Establishing A Solely Foreign-funded
Enterprise in China

Executive Summary about the Solely Foreign Funded Enterprises in China

Solely Foreign Funded Enterprise is one limited liabilities company which is solely funded by the foreign investor. All overseas legal person or natural person (more than one shareholder) can register such type of enterprise. All foreign funded enterprises in China are established on the basis of stimulus for the production type of enterprises; therefore, the enterprises carry out the exports-oriented production and introduce the advanced technology. However, with China’s accession to the WTO, the situation will change and the more service providers from overseas have established their offices in Mainland China. We have observed the emergence of many consulting and management firms, software developers and trading companies (at present, the trading companies are limited to the location of bonded areas).

The Advantages of Establishing A Solely Foreign-funded Enterprise in China

1. The foreign investor may independently control and easily manage the enterprise, which is useful for the realization of better efficiency in the operation, management and future development.
2. The enterprise may enjoy the preferential policies granted by the local governments.
3. The enterprise may officially carry out the business, encountering much less constrictions which are imposed on the representative offices.
4. The enterprise can directly issue the invoice to the clients and receive the income in Renminbi.
5. The enterprise can convert the profits in Renminbi to US dollars, and then remit to the overseas headquarters.
6. The enterprise can directly hire the local employees.
7. The enterprise can protect the intellectual property rights and know-how.

Business Scope

In China, for all industries, there are strict limitations. Foreign funded enterprises can only carry out the business activities within the allowed business scope, which is specifically carried on the Business License. If any changes are to be made to the business scope, application should be submitted and approved. Post China’s accession to the WTO, the Chinese governments have granted much wider business scope for the foreign funded enterprises.

Enterprise Management

Foreign funded enterprises have two-level management system: the Board of Director, which is the highest level of decision body of the foreign enterprise, and the General Manager, who is responsible for the general management of the company. The members of the Board of Directors at least hold one meet each year, and the directors meeting is presided over by the Chairman of the Board. The legally effective number of the directors should be at least 2/3 of the total number. If one director cannot take part in the meeting, then he/she can entrust one representative to vote on behalf of him/her.

The Tenure and Termination

Typical production-type foreign funded enterprise has the tenure of 15 to 30 years (or even more). If the tenure is necessary to be prolonged, then approval should be given upon the application. For those projects which involve comparatively investment amount, comparatively long construction period, low investment return rate, which produce complicated products, involve the introduction of key technology from the foreign investor and the production of internationally competitive projects, the tenures can be prolonged to longer than 50 years. Some individual projects which have been specially approved by the State Council of China can even witness the tenure of more than 50 years. The foreign funded enterprise can be terminated under the following situations, for example, due to heavy loss, the enterprise cannot continue the persistent operation or encounter the conditions of force majeure.

Documents Required for the Application

1. One original application letter for the establishment of solely foreign-funded enterprise in China;
2. The Business License and Business Commencement Certificate of the Foreign Investor (that is, the overseas company registration certificate and the business registration certificate);
3. Original credit certification issued by the bank of the foreign investor in English and Chinese (under some circumstances, the documents may be required);
4. Resolution of the Board of Directors of the foreign investor;
5. The photocopies of the ID Cards or the passports of the members of the Board of Directors of the foreign investor;
6. The Appointment Letter(s) for the Chairman and the members of the Board of the Directors;
7. The photocopy of the ID Card/Passport of the assigned Chairman of the Board of Directors (Legal Representative), two photos, and one curriculum vitae;
8. One original office place leasing contract (must be recorded at the leasing administration office of the leased office);
9. The feasibility report and the article of the purposed China-based company;
10. One original Copy of Enterprise Registration Entrusting Letter.

Application Procedures

Signing the agreement→paying the submitting the required materials→signing the files→submitting the required materials→signing the documents→obtaining approval documents issued by the foreign investment supervising departments→obtaining the approval documents from the environmental protection bureau→Business License issued by the local Administration for Industry and Commerce →financial registration→ handling the state tax and local tax registration at the taxation bureau→enterprise coding card→prepare the seals under the supervision of the local Public Security Bureau→carving the corporate seal(s)→Opening a bank account at the bank→handling the foreign exchange registration certificate→handling the customs registration certificate

Handling Time

It takes about twenty days to finish the work upon the submission of the whole set of application materials.

Documents Obtained When the Application is Completed:
Documents issued by the Foreign Economic and Trade Bureau(s)(The establishment of the project)/Approval Certificate issued by the Foreign Economic and Trade Bureau(s)/Original and Duplicate Copies of the Business License/Original and Duplicate Copies of the Local Tax and State Tax Certificate/State and Local Taxation Registration Forms/Registration Card for the Application of Seal Carving/Corporate Article/Environmental Protection Approval Documents/Enterprise Coding Certificate/Financial Registration Certificate/Foreign Exchange Registration Certificate/Basic Bank Account/Customs Registration Certificate/Corporate Seal, Private Seal and Financial Seal