What are the new requirements of Foreign-Invested Enterprises?

Many provisions of China’s Company Law (including recent amendments summarized in the February 2006 China Country File) have since been confirmed to govern ‘foreign-invested enterprises’ (FIEs), mostly now being referred to as ‘foreign invested companies’ (FICs). FICs are now subject to clearer
Requirements and procedures for key matters including establishment, classification, capitalization, internal structure, equity pledges and onward investments.
The main government document clarifying these matters (not all based on the Company Law) is the ‘Implementation Opinion for Several Issues on Application of Laws Concerning Foreign-Invested Company Examination, Approval and Registration Administration’. Issued by several ministries and departments on April 24, 2006. Also important is a related implementation circular issued by the State Administration of Industry and Commerce on May 26, 2006.

Notarization and consularisation: Applications for government approval of a FIC’s establishment or amendment require both notarization and (except in Hong Kong, Macao and Taiwan) consularisation of each foreign investor’s status documents.

Single-owner companies: A single-owner Wholly Foreign-Owned Enterprise (WFOE), like a domestic single-owner company, must have registered capital of at least 100,000 renminbi (US$12,608) and, if its single owner is an individual, is not permitted to establish or invest in another single-owner company. Unlike a domestic single-owner company, a single-owner WFOE may receive contribution of its registered capital in multiple installments.

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