FAQ

It is true that the minimum registered capital required is lower since December 2004. In fact, the minimum registered capital required for wholly-owned foreign enterprise or joint venture company with retailing activities is RMB 300,000 and 500,000 for wholesale activities.

It is common in most Western countries to not require companies to have a company seal. From our past experience, documents without a seal affixed submitted to Chinese authorities have been accepted but a risk remain that the FETB and AIC reject them.

This is a common practice for many foreign companies although under the Chinese Income Tax Law, employees shall also pay income tax on salary paid overseas. However, please note that in practice, it is almost impossible for the Chinese tax authorities to verify whether a foreign employee has been paid a salary overseas. Another option may be to hire this employee via a consultancy agreement and pay him professional fees in Hong Kong or Singapore and expenses in China. These expenses paid to him shall be taxed under PRC law though.

Unfortunately, these types of companies can’t benefit of income tax advantages if they are set up in economic zones.

You shall submit your audited report to the Foreign Economic and Trade Bureau (known as “FETB”) or in some cities, it is called the Commercial Bureau.

Yes, we suggest that the exchange rate be fixed in the articles of association of the joint venture company and agreed on upon signature of the documents by all parties as the exchange rate may vary from time to time during the payment schedule of the registered capital.

Unfortunately, the three-year term is mandatory according to PRC Company Law. However, the supervisor and general manager can be dismissed at anytime if the dismissal and new appointment is in accordance with Chinese law and the articles of association of the WOFE. For example, your articles of association shall explicitly state that the shareholders can dismiss and appoint new supervisors and general managers upon giving them a one-month notice period or pay them in lieu of salary.

Firstly, please note that the shareholders of the WOFE appoint supervisors. The supervisor’s duties are to supervise the directors’ and managers’ activities in order to protect the shareholder’s interests. Supervisors’ rights include reviewing the company’s accounting books and financial documents, attending meetings of the board of directors of the WOFE and holding shareholders meetings. Supervisors can be Chinese or foreigners, but can’t simultaneously be directors or managers of the WOFE. (See art. 52, 54, 55 of the Company Law 2005)

Yes, it is true. The minimum will vary from one bank to another one, and within the same bank, from one city to another city. It should be noted that in some cases, the deposit required can be negotiated with the bank.

The registered capital shall be paid in the foreign currency account and you should mention in the telegraphic form that it is a payment for the registered capital.

Yes, your WOFE shall open a bank account at the sub-bank of the foreign-invested bank in China which business scope has been approved by the China’s Bank Regulatory Commission. However, in practice, some foreign bank has set up sub-bank in China but they have not provided the corporate banking service yet and some foreign banks do not have the payroll service, which you can not pay the salary to the employees through this opening bank. Besides, foreign banks usually have more requirements on the daily balance of the WOFE kept in the bank account. Thus, we would like to suggest using a Chinese commercial bank as the opening bank for your WOFE.

A WOFE must have (a) a foreign currency account to receive foreign currencies from the investor/shareholder in order to pay the registered capital required of the WOFE and (b) a RMB account in China to receive RMB. Usually, foreign currencies can’t directly be used in China. Foreign currencies/RMB deposited in the RMB account or transferred from the foreign currencies account shall be used for the daily operations of the WOFE.

There are three types of patents under Chinese law: invention, utility model and appearance design.

Are novelty requirements less strict for a utility mode patent than for an invention patent?

Yes, because there are more techniques in an invention than in an utility model, thus, there are more requirements for creativity. Besides, invention application includes product invention and method of invention, while the utility model focduses more on product’s structure (not on the way of manufacturing the product).

Is a publication made outside china novelty destroying for a Chinese utility model filed later?

Under Chinese patent law, novelty means that no similar invention or utility model has ever been published in Chinese and foreign publications or similar invention or utility model has never been used publicly in China or made public in China in any means. In a common sense, a publication made outside China will destroy the novelty of a utility model filed later in China. However, there are some exceptions:

1. Within 6 months prior to the application date, the utility model or invention was exhibited for the first time in an exhibition held by or recognized by the Chinese government;
2. Within 6 months prior to the application date, the utility model or invention was published for the first time in certain academic meetings or technical communication meeting;
3. Within 6 months prior to the application date, any third party released the contents of utility model or invention without permission of the patent owner or holder;
4. The prior patent application is canceled, revoked or abandoned before it is published, then, the later utility model or invention application shall still have the novelty.

Under Chinese laws and regulations, a representative office has no right to hire a Chinese employee directly. Chinese employees have to register with Fesco (i.e. Foreign Enterprise Services Co., Ltd.) first and the contractual relationship will be established between the Chinese employee and Fesco. Fesco will then sign a labor service agreement with the representative office and the Chinese employee will be appointed to work with the representative office in accordance with the labor service agreement signed between the representative office and Fesco.

Yes, there are some requirements. Please note that representative offices can be set up only if they have an official lease in a commercial building and NOT in a residential building. This aspect is regulated in China and different cities have different requirements. In addition, in Shanghai for example, only landlords having permission from the Shanghai Foreign Economic and Trade Committee are entitled to rent premises to foreign companies. However, there is no such regulation in Beijing and Guangzhou.

Under Chinese law, a person getting married is entitled to three (3) day leave. However, if the groom is 25 years old or older, he is entitled to ten (10) more days. If the bride is 23 years old or older, she is entitled to ten (10) additional days. Please note that the marriage leave shall be a continuous calendar day leave (including the week-end). In addition, please note that in the event that the marriage leave falls on weekends and/or legal holiday, the weekends shall be included in the marriage day leave but the statutory holiday shall be excluded.

According to the regulation on female employees’ labor protection of the PRC and the regulation on population and family planning of Shanghai, the female employee shall be entitled to no less than ninety (90) days for maternity leave and the 90 days include fifteen (15) days before giving birth; If a female Employee has a Caesarean birth, she will be entitled to thirty (30) additional days of maternity leave; If the female Employee gives birth to twins or triplets, she shall be entitled to fifteen (15) additional days of maternity leave for each child; If the female Employee gets married for the first time later than 23 years old, she will be entitled to seven (7) additional days; If the married female Employee is over 24 years old when she gives birth to her first child, she will be entitled to thirty (30) additional days and her husband shall be entitled to three (3) days as paternity leave as well.

Please note that in China, there is no bank signatory. To withdraw money/have access to bank accounts, anyone can do it as long as they have the three (3) seals (which include the seal of the legal representative of the WOFE).

Under PRC law, you have two options: you can either appoint one executive director or a board of directors with a minimum of three (3) directors. None of them have to be resident in China and none of them have to be Chinese national.

Under Chinese law, a legal representative of a company is a person who can act (and thus sign) on a company’s behalf. Thus, for a foreign company, the Chinese authorities deem a legal representative of the company as the person who is able to act on your company’s behalf; such person is usually a director, or the chairman of the board of directors. The Chinese authorities will usually require proof of such person’s position. Where they require proof, your company would need to submit to the nearest Chinese embassy documentation such as your company’s articles of association, written resolutions of the board of directors or shareholders of the company, a business profile issued by the local government stating the name of this person as director, or an appointment letter outlining the signing powers of the person in question. This person would then be deemed the legal representative for all relevant dealings of your company in China. Such documentation needs to be notarized, authenticated and legalized by a local notary and the Chinese embassy. In some countries, the embassy requires the so-called legal representative to come physically to the embassy.