It is part of a company's incorporation process to obtain various certificates and stamps/seals from Chinese government authorities. These various certificates and stamps/seals are required in the company’s dealings with the government authorities. Many foreign investors may be confused about the usage of these items. What follows is a description of each of the certificates and stamps/seals obtained after the incorporation of a WFOE in China.
Permanent Representative Offices (ROs, also known as Resident Representative Offices) registered in China are non-legal entity and therefore not considered to be separate and independent from the foreign enterprises. Chinese laws do not expressly provide that ROs should bear liabilities independently with their own assets (i.e. limited liability), ROs may be deemed to be part of the foreign enterprise.
The Chief Representative of a China Representative Office is the person who is responsible for the daily operation of the Representative Office (RO). However, Chinese laws do not clearly specify the limitation of the authorities of a Chief Representative or a Representative. In the absence of express statutory provisions, it is not clear whether or not documents signed by a Chief Representative
Representative Offices, also known Permanent Representative Offices or Resident Representative Offices, cannot employ Chinese staff directly. Chinese staff can only be employed through local foreign service companies or other entities designated by the local government. These foreign service companies will enter into employment contracts with Chinese individuals and should be responsible for paying salaries
According to the Company Law of the PRC, a one-person limited liability company shall prepare a financial report by the end of every fiscal year and have the report audited by a certified public accounting firm registered in China. The term "one-person limited liability company" refers to a limited liability company with only one natural person shareholder or legal person shareholder.
The Wholly Foreign Owned Enterprise (WFOE) in general refers to a Limited liability company wholly owned by one or more foreign investor(s). Company limited by shares, if all shares are held by foreign nationals or foreign enterprises, then it is also referred to as WFOE. In China, WFOEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology.
Before the official incorporation of a FIE, if it needs cash urgently for the purpose of pre-incorporation expenses, it can choose to set up a Temporary Capital Account. This account is to temporarily receive funds directly related to the investment in China. However, this account is not a necessity. It should be based on the needs and requirements of the company and approval by the State Administration of Foreign Exchange (SAFE).
The procedures for establishing a Resident Permanent Representative Office (RO) vary slightly in different areas of China and also vary in accordance with the places where the foreign companies are located. In general, the procedures for the establishment of a Permanent Representative Office consist of three steps:
China Representative Office Registration. Change of Name of the Representative Office,Application for Extension of Residence of a China Representative Office. The duration of the residence for the Representative Office (RO) is registered in the registry office, which is starting from the date on which the registration certificate is issued by the registry office.
A liquidation committee is composed of its shareholders to handle the liquidation within 15 days from the dissolution date of the company. The liquidation committee shall liquidate and value the company’s assets in accordance with Chinese law and the articles of association.During the course of liquidation, the company shall not conduct any business activities irrelevant to the liquidation.