China lawyersChina has greatly revamped its WFOE formation procedures, making WFOE formations easier in some ways and more difficult in other ways. See China’s New Foreign Investment Law — Less Than Meets the Eye.

Because the WFOE formation procedures are so new, our China lawyers have been getting a number of calls from Western companies whose WFOE formations have stalled or simply died out, usually stemming from an inability to work through the new system with the local authorities. One of the things our China attorneys do with our WFOE formations is to set out early and often the steps that must be followed and accomplished for our clients to come out on the other side with a spanking new China WFOE.

I was cc’ed on an email the other day from one of my firm’s China attorneys  to a client for whom we are working on setting up a China WFOE. The email does such a good job setting out what must be accomplished to form a WFOE under the new WFOE formation rules, I thought my reprising it here (taking out any and all identifiers of course and adding in a few links) could prove helpful to anyone out there looking to form a China WFOE.

Here goes:

 

As you know, the PRC government drafted a new foreign investment law last fall and also promulgated a new set of regulations concerning the procedure for registering WFOEs in China. Each local government has been working out their internal procedures for adapting to this new system. Your WFOE in _____________ will be one of the first WFOEs to make use of the new system.

We have been working closely with the ____________ authorities (the Administration of Industry and Commerce of AIC). The local AIC has finally made their basic decisions on the procedure they will follow for the formation of a WFOE under the Foreign Invested Enterprises (FIE) law and associated Ministry of Commerce (MOFCOM) regulations.

The steps in the application will be as follows:

1. WFOE name approval.

2. MOFCOM online registration.

3. Application to form WFOE submitted to local Administration if Industry and Commerce (AIC).

4. Issuance of business license by AIC.

5. Start of business processes: a) open bank accounts, b) cut and register chops, c) open tax and other government accounts, d) set up daily bookkeeping and reporting to the local government, e) execute written employment agreements with employees and open employee tax/social benefit accounts,.

We will be working through each step in order. I will shortly be sending you a series of emails on what we need for step one, the WFOE name approval.

Our team will work with you on Steps 1 to 4 above. With respect to Step 5, we will work with you on drafting your employment agreements for China and your employer rules and regulations. On the other procedures in Step 5, we can take you through all the procedures up to the point where you are ready to formally do business in China.

Step 5 will involve your needing to decide on the following:

  • Local bank.
  • Local bookkeeper.
  • Accountant for tax returns and annual audit and reporting to the parent entity (can be same as B, or different).
  • Employee payment processing and maintenance of employee social benefit accounts.

We must report these names during the formation process, so we will need an answer as soon as is practical. We, of course, are happy to assist you in finding appropriate service support.

As noted, I will send an follow up email explaining the name approval process and the current status.

Please contact me if you have any questions on this matter.

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.