Booklet of Wholly Owned Foreign Enterprises in China

Transcription

1 Booklet of Wholly Owned Foreign Enterprises in China Manivest Xingzhong (Shanghai) Consulting Co., Ltd. 宏杰兴中 ( 上海 ) 商务咨询有限公司 Unit 2402, Block A, Universal Mansion, 172 Yu Yuan Road, Jingan District, Shanghai , China Tel: (+86) Fax: (+86) shanghai@manivestasia.com.cn Website: MA-China/Taiwan Toll Free Line :

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3 Index Chapter 1:Business Entities in China 2 Chapter 2:About Shanghai 8 Chapter 3:Professional Business Process Outsourcing (BPO) Service 14 Chapter 4:Setting Up Wholly Owned Foreign Enterprises 16 Chapter 5:Setting Up a Joint Venture 22 Chapter 6:Setting Up a Representative Office 24 Chapter 7:The Maintenance of Wholly Owned Foreign Enterprises 29 Chapter 8 : Taxation in China 32 Chapter 9 : The Dissolution of Wholly Foreign-Owned Enterprises 38 1

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5 源於亞洲 基於亞洲 服務全球 Originated in Asia Based in Asia Serving the World Business Entities in China Our Offices Manivest Hong Kong Unit 511, Tower one, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong Tel: (852) Fax: (852) Mainland China/ Taiwan toll free line: Website: Manivest Shanghai Unit 2402, Block A, Universal Mansion, 172 Yu Yuan Road, Jingan District, Shanghai , China Tel: (86 21) Fax: (86 21) Website: Manivest Macao Manivest Asia, Limitada Rua do Campo N 202, Edf Associacao das Senhoras 7, Andar D, Macau Tel: (853) Fax: (853) Macao@ManivestAsia.com Website: General The principal forms of business entities available to foreign investors in Shanghai are: 1. Foreign Investment Commerce Enterprises (FICE) a) Equity Joint Venture (EJV) b) Cooperative Joint Venture (CJV) c) Wholly Owned Foreign Enterprise (WOFE) 2. Foreign Enterprises a) Representative Office (Rep. Office) b) Branches of Foreign Enterprise c) Enterprises other than those listed above that have establishments or places of business in China and engage in production or business operations, e.g. factory, places for exploitation of natural resources, contracted project sites. Laws and Regulations Relating to Formation of Business Entities When choosing among different forms of business entities, it should be noted that not all types of entities are available for all kinds of industries. The formation, organisation, management of most of these entities are governed by their respective laws and regulations, which are special laws relating to the particular form of business entities in question. In 1994, the first company law of China, which is a general law was enacted. Briefly speaking, special law should be used and general law should only be relied upon in circumstances when there is no provision in special law. The new company law of the People s Republic of China (PRC) took effect in January The new law brought about many changes to the old company law and aimed at improving commercial and corporate governance. The following laws are applicable when setting up business entities in China: General Law Company Law of the PRC ( 中華人民共和國公司法 ) Special Law Law of the PRC on Chinese Foreign Equity Joint Ventures ( 中外合資經營企業法 ) Law of the PRC on Chinese Foreign Cooperative Joint Ventures( 中外合作經營企業法 ) Law of the PRC on Enterprises Operating Exclusively with Foreign Capital( 外資企業法 ) 2

6 Special Law Legal Person (corporation) No of Owner Board of Directors Capital Required Different Forms of Business Entities Available to Foreign Investors EJV CJV WOFE Rep. Office Branch Law of the PRC on Chinese Foreign Equity Law of the PRC on Chinese Foreign Law of the PRC on Enterprises Operating Law of the PRC on Enterprises No special law applicable, Joint Venture Cooperative Joint Exclusively with Foreign Operating Governed only by Ventures Capital Exclusively with Foreign Capital Company Law Yes, Limited Liability Yes, Limited Liability Yes, Limited Liability No No Company Company unless specified Company but can be in on the constitution other forms upon application and approval Minimum 2 of which one Minimum 2 of which one Minimum1 N/A N/A must be Chinese national must be a Chinese national Yes, at least 3 persons Yes, at least 3 persons Yes at least 3 persons. For small scale company, no board of directors (BOD) is required, but there is a requirement of at least 1 executive director in the company. The executive director will be the legal representative of company. N/A N/A The minimum amount No minimum contribution required by that industry. is required from foreign party initially At least 25% must be contributed by foreign parties. The minimum amount No capital [See below] required by that requirement industry. Audit Required Required Required Required [See below] In accordance with the In accordance with the Solely borne by the N/A a Solely borne by the Profit and Loss Sharing proportion of capital contribution contract of the CJV foreign investor representative office should not foreign parent conduct business in China Branch In theory, branches of foreign companies can be registered under the Company Law but practically, since there is no implementation regulation relating to the registration and administration of branches in China, only certain industries are allowed to set up branches in China and only in certain locations. Currently, the only industries allowed to set up branches in China are: 1. Branches of foreign banks, which are governed by a special set of regulations implemented by the People s Bank of China (the Central Bank) and 2. Branches of foreign companies operating in one of the designated districts in Beijing, which are engaged in high-technology industry. Separate regulations promulgated by local government apply. 3

