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Frequently Asked Questions and Answers about China Company Registration

This page lists frequently asked questions by our clients when opening a company in China. If you cannot find the answer to your questions here, please feel free to call us or email us at info@3ecpa.com.cn and we will reply to you within 24 hours. Refer to the China Company Incorporation Guide for more details.

 

Frequently asked questions about registering a China company

Since January 1, 2020, China has implemented a new Foreign Investment Law to further open its market, encourage and protect foreign investment, and enhance regulatory transparency. This shows that China is serious about maintaining an ideal business environment.

Other advantages of incorporating in China include the country’s large market and labor force, the government’s numerous incentives aimed at promoting “mass entrepreneurship,” and a relatively well-developed business ecosystem in the country.

No, you do not need to travel to China in person, 3E Accounting can handle the entire registration process for you via email and courier. For more information, please refer to the China Company Registration Guide.

Typically, it takes 10 days from the time the company name is approved until the business license is received. For the process, please click China Company Registration Guide.

If you’re unsure whether your company name is available, 3E Accounting can assist you with a free search for a suitable China company name. Email us the company name you plan to use at info@3ecpa.cpm.cn and we will get back to you within 24 hours. For information on naming rules and requirements for China companies, please click on China Company Naming Guide.

Foreign-invested enterprises are the only kind of business that China law allows foreign capital to run in mainland China right now.

Since January 2020, the Foreign Investment Law of the People’s Republic of China, as a standard law applicable to foreign investment, has replaced the previous “Three Laws on Foreign Investment”. Under the new law, the wholly foreign-owned enterprise is abolished and merged into the foreign-invested enterprise, while existing Sino-foreign joint ventures will have a five-year transition period to comply with the new requirements of FIL.

China has gradually streamlined administrative procedures for foreign investment since 2016, with foreign investors being allowed to hold 100% of shares in most sectors. Starting from 2021, foreign shareholding restrictions in securities, fund management, futures, and life insurance businesses will be lifted, and foreign shareholding restrictions in passenger car manufacturing will also be lifted in 2022.

The legal representative and executive director of a foreign company can be a China resident or a foreigner, as long as they meet the requirements. The legal person can be one of the shareholders or can be externally recruited.

According to the China Company Law, a director of a company must be a natural person with civil subject status. A person cannot serve as a director of a company if he or she is involved in one or more of the following situations:

  1. A person without civil capacity or with restricted civil capacity.
  2. Having been sentenced to a penalty for embezzlement, bribery, misappropriation of property, misappropriation of property, and disruption of the socialist market economic order for which the execution period has not exceeded five years, or having been stripped of political rights for a crime for which the execution period has not exceeded five years.
  3. Serving as a director or factory manager or manager of a company or enterprise in bankruptcy liquidation, and is personally liable for the bankruptcy of the company or enterprise, and has not exceeded three years from the date of the completion of the bankruptcy liquidation of the company or enterprise.
  4. Acting as the legal representative of a company or enterprise whose business license has been revoked or ordered closed for violation, and is personally liable for the company or enterprise for less than three years from the date of the license revocation.
  5. Personally liable for a large number of debts that have not been settled when due.
  6. In addition to the above, a person may not serve as a director if he or she has been punished by the China Securities Regulatory Commission (CSRC) with a ban on entering the securities market and the period has not yet expired, or if there are other prohibited circumstances stipulated by laws, administrative regulations, or departmental rules.

Registered capital refers to the registered capital committed to the registrar at the time of incorporation, i.e., how much money the company is prepared to put aside to establish the company.

Issued capital refers to the total amount of share capital that has been issued to the shareholders of the company, which is the registered capital that the enterprise has committed to the business bureau.

Paid-up capital, also known as paid-in capital, refers to the total amount of capital actually received by the company from shareholders at the time of incorporation, which is the actual capital owned by the company. The paid-up capital must be in place at the time of registration and the capital verification agency should verify and issue a capital verification document for company registration purposes.

The paid-up capital, or registered capital, contributed by shareholders can be withdrawn, but only after the registration procedure is complete and subject to certain conditions. It must be used for the business’s needs only. There are two specific cases:

  1. Business operation: Once the investor’s money is injected into the business through capital verification, the right to use it is vested in the business. The company can use it to purchase equipment, and materials, pay salaries, etc.
  2. Shareholder Loan – In a legal sense, once the firm is founded, it constitutes two entirely independent legal subjects with the investors, and it is legitimate for two independent legal subjects to have borrowing and lending connections. Shareholder loans are often handled properly and are normally pegged to other receivables.

Once your China company has been incorporated, you are basically ready to start your business. However, there are some follow-up tasks that should not be overlooked and need to be taken care of before starting a business.

  1. Bank account opening: Open a basic account for daily use. Payroll, bonuses, and other cash withdrawals can only be handled through the account. Each bank has different taxes and fees, which can be checked in advance.
  2. Tax registration: Bring all the business licenses, bank account certificates, business premises certificates, and other documents to the tax bureau to declare for tax registration. For details, please refer to China Corporate Tax Compliance Service.
  3. Tax registration: Bring all the business licenses, bank account certificates, business premises certificates, and other documents to the tax bureau to declare for tax registration. For details, please refer to China Corporate Tax Compliance Service.
  4. Social Insurance Account Setup: After the company registration is completed, you need to set up a social insurance account at the local social insurance bureau within 30 days, apply for the Social Insurance Registration Certificate and CA Certificate, and sign a tripartite agreement with social insurance and bank.
  5. Apply for tax control and invoices: If the company has a need for invoicing, it must apply for a tax-control device (government-supplied printers which are electronically linked to the tax system), attend training on the use of the tax-control device, and approve the application for invoices. After completing the application, the company can issue invoices by itself.

It might not be the same everywhere in China when it comes to using a home address to register a company. Theoretically, it is possible, but relevant information must be submitted in accordance with the provisions of the Notice on Registration of Residence of the State Administration for Industry and Commerce of China.

Currently, some regions in China have conditionally opened up the registration conditions for residential businesses, such as Chongqing and Shaanxi, which stipulate that businesses engaged in specific industries, such as e-commerce, online trading services without physical stores, creativity, and design, do not need to obtain the consent of the property committee.

The legal representative needs to be present in person at least once. Each bank has different information requirements. For example, the information required by the Bank of China includes:

  1. Original company business license
  2. Official company stamp, financial stamp, and legal representative stamp.
  3. Proof of the company’s registered address (usually a lease contract)

On the day of account opening, the legal person needs to be present with the original ID card or passport and the ID card of the online internet banking account administrator. It should be noted that, in general, you need to make an appointment and book a date and time with the bank in advance to open an account, and then bring the information to be submitted.

Since 2002, all companies have been required to undergo an annual audit, with the exception of a few special sectors. It is important to know that foreign companies are required by accounting rules to have an annual audit done by a certified public accounting firm in China.

Yes, you are required to prepare financial statements for your company. The audit of the company’s financial statements by the accounting firm is one of the things that the industrial and commercial administrative authorities look for when they inspect the company every year.

It is the responsibility of the company’s governance to ensure compliance with the legal requirements related to financial reporting, such as registration and filing with regulatory bodies and the provision of financial information to investors and shareholders, as required by the relevant laws.

注册中国公司的常见问题及解答