Viewpoints

1. Introduction The term of a Representative Office normally is one year only. The investor could apply to have its Representative Office deregistered before its term expired. If the RO of a foreign enterprise wishes to terminate its business operations upon or before the expiration of its term; or if the parent company of the RO declares bankruptcy, a mandatory process called de-registration has to be done at the registration office. Documents have to be submitted to relevant authorities such as the tax authorities, Customs and banks to certify the clearance of the entity’s liabilities. This is a prerequisite to obtaining the approval for de-registration and cancellation of the certificate of registration. Should the RO leave any matter unsettled, the foreign enterprise or economic organisation represented by the RO shall be held responsible.   2. China Representative Office Deregistration Procedures (1) De-registration of Tax Certificate Step 1: Apply to the […]

1. Introduction A representative office (RO) is not an independent legal entity but an extension of the parent entity. Therefore, it must confine its activities to promotion or acting as a liaison and coordination office on behalf of its parent company. Generally, an RO is not allowed to carry out trade and businesses activities or sign sales contracts with customers. The parent entity will fund its operations and appoint a Chief Representative. One exception is the ROs of law firms which are allowed to conduct sales upon approval from the relevant authorities.   2. Accounting and Tax Requirements for Representative Offices (1) Keeping of Accounting Books, Records & Supporting Documents All accounting vouchers, ledgers as well as financial statements should be prepared and maintained under PRC GAAP (Generally Accepted Accounting Principles). Source documents, Journal Vouchers (JVs) and ledgers should be in Chinese and Standard China Chart of Accounts (COA) should […]

1. Procedures for changing the chief representative, business scope, name and office address (1) Changing chief representative or adding representatives • Provide the application letter for changing the chief rep signed by the chairman or general manager of the enterprise; • Provide the Authorization and Appointment letter of (chief) representative signed by the chairman or general manager of the enterprise; • Provide resume of new (chief) representative(s); • Provide photocopy of the ID card/Passport of new (chief) representative(s); • Provide a 2-inch sized photo of new (chief) representative(s); • Fill in Application Form of Amendment of the Representative Office of Foreign Enterprise; • Provide photocopies of Approval Certificate of establishing the representative office and Registration Certificate (the original Approval Certificate for Change shall be provided in case the Chief Representative has been changed); • Provide the dispatching letter issued by a foreign service provider in case the (chief) representative is […]

1. General Industry The application for registration of a Representative Office by a foreign company which engages in general business is straight forward. It normally involves a two step process. That is, first application to register with local Administrative Bureau for Industry and Commerce and then handle the post registration procedures. The detailed registration procedures for these Representative Offices are described in China Representative Office Registration and Maintenance Guide (7) – Registration Procedures. 2. Special Industries The applications for registration of a Representative Offices by those companies which engage in some industries, however, requires pre-approval from the relevant regulators in those industries. Authorities for approval are distributed among various State Council Departments and are delegated to their local offices. Applicants should apply for approval from different departments (at their local offices) according to their core activities. Some of the major types of industries and their approval authorities are: Industry Approval […]

1. China Representative Office Registration Procedures The procedures for establishing a Resident Permanent Representative Office (RO) vary slightly in different areas of China and also vary in accordance with the places where the foreign companies are located. In general, the procedures for the establishment of a Permanent Representative Office consist of three steps: Step 1: Pre-registration Before submitting the registration application documents to the local Administration for Industry and Commerce for registration, the foreign enterprise should have certain documents ready, including the tenancy agreement for the office premise to be used by the RO and the legalised identity documents and banker’s reference letter. Step 2: Registration The foreign investor submits the application documents to the relevant AIC to application for Representative Office Registration Certificate. This step is completed when the AIC issues a Registration Certificate for Permanent Representative Offices of Foreign Enterprises. Step 3: Post-establishment Registrations After a Permanent Representative […]

Representative Offices, also known Permanent Representative Offices or Resident Representative Offices, cannot employ Chinese staff directly. Chinese staff can only be employed through local foreign service companies or other entities designated by the local government. These foreign service companies enter into employment contracts with Chinese individuals and should be responsible for managing the personal files of the Chinese employees. These foreign service companies are also responsible for paying salaries to the Chinese employees and providing social benefits such as retirement packages and medical insurance.   A foreign service company usually enters into a service contract with a Permanent Representative Office, whereby the foreign service company seconds these Chinese employees to Permanent Representative Offices of foreign enterprises. Therefore, from the legal perspective, Rep Offices and their Chinese staff do not have a direct employment relationship. The Chinese staff members are only service providers. The relationship between the Chinese staff and the […]

1. Powers of Chief Representative of a China Representative Office The chief representative of a Permanent Representative Office is the person who is responsible for the daily operation of the Permanent Representative Office (RO). However, Chinese laws do not clearly specify the limitation of the authorities of a chief representative or a representative. In the absence of express statutory provisions, it is not clear whether or not documents signed by a chief representative or a representative have binding force upon the foreign enterprise. Therefore, foreign enterprises should clearly set forth the authorities of the chief representative and representatives of a Permanent Representative Office (RO) in order to avoid, to the greatest extent possible, situations in which the acts of a chief representative or a representative have binding force upon the parent foreign enterprise.   2. Qualifications for Acting as Chief Representative Permanent Representative Offices (RO) may retain either Chinese or […]

1. Scope of Business of Representative Offices The business scope of a Permanent Representative Office (RO, also known as Resident Representative Office) should be clearly stated in the application document prepared by the applying foreign enterprise. After approval by the relevant authority and registration with the AIC, the business scope will be stated in the Registration Certificate of the Permanent Representative Office (RO). A Representative Office (RO) can only engage in business activities which are within the business scope as set forth in the Registration Certificate (business registration certificate). Normally, ROs can only engage in non-operational activities in China, such as liaison, product promotion, market research and technology exchange. However, if a bilateral treaty between China and the home country of the foreign enterprise provides that Permanent Representative Office (RO) established by enterprises of both countries should have the authority to engage in direct operational activities, such provisions should prevail. […]

1. Non-Legal Entity Permanent Representative Offices (ROs, also known as Resident Representative Offices) registered in China are non-legal entity and therefore not considered to be separate and independent from the foreign enterprises. Chinese laws do not expressly provide that ROs should bear liabilities independently with their own assets (i.e. limited liability), ROs may be deemed to be part of the foreign enterprise. As a part of the foreign enterprise, the foreign enterprises should bear liabilities of the Permanent Representative Office with all its assets. It the assets of the RO are not sufficient to satisfy its liabilities, the foreign parent enterprise should be responsible for the liabilities of the Permanent Representative Office. However, it is not clear as to the extent of liabilities to be borne by the foreign enterprise if a Permanent Representative Office exercises its authority which exceeds its business scope. Moreover , a Permanent Representative Office will […]