Some clients recently consulted me regarding the formation of a WFOE in China. While the policy on this issue has changed since October 1, 2016, and the process seems to be simplified, our law firm has done some research on the new policy, and we have found that things are only a little better.
Why do we say this? Under the new policy, we still need to go to at least two administrative authorities, namely the commercial committee and the AIC. The only change in the incorporation process is that the approval procedures with the commercial committee have been made into a recordal system which means the required materials are reduced and the process is expedited.
According to the new regulations, the following documents still needed to be submitted for recordal with the commercial committee:
1. Name pre-approval letter or the business license of the company to be formed;
2. Commitment letter signed by the investor or its authorized signatory;
3. Power of attorney signed by the investor or its authorized signatory and the commissioned person’s ID;
4. ID of the investor;
5. ID of the legal representative of the company to be formed.
Analyzing the above listed materials, we can see changes. In particular, the recordal could be made after the formation of the company, something that is signified by the issuance of a business license. Compared with the old policy, the approval certificate and approval letter are the preconditions of applying for a business license. Additionally, some documents don’t need to be submitted, such as the feasibility report, articles of association, bank credit letter, documents on company’s premise, etc… But that doesn’t mean we don’t need to prepare such documents, because many of them still need to be submitted to the AIC.
In summary, some time is saved in the new process, but it still requires the same amount of effort from all parties involved.
For a company whose business scope includes import or export, there are other more complicated procedures to go through. Next time, we will talk about those procedures.