China WFOE Incorporation service
Hotline: 86-755-82143348, Email:amyhuang@citilinkia.com
The WFOE setup procedure is quite complex and takes several months to complete. The WFOE setup process can be broken down into two stages: business license application and post license registration.
• Business license application: There are three steps in this process. Before the WFOE can apply for its business license, it needs to apply to get its name approved, then it need to apply to be permitted to invest in China. Only after receiving the investment permit, the WFOE can apply its business license. These three procedures usually take about 5-6 weeks to complete. For WFOEs in restrictive industries or require additional licenses, this process can take longer to complete.
• Post license registration: Once the WFOE receives its business license, it is legally setup. However, it is still months away from been fully operational. During the post license registration period, the WFOE will need to register with various government agencies (statistics bureau, finance bureau, tax bureau etc), open its bank accounts, and make its initial registered capital (investment) deposit. These registrations will normally take around 2 month to complete. For trading WFOEs, it also needs to register with the customs office, which will take around 5 weeks.
Requirements
There are several prerequisites that investors must meet to qualify for WFOE setup. Some industries have higher standards for company setup and require higher qualifications. Below is a list of the minimum requirements for WFOE setup:
• Registration address: Before applying for the WFOE setup, the investing company must first sign an office rental lease minimum for one year in a commercial building. Based on the location of the office, the investor must apply for the WFOE setup at the local district’s foreign investment and business bureaus;
• Registered capital: Registered capital is the amount of investment capital that is required for the WFOE. The amount should be able to cover WFOE’s operational costs until it reaches breakeven. By law, the minimum registered capital for companies is 30,000 RMB, and different industries could have different its own standards. Due to the cost of operation has gone up significantly in recent years, 30,000 RMB is not deemed to be sufficient fund for startup companies. In Shanghai city area, the government will expect WFOEs to invest at least 100,000 USD before giving license approval. The registered capital is not a deposit; it is working capital that the WFOE can use for its operations. The WFOE must invest at least 20% of the registered capital within three month of getting its business license. 100% of the registered capital needs to be invested within two years of getting the business license.
Both the registration address and registered capital are required for WFOE setup. And in both cases, the requirements can vary based on the type of business the WFOE engages in. Based on the industry, there could be additional license or requirements the investors must meet or acquire before applying for the WFOE business license.
The WFOE has also requirements on its management staff:
• Legal Representative: The WFOE must have one and only one Legal Representative. The Legal Representative must be an individual and cannot be a corporation. There is no restriction on the nationality of the Legal Representative, but he or she must be within the Chinese working age requirement (under 55 for women and under 60 for men). The Legal Representative is legally responsible the WFOE’s actions and has the highest authority of anyone within the WFOE. Legal Representative can open and close bank accounts, move funds, and sign contracts on behalf of the company. The Legal Representative also must take at least another position as the director or the general manager of the WFOE, or both.
• Board of Directors: For WFOEs, the Board of Directors (BOD) must contain odd number of directors starting from 3 directors, up to 13 directors. The directors are appointed by the parent company/investor, and can be of any nationality. The directors do not need to work or reside in China, and they do not need to receive any stipends. If the WFOE chose not to have a BOD, then the WFOE can just appoint one individual to act as the Managing Director of the company.
• General Manager: General Manager (GM) is the person overseeing the operations of the WFOE. The GM can be of any nationality and must fits the Chinese labor regulation for working age.
• Supervisor: The supervisor’s responsibility is to supervise the WFOE’s activities to make sure that the WFOE does not do anything to harm investor’s interests and to stay compliant within the law. The Supervisor has the ability to check financial records of the WFOE, and call BOD meetings to bring any red flag activities to the director’s attention. The Supervisor can be of any nationality as long as he/she is not a member of the WFOE’s management team (to avoid conflict of interest)
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling China hotline at 86-755-82143348, or emailing to amyhuang@citilinkia.com.