7 No. of Shareholders Minimum Registered Capital Capital Contributions Share Transfers Company Law of the PRC The company law of the PRC permits two types of corporate entities are: 1. Limited Liability Companies (LLC) 2. Companies Limited by Shares (Joint Stock Company) (JSC) LLC JSC Minimum 1 At least 5 promoters. The majority of the promoters must be domiciled within China. Established by promotion promoters must subscribe to all the shares Established by share offer promoters must subscribe to at least 35% of the shares. The remaining shares shall be offered to the public. RMB 30,000 dependent on the industry. More capital may RMB5,000,000 dependent on the industry. More capital be required for particular businesses due to specific may be required for particular businesses due to specific requirements under the law requirements under the law Includes cash, tangible assets, industrial property, nonpatented technology, or land-use rights. Industrial property assets, industrial property, non-patented technology, and Promoters can contribute in the form of cash, tangible and non-patented technology should not exceed 20% of land-use rights. Industrial property and non-patented the registered capital, except otherwise required bylaw technology should not exceed 20% of the registered capital, except otherwise required by law Requires the consent of the majority of shareholders if Must be made through a securities exchange. Promoter transfer to non-shareholders shares may not be transferred within 3 years of the establishment of the company. Directors, supervisors and management should not transfer their shares during their term of office Board of Directors 3 to 13 directors (with some exceptions) 5 to 19 directors Supervisory Committee Required: Not less than 3 persons. For small scale company: 1-2 For large company, not less than 3 EJV, certain CJV and WOFE are limited liability companies. Foreign investors cannot set up solely owned Joint Stock Company but they may set up Joint Stock Company with Chinese partners. Joint Stock Company can be established through promotion or share offering. Currently, PRC government encourages the setting up of JSC only in hightechnology production industries. The minimum capital requirement is RMB10 million and the foreign investor should not own less than 25% of the registered capital. General Procedures for Setting up Business Entities Application procedures for different types of Business Entities are different. Please refer to our respective Fact Sheets. In general, it is a two-step procedure: 1. Approval - applicant should obtain approval from the Ministry of Commerce of the PRC ( 中华人民共和国商务部 ) and the Administration Bureau of Industry and Commerce ( 国家工商管理局 ). 2. Registration - registration at the respective authorities. The foreign enterprise may engage an agent authorized by the Shanghai Administration of Industry and Commerce to handle the application on its behalf. 4

8 Approval Authorities Approval authorities are distributed among various State Council Departments ( 国务院 ) and are delegated to their local offices. Please refer to our Fact Sheets for information. Please note that the Central Government works on an approval system instead of a registration system. Criteria for Granting Approval Please note that the Shanghai Government works on an approval system instead of a registration system, that is, the application may be rejected without any reason given. Nevertheless, Shanghai has been reckoned as having the most liberal policies in approving establishment of business in the country. However, the following criteria have been considered beneficial to the City and therefore approval is more likely to be secured: The enterprise will use advanced technology and equipment The enterprise will use advanced management technique and has proven management experience, as reflected by the status of its parent company. The enterprise will export all or most of its produced products. Moreover, it is important that the necessary requirements be fulfilled and documents required by the government be fully and accurately submitted. Some of the requirements are: 1. The parent company/investor should have at least one to three years of operating results. 2. A business address (for commercial operations) located in a building, which is approved by the government to house foreign enterprises, is required. For manufacturing concerns, the factory should be located at a site approved by the government. 3. For non-chinese documents, certified translation by approved translator are required. 4. Notarization of statutory documents of the parent company may be required. Capital Requirement China adopts a registered capital system. All registered capital must be paid up in cash, physical assets or intangible assets. If the capital is not in the form of cash, then valuation according to regulations relating to the particular industry by a local valuation professional is required. Strict capital injection requirement must be fulfilled. Capital includes not only registered capital but also promissory loans from the parent company or financial institutions. Different regulations for different industries govern the minimum capital requirements and the schedule of injection. Local auditors should be engaged to issue audit report on capital injection. If capital is not injected according to the schedule, business license and certificate granted may be withdrawn. 5

