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How to Structure Your Business in China
Hao Wang
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Questions from Business Clients• What if I do not plan to make any investment now,
but I still need to do business in China?• I know there is a market for our products and I am
ready to go. What do I do next?• I would like to start an on-line gaming business in
China, but I heard there are restrictions relating to foreign ownership.
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Structure Options
• Representative office
• Wholly-Owned Foreign Enterprise
• Sino-Foreign Joint Venture
• Trust structure
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Representative Office
• Liaison and communication
• Easy to set up
• Restrictions on direct recruitment of local staff
• Tax for cost center
• Rep office plus local partner
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WOFE
• Guidance on Foreign Investment in different industries
• Total investment vs. registered capital
• Holding your subsidiaries in China via an investment company
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WOFE [Part One: Industry Guidance]
• Mechanism used for macro economic control
• Different editions published at different times reflect policy orientation at time of publication
• Encouraged, restricted and prohibited categories
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WOFE [Part Two: Total Investment vs. Registered Capital]
• Total investment=registered capital+debt• Ratio• Why registered capital matters
* name, e.g.. XYZ(China) Co., Ltd.
* match business operation scale
* capital increase approval• Injection schedule
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Joint Venture
• Why a JV is needed * Restrictions on equity percentage held by foreigners
* Difficulties in setting up a WOFE (e.g. banks)
* Regulatory hurdles in foreign mergers & acquisitions
• Two forms of JV
• Sweet or sour marriage?
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Trust Structure• Type(s) of Angelo-Saxon trusts that are
recognized under PRC Trust Law 2001
• Commercial trusts are widely used as investment vehicles
• Savvy foreigners use trust structure to get around regulatory hurdles (e.g., on-line gaming business)
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Legalmall: One Stop Shop for Doing Business in China
• Legal Document Templates• Company Search: find who you are dealing with
in China• Service: Set up a company in Beijing/ HK• Ask a Lawyer• FAQ: tips you need to know
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Legalmall: a platform to find Clients from China
• Chinese clients seek answers from attorneys from multiple jurisdictions
• Chinese clients check foreign partners background information
• Chinese clients need foreign legal templates
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Thank [email protected]