Features of Wholly Foreign Owned Enterprises
The official language is Chinese, with English being used
normally in the major cities, including Beijing, Shanghai,
Shenzhen, Guangzhou and some other second tier cities.
The official currency is Renminbi (RMB) which is officially
pegged to a basket of major currencies. Renminbi to US Dollar
is trading at USD1=RMB8.04.
Type of Laws
Features OF Wholly Foreign Owned Enterprises
Type of Company Commonly used by foreign
Limited Liability Company (LLC), a Company type generally
referred to as a Wholly Foreign Owned Enterprise (WFOE);
The Wholly Foreign Owned Enterprise (WFOE, also know as Wholly Owned Foreign Enterprises, WOFEs) is a Limited
liability company wholly owned by the foreign investor(s).
In China, WFOEs were originally conceived for encouraged manufacturing
activities that were either export orientated or introduced
advanced technology. However, with China's entry into the
WTO, these conditions were gradually abolished and the WFOE
is increasingly being used for service providers such as a
variety of consulting and management services, software development
and trading as well.
Law on Foreign-capital Enterprises of the People’s Republic of China, Law of the People's Republic of China on Wholly Foreign-Owned Enterprises; Company Law of the People's Republic of China (revised 2005).
Restrictions on Trading
Wholly Foreign Owned Enterprises could only engage in those business activities (Business Scope
section) stated in the Articles of Association.
sample Articles of Association of a management consulting company registered in Shenzhen, China
sample Articles of Association of a technology company registered in Qingdao, Shangdong Province, China
One of the most important issues covered in the project documentation
is the business scope of the WOFE. Business scope is narrowly
defined for all businesses in China and the WOFE can only
conduct business within its approved business scope, which
ultimately appears on the business license. Any amendments
to the business scope require further application and approval.
Inevitably, there is a negotiation with the approval authorities
to approve as broad a business scope as is permitted.
General business scope usually includes, investment consulting,
international economic consulting, trade information consulting,
marketing and promotion consulting, corporate management consulting,
technology consulting, manufacturing, etc.
Power of Company
A China Company (Wholly Foreign Owned Enterprises, WFOEs) has all the powers of a natural person.
Language of Legislation and Corporate
Legislation in Chinese; Corporate documents could only be
prepared in Chinese.
Name Approval Required
Pre-approval is required for use of a name. It is possible
to reserve a name of a proposed WFOE by as long as six months. It is essential to check that there is
no similar or identical name on the register, which would
prevent the company being incorporated.
Shelf Company Available
Procedures to Incorporate
Incorporation procedures could be divided into two phases,
namely pre-registration procedures, registration procedures
and post-establishment procedures (please
click here for a description of incorporation procedures).
Time to Incorporate
Approximately four to six weeks from the submission of documentation
for most types of business activities. Company to be engaged
in some types of business activities may takes up to 6 months.
A name that is similar to or identical to an existing company.
A name that constitutes a criminal offence or is otherwise
contrary to the public interest. A name that implies government
See Also: Provisions on Administration of Enterprise Name Registration
Suffixes to Denote Limited Liability
Disclosure of Beneficial Ownership
Authorised and Paid up Share Capital
For the WFOE, the minimum amount of registered capital required
starting from RMB30,000 (about USD4,000), Under the
Company Laws, the paid-up capital is equal to registered capital,
Investors or shareholders must pay for the shares subscribed
and deposit the money into a specified bank account. The amount
of share capital so deposited should be audited by a firm
of certified public accountants.
See Also: Foreign Invested Enterprsies Total Investment and Registered Capital
A minimum of one shareholder is required whose details
are filed on the the local Adminsitration for Industry and Commerce. Corporate shareholders are
permitted. The shareholders can be of any nationality except
China and be resident anywhere except China in the world and
meetings can take place anywhere.
Director/Board of Directors
A wholly Foreign Owned Enterprise requires a minimum of one directorand full details of
these must be filed with the Administration for Industry and Commerce.
The sole dirctor is the executive director or managing director. The director can be of any nationality and be resident anywhere.
Corporate director is not allowed. There is no requirement
for board meetings to be held within China and directors may
be resident anywhere in the world except China.
If the investor decides to set up a board of director for their WFOE, then the minimum number of directors are 3 and the maximum are 13.
Supervisor/Board of Supervisors
A WFOE is required by the Company Law to appoint at least one Supervisor. The supervisor can be of any nationality and be resident anywhere.
Registered Office/Business Address
A company must maintain a business address in China where
the correspondence from Chinese Government can be served and
business is carried out.
China companies are required to prepare audited accounts under
the company laws. Also, a copy of the audited financial statements
is to be furnished with tax authority for tax report purpose.
The audited financial statements are not available to the
public or to the foreign authorities except those of a listed
company. We can provide complete supporting services after
incorporation, such as book-keeping and auditing and tax filing.
Terms and Termination
In China, terms of 15 to 30 years are typical for a manufacturing
WFOE (although some may have a longer term). It is also possible
to obtain extensions of the WFOE's duration. For projects
in which the amount of investment is large, or the construction
period is long and the return on investment low, projects
producing sophisticated products using advanced or key technology
provided by the foreign partner, or for projects producing
internationally competitive products, the term of WFOE may
be extended to 50 years. With special approval from the State
Council, the term may be even longer than 50 years.
The WFOE may be terminated under certain conditions. For
example, the inability of the WFOE to operate due to heavy
losses, or in the occurrence of an event of force majeure,
See also: Termination of a Foreign Invested Enterprsie
For further information, please feel free to
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