9 Name The foreign enterprises operating in Shanghai has to submit their proposed names to their respective government departments for approval. Business Address The requirement is that the office/ factory must have a separate business address and must be located in commercial buildings (i.e. non-residential buildings) or sites approved by the government. Post Establishment Registration Procedures Upon the issuance of a business license, the applicant is required to complete postestablishment registration procedures which mainly involve: 1. Opening of bank accounts 2. Registration with the Inland Revenue 3. Application of a Enterprise Code ( 企業代碼 ) 4. Preparation of statutory stationery, including company chops 5. Registration with the State Statistics Bureau 6. Registration with the Customs Office. 7. Application for employment visas (for expatriate staff) 8. Capital injection and Verification of capital Time Required In general, it takes around 3 months to complete the necessary registration of entities in China. However, some special industrial entities may require different pre-establishment licenses from the relevant authorities. The length of application time of these licenses will depend on the project size. For details, please refer to respective fact sheets. The Role of Manivest Manivest can help investors to: 1. Prepare pre-establishment documents (minutes, power of attorney etc.), arrange translation, notarization and certification from various authorities. 2. Engage Registration Agent and supervise the registration work. 3. Draft the necessary project proposal and feasibility study report. 4. Engage auditors for the examination of capital injection and annual examination. 5. Locate suitable business address and arrange for leasing, set up office, including arranging telephone, fax and broadband, acquisition of office machine and furniture. 6. Employ local staff and complete formalities in accordance with labour laws. 7. Post -establishment registration work and open bank accounts. 8. Annual Joint Inspection Report. Through our offices and staff in Shanghai and Hong Kong, Manivest shall follow through the establishment process and save investors time and trouble. 6

10 How Manivest Can Help You The directors and management of Manivest are professionals in the offshore industry having served the Asia market for over 22 years. Through our offices in Hong Kong, Shanghai and Macao as well as our associates in other Asia cities, we offer a full range of comprehensive value-added services to professional advisors and their clients. Manivest offers the following services: Formation of corporate and business structures in Shanghai Incorporation of companies/structures in other onshore/offshore jurisdictions Full corporate management services Registered office, business office, mail redirection and business centre Accounting and re-invoicing services Tax and asset planning services Asset protection and preservation advisory services Business establishment services Market exploration services Manivest. Originated in Asia, Based in Asia, Serving the World Manivest Asia Limited 7

11 源於亞洲 基於亞洲 服務全球 Originated in Asia Based in Asia Serving the World About Shanghai 上海 Our Offices Manivest Hong Kong Unit 511, Tower one, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong Tel: (852) Fax: (852) Mainland China/ Taiwan toll free line: Website: Manivest Shanghai Unit 2402, Block A, Universal Mansion, 172 Yu Yuan Road, Jingan District, Shanghai , China Tel: (86 21) Fax: (86 21) Website: Manivest Macao Manivest Asia, Limitada Rua do Campo N 202, Edf Associacao das Senhoras 7, Andar D, Macau Tel: (853) Fax: (853) Macao@ManivestAsia.com Website: Shanghai is the financial hub of China. It is estimated that over 30% of the commercial activities in China goes through Shanghai and its adjacent areas. As of 31 Dec, 2007, more than 300 international corporations had set up regional offices in Shanghai, and the total account of foreign direct investment reached USD 7.92 billion in At present, Shanghai is the most populous area in China with the highest concentration of foreigners and foreign enterprises. In terms of regulation, it is the most flexible and open city, which allows more leeway for offshore business. With more than 200 years history for the financial industry, Shanghai was the biggest financial center in China and Far East s major commercial center in 1920s and 1930s. Since the last decade, Shanghai has regained much of its vitality and is gradually emerging as a financial center for the region once again. Expo 2010 in Shanghai Shanghai is the host city of World Expo As of April 2008, more than 200 countries and international organizations have confirmed to participate in the expo, which means that more than 70 million visitors will come to Shanghai from across the world. It is estimated that over USD 3 billion will be directly injected to the related industries, such as urban transportation, commerce, telecommunication networks and other constructions. The China Government expects the World Expo 2010 to bring approximately RMB 450 billion to Shanghai in economic development. Location Surrounded by the Yangtze River in the north, the East China Sea in the east, the Hongchow Gulf in the south and Jiangsu and Zhejiang provinces in the west, Shanghai is the mid-point of China s coastal lines and boasts the occupation of a perfect natural port. The city has a total area of over 6,300 square kilometers and is divided into 19 districts and 1 county. The most notable new developing district is Pudong New Area( 浦東新區 ). Population Shanghai has a population of over 18 million, representing 1% of China's total. In 2007, with a GDP per capita of USD8, Shanghai employed around 7.9 million people. City 1 At the end of

