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Various Types of Company Registration in China

Narendra Kumar

| Updated: May 18, 2019 | Category: Company Registration

Company-Registration-in-China

China has one of the largest populations in the world and with the rapid increase in the competition, the population is becoming urbanized. China is rapidly uplifting its growth in different field’s like-automation, machinery, medical equipments and electronics. The Incorporation process of China is complex as compare to other countries and time consuming too.

Further to modernize their own company laws, number of countries including India, UK, Canada, Australia and Hong Kong, China has initiated progressive efforts to accelerate growth, better regulation and greater transparency in corporate governance which is of utmost importance and to implement these strategies are the underlying objectives of the country. For incorporating the company in China, it is essential to understand the compliance and registration process.

Company Registration in China

Types of Company Registration in China

Different kind of companies provides a general overview of the various forms of company registration in China:

Types of Company Registration in China

1. Private Enterprise

Private Enterprise is the most popular form of company registration in China and is registered by an individual or group of individuals without and government ownership. Every company operating and doing business in China must be legally registered and must hold a valid license of business.

2. State Owned Enterprise (SOE)

Considering SOE to be of strategic importance by the government State-owned Enterprise is set up to operate in specific key sectors. For Example: Electric Power, Telecommunication and Aerospace.

State Owned Enterprise contributes mainly to China’s economy and considered to be some of the world’s largest companies. SOE is also known as Government owned Corporation. SOE after 1980’s reform has gone to a drastic fall but still contributes to the economic growth of China.

3. Representative Office

Representative Office

Representative Office is the entities establish solely to represent foreign companies registered with China. In actual Representative is not a legal entity in real and cannot do any such activity to operate profitable business directly. The Representative office serves as per China’s regulation and termed as a non-profit office.

Foreign companies having a limited presence in China opens a Representative office as it is a simple way to have a physical existence of the office which has certain restrictions on it that Foreign Company cannot directly employ the staff by themselves .i.e. Chinese staff.

In Representative office, foreign capital is not required to register. The Office helps in meeting and interacting with the new clients, research and to conduct market research.

4. Joint Venture

Joint Venture

In China, Joint Venture is a unique form of company registration where two parties are involved, i.e. China and foreign party. A Joint venture is one of the best methods for foreign companies to capture the market of China. For entering into Joint Venture, a partnership with the Chinese market is necessary.

Different types of joint venture serve different purposes of foreign parties which are divided into two parts:

Types of joint Venture
  • In Corporate joint venture capital investment is done by the parties, i.e. foreign companies and China and sharing of profit ratio may differ from the ownership (proportionate) by the investor.

Corporate Joint venture is a model which provides both the parties to exchange the resources and technologies. Pre-licensing is required before entering into a joint venture agreement which is signed by both the parties along with the LOI (Letter Of Intent) and Memorandum.

  • In Equity Joint venture is a two-tired management structure as CJV which constitutes of BOD and management that is responsible for the operations of the company. In EJV profits are distributed as per the contribution.

5. Wholly Foreign Owned Subsidiary

Wholly Foreign-owned subsidiary is established solely by foreign countries. For establishing a wholly owned subsidiary, an agreed level of foreign capital is required to invest as it does not have direct involvement of Chinese investor. An Enterprise which is 100% owned by a foreign company or companies is termed as a wholly foreign-owned subsidiary. The foreign companies solely make the capital contribution. The main objective is to encourage manufacturing activities for advanced technology accomplishment. For establishing WFOs, the entity must have its business procedure, operation system, accountability and legal responsibility. There is a minimum and suggested capital requirement for manufacturing, trading and consulting registration-

Minimum registered Capital Requirement Suggested Capital Requirement
1.Manufacturing-RMB 5,00,000 WOFE>RMB-10,00,000
2.Trading-RMB 5,00,000 WOFE>RMB-10,00,000
3.Consulting-RMB-1,00,000 WOFE>RMB-  3,00,000

Note: Apart from the types mentioned above of companies China also registers Individual owned company, Shanghai free trade Zone Company, Partnership Company, Hong Kong Company.

  • The Individual owned company works like a proprietorship in India with small Capital structure, the authority and decision-making rest with the individual.

Note: Here Individual means those who possess the nationality of China.

  • Partnership Enterprise where two or more individuals (partners) can start their business with less capital with no minimum capital requirement and less paperwork.
  • Hong Kong Company establishes as Special Purpose vehicle mainly by Europe and American investor as Hong Kong is the convenient location to operate the business activity.
  • Shanghai Free Trade Zone-It is the First free trade zone in Chine to operate business activity with less complexity and procedure. The formalities in this zone are simple, with easy movability of goods and values without any intervention.

The initiative is taken by the government to increase the global economic development of the country and to achieve a roadmap to the outside world, which provides a new platform to build a relationship with other countries.

To Sum Up

China is one of the fastest developing countries which is providing numerous platforms to the individuals as well as to the foreign investors by cooperating with other countries, which as a result has upgraded the economy of China. Hence, it is the right time to start a business in China which provides numerous benefits.

Looking for a Company registration in China? Contact Enterslice now.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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