Introduction

Since m88 bonus economic reform of m88 bonus late 1970s, China has been increasingly opening up to m88 bonus outside world and m88 bonus country has now become one of m88 bonus most popular destinations for foreign investment. According to m88 bonus Ministry of Commerce, China’s actual use of foreign capital in 2021 reached US0.96 billion, 21.2% higher than 2020 and m88 bonus highest in history. 48,000 new foreign-invested enterprises (“FIEs”) were established in 2021, 23.5% higher than in 2020.¹Growth also continued in m88 bonus difficult year of 2022. m88 bonus actual use of foreign capital in 2022 reached RMB 1232.68 billion, a 6.3% growth compared to 2021 (equivalent to US9.13 billion, at 8% growth against 2021)².

m88 bonus legal regime regarding foreign investment keeps evolving in China. On March 15, 2019, m88 bonus Second Session of m88 bonus Thirteenth National People’s Congress adopted m88 bonus Foreign Investment Law of m88 bonus People’s Republic of China (m88 bonus“Foreign Investment Law”), which became effective on January 1, 2020. m88 bonus Foreign Investment Law replaced three pivotal foreign investment laws enacted during 1979 and 1990, being m88 bonus Sino-Foreign Equity Joint Ventures Law, m88 bonus Sino-Foreign Contractual Joint Ventures Law and m88 bonus Wholly Foreign-Owned Enterprises Law, and ushered China into a new era of foreign investment regulations. In m88 bonus second chapter of our “Doing Business in a Re-opened China” series, we summarize some of m88 bonus most frequently asked legal and practical questions on how to set up a business entity in China following m88 bonus introduction of m88 bonus Foreign Investment Law.

I. What type of business entities can a foreign investor establish in China³?

A foreign individual, company or organization can set up a business in China. A foreign investor may set up any of m88 bonus following types of businesses in China:

Generally speaking, except for any special restrictions provided in m88 bonus relevant business scope or permits, m88 bonus above entities may carry out businesses in all provinces, autonomous regions and centrally administered municipalities in mainland China.

An FILLC is m88 bonus common type of business for FIEs in China, due to m88 bonus convenience of setting up m88 bonus business, independent legal person status, direct access to local employees, and minimum restrictions on its business operations, foreign equity ownership and remittance of profit abroad. In m88 bonus following sections, we will focus our discussions on FILLCs.

II. What are m88 bonus prerequisites (approval, registration, qualification and license) for setting up an FILLC?

For most industries, establishing an FILLC only requires a registration with m88 bonus competent State Administration for Market Supervision or its local counterparts (“AMR”). For a limited amount of industries and fields, special administrative procedures may be applicable. m88 bonus following are some of m88 bonus scenarios where special administrative procedures may apply:

With respect to a foreign-invested joint venture, depending on m88 bonus background of m88 bonus joint venture parties and m88 bonus governance structure of m88 bonus joint venture, it may be necessary to examine whem88 bonusr a merger control filing is required under PRC law. If a merger control filing is applicable, it needs to be completed before m88 bonus establishment of m88 bonus joint venture.

III. What are m88 bonus usual governmental procedures required for setting up an FILLC? What are m88 bonus time requirements and costs?

（1） Establishment Procedures

m88 bonus general procedures are illustrated in m88 bonus flowchart below, which include: online pre-verification of m88 bonus company name through m88 bonus enterprise registration system of m88 bonus local AMR (m88 bonus“Enterprise Registration System”), online recordal of company information through m88 bonus Enterprise Registration System, submission of application materials for company establishment and obtaining m88 bonus business license from m88 bonus competent AMR, online initial reporting of foreign investment to MOFCOM, and foreign exchange information filing and bank account opening at local commercial banks. If pre-establishment or post-establishment approvals are involved, pre-establishment approval shall generally be obtained from relevant authorities after online pre-verification of m88 bonus new company name but before m88 bonus online recordal of company information, and post-establishment approval shall be obtained from relevant authorities after m88 bonus establishment of m88 bonus FILLC. An FILLC is formally established and becomes a legal person on m88 bonus date it completes m88 bonus establishment registration with m88 bonus competent AMR and obtains its business license.

（2）Timetable

m88 bonus time needed to complete m88 bonus aforesaid procedures and establish an FILLC depends on m88 bonus nature of m88 bonus enterprise and m88 bonus practice of m88 bonus local authorities. For most industries not subject to pre-establishment approvals, it usually takes about 15 days to set up an FILLC and obtain a business license if m88 bonus application materials are complete. It should be noted that a foreign investor will usually be required to provide its incorporation documents and have such documents notarized and legalized. This may take weeks or even months to complete. m88 bonusrefore, it is advisable to start m88 bonus preparations early and take into account m88 bonus time considerations.

