Overview of WFOEs
Wholly Foreign Owned Enterprises (WFOEs) are the investment vehicle of choice for the international investor wishing to manufacture, process, or assemble in China. The shareholders are 100% foreign. After China becomes the member of World Trade Organization (WTO), more WFOEs in the area of business service, consulting, software development or trading companies are established in China.
Advantages of WFOEs
- Independent control on management
- Able to carry business, no limitations as just a representative office
- Able to issue invoice in RMB and record the revenue accordingly
- Able to remit the profits generated from the WFOEs to the holding companies at overseas
- Able to recruit local employee in China
Business Scope of WFOEs
There is a strict limitation on carrying business in China. WFOEs only allowed to carry business within its allowed business scope which is stated on its business certificate.
Management of WFOEs
The controlling structure of a WFOE is mainly 1) Board of Director (The highest decision unit); and 2) General Manager (Responsible for Daily operation). The Board member should participate the Board meeting at least one every year while the meeting should be held by the Chairman of the Board. The Board member can authorize any person to attend the Board meeting on behalf of him.
Period and Termination of WFOEs
Manufacturing WFOEs are normally allowed to carry business for 15 -30 years (or even long period). You may be granted a longer period after a special application. The period maybe further extended to 50 years if those Projects are with great amount of capital investment, long investment period, lower investment of return, manufacturing of more complicated products, advanced technology from international investor is required or the development of a brand with competitive advantage around the world. Such special approval must be get from the State Council. WFOEs must terminate its business if it is reported a great amount of loss, unable to continue its business.
Procedure for application of WFOEs
- Application form for establishment of a WFOE
- Certificate of incorporation and business certificate of the investor
- Bank reference letter issued by investor’s banker within 6 months before the application (2 set)
- Board resolution of investor
- Copy of passport, 2 photos, Hong Kong ID card or special pass of the legal representative
- Rental agreement (Original)
- Details of investors, say Annual Return (AR1), passport copy of directors and shareholders
- Appointment letter of the Chairman and board members
- Feasibility study and Memorandum and Articles of Association of the WFOE
- Authorization letter for business registration
Time Required for the Application
Around 30-50 working days.
Upon completion of the registration, you can get the required license and able to carry business in China.