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Procedures to set up foreign-invested enterprises

( www.chinadaily.com.cn )

Updated: 2013-10-17

1. Submit project application for examination

According to the State Council Decision on Investment Reform, foreign-backed projects are to be examined for approval by the the Chinese government.

Chinese and foreign investors have to submit a project report (or feasibility study) before applying, to the government department with the power to examine and approve, as stipulated by the government.

For some non-manufacturing projects, Chinese and foreign investors can submit the project report (or feasibility study), along with other materials relating to establishing foreign-invested enterprises, directly to the provincial department of commerce or, via the provincial department of commerce, to the Ministry of Commerce for examination and approval, in accordance with government stipulations.

2. Confirmation and registration of an enterprise

When the project report (or feasibility study) is approved, the company can apply to the industry and commerce administration for a check of the name to be used.

3. Reporting enterprise contract for approval, and certificate of approval

After the investment department approves the foreign-backed enterprise project and then the industry and commerce administration approves the company name, or the local industry and commerce administration approves the name of an enterprise with a non-manufacturing foreign-invested project, the company has to submit the contract and rules of the enterprise, along with related materials, to the local commerce administration for approval, in accordance with its approval powers.

Before it can get the certificate of approval, the company needs to take the official document with commerce authority approval to the technical supervision bureau to get a Letter of Notice on Business Organization Codes.

4. Applying for industry and commerce registration

The company will have to go to the local industry and commerce administration to get a business license within 30 days of receiving the certificate of approval.

Note: According to the Company Law, the company will have to register the establishment within 90 days of date of project approval. The laws on Sino-foreign joint ventures, cooperative businesses, and exclusively foreign-owned enterprises in China state that the company has to register within 30 days of receiving the certificate of approval. In agreement with the principle of the special law being above common law, a company will have to abide by the laws Sino-foreign joint ventures, cooperative businesses, and exclusively foreign-owned enterprises in China.

5. Registering with the finance, taxation, foreign exchange, and customs authorities

The company has to go register with the local finance, taxation, foreign exchange, and customs authorities within 30 days of receiving the business licenser and must go to the enterprise code center to get a business code certificate and open a bank account.

For an exclusively foreign-owned enterprise, the foreign investor has to fill out an application form for establishing a foreign-funded enterprise and make a feasibility study. It then submits these along with the enterprise rules and related documents directly to the local commerce authority for approval. The other procedures are the same as those above.

Any foreign-backed project that does not accord whit the aforesaid provisions for approval will have its project annulled within 30 days of filing the documents by the higher approval authority. The contract and enterprise rules will be declared invalid and the enterprise registration authorities will not register it or will nullify the registration. Customs officials will refuse to handle import procedures.

Article 31 of the Administrative Permission Law of Aug 2003 states that, “In applying for administrative permission, the applicant will have to submit accurate materials and tell the truth to the administrative offices and vouch for the authenticity of the application materials.” Should the party applying for a foreign-invested project use improper means or cheat for the purposes of defrauding and get the project approved, the party concerned will be investigated to ascertain responsibility and the seriousness of the case judged in accordance with the law.

The approving authority will annul the project and the authorities will deal with it in accordance with the law. Article 12 of the Circular on Issues Relating to Further Intensify Management of Examination, Approval and Registration of Foreign-invested Enterprises state that, “When it is discovered that Chinese and foreign investors or foreign-invested enterprises have seriously violated Chinese laws and regulations, especially in making use of whatever means to establish a fake joint venture, the approving authority and registration authority will immediately order them to correct the mistake within a certain period of time and once it has been discovered. If they fail to correct the mistake in time, the approving authority and registration authority is entitled to take over the certificate of approval for foreign-invested enterprises, revoke the business license, and penalize them in accordance with the laws and regulations”

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