This guide provides an overview of the matters relating to the incorporation of a Wholly Foreign Owned Enterprise (WFOE) in Beijing, China, to engage in intellectual property agency service. The requirements, procedures and matters needing attention associated with such establishment are hereby presented as a reference for Kaizen’s clients and potential clients.
2. Features of WFOE
(1) Type of Company Commonly used by foreign investors
Investment in WFOEs is now the most popular foreign direct investment vehicle in the PRC as the investor may completely control over their business entity as well as enjoy the full profit from its operation.
A WFOE refers to an enterprise that is established by one or more foreign companies, enterprises and other economic organizations or individuals (including investors from Hong Kong, Macau and Taiwan region) with sole foreign capital in the PRC in accordance with the PRC law.
A WFOE is formed as a limited liability company (LLC). It is considered as a separate legal person that shall be liable for its debts to the extent of all its assets under the PRC law. The shareholder’s liability is limited to its subscribed registered capital.
(2) Scope of Business
The scope of business must be specified in the application for the establishment of a WFOE in accordance with the PRC law. And the WFOE can only conduct business activities within its approved scope of business. Any amendments to the scope of business require further application and approval.
The scope of business for an architectural design consulting WFOE could be: architectural design consulting, drafting and drawing.
(3) Company Name
The company name for a WFOE should follow the format outlined below:
Administration Region(City) + Business Name + Main Industry + Limited or Business Name + Main Industry + Administration Region(City) + Limited
Beijing ABC Intellectual Property Agency Limited, or ABC Intellectual Property Agency (Beijing) Limited
Some words, such as Country China and International etc. cannot be freely used in the company name. It is subject to further requirements and approval of relevant authority.
A minimum of one shareholder is required (The maximum is fifty.) for the incorporation of a WFOE. The details of the shareholders are filed on the local Administration Bureau for Industry and Commerce (AIC). Corporate shareholders are permitted. The shareholders of a WFOE can be of any nationality except Chinese and meetings can take place anywhere.
(5) Director/Board of Directors
A WFOE requires a minimum of one director and full details of the director must be filed with the local AIC. The sole director is the executive director who could act as the legal representative and general manager at the same time. The director can be of any nationality and be resident anywhere. But corporate director is not allowed.
If the investors decide to set up a board of directors for their WFOE, then the minimum number of directors is three and the maximum is thirteen. There is no requirement for board meetings to be held within China and directors may be resident anywhere.
(6) Legal Representative
A WFOE is required to appoint a legal representative and full details of that person must be filed with the local AIC. The legal representative should be either the chairman of the board of directors (or executive director in lieu of a board) or general manager of the company in accordance with the Company Law of the PRC. The legal representative could be of any nationality and does not have to be a resident in China.
(7) Supervisor/Board of Supervisors
A WFOE is required by the Company Law of the PRC to appoint at least one supervisor. The supervisor can be of any nationality and be resident anywhere. But a director, legal representative, general manager, and other senior officer of the company shall not serve concurrently as a supervisor. Corporate supervisor is also not allowed.
(8) Registered Capital
Under the new Company Law of the PRC, the minimum registered capital requirement for company establishment has been abolished and the paid-up capital registration system has been replaced with a subscribed capital registration system.
In accordance with the relevant laws and regulations of the PRC, the company investor/shareholder may decide on the capital amount, method and deadline for capital contributions at their own discretion. However, the capital amount, method and time limit of capital contribution should be specified in the Articles of Association of the WFOE. We always recommend our clients to set the capital amount based on their budget for the WFOEs initial operations before it generates any income or profit.
After each contribution of the registered capital, the WFOE shall employ a CPA firm registered in China to verify the capital and issue a capital verification report. The capital verification report shall be submitted to the bank for examination when applying for foreign exchange settlement and transfer the registered capital from WFOE capital account to RMB basic account.
(9) Registered Address
The investor is required to enter into a tenancy agreement in relation to the office space to be used by the WFOE. The office shall be located in a commercial building and residential address is not allowed to be used as registered address in Beijing
(10) Term of Operation
The standard term of operation for a WFOE is generally 15-30 years which shall be specified in the Articles of Association. The investor could submit an application for extension to the examination and approving authority 180 days prior to the expiration of the term.
3. Procedures for Establishing a WFOE
(1) Lease of Office Space
Firstly, the investor will have to enter into a tenancy agreement in relation to the office space to be used by the WFOE.
