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| Business
- Chinese Company Formation |
Opening and
Operating a Chinese Company (December 2008) |
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Types of Company
Ventures:
The theory is very simple, and all versions come under
the general heading FIE (Foreign Invested
Enterprises).
Investment nowadays is being streamlined along the WOFE
(Wholly Owned Foreign Enterprise) conduit by Beijing.
This is also known as a WFOE (Wholly
Foreign Owned Enterprise).
Alternative channels are proactively promoted via the
Registered Office (RO) mechanism, which
you should only view as being a stepping-stone with
many important restrictions. RO's do provide you with
Office and Presence in China Mainland, and are ideal
for supporting a Sourcing or Development Team - But
they cannot make direct payments to Suppliers according
to Chinese Law
Other Corporate mechanisms still exist - such as: EVJ
(Sino-foreign Equity Joint Venture), and CVJ
(A Sino-foreign Co-operative Joint Venture). You may
also be interested in a FICE (Wholesale
and Retail Shop). Then there are local Chinese and Hong
Kong companies + Sole Trader and other options.
This page should be read as a brief introduction to
what we consider you may be most interested in. Complex
and differing regulations apply to all the above, and
China Expats has full details of each upon request.
Please contact us for the
unexpurgated specifics of your interest, quoting the
mnemonic and proposed location in the subject line (eg:
EVJ + Shenzhen)
China Expats 'Top 3' requested Factsheet's are now
on the webpages below:
(May require a Masters Degree in Gobbledygook, or You
may find these examples too simplistic. China Expats
understands both viewpoints, and can accommodate your
personal perspective)
* Chinese Business
Registrations
* WOFE vs Registered
Office
* WOFE Process
Guidelines
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Contact
Address
Tel
Mobile
Fax
Website |
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Nancy
Li
2206 Citic Plaza, Guangzhou ... (Also Hong
Kong & Shenzhen)
+86 020 2831 3523
+86 135 600 73294
+86 020 2831 3554 - 3523 and 020 2831 3556
www.chinabiz21.com
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WOFE
Charges for opening a WOFE seem to be constantly under
review, and are usually initially quoted upon how large
the Chinese Authorities think your Company is. As a
rough guideline for 2008, the following charging band
applies: $1million for a Corporate WOFE, $100, 000 for
an Ordinary Company, and down to $30, 000 for a local
version in the right location for a small private company.
Prices quoted in US Dollars (Before the World Financial
crisis)
As a brief introduction:
A WOFE is wholly owned by Foreign investors, and should
be viewed as a semi-autonomous National Facility or
Branch of the parent company / conglomerate. Chinese
Authorities will treat this Company as a separate entity.
Directors will be Foreigners to China, and one must
be nominated as resident. The nominated person must
live in China (Definition is more than 185 days
continuously, or for more than 9 months if not continuous
- per year at time of press), and they will be issued
a Z visa of normally 5-years duration as part of the
formation process. This visa is only valid for the term
of employment by the WOFE however
Setting up a WOFE is usually done via specific Agents,
and whilst there are numerous application forms that
have to be submitted in a precise order, most of this
becomes a seamless process are far as you are concerned.
The exception is if you decide to do it yourself - which
will then see you waiting for Licence A to be approved
before you can apply for Licence B, and also submit
some other relevant forms. We do not advise you to do
this yourself! China Expats will be pleased to help
you with this, and the process is fully documented via
the link above
Notes:
1. A WOFE can operate as any normal
Chinese company
2. Payments can be made and received,
both Nationally and Internationally
3. Normal Chinese Banking practices
apply, therefore: you can only make Bank Transfers between
business accounts, (or between private accounts). You
cannot transfer funds between business and private accounts
in China
4. During the company formation process
you must specify which areas the WOFE will operate in,
as outlined in the Feasibility Study and associated
Business Plan. You can only operate (Like all Chinese
Companies) within these guidelines. Therefore business
diversification is restricted, unless you alter the
business parameters officially
5. You should ensure the appropriate
Import and/or Export licence is provided at inception.
Normally this is an integral part of the set-up process.
6. Consider very carefully whether
a Manufacturers Export Licence, or an Agents Export
Licence is more useful to your company. You may not
have a choice of course, but if you do; then an Agents
licence is far more flexible for general exports, whilst
a manufacturers licence is heavily restricted but offers
greater depth and has particular benefits the other
type does not
7. Consider whether it is in your best
interests to be a manufacturer or an assembly plant.
If all you want is control of QA, then the latter is
more cost effective, and could qualify for an Agents
Export Licence
Chinese Registered Office
A far cheaper alternative to creating and operating
a Chinese Company.
