For the small Swedish company with limited resources the costs and difficulties in establishing a business in China can appear overwhelming but today there are a number of lawyers, auditfirms and other consultants that offer services aimed at assisting, not only the large corporations but also smaller companies in their business ventures into China.

As a brief introduction we have outlined below the basic formalities for setting up a Chinese production company.

Procedures for Establishing a Wholly Foreign Owned Enterprise (“WFOE”)

I. Overview

The procedures for establishing a wholly foreign owned enterprise (“WFOE”) in China. In general, there are six major steps for setting up a WFOE which is engaged in manufacturing business in China:

• Company Name Pre-registration with Administration for Industry and Commerce;

• Approval of Environmental Assessment Impact Report by Environmental Protection Bureau;

• Approval of Establishment of WFOE by Ministry of Commerce or Its Local Branches;

• Project Approval by Development and Reform Commission

• Registration with and Issuance of Business Certificate by Administration for Industry and Commerce; and

• Post-establishment Registrations with Various Governmental Authorities.

II. Brief Introduction

A brief introduction of the procedures, documents required to be submitted to the relevant government authority and estimated time is set out as follows:

1. Company Name Pre-registration with Administration for Industry and Commerce

This step is to pre-register the proposed company name for the WOFE. Subject to local regulations, the pre-registration will usually be valid for several months (which may be extended before expiry) during which the applicant will have the exclusive rights to the name pre-registered.

Administration for Industry and Commerce (“AIC”) is the registration authority for enterprises in China. The investor applicant will be required to submit the application for preliminary verification and approval of the proposed enterprise name to the AIC, usually along with other documents such as the identification documents of the applicant and the person appointed to submit the application, etc.

Generally, this step will take about a week.


2. Approval of Environmental Assessment Impact Report by Environmental Protection Bureau.

An environmental assessment impact report needs to be prepared for the proposed WFOE given that the nature of the WFOE’s business is a manufacturing related as opposed to a services related. The report will be subject to the approval of environmental protection bureau. In addition to the report, the specific documents required to be included in the application may vary from case to case.

This step will normally take at least 2 months, depending on the actual circumstances of the proposed project.


3. Approval of Establishment of WFOE by Ministry of Commerce or Its Local Branches

Ministry of Commerce (or its local branches) is China's primary foreign investment regulator and approval authority. The establishment of a foreign invested enterprise, including WFOE, shall be approved by the relevant Bureau of Commerce or the Ministry of Commerce. The documents required to be submitted to the authority shall include application letter, feasibility study report, articles of association and company name pre-registration certificate, etc.

It usually will take about 1-2 months for the relevant authority to decide whether to issue approval certificate and approval letter to the applicant.


4. Project Approval by Development and Reform Commission

Development and Reform Commission is responsible for approving foreign investment project, many of which primarily involve industrial sectors. The application documents shall include project application report, feasibility study report, approval letter of environmental assessment impact report, articles of association and company name pre-registration certificate, etc.

This step will proximately take 1-2 months.


5. Registration with and Issuance of Business Certificate by Administration for Industry and Commerce

Within 30 days after obtaining the approval certificate from the approval authority, the investor applicant shall handle the registration procedure with AIC. The applicant will be required to submit the following documents: standard application form, approval letter and approval certificate from the approval authority, articles of association and approval letter of environmental assessment impact report, etc.

Upon receipt of the above required documents, AIC will take 2 to 4 weeks to issue the business license of WFOE.


6. Post-establishment Registrations with Various Governmental Authorities

Within thirty days after the business license is issued, WFOE will need to register with relevant Public Security Bureau, Bureau of Quality and Technical Supervision, Tax Bureaus, Foreign Exchange Administrative Bureau, Custom Authority, Finance Bureau, Statistics Bureau, etc. for post-establishment registrations of WFOE.

The documents required to be submitted to such authorities will include approval certificate, business license, application letter or standard form for application for registration, etc.

Please kindly note that the above information merely serves as a general introduction. The specific requirements may vary from case to case, depending on some factors like the amount of total investment, the project classification, etc.

Take the project classification for instance, investment projects are classified by industry sector as “encouraged”, “permitted”, “restricted” or “prohibited”. This project classification impacts the investment approval process. Majority Chinese equity enterprises may be required in some restricted sectors, while WFOE may be prohibited in others. Specific National approvals may be required for certain types of project.

Upon receipt of more detailed information about the proposed WFOE, we will be able to provide you with specific requirements which are applicable to your particular case.


                                              The law firm - Hellström Advokatbyrå
                                                            Ling Fan - Mats Hellström