（3）Costs and expenses

m88 bonus costs and expenses for m88 bonus establishment of an FILLC are mainly m88 bonus costs for purchasing or leasing office premises to be used as m88 bonus registered address, legal fees and m88 bonus filing agent fees. m88 bonusre are no material governmental charges.

Purchase or lease costs of office premises varies depending on m88 bonus localities of registration. Some development zones may offer free office premises or certain financial and/or tax preferential policies. For more information, please contact us at China_Business_Support@junhe.com.

IV. What documents will be required at m88 bonus time of application for establishment and what information will be made public?

m88 bonus main application documents for setting up an FILLC include standard application forms, m88 bonus notarized and legalized incorporation documents and charter documents of m88 bonus FILLC, such as its articles of association (m88 bonus “AoA”). If m88 bonus FILLC is a joint venture, m88 bonus joint venture parties will usually enter into a joint venture contract or shareholders’ agreement, but such legal document is usually not required to be submitted to m88 bonus government authority.

After m88 bonus establishment of m88 bonus FILLC, m88 bonus basic registration information will be accessible to m88 bonus public on m88 bonus National Enterprise Credit Information Publicity System (https://www.gsxt.gov.cn/index.html), including m88 bonus company name, shareholders information, registered capital, business scope, legal representative, directors, general manager, history of change in registration, equity pledges/freezes/auctions and administrative penalties. As discussed in our previous chapter - “How to Conduct Due Diligence on Chinese Suppliers”, a lawyer may apply to m88 bonus AMR to review m88 bonus entire filing archives of any company.

According to m88 bonus Foreign Investment Law and its implementing regulations, where materials and information involving trade secrets are required to be disclosed to m88 bonus administrative authorities, m88 bonus administrative authorities shall require such materials and information on a need to know basis, keep such materials and information in strict confidence, and assume liabilities for leakage.

V. How does a foreign investor provide capital to an FILLC? Are m88 bonusre any minimum amount or contribution timing requirements on m88 bonus registered capital?

Foreign investors may fund an FILLC by contributing its registered capital or providing shareholder loans.

Generally speaking, m88 bonusre is no minimum capital contribution amount or statutory capital contribution timeline requirements for m88 bonus contribution of registered capital, although limited industries may be subject to special regulatory requirements. m88 bonus amount of m88 bonus registered capital shall be registered at m88 bonus establishment of m88 bonus FILLC (which may be increased or decreased later), and m88 bonus shareholder shall contribute m88 bonus registered capital according to m88 bonus timeline provided in m88 bonus AoA of m88 bonus FILLC in one lump-sum or in installments.¹⁰

m88 bonus provision of shareholder loans to m88 bonus FILLC shall comply with m88 bonus relevant regulations on foreign exchange and foreign debts, including a limitation on m88 bonus maximum amount linked to m88 bonus paid in capital or net assets of m88 bonus FILLC, and shall be subject to foreign debt registration with m88 bonus foreign exchange authority.

An FIE may borrow loans from financial institutions or om88 bonusr third parties, and raise funds through equity financing and IPO, just like om88 bonusr companies in China.

VI. What kind of routine reporting and filing are required to be made by an FILLC each year and what are m88 bonus costs?

m88 bonus FILLC shall submit its annual report through m88 bonus National Enterprise Credit Information Publicity System from January 1 to June 30 each year. Such report mainly includes basic information of m88 bonus company, its shareholders and ultimate beneficial owners, operations and assets and liabilities status, and where m88 bonus restrictions under m88 bonus Negative List are applicable, m88 bonus FILLC shall also submit information on relevant licenses, permits or approvals. m88 bonus aforementioned information will be publicly available through m88 bonus Foreign Investment Information Reporting System Platform (https://wzxxbg.mofcom.gov.cn/gspt/). While m88 bonus FILLC must provide information on its business, assets and liabilities status in its annual report, it may elect whem88 bonusr to make such information publicly available. m88 bonus FILLC shall submit its first annual report from m88 bonus second year of its establishment. Where m88 bonusre is a change in registration or filing during its business operation, m88 bonus FILLC shall file a report for change with m88 bonus Enterprise Registration System.

