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GENERAL INFORMATION ON CHINA COMPANY FORMATION

In doing business in China, there are several different registration classifications for foreign companies to consider. The main classifications are a Wholly Foreign Owned Enterprise (“WFOE”) and a representative office (‘RO”).

  1. SETTING UP A WHOLLY FOREIGN OWNED ENTERPRISE (“WFOE”)


A Wholly Foreign-owned Enterprise (WFOE) is a limited liability company set up in China through foreign investment only. The foreign investor has full managerial and operational control over the newly-established business. A WFOE requires a minimum capitalization, can generate income, pays tax in China and can repatriate profits.

Advantages in setting up a WFOE

  • Independence of operations without requirement of involvement of domestic Chinese investors.
  • Ability to formally engage in direct business operations and the scope of business is wider than a representative office.
  • Greater efficiency in operations, management and future development. It can set up its own legal representative office or branch office in other cities in China.
  • Greater level of intellectual property protection.
  • Investor’s parent company can be a newly incorporated company.


In respect of the legal requirement, we list the following points for your perusal:

  1. Company name

The construction of the name of a WFOE should include (i) name of company, (ii) nature of business (iii) location and (iv) legal status (such as limited liability company). The example of the company name will be “xxxx 電子(廣州)有限公司”.

The English name is not allowed to be registered in the Business License of the WFOE and the local authority will only look after the Chinese name (the official language in China) without interfere the use of English name.


  1. Registered capital

The minimum amount of the registered capital depends on the scope of business and location of the WFOE. Generally, a minimum amount of RMB100,000 to RMB1,000,000 is required for most types of business.


  1. Scope of Business

The scope of businesses is strictly controlled by the Ministry of Commerce. The WFOE can only conduct business within its approved scope of business which ultimately appears on its Business License. The business activities beyond the approved scope of business may result in cancellation of the Business License.


  1. Management organization

(i) Legal representative

A WFOE must have a legal representative who has the legal power to represent and enter into binding obligations on behalf of the WFOE. There is no restriction on the nationality and residency on the legal representative and the chairman, executive director or general manager can act as legal representative.


The appointment of a legal representative is required to be registered with the company registry authority and his/her name will also be on the WFOE’s Business License.


(ii) Director

A sole director or a board of director (comprise 3 up to 13 members) shall be appointed. There is no restriction on the nationality and residency of the directors. The director shall have overall responsibility for the day to day operations of the WFOE and shall report to the shareholder.


(iii) Supervisor

A sole supervisor or a board of supervisor (comprise 3 up to 13 members) shall be appointed to monitor the activities of the legal representative. There is no restriction on residency status of the supervisor. The shareholder and employee representatives of the WFOE can be act as supervisors. However, members of the WFOE’s board of directors or senior management may not simultaneously serve as supervisors.

  1. Registered/ Business address

A lease agreement must be signed before commencement of the registration processes, which means the registered office address must be confirmed in advance. The registered address should be the location of the WFOE’s operation. It cannot be in a residence building nor residence and commerce combined building.

  1. Time required for incorporation

Incorporation of a WFOE will take at least 3 months to complete. Details of the procedures for setting up a WFOE are set out under Appendix A.

  1. Form of capital injection

The injection of capital can be in form of monetary and non-monetary assets.


  1. Banking

WFOE shall at least set up the following types of bank accounts:


  • 1 capital account in foreign currency for the injection of registered capital
  • 1 current account in RMB for daily operation used and tax payment.






  1. ESTABLISHMENT OF A REPRESENTATIVE OFFICE (“RO”)


A Representative Office (RO) is not a legal person in China and the legal liability of RO should be borne by the foreign parent company a RO is deemed to be part of the foreign parent company and is not allowed to carry on direct business activities in China. It can only act as a liaison and promotion office for its parent company.

Advantages in setting up a RO

  • Simplicity and short time required for establishment.
  • No registered capital is required.
  • An extended arm of the parent company in developing full commercial operations in China.


To set up a RO in China, the parent company must be established for more than 2 years.


In respect of the legal requirement, we list the following points for your perusal:

  1. Company name

The construction of the name of a WFOE should include (i) location of the parent company, (ii) name of the parent company, (iii) location and (iv) legal status (such as representative office or office). The example of the company name will be “香港xxxx有限公司廣州代表處”.

  1. Registered capital

No specified requirement.


  1. Scope of Business

It can only engage in non-profit making activities, including business liaisons, product promotion, market research and technical exchange on behalf of its parent company.


  1. Management and local employment

(i) Chief representative

A RO must have a chief representative who is one of the legal representatives (limited to 4 representatives) of the RO and is approved by the board of directors of its parent company. There is no restriction on the nationality and residency on the chief representative.


(ii) Local staff

A RO is not allowed to enter into local employments. Local staff has to be hired through a foreign enterprise service corporation (“FESCO”) in China. The employment contract is signed between the staff and the FESCO. In the meantime, FESCO signed service agreement with the RO for provision of the staff.

  1. Registered/ Business address

A lease agreement must be signed before commencement of the registration processes, which means the registered office address must be confirmed in advance. The registered address should be the location of the RO’s operation. It cannot be in a residence building nor residence and commerce combined building.

  1. Time required for establishment

Incorporation of a WFOE will take about 1 month. Details of the procedures for setting up a RO are set out under Appendix B.

  1. Renewal of the license

The RO has to renew the license during 1 March to 30 June every year.


  1. Banking

RO shall at least set up the following types of bank accounts:


  • 1 account in foreign currency for receipt of fund from its parent company
  • 1 account in RMB for daily operation used



Appendix A

Appendix B