Malaysia Hotline: +603- 2141 8908
A
Wholly Foreign-Owned Enterprise (WFOE) is a limited liability company that is
entirely funded by one or more foreign entities. WFOE is the most popular form
of foreign invested enterprise (FIE) in China because it allows for the most
freedom in business management. While establishing a WFOE requires large
overhead investment (in comparison to a representative office), it creates an
independent legal entity that can engage in profit making business, address
human resources of its own accord, and expand to create subsidiaries. The term
for a business license is generally 30 years with opportunities for extension
(although shorter or longer terms may be granted).
A
WFOE cannot be incorporated to conduct general business activities. In China,
the specific business scope and investment must be clearly defined in the
application phase, and are subject to government approval. It is critical that
both the business scope and total investment are accurately defined because
once established the WFOE is legally obliged to remain within the parameters of
its business scope and meet its financial commitments.
The
“total investment” of a WFOE is the amount of capital required to start-up the
business until it becomes self-sufficient from its investors. Total investment
is made up of two components: the registered capital portion, and the non-registered
capital portion. “Registered capital” refers to the equity investment in a
WFOE. This amount is fixed in the articles of association of a WFOE, and
constitutes an investment commitment on the part of the investor(s) to the WFOE
(subject to any increase or decrease of registered capital approved by the
government). The non-registered capital portion of the total investment of a
WFOE is essentially the amount of debt financing which the WFOE is permitted to
obtain. Unlike registered capital, there is no commitment to finance the
non-registered capital portion of a WFOE’s total investment (such debt
financing may be obtained at the WFOE’s discretion).
The
WFOE’s investors must pay 15% of the registered capital of the WFOE within the
first three months after issuance of the WFOE’s business license (similar to a
certificate of incorporation under Canadian law), with the balance due in the
first two years. The minimum legal requirement is 30,000 RMB if the WFOE has
two or more investors, or 100,000 RMB if the WFOE has only one investor.
Despite these minimum amounts, the authorities will approve the amount of
registered capital on a case-by-case basis depending on the intended business
activities, scale of operation and location of the WFOE. The amount is then
written into the company’s articles of association.
Contact us
If you have further queries, please contact Tannet
24 hours Malaysia hotline：603-21418908;
24 hours Hong Kong hotline：852-27837818;
24 hours Hong Kong hotline：86-755- 36990589;
Email: mytannet@gmail.com
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