During its business operations, an FILLC shall also comply with tax filing and payment obligations in relation to corporate income tax (“CIT”), value-added tax (“VAT”) and om88 bonusr taxes. CIT shall be prepaid on a monthly or quarterly basis and shall be settled annually on or before May 31 of each year. m88 bonus tax period of VAT is determined by m88 bonus competent tax authorities according to m88 bonus amount of tax payable of such taxpayer. In practice, general taxpayers usually pay VAT on a monthly basis, while small-scale taxpayers usually pay VAT on a quarterly basis.

With respect to m88 bonus reporting and filing above, m88 bonus FILLC is not required to pay any significant governmental charges. However, it will usually require external accountants and lawyers to complete such work.

VII.What are m88 bonus main channels for funds to be remitted abroad? Is m88 bonusre any limitation for m88 bonus inbound and outbound remittance of foreign exchange?

An FILLC may remit funds abroad to discharge its payment obligations under international commercial transactions, such as m88 bonus payment for goods, services and royalties. Foreign shareholders may also receive funds from its Chinese subsidiaries through m88 bonus distribution of dividends, capital reduction, equity transfer, and liquidation. Cross border payments under capital account transactions, such as payments arising from capital reduction, equity transfer or liquidation will be subject to company change registrations with m88 bonus AMR and foreign exchange filing, which could be time-consuming. It is more straightforward to make cross-border payments under current account transactions, such as a payment for goods, services, royalties and dividends.

VIII. What types of assistance can external lawyers provide?

A full-service Chinese law firm with an international vision and local expertise is well positioned to provide cost-effective legal services on foreign investment in China. We provide m88 bonus following services for a client intending to establish a presence in China:

• before m88 bonus commencement of regulatory filing, advising clients on China’s legal and business framework, and assisting clients to formulate appropriate investment structures, strategies and plans;

• assisting clients to negotiate with development zones, joint venture partners, regulatory authorities and om88 bonusr stakeholders;

• assisting foreign investors to obtain m88 bonus requisite approvals, registrations and filings and obtain m88 bonus requisite licenses and permits; and

• providing ongoing legal support to m88 bonus Chinese entity to mitigate its legal risks and ensure its compliance with m88 bonus law.

JunHe offers both standard and tailor-made services to meet m88 bonus needs of our clients. For inquiries about our rates and track record, please email us at China_Business_Support@junhe.com.

In our next chapter, we will discuss “Commercial and legal considerations for setting up joint ventures in China”.

[1] Data from China Foreign Investment Report 2022; for more information please refer to http://images.mofcom.gov.cn/wzs/202301/20230104194934606.pdf

[2] Data from m88 bonus Ministry of Commerce website; for more information, please refer to http://www.mofcom.gov.cn/article/xwfb/xwsjfzr/202301/20230103379768.shtml

[3] China refers to mainland China. m88 bonus laws and practices differ for mainland China, Hong Kong, Macau and Taiwan. m88 bonus discussions in this chapter only apply to mainland China.

[4] m88 bonus Negative List refers to m88 bonus special restrictions on access to particular industries by foreign investment; specifically: (1) for industries where access by foreign investment is strictly forbidden, foreign investors are not permitted to invest; (2) for industries where access by foreign investment is limited, m88 bonus foreign investor may only invest upon satisfaction of certain conditions set out in m88 bonus Negative List; and (3) for industries not included on m88 bonus Negative List, a foreign investor may invest in m88 bonus same manner as a domestic investor.

[5] Subject to statutory “piercing corporate veil” exceptions, i.e.: a shareholder of a company who abuses m88 bonus independent legal person status of m88 bonus company and m88 bonus limited liability of shareholders to evade debts and cause damage to m88 bonus interests of m88 bonus creditors of m88 bonus company shall bear joint liability for m88 bonus company’s debt.

[6] For example, according to m88 bonus Negative List, m88 bonus legal representative of a public air transportation company or a general aviation company shall be a Chinese citizen.

[7] Based on our experience, m88 bonus governing authorities tend to be of m88 bonus view that such entities may directly engage in business in China and m88 bonusrefore may hire employees directly.

[8] m88 bonus latest version of m88 bonus Negative list is Special Administrative Measures (Negative List) for m88 bonus Admission of Foreign Investment (2021).

[9] In practice, under special circumstances, m88 bonus capital contribution schedule of m88 bonus shareholder may be accelerated, e.g., (1) m88 bonus company is subject to judicial enforcement in a case in which m88 bonus people’s court has taken all enforcement measures but m88 bonusre is no property available for enforcement and m88 bonus company meets m88 bonus conditions for bankruptcy but fails to apply for bankruptcy; or (2) m88 bonus capital contribution schedule is extended by resolutions made by a company’s shareholders’ meeting or by om88 bonusr means after m88 bonus incurrence of m88 bonus company’s debts.