12 unemployment rate is 4.8%. By the end of 2007, over 70,000 overseas graduates and over 110,000 foreign professionals were working in the city. There are over 40 tertiary institutions and advanced vocational and technical colleges. Shanghai has a nine-year compulsory education system. The literacy rate is 93.8%. Most of the people speak Mandarin (the national language) and Shanghaiese. English is also spoken and used in business environment. In general, businessmen can find very good interpreters in various languages (including English, French, German) in Shanghai At present, more than 600,000 foreign investors and workers are working and living in Shanghai. Such figure include the 100,000+ permanent residents in Shanghai, as well as others who temporarily reside in Shanghai for work. Economy Shanghai s economy has witnessed fast and sustained growth in recent years. In 2007, the city's GDP reached USD8,940 billion. From 1998 to 2008, Shanghai had registered a double-digit annual GDP growth rate for nine consecutive years. Industry structure was optimized with the secondary and tertiary industries, which are supporting the economic development independently. Currently, finance and insurance, commerce, transportation, telecommunications, real estate and information technology are the key development sectors in Shanghai. Key Industries There are six key industries in Shanghai which contribute to 58% of the total industrial output, namely, information technology, automobile, petrochemicals, fine chemicals, equipment production and Biopharmaceuticals. There are five primary sectors which contributed to 62% of the total output in the tertiary industry, with finance contributing to 21% and ranking first, which are finance and insurance, real estate, transportation, postal and telecommunication as well as wholesale and retailing. Ideal Investment Region in China Shanghai is one of the most attractive cities in China for foreign investments, as it has many Development Zones, such as Pudong New Area, State-level Economic Technological Development Zone, State-level Export Processing Zone and Municipal Industrial Zone. These Development Zones offer favorable polices which boost the business environment for investors. Infrastructure and Investment Areas Shanghai has two airports. It is a major land, sea and air transportation centre in China. It has established stable trading routes with over 1,100 ports in over 200 countries and regions. The newly built Pudong International Airport has a capacity of 70 million passengers per year. 9

13 The city itself is divided into: Central Business District Lujiazui Finance & Trade Zone ( 陸家嘴金融貿易區 ) and the Bund financial trade zone( 外灘金融貿易區 ) make up the Central Business District in Shanghai. Over 100 domestic and foreign financial organizations have established in this district including the regional headquarters of many multi-national corporations, such as Siemens and Johnson & Johnson. Free Trade (Tax Bound) Zone Waigaoqiao Free Trade Zone ( 外高橋保稅區 ) is one of the biggest trade zones in China. In 2000, reported turnover was USD6.5 billion. The total amount of export and import was USD92 million; the goods throughput was 14,620,000 ton; the container throughput was 1,840,000 standard containers. Up to 2000, more than 600 storage enterprises have set up in this Zone. Pudong New Area Pudong is designed to be built as a multi-functional and radiant modern city. From 1990 to present, the total investment of capital construction in Pudong New Area amounted to USD 11 billion. The ten capital construction projects, represented by Pudong International Airport, Pudong Cyberport, Mass Transit (No.2), Waigaoqiao Electricity Generation Plant, East China Sea Natural Gas have been completed. Export Processing Zone Jinqiao Export Processing Zone ( 金橋出口加工區 ) now has become one of the most important bases of high-tech industry in Shanghai. In 2000, the total production value of the Zone amounted to USD55 Billion. The major high-technology products produced in this area are automobile parts, micro-electronics, computer accessories, telecommunication parts and accessories, bio-technology products and photo-electric products. High-tech Park 高科技園區 Occupying an area of 100,000 square meters, there are 16 governmental research institutions and 70 civil institutions and enterprises established in the Park up to the end of Financial Industry in Shanghai Shanghai is traditionally famous for its finance industry. It ranks top in the total number of licences granted to domestic and foreign financial institutions in China. 10

14 Shanghai has more than 3,300 Sino-foreign financial institutions, consisting of 70 operative foreign financial enterprises, 54 foreign banks and 15 foreign insurance companies. Pudong Financial Center Pudong Financial Center is one of the leading financial areas in China. It attracts financial professionals, financial institutions and banks to set up their offices there every year. Over 50% of foreign bank's transactions in China and nearly 50% of imports and exports take place in Pudong. Shanghai Stock Exchange (SSE) is the most preeminent stock market in China, with a total market capitalization of nearly RMB 27 trillion in SSE s plan to be listed in the international stock exchanges has attracted attention from the London Stock Exchange and the Tokyo Stock Exchange. Financial services at an international level can be expected in Pudong in the near future. As of September 2007, more than 470 financial institutions have moved to Pudong, Shanghai and the number is expected to increase to 600 and involving more than 200,000 employees in Legal System in China The legal system of China is similar to the European civil law system. The National People s Congress (NPC) is the ultimate law making body, whose functions are mostly delegated to the standing committee of the NPC, which enacts laws in accordance with the constitution of the PRC. State Council, together with its various administrative departments, are also authorised to adopt administrative regulations and measures. These administrative regulations and measures, as long as they do not contravene the relevant laws, are important sources of laws in China. The administrative bodies are the sole interpreter of the administrative regulations and measures. Their power to interpret the laws is only limited to or subject to its supervisory bodies and the court. In doing business in China, it is very important to check up all current laws and regulations applicable to the invested industry. As a promise to the WTO, China s laws have been made more transparent. In fact, all laws and regulations applicable in Shanghai can be downloaded from government s web site. The People s Courts are the judicial organs of the state. They are able to exercise independent power in accordance to the law. The People s Courts and their judges are appointed by the NPC and its Standing Committee. When a person believes that his/her right has been infringed by any administrative body, he/she can normally complain to its supervisory body, or resort to a review by the court under the administration law. 11

