Shenzhen Company Formation Service
Hotline: 86-755-82143348, Email: amyhuang@citilinkia.com
Many foreign investors want to setup WFOE in Shenzhen , (WFOE is that Wholly Foreign Owned Enterprise,that to sregister a Shenzhen WFOE need the original capital .Then in this article , in formation about Shenzhen WFOE registered capital will be introduced.
.jpg)
Under PRC law, all companies including foreign investment enterprises (FIEs), must have a minimum registered capital (registered share capital). For FIEs, in addition to the requirement for minimum registered capital the requirement for total investment is a unique legal requirement that has implications involving many aspects of such companies.
1.Interpretation of Registered (Share) Capital and Total Investment
According to the legal definitions, registered capital (share capital) refers to the total capital contribution of the shareholders that is registered with the relevant government agency. Total investment refers to the amount (including registered capital and funds borrowed by the company) that is required for the planned project as stipulated in the joint venture contract and the articles of association of the company.
2.Comparison Registered (Share) Capital and Total Investment
Registered capital (share capital) contribution is subject to more stringent regulation and supervision than total investment. Registered capital must be duly contributed and paid within the time limit stipulated in the company’s articles of association and/or joint venture contract and and is subject to the relevant regulations of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) that provide mandatory time limits for the contribution of different levels of registered capital.
In practice, part of the registered capital could be contributed after establishment. However, schedule for this shall be expressly prescribed in the articles of association and/or the joint venture contract. Relevant government authorities will make joint annual supervisions of every FIE. One aspect of such supervision is to verify whether the registered capital has been contributed subject to the prescribed schedule. Total investment, on the other hand, is not subject to any such contribution time limits or supervision, and the absence of the contribution of the balance amount between total investment and registered capital will not affect the validity of a FIE.
The same follows for the amount of registered capital and total investment. PRC law has no mandatory requirements for the amount of total investment that shareholders may stipulate by agreement. There is, however, a regulation promulgated in 1987) that stipulates the required proportion of registered capital to total investment. The regulation sets out the different proportions of registered capital contribution to total investment for each amount of total investment: the lower the amount of total investment, the higher the proportion of mandatory minimum registered capital contribution of the total investment .
In normal cases, it is prohibited to reduce registered capital and total investment. Especially, this applies in the following cases: (i) where the amount of registered capital after adjustment is less than the legal minimum for registered capital; (ii) while the FIE is involved in judicial or arbitration procedures; (iii) where the amount of total investment after adjustment is less than the minimum amount regarding production or operation set out in the joint venture contract or articles of association; or (iv) where the joint venture contract or articles of association provide that the foreign party may recover their investment and that the foreign party has already done so.
3.Implications of Total Investment
Total investment amount is the determining factor (as opposed to registered capital amount) for deciding which government agency has the authority to grant FIE approval. For setting up a foreign-invested manufacturing enterprise in which total investment is more than US$30 million, the applicant shall obtain approval from MOFTEC, while those with total investment less than this amount can be approved by the government authority at the provincial level. Notwithstanding the above, when such a FIE belongs to an "encouraged" industry and is self sustainable, in respect of foreign exchange, approval can be granted by the government authority at the provincial level if its total investment is more than US$30 million.
4.Minimum Amounts of Registered (Share) Capital Required
As stipulated in Shenzhen’s Corporate Law, minimum registered capital for limited liability corporations is based on the nature of the industry. For manufacturing industries it cannot be less than RMB 500 thousand. The minimum registered capital for various industries according to current laws is given below.
(1) Foreign funded banks, joint venture banks: minimum registered capital of RMB 300 million in a freely convertible currency;
(2) Foreign funded financial institutions, joint venture financial institutions: RMB 200 million in a freely convertible currency;
(3) Joint venture tour operators: not less than RMB5 million;
(4) Joint venture advertising agencies: not less than USD300 thousand;
(5) International joint venture freight forwarding enterprises: not less than USD1 million;
(6) Foreign funded investment oriented enterprises: not less than USD30 million;
(7) Foreign Limited Liability Joint Stock Companies: not less than RMB30 million.
5.Regulations Concerning the Ratio of Registered Capital to Total Investment
In the Interim Measures Concerning the Ratio of Registered Capital to Total Investment Amount of Sino-Foreign Equity Joint Venture Enterprises, the State Administration for Industry and Commerce (SAIC) provides the following policies regulating the ratio of registered capital to total investment for foreign funded companies (including a Wholly Foreign Owned Enterprise):
(1) If total investment is equal to or less than USD3 million, registered capital must be at least 7/10 of the total investment;
(2) If total investment is above USD3 million but less than or equal to USD 10 million, registered capital must be at least 1/2 of the total investment. If total investment is less than USD4.2 million, registered capital must be at least USD 2.1 million;
(3) If total investment is above USD 10 million but less than or equal to USD 30 million, registered capital must be at least 2/5 of the total investment. If total investment is less than USD12.5 million, registered capital must be at least USD 5 million;
(4) If total investment is above USD30 million, registered capital must be at least 1/3 of the total investment. If total investment is less than USD 36 million, registered capital must be at least USD12 million;
(5) Foreign funded companies that for whatever reason cannot meet the guidelines listed above should report to the Ministry of Commerce, and any corresponding modifications must be jointly approved by the Ministry of Commerce and the State Administration of Industry and Commerce.
6.Time Limit for the Contribution and Payment of Registered (Share) Capital
The table below details the amounts of registered capital and the time limit for contribution and payment:
Amount of Registered (Share) Capital Time Limit
USD0.5 million and less one year
USD0.5 to 1 million one and half a year
USD1 to 3 million 2 years
USD3 to 10 million 3 years
USD10 million and above To be decided by the approving authority
Note: In accordance with Shenzhen Compamy Law, at least 20% of the registered capital should be paid within 3 months from the date of registration.
Immediately after the remittance of registered capital, the WFOE should arrange a local accounting firm (public accounting registered for practicing in Shenzhen) to verifiy whether the registered capital has been contributed and paid in accordance with the regulations of the Shenzhen Company Laws and/or the WFOE’s Articles of Association (a process known asCapital Verification). The WFOE could use the registered capital for daily operation after the issuing of Capital Verification Report.
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling Shenzhen hotline at 86-755-82143348, or emailing to amyhuang@citilinkia.com.