Advantages = Very cheap and easy to
start and maintain
* Best viewed as a Designers' Chinese Office, with associated
Sourcing via a mutually involved Agent
* Provides immediate access to a 5-year standard Z visa
(Circumstances apply)
Disadvantages:
* Cannot make Direct Payments for Product, nor any payments
that fall outside a strict regimé
* Can give your company a legal presence in China
You do need to Understand:
* Official Chinese Banking Practices:
1. Payment is made between Company
accounts
2. Payment is made between Personal
accounts
3. You cannot make any direct payment
between a Personal and a Company Account whatever in
China = ways round this tricky one ;-)
Important:
1. A WOFE basically gives you a Fully-Fledged
Company in China
2. A Representative Office is not what
you think, and can pay Staff and local utility bills.
It is expressly denied the ability, (Legally), to make
payments for products. This is definitely not the route
to use if you want to buy product in RMB = contact
us for our best current advice
3. Other devices include the above
mentioned: 'EVJ's etc + those listed below:
Chinese and Hong Kong Registered Companies
Hong Kong Company:
1. One Director must be a Hong Kong
Citizen = usually the Company Secretary, Monetary Director;
or Agent Providing 'Office Services'
2. All other Directors can be of any
Nationality (Generalised)
3. Can operate and transfer funds between
Hong Kong and Mainland China
4. Online Banking Services are normally
provided. This is a very good way around the restrictive
Chinese style Banking Practices
5. Hong Kong Bank Accounts are generally
expensive to operate if you only need to use them occasionally
6. Many companies form a Head Office
in Hong Kong, and then a Registered Office in China.
This provides great versatility for International Trading
7. Specialised Agents in Hong Kong
will do this all for you as a package. You have many
options here; from having a real office presence, to
conducting a paper exercise with accounts and annual
Audit services, tax returns etc, all dealt with for
you at a set administration fee
Chinese Company:
1. At Incorporation: All Directors
must be Chinese Mainland or Sars Citizens (Sars = Hong
Kong & Macao). If a mixture, then one must be The
Company Secretary, who has to be a Mainland Chinese
person by Law
2. After the obligatory 30-Days inception
process, you can change all Directors, except the Chinese
person named in Law (Whom can be changed to a different
Chinese Mainland [and suitably qualified] National via
a different process).
3. You will need to deposit a set fee
which is currently ¥ 30, 000 (December 2008). This
must remain in your business account for 30 clear days,
after which time you can withdraw it all if you wish!
Specialist Agents will offer you 1-month loans of this
amount if required
This Gobbledygook actually means in simple English,
that you have to lay down the cash to make the Chinese
Company, then wait 30-Days for 'Somebody' to add you
personally as a Director = no problem, if they are honourable
- Otherwise you just lost your money and investment
Very Briefly:
1. Most Operators choose to have a
Hong Kong Registered Office, with a Branch Registered
in China, both created virtually simultaneously. Those
venturing into manufacturing will need a WOFE
There are many permutations of this equation, so we
will focus on the main versions for now - but contact
us for specific information related solely to your
personal or small company situation:-
To Recap the Essential Points
The theory is very simple, and investment nowadays is
being streamlined along the WOFE (Wholly Owned Foreign
Enterprise) conduit, although other Corporate mechanisms
still exist. There are also other tools such as a Representative
Office (Cannot Export or make Factory payments), and
Chinese or Hong Kong registered Companies (Nationality
restrictions)
First: location. Are you in an Economic
Development Zone? What is local and Regional Government
Policy? Local resources and manpower availability. Social
and environmental concerns. Transportation. Direct Export
permitted from the region? Rural locations may offer
tax and other incentives for you to build your factory
there. City centre offices are horrendously expensive
- do you really need one? Is your shop or office in
a good location for actually doing business?
Second: Investment.
How much do you have available? What do you want to
spend it on exactly? Is this the best way to promote
your business and profitability?
Third: Small Enterprises. Sole Traders
and very small companies should examine options of registering
in Hong Kong, or in China, or both. All of these option
will require a Chinese partner, and a small Chinese
registered company can only have you listed as a Director
after 30 days of existence, not at inception (Generalised).
Note: A WOFE normally comes with either
a general or manufacturers Export Licence! Your Agent
does have to apply for this (Paperwork exercise only),
and may overlook this important aspect completely! All
will require additional business licences, usually paid
directly in cash to local government officials = a couple
of thousand RMB each (Versions)
China Expats are very accomplished at forming Chinese
companies for Foreign investors and entrepreneurs =
we live here, we have done it ourselves, we know what
to do and how it all works. We will also tell you clearly
where your money goes, and why. We can also advise you
on your choice of Chinese partner (If required by law),
and have a fully qualified Chinese Corporate Lawyer
working in association with ourselves to advise on contractual
issues, etc (She is my very good friend). We can also
advise you on Export Agents, and Company Formation Specialists
both in Hong Kong and Mainland China
Of utmost concern for many, is the high level of trust,
blind-faith and investment - that you end up placing
with people you cannot even hold a simple conversation
with. You will definitely feel you need your own independent
translator |
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| This
information is as supplied by the Chinese Embassy in
UK, as dated 20th June 2008, and/or other reliable sources.
Please check this information yourself as it may alter
without notice, and whilst we try our best to ensure
it is correct, please do not hold us responsible for
any errors - this is intended as a simple guide only |
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