15 Currency and Exchange Control The currency of China is Renminbi (RMB). The currency is a non-convertible currency. The value of RMB or Yuan is fixed by the People's Bank of China on the basis of movements in a mixed basket of the currencies of its major partners. Although exchange controls still exist on capital account, which is used exclusively for the inward remittance of capital items, exchange controls on trade account or current account have in effect stopped to exist. It is very easy to remit dividends (after tax profit) from China. There is virtually no control on remittance of trade-related items. The foreign exchange rate system is a controlled and floating one, determined by market demand by the State Administration for Exchange Control (SAEC). Professional Support Many leading international professional legal and accounting firms have set up offices in Shanghai. Up to present, foreign law and accounting firms established in Shanghai can only accept business in relations to foreign laws and foreign accounting services. At present, over 800 law firms with 9,000 practicing lawyers, and over 100 CPA firms are serving in Shanghai to provide professional assistance in investments. Currently Citibank, HSBC, Standard Chartered and Overseas Chinese Bank have established their China s headquarters in Shanghai. Please note that foreign law firms and accounting firms established in Shanghai can only accept business in relation to foreign law and foreign accounting services. The Role of Manivest Manivest can help investors to: 1. Prepare pre-establishment documents (minutes, power of attorney etc.), arrange translation, notarization and certification from various authorities. 2. Engage Registration Agent and supervise the registration work. 3. Draft the necessary project proposal and feasibility study report. 4. Engage auditors for the examination of capital injection and annual examination. 5. Locate suitable business address and arrange for leasing, set up office, including arranging telephone, fax and broadband, acquisition of office machine and furniture. 6. Employ local staff and complete formalities in accordance with labour laws. 7. Post -establishment registration work and open bank accounts. 8. Annual Joint Inspection Report. Through our offices and staff in Shanghai and Hong Kong, Manivest shall follow through the establishment process and save investors time and trouble. 12

16 How Manivest Can Help You The directors and management of Manivest are professionals in the offshore industry having served the Asia market for over 22 years. Through our offices in Hong Kong, Shanghai and Macao as well as our associates in other Asia cities, we offer a full range of comprehensive value-added services to professional advisors and their clients. Manivest offers the following services: Formation of corporate and business structures in Shanghai Incorporation of companies/structures in other onshore/offshore jurisdictions Full corporate management services Registered office, business office, mail redirection and business centre Accounting and re-invoicing services Tax and asset planning services Asset protection and preservation advisory services Business establishment services Market exploration services Manivest. Originated in Asia, Based in Asia, Serving the World Manivest Asia Limited 13

17 14 源於亞洲 基於亞洲 服務全球 Originated in Asia Based in Asia Serving the World Professional Business Process Outsourcing (BPO) Service Our Offices Manivest Hong Kong Unit 511, Tower one, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong Tel: (852) Fax: (852) Mainland China/ Taiwan toll free line: Website: Manivest Shanghai Unit 2402, Block A, Universal Mansion, 172 Yu Yuan Road, Jingan District, Shanghai , China Tel: (86 21) Fax: (86 21) Website: Manivest Macao Manivest Asia, Limitada Rua do Campo N 202, Edf Associacao das Senhoras 7, Andar D, Macau Tel: (853) Fax: (853) Macao@ManivestAsia.com Website: Getting MORE with spending LESS through Business Process Outsourcing As a professional Business Process Outsourcing (BPO) provider in the Asia Pacific, Manivest is your strategic business process-outsourcing partner. We manage your business or business processes to help you stay focused on your core business, resulting in cost savings and increased efficiency for your enterprise in China. What we can offer you We offer BPO services in the following areas: Corporate maintenance and company statutory compliancy support Taxation arrangement compliancy services in China Business transactions handling (re-invoicing, trading) in China Human resources outsourcing for recruitment and staff training, payroll, compensation and benefits administration, and claims Legal assistance Advantages By using our BPO services, you will reach the following optimal performance and achievements in China: reduced risks and costs involved with entering into the China market attaining the status of a professional corporate in the China market by Manivest s full range of comprehensive and effective services in China full range of comprehensive support to your company in China operations the ability to manage your professional and knowledgeable working team effectively and easily for all incorporation and taxation matters in China updated practical knowledge of Chinese corporation and taxation laws, and regulations, through our trainings. You and your staff will obtain the most updated industrial information, as well as the knowledge needed to deal with various government authorities effective, convenient, and stable company development in China without committing extra manpower and investment through Manivest s internal working and management system increased company attraction as a result of an experienced and high-level performance, which in turn generates more opportunities, leads and sales 14

