Viewpoints

1. The Origins of Stamps and Seals The use of company stamps and seals (‘seals’ in China is related to Chinese history. They were originated from pottery making. At the beginning, pottery seals were used to imprint words or marks on surface of pottery to indicate the ownership of the goods. This was deemed as a certification of proprietorship. As time passed, seals developed as tally and eventually held the function of credit. Thus, in Chinese culture, seals become more important than signature in certifying credibility. 2. Stamps vs. Signature Many foreign investors in China are confused about the usage of ‘seals’ when they are doing business in China. While signatures of companies’ chairman are the ultimate mark of authority outside China, in China, the function and authority of ‘seals’ are far greater. In the case of setting up a business entity in China, the first thing after obtaining the […]

Introduction It is part of a company’s set-up process to obtain various certificates and stamps/seals from Chinese Government Bureaus. These various certificates and stamps/seals are required in the company’s dealings with the bureaus. Many foreign investors can be confused about the usage of these items. What follows is a description of each of the license and certificate obtained after the registration of a WFOE in China is completed. 1. WFOE Registration Certificates and Licenses Certificate of Approval (Original, Duplicate) Issued By: Local Bureau of the Ministry of Commerce Main Items: ~ Approval Number ~ Date of Approval ~ Name of Organisation ~ Address of Organisation ~ Type of Business ~ Business Scope ~ Total Investment ~ Registered Capital ~ Name of Investors ~ Business Duration (10, 20, 30 or 50 years) Purpose: The certificate provides the approval for the foreign investors to set up a company in Shanghai. It expresses […]

1. WFOE Registration Application Documents The following is a list of documents and information which needed to be prepared for the purpose of application for registration of a WFOE in China: (1) the name, registered office or residential address of shareholder (member) of the China WFOE; (2) the name and nationality of the legal representative or managing director or president of the shareholder (member); (3) the identity documents of shareholder (member) of the China WFOE; the identity documents need to be legalised by the Chinese Embassy or Consulate General in the country where the corporate shareholder is registered or where the individual shareholder resides. The identity documents of a corporate shareholder include the Articles of Incorporation and bylaws or documents with a similar nature; for individual shareholder, it refers to the passport of the shareholder. (4) Two copies of Tenancy Agreement with a term of no less than 12 months […]

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 […]

1. Definition of Bank Reference Letter A Bank Reference Letter provides important information regarding a company’s relationship with primary lending and depository institutions. It is used generally to verify the existence of a bank account with the bank and that the account has no bad record. 2. Content of the Banker’s Reference Letter A Bank Reference Letter usually contains these details  The bank header  The letter is addressed to the specified agency  A short paragraph on the record of the company by the bank and verified on a particular date  The date that company set up the bank account with the bank  The signature of the authorized personal of the bank together with the stamp of the bank. The banker’s reference letter will also contain the name of the addressee. 3. Purpose of the Bank Reference Letter The bank reference letter is needed to verify […]

1. Introduction For an incorporation of an entity in China, there are many procedures, legal documentation and various governmental requirements. One of the documents to be submitted for the purpose of registration of a WFOE is the duly legalized Certificate of Incorporation or identity document of the shareholder of the WFOE. 2. Definition of Certificate of Incorporation A Certificate of Incorporation is a legal document relating to the formation of the investor corporation. It may differ among different countries. It is a certificate issued by the relevant government registry as confirmation of the due incorporation and valid existence of the company. American Legal system The meaning of a Certificate of Incorporation in the American context usually refers to the Articles of Incorporation or the Articles of Association. Despite the differences in the meaning of a Certificate of Incorporation, the usage of the Certificate of Incorporation in the incorporation of a […]

1. Responsibilities and Powers of Supervisor/Board of supervisors A limited liability company may set up a board of supervisors, which shall comprise at least 3 persons. A limited liability company, which has relatively less shareholders or is relatively small in scale, may have 1 or 2 supervisors, and does not have to establish a board of supervisors. The supervisor is also appointed by the investor. The board of supervisors or supervisor of a company with no board of supervisors may exercise the following authorities: (1) checking the financial affairs of the company; (2) supervising the duty-related acts of the directors and senior managers, and bringing forward proposals on the removal of any director or senior manager who violates any law, administrative regulation, the articles of association or any resolution of the shareholders’ meeting; (3) demanding any director or senior manager to make corrections if his act has injured the interests […]

1. Responsibilities and Powers of Director/Board of Directors The board of directors established by a limited liability company shall comprise 3 up to 13 members unless for the company with relatively less shareholders or a relatively small company, it may have an acting director and no board of directors. The board of directors shall be responsible for the shareholders’ meeting and exercise the following authorities: (1) convening shareholders’ meetings and reporting the status on work thereto; (2) carrying out the resolutions made at the shareholders’ meetings; (3) determining the operation plans and investment plans; (4) working out the company’s annual financial budget plans and final account plans; (5) working out the company’s profit distribution plans and loss recovery plans; (6) working out the company’s plans on the increase or decrease of registered capital, as well as on the issuance of corporate bonds; (7) working out the company’s plans on merger, […]

1. Power of Shareholder(s) The authority of a limited liability company is the shareholders’ meeting which comprises all the shareholders. The shareholders’ meeting shall exercise the following authorities according to Company Law of the PRC: (1) determining the company’s operation guidelines and investment plans; (2) electing and changing the director and supervisors assumed by non-representatives of the employees, and determining the matters concerning their remuneration; (3) deliberating and approving the reports of the board of directors; (4) deliberating and approving the reports of the board of supervisors or the supervisor; (5) deliberating and approving annual financial budget plans and final account plans of the company; (6) deliberating and approving profit distribution plans and loss recovery plans of the company; (7) making resolutions on the increase or decrease of the company’s registered capital; (8) making resolutions on the issuance of corporate bonds; (9) adopting resolutions on the merger, split-up, change of […]

1. Defining the Scope of Scope of WFOE Under China’s Company Law and Administration of Registration of the Scope of Business of Enterprises Provisions, an enterprise can only engage in operations within its business scope as approved in its registration with the enterprise registration authority. Unlike other countries, the defined business scope in China is more detailed and has more implications. Hence, an investor needs to take note of certain considerations when defining its business scope for registration. (1) Catalogue for Guidance on Foreign Investments The Catalogue for Guidance on Foreign Investments (“Catalogue” is a legal pronouncement by the Ministry of Commerce. It specifies the types of investments that are: A. Encouraged B. Prohibited C. Restricted D. Permitted. A. Encouraged Investments Typically, investments that may bring about technology transfer or IT advancement etc. into China are encouraged investments. Foreign investors are normally encouraged to establish Wholly Foreign-owned Enterprises (“WFOEs” to […]