1.What is WFOE?

WFOE, means Wholly Foreign Owned Enterprise. It refers to the company established by foreign shareholders according to China laws.

The shareholders of a WFOE could be a foreign company, economic organization or individual person. WFOE is registered in China according to China laws and rules, it is an independent economic entity with independent operation, and independent accounting and independent bear legal responsibility. WFOE is a limited company but not a branch company, its shareholders shall be responsible for the company to the extent of the capital contributions they have paid.

2. WFOE Types

The enterprises can be classified into domestic company and foreign company/ WFOE according to the nationality of their shareholders.
According to the different forms of shareholder liability, the enterprises can be classified into limited company, partnership, foreign representative office, etc.
According to the business scope or business purpose, WFOE can be classified into

●Consulting WFOE (all services & consulting business)

●Technology WFOE (Design, multi-medias, IT, networks etc.)

●Trade WFOE (import and export of some products or even local trade only)

●F&B WFOF (Restaurant, bar, coffee shop, drink shop, snack shop etc.)

●Manufacturing WFOE

All China companies have clear business scope and must operate their business based on approved business scope. Basically, the business scope will decide the WFOE type, requirement, procedure and lead time. So, if you want to setup your company in China, please do self-evaluate what business you’d like to do firstly.

3. The Company Law of P.R.China was amended in 2014

1) Change the paid-in registration system of registered capital into the registered capital subscribed system. The company shareholders could independently decide the amount of capital subscribed, the way of capital contribution and the time limit of capital contribution, which should be recorded in the articles of association of the company.

2）Simplify registration items and documents for company registration.
The subscribed capital contribution and paid-in capital of a limited liability company shall no longer be listed as registered items. No need to submit capital verification report for capital contribution.

3) Created National Enterprise Credit Information Publicity System and established an annual report Publicity System for better supervising enterprises.

4. Basic Requirements on WFOE Registration
No Matter what WFOE type finally you need, below items are very important for your pre-consideration.

01 Shareholders
If the shareholder is individual persons, then his/her original passport need to be checked by government; If the shareholder is overseas companies, its official Certificate of Incorporation including articles of association need to be authenticated by China embassy or consulate stationed in the same country.

02 Company Name
In China, all the WFOEs will have both English name and Chinese name, and government just paid more attention to check your Chinese company name, so you can decide English name directly as whatever you like, suggest ending with LIMITED. For English name, it could have China, Shanghai or even without country/ city name, more flexible for you; For Chinese name, you must follow the fixed name format with city name Shanghai in it if you register your company in Shanghai. Once Chinese company name approved, it’s only valid within 6 months before you applied for business license.

03 Business Scope
Please consider what business you’d like to do now and what’s your 5 years plan, then we will help evaluate to make perfect business scope for you. Anyway, it need follow “Catalogue of Encouraged Foreign Investment Industries” released by the State Council. If your business includes food, alcohol, medical instrument or hazardous chemical substance, it will cause special permit with long time, physical office and warehouse are required.

04 Registered Capital
1) According to the newly amended company law released in Jan 2014, your registered capital is allowed to be contributed within 30 years after business license released, which was called the registered capital subscribed system.
2) it’s the only legal way to receive foreign currency as registered capital to China without any tax, you can use your registered capital for your business operation purpose after completed the verification process at bank. If you indeed need capital to startup your business, please do make your budget and make it could the amount could cover your first 6 ~12 months ‘cost.
3) During the 30 years period, you can decide whether contribute the capital to China. It’s flexible for you because you were protected by China Company Law.
4) You can sell or close this company even without registered capital contribution.

05 Registered address
You have two options for registered address.
Option#1 is to rent physical office or shop directly as registered address, then all the licenses will be indicated with this address, all information is perfectly matched.
Option#2 is to use virtual address for company registration. The key benefit is you can rent or change your physical office flexible in the future, and possibly get tax refund from the office provider / local district government.

06 Legal representative
You can have only one legal representative for your company, this person is very important for now and future, because tax bureau and bank may request to meet your legal representative in person. Legal representative could be concurrently as executive director and General Manager.

07 Supervisor
Foreigner or Chinese both okay. Need your company supervisor’s passport copy, China mobile number and email address for registration purpose; Company Supervisor has right to check the financial affairs of the company and supervise company management team’s performance in order to protect shareholders’ benefit. For small-medium size companies, supervisor is for processing only, who will not really involve in your company management, no need to pay salary.
Legal representative, executive director and general manager shall not concurrently hold the position of supervisor.

08 Finance responsible person
Finance responsible person must be a Chinese. Need your Finance responsible person’s ID copy, China mobile number and email address for registration purpose; this person’s name could be changed after company established during tax registration at tax bureau.

09 Main contact Person
Need this person’s ID card copy, China mobile number, email and contact address.

10 Photo of legal representative
Need the half-length photo of legal representative taking with his passport.