18 By outsourcing to an experienced BPO service providers like Manivest, you can focus on your core business, take advantage of industry best practices and save cost and time. 14 Our solution full operations out-sourcing You can outsource your business operations in China to us if you are not familiar with the operation processes, or cannot afford to spend valuable time and energy in managing those transactions and processes. We can also help you set up a company in China, that is, a Wholly Owned Foreign Enterprise (WOFE), and take care of your business from incorporation to operation on a contractual basis. During the contractual period, which would normally be 2-3 years, we shall take care of all activities of your company in China including recruitment, legal assistance, finance, accounting, payables, research and development. We would also assist you in developing your own internal working system, organization structure, company internal policies, operation manual and working manual. In addition, we can also provide assistance to support your operations, such as project management for ad-hoc assignments (e.g. training, trading, sourcing, liaison with suppliers). Ultimately, you can benefit from having a mature and stable business in China at the end of the contract period. Why Choose Manivest With more than 22 years of experience of professional services in serving international clients and other professional firms, we have the capability to deliver maximum value in BPO services tailored-made to your specific strategic goals. How Manivest Can Help You The directors and management of Manivest are professionals in the offshore industry having served the Asia market for over 22 years. Through our offices in Hong Kong, Shanghai and Macao as well as our associates in other Asia cities, we offer a full range of comprehensive value-added services to professional advisors and their clients. Manivest offers the following services: Formation of corporate and business structures in China Incorporation of companies/structures in other onshore/offshore jurisdictions Full corporate management services Registered office, business office, mail redirection and business centre Accounting and re-invoicing services Tax and asset planning services Asset protection and preservation advisory services Business establishment services Market exploration services Manivest. Originated in Asia, Based in Asia, Serving the World Manivest Asia Limited 15

19 源於亞洲 基於亞洲 服務全球 Originated in Asia Based in Asia Serving the World Setting Up Wholly Owned Foreign Enterprises Our Offices Manivest Hong Kong Unit 511, Tower one, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong Tel: (852) Fax: (852) Mainland China/ Taiwan toll free line: Website: Manivest Shanghai Unit 2402, Block A, Universal Mansion, 172 Yu Yuan Road, Jingan District, Shanghai , China Tel: (86 21) Fax: (86 21) Website: Manivest Macao Manivest Asia, Limitada Rua do Campo N 202, Edf Associacao das Senhoras 7, Andar D, Macau Tel: (853) Fax: (853) Macao@ManivestAsia.com Website: Foreign enterprises can establish Wholly Owned Foreign Enterprises (WOFE) in Shanghai upon application and approval. Characteristics of a WOFE Wholly Owned Foreign Enterprise (WOFE) is a limited liability company, the establishment of which is governed both by the Company Law of the People s Republic of China (PRC) and Law of the PRC on Enterprises Operating Exclusively with Foreign Capital ( 外資企業法 ). A WOFE can engage itself in approved business activities and issue tax invoices on its own. It is a corporation and a tax resident. All shareholders of WOFE should not be Chinese nationals, save for Hong Kong and Macao residents. Name The name of the WOFE is governed by Regulations on the Management of name of Enterprises ( 企業名稱登記管理規定 ). The proposed name should contain 4 components: (1) location; (2) enterprise name; (3) industry; (4) company limited. Please note that if over 50% Registered capital come from foreign investors, the name can be formed as enterprise name + industry + location + company limited, for example: ABC Trading (Shanghai) Company Limited. There are certain restrictions on the use of company names 1. It should be in Chinese. 2. Arabic numerals, foreign characters or alphabets are not allowed. 3. It should not have content which contradicts national policies, damages social ethics, religions and culture. 4. It should not have content which damages fair competition and misleads the public 5. Unless special approval is obtained, it should not contain the following restricted words : 中國 (China) 中華(Chinese) 全國(National) 國家(State) 國際 (International) is a restricted word unless it is used to designate the industry in which the company is operating, e.g. ABC International Trading Company Limited (XXX 國際 貿易有限公司 ). 16

20 the company is operating, e.g. ABC International Trading Company Limited (XXX 國際 貿易有限公司 ). The proposed name of WOFE must be approved by the Administrative Bureau for Industry and Commerce ( 工商局 ) before registration. 14 Approval Authorities The Ministry of Commerce of the PRC ( 中華人民共和國商務部 ) is the ultimate approving authority of foreign investments. Different cities have different requirements, regulations and threshold for approval. Taking Shanghai as an example, the following table illustrates the specific criteria in the approval of foreign investments in Shanghai: 1 Amount of Investment Category Location Approving Authorities Less than USD 30,000,000 Encouraged Unrestricted District or County Government Less than USD 10,000,000 Permitted Unrestricted Less than USD 30,000,000 Encouraged and Located in municipal Permitted Industrial Area 2 Less than USD 30,000,000 All included, except Restricted 3 Pudong New Area Less than USD 100,000,000 Encouraged and Permitted (the above two categories are not included) Unrestricted Less than USD 50,000,000 Restricted Unrestricted 4 More than USD100,000,000 /Projects specially approved by the State All included, except Prohibited Waigaoqiao Free Trade Zone Zhangjiang Hign-tech Park Jinqiao Export Processing Zone Shanghai Chemical Industry Park Linhai New Urban District Unrestricted Government of Pudong New Area Administrative Commission of Waigaoqiao Free Trade Zone Zhangjiang Hign-tech Park Office Administrative Commission of Jinqiao Export Processing Zone Administrative Commission of Shanghai Chemical Industry Park Administrative Commission of Linhai New Urban District Shanghai Foreign Investment Commission Minister of Commerce and National Development and Reform Commission (Central Government in Beijing) Manivest will provide you with the latest information regarding the approval criteria of the city/ district where your WOFE is located. The Chinese government has produced a list of Approved Investment Projects, which categorizes investment projects into four categories: encouraged, permitted, restricted and prohibited. Please note that the hightech industry, electronic industry, and service industry are all encouraged for foreign investments. Application Application is a three -step procedure. Step one: Application for intended name to be used by the WOFE with the Shanghai Administrative Bureau for industry and Commerce 17

