Setting up a Technology Type Wholly Foreign Owned Enterprise (WFOE) in Beijing, China

1. Procedures for Establishing a WFOE in China

1.1 Preliminary

(1) Reservation of the WFOE Company Name

Prior to any of the following applications, the applicant company should reserve a name for its prospective WFOE with the Beijing Administrative Bureau for Industry and Commerce ("AIC"). This is called "Name Pre-registration" in China .

AIC requires that a proposed name and two alternative names be provided.

(2) Project Proposal and Approval

According to the PRC WFOE Law and its Implementing Rules as amended in April 2001, there should be a Project Proposal Approval stage before the final examination and approval. In practice, however, these two stages have been combined as one.

(3) Project Proposal

The foreign investor is required to submit a Project Proposal to the local approval authority (" Approval Authority ") where it intends to establish the WFOE. Generally, the Project Proposal should cover the following points:

(a) the purpose of the WFOE, production plan and market forecasting;

(b) the scope and scale of the business, the products to be produced / services to be provided (a 4-5 line description should suffice);

(c) financing, financial forecasts and evaluations;

(d) the technology and equipment to be used;

(e) land-use requirements (including the area), selection of sites;

(f) personnel and wages; and

(g) any requirements for public facilities (water, electricity, coal, gas or other energy source).

1.2 Examination and Approval

The following documents should also be submitted to the local Approval Authority:

(1) a written application for the establishment of the WFOE;

(2) a Feasibility Study Report. Based on our experience, this is generally a 10 to 20 page document;

(3) the Articles of Association of the proposed WFOE;

(4) a list of the proposed chairman and the members of the WFOE board of directors, and appointment letters;

(5) the incorporation document of the WFOE investor;

(6) a credit certificate of the WFOE investor issued within 3 months;

(7) lease agreement for the premises;

(8) the reply of pre-registration of name approved by the relevant AIC; and

(9) such other documents as may be required by the Approval Authority.

As for the timing of approval, Approval Authorities are required to make its decision within 15 working days after receipt of all the documentation.

1.3 Registration for Business License

Within 30 days after obtaining the approval certificate, the foreign investor will need to register and apply for a business licence for the WFOE from the local AIC. As part of this step, the foreign investor will need to submit similar documentation to the approval documentation for AIC filing purposes. This is purely a procedural step and the local AIC must issue the Business License within 30 days, but in our experience AIC will usually issue the Business Licence within 5-10 days after receiving all the required documentation.

Once the business license is issued, the WFOE is deemed to be a legal person duly organised and existing under PRC law and will have full operational rights to operate a business in China within the scope of its Business Licence.

1.4 Registrations with other Government Authorities

Registration is also required with other government authorities. Specifically, registration should be done with the following government departments:

(1) Making of Office Stamp (Office Seal)

(2) Opening of bank accounts

(3) Registration with the State Tax Bureau

(4) Registration with Local Tax Bureau

( 5 ) Application of ¡§ Enterprise Code¡¨

( 6 ) Registration with Foreign Exchange Control Bureau

(7) Finance Registration

(8) Registration with the Customs Office

2. Estimated Time Frame

The table below shows the estimated time frame for each of the steps for the registration process.

3. Required Documents and Materials

The following documents and materials needed to be prepared by the application before submitting an application for registration:

(1) Required Documents

(i) 2 sets of the investor¡¦s identity or incorporation evidence (i.e. passport for individual foreign investor and Certificate of Incorporation and/or Registration Certificate for corporate foreign investor); the identity or incorporation document of the investor shall be legalized by the Chinese Embassy in the country where the investor is from or registered;

(ii) 1 set of Tenancy Agreement of the office premise to be used by the proposed WFOE. Two photocopies of the property ownership certificate of the office with the signature and/or seal of the owner are also needed;

(iii) 2 sets of credit standing certificate (banker¡¦s reference letter) of the WFOE investor issued within 6 months, which shall indicate the name and account number of the investor and shall state that the account does not have bad records and the company maintained a well-conducted current account or other statement of good creditability;

(iv) a copy of the latest Audited Financial Statements, if the investor is a corporation and has been registered for more than one year;

(v) a feasibility study report

(2) Required Information

(i) the name, address and/or place of registration of the investor;

(ii) the name, nationality and position of the legal representative (or the name and nationality of the managing director) of the investor;

(iii) the name and business address of the WFOE. Please provide the proposed name and 2 alternatives;

(iv) a summary of the proposed scope of the business, the types of products and the scale of business;

(v) the total amount of investment in the WFOE, including:

(a) the registered capital. The minimum amount of registered capital of RMB100, 000 is required for a technology type company in Beijing ; however, for easy approval, we suggest the registered capital to be above RMB 500,000.

(b) method and time limit of contribution of capital;

(vi) the form of organisation, management structure (including directors and supervisors) and legal representative of the WFOE; the photocopies of the identity certification (i.e. passport for foreigners) of the directors, supervisors and legal representative; the resident address, Tel. No., and 2 photos of the proposed legal representative;

(vii) the establishment and staffing of the structure;

(ix) the proposed term of operation for the WFOE. The standard term is generally 15-30 years.

For further information or assistance, please call us:

Hong Kong Office: +852 2341 1444
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Shanghai Office: +86 21 6439 4114
Beijing Office: +86 10 6874 8420

or send email to enquiries@bycpa.com.