How to incorporate a wholly foreign owned enterprise (WFOE) in Zhuhai?

Introduction to WFOE

WFOE is one of the foreign direct investment vehicles in China. Its 100% shareholding is owned by foreign enterprises or individuals and it negates the need for a Chinese partner. However, some industries are restricted or prohibited to be invested by foreign enterprises or individuals; some industries are required to be invested by setting up joint venture with local partners. Foreign investors shall review The Catalogue of Industries for Guiding Foreign Investment or consult with their legal counsel prior to incorporating a WFOE.

Registered and Paid-up Capital

WFOE is a limited liability company, which means, the limited liability is recognized by the amount of registered capital injected into the business. The registered capital refers to the total amount of capital registered with the Zhuhai Administrative for Industry and Commerce (“ZHAIC”), i.e. the total amount of investment that the foreign investor undertakes to contribute. The contribution can be made with convertible foreign currencies, or with machinery and equipment or with industry property rights and proprietary technology. The amount of registered capital must be in keeping with the enterprise’s operation scale and must be approved by the examination and approval authority. The time limit for the foreign investor to make the investment contributions shall be clearly indicated in both the application for the establishment of WFOE and the enterprise’s article of association. The foreign investor may contribute the investment in installments, provided that the last installment shall be made within three years from the date of the issuance of the business license. The first installment may not be less than 15% of the total amount to be contributed by the foreign investor, and shall be made within 90 days from the date of issue of the business license. While cash contribution is legally allowed to be used as operational capital, the incorporator may not withdraw the registered capital during its operating period.

Procedure for Establishing a WFOE

1. Reservation of the Proposed WFOE Name with ZHAIC

Prior to any of the following applications, the Investors shall reserve a name for its proposed WFOE with ZHAIC. The name reservation is valid for 6 months. ZHAIC requires that a proposed name and two alternative names be provided.

2. Prepare application documents and submit them to Zhuhai Foreign Trade and Economic Cooperation Bureau (“ZHTECB”) for examination and approval.

The foreign investor is required to submit the following documents to ZHTECB:

2.1 a written application for the establishment of the WFOE;
2.2 a Feasibility Study Report and the Article of Association of the proposed WFOE;
2.3 the incorporation document of the investors or in the event that the investors are foreign individuals, their identification documents;
2.4 an original bank financial credit certification;
2.5 a list of the proposed chairperson and the members of the WFOE board of directors and appointment letters;
2.6 office lease agreement;
2.7 legal representative’s registration form;
2.8 name approval certification issued by ZHAIC;
2.9 such other documents as may be required by ZHAIC.

The above mentioned documents submitted to ZHAIC must be prepared in Chinese version. In the event that any documents are prepared in English such as bank financial credit certification, Chinese translation shall accompany the English documents.

3. Obtaining Approval Certificate from ZHTECB

As for the timing of approval, approval authorities are required to make its decision within 90 days from receipt of all the documentation. However, ZHTECB is able to give its decision within 5 working days upon receiving all the required documentation.

4. Registration for Business License

The foreign investor will need to register and apply for a business license to ZHAIC within 30 days after obtaining the approval certificate.

Once the business license is issued, the WFOE is deemed to be a legal entity duly incorporated pursuant to PRC law and will have full operational rights to conduct business in China within the business scope prescribed in its Business License.

5. Registration with Other Government Authorities

Registration is also required with other government authorities such as State Taxation Bureau and Zhuhai Local Taxation Bureau, Foreign Exchange Control Bureau, Customs and so on.

(Prepared for reference purpose only, and should not be construed as legal advice)

Author: Helen Yan - Attorney at Law, Member of PRC Bar Association
Tel: 0756-3229508 Mobile: 13928008926
Email: yanhailing@yahoo.com