21 Step two: Application for the approval of the proposed investment in China from Foreign Economic Relation & Trade with submission of the approval of feasibility study, constitution (memorandum and articles of association) A feasibility study will be prepared covering financing, site selection, technological process, equipments, raw material supply, market survey, economic results, foreign exchange, infrastructure facilities, etc. 14 Articles of Association should be prepared and submitted to the examination and approval authority. The examination and approval authority shall reply within 30 days on receipt of the feasibility study report and articles of association. After the feasibility study report and articles of association have been approved, the applicant shall apply to the examination and approval authority, which shall issue the Approval Certificate within 3 days after receiving the application. Step three: Registration with the Administration Bureaus for Industry and Commerce. The company may then register with Shanghai Administrative Bureau for Industry and Commerce within 30 days after receiving the Approval Certificate and apply for the business licence. Shanghai Administrative Bureau for Industry and Commerce shall issue the business licence within 10 working days to those projects approved by the examination and approval authority of Shanghai. The enterprise is deemed as established on the date when the business licence is issued. The foreign enterprise may engage an agent authorized by Shanghai Municipal Foreign Economic Relations and Trade Committee to handle its application on its behalf. Registered Address and Business Address Registered address is the official and legal address of a WOFE, which is attached to one of the administrative and tax district in Shanghai. It must be located in a non-residential building. A WOFE is not required to operate at its registered office. It can operate at another business address. Legal Representative Legal representative is the only representative of the company in Shanghai, appointed by the board of directors. Local representative is not required. Normally, if the legal representative does not intend to stay and work in Shanghai for over 90 days (within a year), no employment visa is needed. In case that the legal representative is a foreigner and intends to stay in China for over 90 days in a year, employment visa is needed. Capital and Shareholders A minimum of one shareholder, either a corporation or a natural person, who must not be Chinese national, is required. Capital must be of private nature, public offering of capital is not allowed. 18

22 China adopts a registered capital system. All registered capital has to be paid up in cash, physical assets or intangible assets. If injection of capital is not in the form of cash, valuation by a local valuation professional is needed, according to the regulations relating to the particular industry. 14 Strict capital injection requirement should be fulfilled. Capital includes not only registered capital but also promissory loans from the investor, parent company or financial institutions. Different regulations for different industries govern the minimum capital requirements and schedule of injection. Local auditors should be engaged to issue audit report on capital injection. If capital is not injected according to the schedule, business licence and certificate granted may be withdrawn. Directors A board of directors is not always required. For a small company, the general manager or legal representative is the CEO of the company and shall be treated as having the power of the directors of the company. There is no residential requirement for the directors. Status of the Parent Company The Shanghai Government works on an approval system instead of a registration system, that means, the application may be rejected without giving any reason. It is therefore important that the necessary requirements should be fulfilled and documents required by the government must be fully and accurately submitted. Some of the requirements are: 1. If the company documents are not in Chinese, certified translation by approved translator is required. 2. Notarization of statutory documents of the parent company may be required. Documents required for application The applicant should complete "Form for Establishing Wholly Owned Foreign Enterprise" and submit together with the following documents: 1. An application duly signed by the chairman of the board or general manager of the foreign enterprise with the following details: name of the WOFE, name of the legal Representative, scope of business, duration and address, etc; 2. Statutory documents of the parent company issued by the authorities of the country or region of origin; e.g. Constitution, Certificate of Incorporation, Business Certificate, Tax Certificate 3. A letter issued by a bank which has business relations with the applicant certifying its financial and credit standing; 4. The list of Legal Representatives and their curriculum vitae. 5. A feasibility report 19

