China Company Start-up Checklist Part I
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China Company Start-up Checklist, Part I
Introduction
This checklist focuses on establishing Joint Ventures in China, though it can be adapted for Wholly Foreign Owned Enterprises (WFOEs). Please be aware that this guide may not cover every scenario, as industry-specific regulations and local variations can impact the process. Here's a comprehensive overview to help you get started.
1. Assess Foreign Investment Permissions
First, consult the Foreign Investment Guidance Catalog. It categorizes sectors into Encouraged, Restricted, and Prohibited:
- Encouraged: These sectors, supporting energy efficiency, agriculture, or economic development, offer tax breaks and streamlined approvals.
- Restricted: Sectors using outdated technology or harming the environment require Joint Ventures. Foreign ownership is limited, and approvals are more complex and require higher-level government consent.
- Prohibited: Activities that harm the environment, threaten security, or convert agricultural land are not allowed.
To encourage development in central and western China, additional sectors are Encouraged only in these regions.
Note:
Even in Encouraged categories, a foreign investor usually needs at least a 25% stake to qualify as a Foreign Invested Enterprise (FIE) and access tax benefits. Aim for FIE classification as a Technologically Advanced or Export-oriented Enterprise for further advantages.
2. Evaluate Potential Joint Venture Partners
Seek assistance from a local consultant or attorney to identify potential partners, but ensure thorough due diligence.
3. Verify Enterprise Name Availability
Begin with company name pre-registration, adjusting for the enterprise type - Equity Joint Venture, Cooperative Joint Venture, or WFOE. Keep locality naming rules in mind. Upon approval, you'll receive a Name Pre-Registration Notice.
4. Project Approval Process
(a) Preliminary Submissions
Submit the Project Proposal, Preliminary Feasibility Study Report, and a Memorandum of Understanding to approval authorities. Emphasize your enterprise's business scope. If a state-owned enterprise is involved, a State-owned Asset Evaluation may be necessary. Approval typically takes about three weeks.
(b) Final Feasibility Study Report
After preliminary approval, both parties should prepare a final report with feedback from the authorities. In some cases, a comprehensive Project Proposal may replace this report.
(c) Final Submissions
Submit the following:
- Standardized application
- Final Feasibility Study Report
- Joint Venture Contract
- Articles of Association
Include additional documents like:
- Name registration notice
- Board of Directors list and IDs
- Management IDs
- Legal Representative forms
- Certificates of Incorporation
- Credit positions
- Environmental approvals
- Site certification
- Power of Attorney
- Any other required documentation
Decisions are typically made within 30 days.
(d) Obtain Project Approval Certificate
The Chinese party applies for this certificate, with processing taking about seven days.
5. Pre-reserve Legal Person Code
In Beijing, visit the Municipal Organization Code Administration Center with the Name Pre-Approval Notice and approval reply.
6. Enterprise Name Registration
Apply at the local Administration of Industry & Commerce with:
- Application letter and form
- Project Proposal
- Legal status documents
- Name Pre-Approval Notice
7. Business License Issuance
Apply to the State Administration of Industry & Commerce within 30 days of receiving the Project Approval Certificate. Include necessary documentation. The license, marking legal establishment, should be issued in about 15 days. Ensure it accurately represents your business scope.
8. Final Steps
Various procedures follow the issuance of the Business License, typically involving minimal fees.
Stay tuned for Part II where we'll cover the subsequent steps!
You can find the original non-AI version of this article here: China Company Start-up Checklist Part I.
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