foreign Trade. This step involves the submission of all application documents, as listed in Section 4 of this quotation, to the Government for examination and approval.
As for the timing of approval, Approval Authorities are required to make its decision within 45 days from receipt of all the documentation. In practice, the Approval Certificate and documents are normally issued within two weeks after submission of all necessary documents.
Step 3: Registration for Business License
Within 30 days after obtaining the approval certificate, the foreign investor will need to register and apply for a business license for the WFOE from the local SAIC. As part of this step, the foreign investor will need to submit similar documentation to the approval documentation for SAIC filing purposes. This is purely a procedural step and the local SAIC must issue the Business License within 30 days, but in our experience SAIC will usually issue the Business License within 5-10 days after receiving all the required documentation.
Once the business license is issued, the WFOE is deemed to be a legal person duly organised and existing under PRC law and will have full operational rights to operate a business in China within the scope of its Business License.
Post Registration Stage (Stage 3) – Registrations with Other Government Bureaus
Registration is also required with other government authorities such as tax bureau, Foreign Exchange Control and Customs and so on. Some of the post-established is listed below:
Once after the FICE is officially registered, it also needs to apply for various certificates from or apply for registration with the following government departments:
(1) Carving of Company Seal and Chops
Application for Approval for making of Office Stamp (Office Seal) from the Public Security Bureau and arrange the carving the company seal and chops;
(2) Opening of bank accounts
Opening of capital account, RMB basic account and tax paying account with a bank of your choice in China; if the tax authority does not require a separate account for payment of tax, then a total of two accounts will be opened.
(3) Tax Registrations
Apply for registration with both the State Tax Bureau and Local Tax Bureau and obtain the State and Local Tax Registration Certificate;
(4) Application of “Enterprise Code”
Apply for registration with Quality Inspection and Control Bureau and obtain the Enterprise Code and Card;
(5) Apply for registration with Foreign Exchange Control Bureau
Application for registration with the Foreign Exchange Bureau and obtain Foreign Exchange Registration Certificate;
(6) Finance Registration
Application for registration with the Finance Bureau and obtain the Finance Registration Certificate
Additional Post Registration Procedures
(1) Capital Verification
In accordance with the Company Laws, the investor (member) of a WFOE is required to contribute the registered capital either in one instalment within 6 months or in two instalments within a period of 2 years where the first instalment must be not less than 15% and paid within 3 months after issuance of Business Registration License.
And, within 30 days after the payment, the WFOE shall engage a Chinese accounting firm to perform an audit and issue an audited report to certify that the registered capital has been contributed in accordance with the Companies Laws and Articles of Association of the WFOE. Then, the capital verification report shall be submitted to the industrial and commercial administration authority and tax authority for filing.? And the business license must be renewed accordingly so as to reflect that the amount of capital so contributed.
Capital verification is required for each instalment payment.
(2) Normal Taxpayer Qualification and Foreign Trade Operator Registration
Please note that the registration procedures listed above (the three stages) covers only the general procedures required for the purpose of registration of a foreign invested company in China. In this case that the company is to be engaged in international trading business, that is, importing and exporting and distribution business, it is required to application to be qualified as a Normal Taxpayer and handle the Foreign Trade Operator Registration.