23 14 Post-establishment Registration Procedures Upon issuance of the Registration Certificate, the applicant is required to complete postestablishment registration procedures which mainly consist of: 1. Opening bank accounts 2. Registration with the tax department 3. Application of a Enterprise Code ( 企業代碼 ) 4. Preparation of statutory stationery, including company chops 5. Registration with the State Statistics Bureau 6. Registration with the Customs Office 7. Application for Employment Visa (For foreign representative) Time Required It normally takes 60 days from receiving instructions and full particulars and necessary documents from the applicant to issue the Approval Certificate. Thereafter, the Postestablishment Registration procedures take about 60 days. Annual Examination Annual examination is a system that is peculiar to corporations in China. The Shanghai Administrative Bureau for Industry and Commerce, together with other departments concerned (e.g. tax authority, customs, foreign trade) are authorised by law to conduct an annual examination of the enterprise. In brief, the objective of the examination is to investigate whether the enterprise abides to the laws, regulations and the conditions for granting its licences. In particular, the examination will concentrate on the following areas: 1. Registered capital whether the capital has been paid up according to the constitution and conditions for application and in the proposal. 2. Operations whether the company is still operating within the approved activities, at the approved location and within the approved scale and employees. 3. Registration details whether there are any changes in registration details. 4. Financial details whether the company is still a profitable enterprise, whether necessary tax and customs duties are paid and whether foreign exchange is used according to government policies and regulations. The examination is in the form of a report to be completed by the enterprise concerned annually (together with the payment of an annual fee). The Shanghai Administrative Bureau for Industry and Commerce will examine the report and make necessary enquiries. The annual examination will be conducted from March to June every year. Those enterprises unable to fulfill the requirements of the annual examination may have their business licences revoked. 20

24 Audit and Accounting Accounting records are required to be kept in Chinese or in another language with Chinese translation. Annual audit by a local auditor is required. The Role of Manivest Manivest can help investors to: 1. Prepare pre-establishment documents (minutes, power of attorney etc.), arrange translation, notarization and certification from various authorities. 2. Engage Registration Agent and supervise the registration work. 3. Draft the necessary project proposal and feasibility study report. 4. Engage auditors for the examination of capital injection and annual examination. 5. Locate suitable business address and arrange for leasing, set up office, including arranging telephone, fax and broadband, acquisition of office machine and furniture. 6. Employ local staff and complete formalities in accordance with labour laws. 7. Post -establishment registration work and open bank accounts. 8. Annual Joint Inspection Report. Through our offices and staff in Shanghai and Hong Kong, Manivest shall follow through the establishment process and save investors time and trouble. 14 How Manivest Can Help You The directors and management of Manivest are professionals in the offshore industry having served the Asia market for over 22 years. Through our offices in Hong Kong, Shanghai and Macao as well as our associates in other Asia cities, we offer a full range of comprehensive value-added services to professional advisors and their clients. Manivest offers the following services: Formation of corporate and business structures in Shanghai Incorporation of companies/structures in other onshore/offshore jurisdictions Full corporate management services Registered office, business office, mail redirection and business centre Accounting and re-invoicing services Tax and asset planning services Asset protection and preservation advisory services Business establishment services Market exploration services Manivest. Originated in Asia, Based in Asia, Serving the World Manivest Asia Limited 21

25 源於亞洲 基於亞洲 服務全球 Originated in Asia Based in Asia Serving the World Setting Up a Joint Venture Our Offices Manivest Hong Kong Unit 511, Tower one, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong Tel: (852) Fax: (852) Mainland China/ Taiwan toll free line: Enquiry@ManivestAsia.com Website: Manivest Shanghai Unit 2402, Block A, Universal Mansion, 172 Yu Yuan Road, Jingan District, Shanghai , China Tel: (86 21) Fax: (86 21) Shanghai@ManivestAsia.com.cn Website: Manivest Macao Manivest Asia, Limitada Rua do Campo N 202, Edf Associacao das Senhoras 7, Andar D, Macau Tel: (853) Fax: (853) Macao@ManivestAsia.com Website: Joint Venture (JV) is an entity formed by a Chinese party and foreign party for conducting business activities in China. As the Chinese government encourages foreign investors to use JV to obtain exposure, advanced technology and new management skills, many foreign investors favor operating with JV as an investment vehicle to enter into the Chinese market, especially for those restricted industries, such as infrastructure, finance, automobile, entertainment. Characteristics of a Joint Venture Equity Joint Venture (EJV) EJV companies have capital investments from both local and foreign companies. The percentage of the capital investment and registered capital determines the amount of profit and risk for both the foreign and local company. Cooperative Joint Venture (CJV) CJV companies are also a form of partnerships between both local and foreign companies. However, the amount of risk and profit shared and assumed by both parties are not determined by capital investment and registered capital, but by the CJV agreement. In general, each party may contribute non-cash intangibles as capital by agreements. For example, the local company usually provides the labour, land use rights and factory buildings, while the foreign company brings in the necessary technology and key equipment, as well as the capital. Registered Capital The proportion of the foreign party s contribution to the registered capital of an EJV shall not be less than 25% in general. For CJV, there is no minimum required foreign contribution required. The contributions can be labour, resources or services. Board of Directors The Joint Venture company should form a Board of Directors (BOD), which is the highest authority of the company and shall decide all major matters concerning the JV. The BOD should have consist of at least 3 directors. The board shall convene a board meeting at least once a year. Supervisory Committee 22