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Registering a Wholly Foreign-Owned Enterprise (WFOE) in Shanghai

Registering a Wholly Foreign-Owned Enterprise (WFOE) in Shanghai represents a strategic entry for foreign investors looking to engage in long-term business operations in China without local partnership constraints. This detailed guide provides a step-by-step process on how to establish a WFOE in Shanghai, from the initial application to the final stages of opening a corporate bank account.

Step 1: Pre-Registration Planning

  • Business Scope: Clearly define your WFOE’s business scope, as this will determine the regulations and approvals required. Business scope refers to the range of activities the WFOE will engage in China and is strictly adhered to once approved.
  • Company Name: Select a company name and have it approved by the local office of the Administration for Industry and Commerce (AIC). The name must include the location, the business scope, and must end with “Co., Ltd.”
  • Registered Capital: Decide on the amount of registered capital, which is the amount committed to be invested by the shareholders. There is no minimum registered capital for consulting or trading WFOEs anymore, but it’s crucial to ensure that the amount is sufficient for the company’s operational needs until it reaches the break-even point.

Step 2: Documentation and Application

  • Documentation: Prepare the following documents:
  • Application form for company establishment.
  • Feasibility study report detailing business activities, market analysis, and financial projections.
  • Articles of Association.
  • Legal documents of the parent company, such as a Certificate of Incorporation or equivalent, which must be notarized and authenticated in the investor’s home country.
  • Passport copies of the legal representative, directors, and supervisor.
  • Lease agreement of the registered business address in Shanghai.
  • Submission: Submit the application along with all required documents to the Shanghai branch of the Ministry of Commerce (MOFCOM). Once preliminary approval is received, the documents will need to be submitted to the AIC for company registration.

Step 3: Government Approvals

  • Approval Certificate: Obtain the approval certificate from MOFCOM. This document officially approves the establishment of the WFOE in China.
  • Business License: Once the Approval Certificate is received, apply for a business license from the AIC. The business license is critical as it legally allows the WFOE to operate in China.

Step 4: Post-Registration Formalities

  • Carving Chops: Have the company chops made. In China, company chops (stamps or seals) are required for signing all official documents and contracts.
  • Tax Registration: Register with the local tax bureau and obtain tax registration certificates. This will involve setting up an appointment to discuss the WFOE’s tax obligations.
  • Foreign Exchange Registration: Register with the State Administration of Foreign Exchange (SAFE) to set up foreign currency and RMB bank accounts.
  • Customs Registration: If the WFOE will be involved in import and export, register with the customs office.

Step 5: Opening a Corporate Bank Account

  • Bank Selection: Choose a bank based on the company’s business needs. Consider factors such as international services, online banking facilities, and proximity to the business location.
  • Documentation: Prepare the following for bank account opening:
    • Business license.
    • Approval Certificate.
    • Company chops.
    • Passport copies of the company’s legal representative.
    • Proof of address for the WFOE.
  • Account Opening: Visit the bank with all required documents to open the corporate bank account. This process might involve an interview with the bank’s compliance team to clarify the nature and scope of the business.

Conclusion

Registering a WFOE in Shanghai is a detailed process that requires careful planning and compliance with local regulations. Each step must be meticulously followed to ensure a smooth setup and successful business operations in China. Once established, the WFOE offers numerous strategic advantages, including operational control, profit repatriation, and direct access to the Chinese market.