Incorporation of Foreign Invested Enterprises

Forms of Incorporation

An enterprise established by foreign enterprises or individuals in China shall, in general, be in one of the following forms:

• • Wholly Foreign-owned Enterprise A Wholly Foreign-owned Enterprise is a limited liability company invested by foreigners, with no limit on the number of shareholders, and may engage in such industries as trading, consultation and manufacturing.
• • Sino-foreign Equity Joint Venture A Sino-foreign Equity Joint Venture is a limited liability company, co-invested by Chinese enterprise and foreigner (businesses or individuals).
• • Foreign Representative Offices of Foreign Enterprise (Foreign Representative Office for short)

The investor of a Foreign Representative Office must be an enterprise registered and existing abroad for at least two years. It only serves as a liaison on behalf of the headquarters and is excluded from substantial business activities in China.

Basic Incorporation Procedures

• • Submit articles of association and feasibility analysis report
• • Apply for approval certificate for foreign invested enterprises
• • Apply for business license
• • Have official seal, financial seal and legal representative seal engraved
• • Apply for foreign exchange business registration
• • Apply for customs registration and record, etc.

Industrial and Commercial Annual Report

Foreign invested enterprise shall undergo an industrial and commercial annual report from 1 January to 30 June every year from the following year after the incorporation.

Joint Annual Report

Foreign invested enterprises shall undergo a joint annual report generally from 1 January to 30 June every year from the following year after the incorporation (the specific time is subject to the announcement by Ministry of Commerce). The joint annual report involves such government departments as Industrial and Commercial Bureau, Finance Bureau, National Bureau of Statistics, Local Tax Bureau, National Tax Bureau and so forth.

Merger and Acquisition

As the China market continues to grow, more foreign enterprises choose to enter this market through merger and acquisition. Foreign enterprises shall observe the stipulations of Interim Provisions on Foreign Investment Orientation and Catalogue of Industries for Foreign Investment, and not be the sole proprietor, holding side, or predominate side of the restricted or banned industries (for instance, electric power and radio and television, etc.) and own an equity not more than 25% of the new enterprise's registered capital. The required time for approving a merger and acquisition is about 45 working days, which may be prolonged or such merger and acquisition may be refused if the Ministry of Commerce deems that such action may render trade monopoly or hamper market fair competition.