China – Procedure of Incorporation

The procedure of incorporating a company in China is often complicated however Foreign investors are not allowed to directly submit the application documents in order to incorporate a WFOE to the relevant authorities in China. They must retain a PRC Entity to submit all documentations and co-ordinate the process. Eltoma will manage this process on your behalf ensuring you are kept informed every step of the way.

Incorporating a Wholly Foreign Owned Enterprise:

The procedure for incorporating a WFOE can be divided into three distinct phases; the approval phase, registration phase and post establishment phase. Below is a brief summary of the process and what documents may be required:

In the first instance it must be determined if the proposed WFOE will conduct business that will be approved by the Chinese Government. If it is deemed that the business is likely to be accepted then the following documentation is required:

• Certificate of Incorporation, or equivalent, certified by the Chinese Embassy or Consulate
• Passport copy certified by Chinese Embassy or Consulate
• Bank reference letter
• If applicable; passport copy of director of parent company, Legal Representative of China Company, Supervisor of China Company
• Business Scope – One of the most important documents required as a WFOE can only conduct business as defined in the business scope which ultimately appears on the Business License.
• Registered capital and list of proposed names of China Company

If the above documentation is in order and the Chinese Government approves the business scope then the process of incorporation can begin. The following documents are required in order to incorporate:

• Articles of Association – including details of the management and capitalization of the company
• Feasibility Study – including Year 1 Business Plan and Budget
• Leases – Office rental agreement / factory lease etc
• Proposed personnel costs
• Any other documents associated to the specific company

The time frame for incorporation depends on the complexity of the business and the negotiations required. However, Eltoma will guide you through the process providing an informative, smooth and efficient service.

The Opening of a Representative Office:

The opening of a Representative Office in China can provide many opportunities. The summary of the process of establishing a Representative Office is laid out below:

Depending on the type of business that the Representative Office is proposing to represent the Chinese Government will need to provide approval. Once this has been granted the following documents are required:

• An application letter signed by the Chairman of the Board
• Incorporating documents of head office
• Original bank reference letter regarding the company’s financial standing
• A letter appointing the Chief Representative to the Representative Office plus CV
• A copy of the lease agreement for office space

Once approval has been granted and an Approval Permit issued then the foreign investor must apply to the State Administration for Industry and Commerce. If the application is approved then an approval permit is usually issued within one month.

Incorporating a Joint Venture Company:

Setting up a Joint Venture can be a complicated and lengthy process and the documentation and timescale is dependent on the type of Joint Venture being formed. Each case is assessed on an individual basis. Eltoma can manage this process negotiating the complex procedure and keeping you informed every step of the way.

Hong Kong Company:

For details regarding the incorporation of a Hong Kong Company please see the pages opposite. Eltoma can advise whether it is advantageous and efficient to incorporate a company in Hong Kong in order to fulfill your Chinese ambitions.

Company Administration Guidelines

As mentioned previously, due to the differences in the types of companies that can be formed the below is only a very basic overview of the company administration guidelines. Eltoma can advise on an individual basis providing you with specific information tailored to your requirements.

Share Capital:

• WFOE Minimum Registered Capital – RMB 100,000 – RMB 500,000 (approx. US$15,000 – US$75,000) is the minimum capital requirement
• WFOE – Between 1 – 50 shareholders allowed. Public offering of shares are prohibited
• JV Minimum Registered Capital - A minimum of 25% of the capital must be contributed by the foreign partner
• JV - Drawn up by agreement dependent on capital invested

Directors:

• WFOE – The WFOE must designate a single director or a board of directors who will act for the initial term of office, as set out in the Articles of Association
• JV- Directors appointed by the parties in general proportion to the investors respective equity shares

Local Requirements:

• All companies in China must have a physical office address at which the company is registered. They are prohibited from using a virtual address.

• WFOE - At least one individual who is not a Director must act as a WFOE Supervisor
• WFOE – One individual must be designated as the legal representative in the formation of documents.
• JV - A legal representative is required

Timescale:

• This is dependent on the complexity of the business and the negotiations required.