Wholly Foreign Owned Entity – WFOE formation in China is simpler, easier and faster now. The following aspects have changed.
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1 ) No more minimum registered capital requirement.
Actually, there has been no minimum registered capital requirement for company formation since 2014，as the new Company Law of PRC specifies.
For companies invested in by Chinese, no more minimum registered capital is required. However, in reality, minimum registered capital is still required by the local authority for WFOE formation. Actually, it’s not something unusual in China. It’s not something unusual in China since local authorities would rather wait until more detailed instructions are given out each time a new law becomes effective.
Yet in 2018, we found that minimum registered capital is not required even for WFOE formation. There is also no more deadline for capital injection, the period for capital injection could be as long as the duration of the WFOE.
2）No more pre-approval for general WFOE
Another headache for overseas investors is applying for pre-approval with the local commerce administration before applying for setting up the WFOE with the local AIC. To get the pre-approval, the investors are required to submit articles of association, feasibility reports, etc. Sometimes it may take 3 months or even longer get this pre-approval.
However, as of the 30th of June, 2018, pre-approval is not required anymore, as long as the business involved is not listed in Notes on Special Management Measures for the Market Entry of Foreign Investment (also referred as the “Negative List”).
After the business license is issued by the local AIC, overseas investors can carry out the record-filing procedure online by submitting related information via the “Comprehensive Management System” supervised by the Ministry of Commerce. Usually, a record-filing acknowledgement will be issued within three business days.
According to this Negative List, most businesses engaged by overseas SMEs are open to foreign investors and shall be managed according to the principle of “equal treatment of domestic and foreign investment”.
Besides, other procedures are also simplified, such as registration with State Administration of Foreign Exchange （SAFE）, which could be finished while opening the bank account. In some cities, the presence of the legal representative is not required any more to open the bank account, as long as the original passport of the legal representative is presented.
Of course, though the overall procedure is simplified, particular requirements vary from city to city. You may wish to contact us for specific information before you make any plans.
Source: Sophie Mao from ChinaLawHelp.com
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