(2) Legalisation of Identity Documents of the Shareholder
The investor is also required to arrange to have the identity documents of the shareholder legalized by the Chinese Embassy or Consulate in the country where the shareholder is registered/resided. If the shareholder is a corporation, the identity documents required to be legalised are its incorporation documents. In the case the shareholder is an individual, the identity document required to be legalised is his/her passport (for foreigner) or mainland travel permit (for Hong Kong, Macau and Taiwan resident)
(3) Banker’s Reference Letter
Also, the investor needs to arrange with its banker to issue a banker’s reference letter. The banker’s reference letter shall indicate the name, account number and credit standing of the investor and the balance of the account (the deposit shall not be less than the registered capital of the WFOE).
(4) Other Documentation
The investor at the same time needs to prepare other documents, such as photocopies of the passport / identity card / mainland travel permit of the director, supervisor, legal representative and (general) manager.
(5) Opening Bank for the WFOE
The investor also needs to decide on the opening bank for the WFOE. The name and detailed address of the opening bank are required. And it is important to note that the original passport / identity card and/or mainland travel permit of the legal representative of the WFOE shall be presented to the bank for verification purpose.
3.2 Application for the WFOE Registration
(1) Name Search and Reservation
The registration process of a WFOE starts with name availability search and reservation of the preferred name with the local Administration Bureau for Industry and Commerce (AIC). This is called “Name Pre-approval” in China.
(2) Examination and Approval
Upon receipt of the Name Pre-approval, the investor is required to submit an application to the examination and approving authority for a project approval and certificate of approval for the establishment of the WFOE.
(3) Registration for Business License
Upon issuance of the certificate of approval, the investor will need to register and apply for a business license for the WFOE from the local AIC.
Once the business license is issued, the WFOE is deemed to be a legal person duly organised and existing under the PRC law and will have full operational rights to operate a business in China within its scope of business.
3.3 Post Registration Procedures
(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) Application for Enterprise Code
Application for registration with the Quality Inspection and Control Bureau and obtaining the Enterprise Code
(3) Tax Registration
Application for registration with both the State Tax Bureau and Local Tax Bureau and obtaining Tax Registration Certificate.
(4) Tax Report
Arrangement of tax report with both local and state competent tax office.
(5) Statistics Registration
Application for registration with Statistics Bureau
(6) Foreign Exchange Registration
Application for registration with the Administration for Foreign Exchange.
(7) Opening of Bank Account
Opening of one capital account, one RMB basic account with bank selected in China.
(8) Capital Verification
After each contribution of the registered capital, the WFOE shall employ a CPA firm registered in China to verify the capital and issue a capital verification report. The capital verification report shall be submitted to the bank for examination when applying for foreign exchange settlement and transfer the registered capital from WFOE capital account to RMB basic account. Our service fee for the above service will be quoted separately if you decide to engage us for this service.
(9) Trademark Agency Registration
Intellectual property agency WFOE shall need to apply for trademark agency registration as stipulated before it can legally conduct trademark agency business in China.
4. Estimated Time Frame
It is estimated that the whole registration process for an intellectual property agency WFOE would take around 4 months. The table below shows the estimated time frame for each of the steps for the registration process.
|1||Legalisation of identity documents of the investor||Investor’s schedule|
|2||Tenancy agreement (for the office to be used by the WFOE)||Investor’s schedule|
|3||Banker’s reference letter||Investor’s schedule|
|4||Other documents||Investor’s schedule|
|Application for Registration|
|5||Apply for approval of use and reservation of proposed company name||5-7|
|7||Apply for business license||7-10|
|Post Registration Procedures|
|8||Apply for approval and carving of company seals||3|
|9||Apply for enterprise code and certificate||1|
|10||Perform tax registration||1|
|11||Arrange local tax report||2|
|12||Perform foreign exchange registration||7-10|
|13||Open bank account||10-15|
|14||Arrange state tax report||2|
|17||Trademark Agency Registration||15|
|Around 4 Months|
5. Certificates and Materials obtained after Registration
After the WFOE is officially registered, it will obtain the following certificates, corporate documents and seals to prove its legal existence and to carry out its daily operation.
6. Registration Fees
Though the foreign investors are not required to engage a professional agent to handle the company registration procedures for them under the PRC law, they normally would like to engage a professional CPA firm or a law firm to complete the registration process for them considering the complicated procedures and various Chinese government authorities involved for the incorporation of WFOEs in China.
We, Kaizen Certified Public Accountants Limited, are a CPA firm duly registered in Hong Kong. We have three branch offices in China’s mainland, one in Beijing and the other two are in Shanghai and Shenzhen. Our offices in China’s mainland have assisted many foreign investors to establish their China WFOEs. Maintenance services have been provided to our clients by our China team with extensive skills and experience as well after the incorporation of the WFOEs.
Should you need any assistance regarding registration of Intellectual Property Agency WFOE in Beijing China, please feel free to contact us!
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