Introduction to Foreign Invested Commercial Enterprise (FICE)
From 1 December 2004, a new investment vehicle has been made available to foreign investors as the Chinese government is allowing and encouraging foreign investors to set up “Foreign Investment Commercial Enterprises” (FICEs) in China to conduct wholesale, retail and other permitted businesses. This type of business entity possesses the total right of trade and business. It can conduct import/export activities by itself, independent of the local import and export company and does not require the setting up of a manufacturing company.
Furthermore, from 1 March 2006, FICEs are permitted by law to apply and obtain approval documents from the Shenzhen Bureau of Trade and Industry in the Shenzhen City, instead of from Ministry of Commerce in Beijing.
The FICE is normally in the form of a Limited Liability Company wholly owned by one of more foreign investors (both foreign individuals and corporations). It is a legal person. The foreign investor has sole responsibility for its profits and losses. The liability is limited to the amount of registered capital injected into the entity. The FICE is able to implement strategies that effectively conform to the interests of its overseas parent company. To carry on different trading businesses, it must have the required permits and certificates.
To establish a FICE (for the business of importing, exporting, wholesaling, retailing and distribution) in Shenzhen, a foreign investor has to submit the necessary incorporation documents to various authorities for registration. It is advisable for the foreign investor to entrust an authorised consulting body or agency to handle the tedious submission and application processes.
Definition of Investor of a FICE
The foreign investor may be a foreign company, enterprise, economic organisation, or a natural person.
A FICE’s minimum registered capital has to conform to relevant provisions of the Company Law. In accordance with prevailing laws and regulations, the minimum registered capital required for a wholesale and retailing business are RMB500,000 and RMB300,000 respectively.
In addition, the registered capital has to match the actual business activities.
The amount of the initial capital contribution cannot be less than 15% of the registered capital or the minimum statutory amount of registered capital. The initial registered capital must be contributed and remitted to China within 3 months after the date of incorporation.
The investor is allowed to contribute registered capital in cash, in kind, or in the form of technology/intellectual property rights, or other non-monetary properties that may be assessed on the basis of currency. The amount of the capital contribution in cash can be no less than 30% of the registered capital.
Scope of Business of a FICE in Shenhen
According to the “Administrative Measures on Foreign Investment in Commercial Fields”, a FICE can undertake the following business activities:
Shenzhen FICE Registration Procedures
Step 1: Deciding the name of the company
The Chinese name should be in the following format:
For example: Kaizen Trading (Shenzhen) Limited
Use of “China”, “Sino” and “International” are not permitted in the Chinese name unless permission is given, although they are permitted in the non-Chinese name.
Step 2: Reservation and Application of Approval of Use of Company Name
Prior to any of the following applications, the investor should reserve a name for its prospective FICE with the Shenzhen Administration of Industry and Commerce.
Step 3: Registration of Approval Certificate
After completion of the Name Approval Notification, the Approval Letter and Approval Certificate are the next to be registered.
Step 4: Registration of Business License
Within 30 days of obtaining the Approval Certificate, the foreign investor will need to register and apply for a Business License for the FICE from Shenzhen Administrative Bureau for Industry and Commerce. The foreign investor is also required to submit similar documentation to the Shenzhen Bureau of Trade and Industry for approval and filing.
Once the Business License is issued, the FICE is deemed to be a legal person duly organised and existing under PRC laws. It will have full operational rights to operate a business in China within the scope of its Business License.
Step 5: Registration of Organisation Code Registration Certificate
This is purely a procedural step. The Organisation Code Bureau will issue certificates within 1-3 working days.
Step 6: Registration of Tax Registration Certificate
Once your Organisation Code Registration Certificate is approved, you may apply for a Tax Registration Certificate at the Shenzhen local tax authority. At the same time, you should also apply for the company seal and legal representative seal. Together with the Approval Certificate, Business License and other documents, the formal application form affixed with the seals should be submitted to the authority for examination and approval.
Step 7: Other Certificates
Having obtained approval from the tax and foreign exchange authorities, you are legally entitled to open USD Capital and RMB Basic Accounts. You may then proceed with capital injection, capital verification and certificate renewal.
Materials required for Application for Registration of a FICE in Shenzhen
Before submitting an application to the Goverment for approval and registration, the following materials should be readily available:
Expanding the Scope of Business of a FICE to include Retailing Business
Existing foreign investment commercial enterprises could apply to expand its scope of business so as to engage in retailing business. When applying to establish a store have to meet the following conditions:
The procedure of establishing a store is the same as an enterprise set-up. The existing FICE is required to obtain a series of certificates for the proposed store. The following documents are to be submitted:
Time Frame and Governmental Charges
The processing time is within 60 working days if all supporting documents and additional information are provided.
The total government charges for the establishment of a FICE in Shenzhen are estimated to be between USD250 and USD350.
The total government charges for establishment of a FICE and a store together are estimated to be between USD400 and USD500.