Opening a WOFE in China | Article – HSBC VisionGo
As the GBA holds great potential for businesses, Fastlane is keen to help clients take advantage of the growing opportunities in this region.
The article below will discuss how to expand into China through the incorporation of a WOFE.
What is a WOFE?
Wholly Owned Foreign Enterprises (“WOFE”) is the most favoured investment vehicle for non-Chinese enterprises. Pursuant to Chinese corporate laws, WOFE’s are the China-based business entity designated for non-Chinese enterprises to establish their limited liability company in China. Although there are multiple company structures available to non-Chinese enterprises, WOFE’s are the most favoured investment vehicle.
What is the process for incorporating a WOFE?
The first step to incorporating your WOFE is to decide on an appropriate name. China maintains legislation which dictates certain requirements for a company name which must be adhered.
Company names must incorporate the following:
- Administrative region name of the company’s incorporation
- Brand name
- Industry or business the company is operating in
- The company name must include “Company Limited”
Chinese legislation outlines certain restrictions in respect of what is not allowed in a Company name or what may require special approval from government authorities. Generally, names which may mislead consumers or hinder fair competition, damage or challenge Chinese national unity, policies, social ethics, culture or religion are not allowed.
In addition, special characters are not permitted and certain words which can imply business operations in certain industries (e.g., banks or insurance companies) require special approval. Lastly, words such as ‘China’, ‘National’, ‘State’ or ‘International” also require special approval.
2. Obtain Registered Office Address
When incorporating a WOFE, applicants must provide documentation stating that it has a registered office address in which the business will operate from. Applicants should submit a document showing this registered address in the form of a copy of the lease contract or a property deed.
It should be noted that under current Chinese laws and regulations, it is prohibited to apply for incorporation when utilizing a virtual office as a registered office address.
3. Apply for Business License
Upon receiving approval for a WOFE name and obtainment of a registered office address, a business license must be obtained from the local State Administration for Industry and Commerce (“SAIC”).
To prepare for document submission, it is important that applicants compile the following documentation:
- Documentation evidencing that their company name has been approved
- Proof a registered office address
- Business scope (the incorporated WOFE will only be able to conduct business activities the outlined business scope)
- Identity documents of the shareholders
- Proof of registered capital to be injected
On average, it takes approximately 7 business days to obtain a business license. Although there are post-registration activities to complete, a WOFE is deemed to be a legal person duly recognized to conduct business under Chinese law upon obtainment of a business license. The WOFE will then have full rights to operate as a business in China within the scope of its Business License.
The location you incorporate your WOFE in will have considerable effects on your business operations. Different geographic regions in China may possess varying subsidies and initiatives to support start-ups and SME’s. In addition, these geographic regions within China may even offer different consumer markets for certain industries. To ensure applicants can take full advantage of these subsidies and incentives, it is recommended to take time to research which geographic region is most suitable to your firm and your business intentions.
When drafting your WOFE’s business scope, careful attention should be given to defining what business operations your WOFE will perform. The Chinese government maintains the right to prohibit or restrict your business activities if your business scope does not align with Chinese laws and regulations. To avoid any unnecessary complications upon the commencement of your business operations, make sure that your business scope aligns with your long-term goals of your company.
Although there are no rules dictating the minimum amount of registered capital for a WOFE, it is recommended that the initial investment be sufficient to support the WOFE’s proposed business activities. A sufficient initial investment should allow the WOFE to operate in China for at least one year, without the risk of its insolvency for its operations.
Do you have additional questions regarding how to incorporate a WOFE? Are you interested in learning about the various benefits to incorporating a WOFE? If so, please feel free to contact FastLane for assistance!