China is one of the world’s leading economies and thus has a
certain charm for investors and businessmen from all over the world. The
country also provides an attractive business setting for foreigners to set up
new businesses or move their current businesses to China. Before company
registration in China, it is important that you come up with a good business
plan that details the important information about your business in China.
Types of Companies
- Sino-Foreign Equity Joint Ventures (EJV)
This is a limited liability entity which means that the company
can sign contracts and sue or be sued. In China, it is important to have
Chinese partners willing to jointly invest in and manage the EJV along with
their foreign counterparts. Both the parties contribute capital, either in cash
or in kind. In some cases, the partners can also contribute in the form of
equipment, right to use land, office or factory premises by mutual agreement.
They can also choose shareholding in accord with the percentage of equity that each
party has brought into the company. Shareholders, both local and foreign, are
entitled to dividends.
- Sino-Foreign Cooperative Joint Ventures (CJV)
A CJV is a partnership. There are two types of CJV. In the first
type of CJV, each partner remains a separate legal entity and takes on
liability in agreement with the applicable provisions of Chinese civil law.
This type of CJV has a joint management setup giving equal rights to all
partners.
In the second type of CJV, all of the partners put in their investment
and delegate non-investing staff to form a single company that has limited
liability.
In both the cases, the partners can choose the rate of recovery of
investment by mutual agreement. Also profits are shared equally, irrespective
of the each partner’s capital contribution.
- Wholly Foreign-Owned Enterprises (WFOE)
This is a limited liability company with complete legal person
status. Foreign investors can set it up independently and don’t need Chinese
partners to manage the activities of the WFOE.
Company Registration China: The Procedure
Start by getting a notice of pre-approval for the company name.
This approval can be had by filling out the relevant form at the local
Administration of Industry and Commerce (AIC). Then you will need to open a
preliminary bank account. Chinese law states that a new business must open a
bank account to deposit the initial capital contribution. This initial
contribution has to be at least 20 percent of the planned registered capital of
the company.
Next, obtain an organization code certificate. It is the job of
the Technology Supervision Bureau (TSB) to issue this certificate to newly
registered Chinese companies. You will also need to register with the Tax and
local Statistics bureaus. This must be done within 30 days of receiving your
business license. This can be done via filing a registration with the local
Statistics Bureau.
Lastly, in order to complete your company registration in China,
you will need to set up a separate business bank account.
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