Business Registration Not Required for FIE Offices

In order to strictly adhere to the stipulations of the Company Law and other relevant foreign investment rules and regulations, maintain the continuity of China's laws and policies on foreign investment utilisation, as well as carry out foreign investment approval and registration in a standardised, convenient and highly efficient manner, foreign-invested enterprises (FIEs) are no longer required to register their offices with industry and commerce administrations. The new rule is stipulated in a set of opinions on issues concerning the approval and registration of FIEs jointly published by the State Administration for Industry and Commerce (SAIC), MOFCOM, General Administration of Customs and State Administration of Foreign Exchange recently.

Among these opinions, the lifting of the registration requirement on FIE offices has raised some concern. As an official at SAIC's foreign investment department explained, while the establishment of offices is not prohibited under Chinese laws, the opinions state explicitly that the setting up of FIE offices no longer requires business registration. It gives FIEs greater convenience in setting up offices that do not engage in business operations according to their own needs.

Offices that are already in existence may go on as long as they do not engage in business activities. Alternatively, they may convert into branch companies according to actual business needs. Company registration authorities should step up supervision to prevent these entities from directly conducting production or other business activities under the disguise of offices.

Furthermore, to maintain policy continuity, the opinions state that wholly foreign-owned companies are not subject to quantitative restrictions in accordance with the law. However, these companies have to comply with the minimum registered capital requirement as stipulated in the Company Law. One-man limited companies established by foreign natural persons are not allowed to set up another one-man limited company.

The opinions also set forth detailed suggestions at the implementation level, covering a wide range of issues concerning FIE establishment, namely corporate structure, form of incorporation, deadline for registration application, checklist of documents required for approval and registration, mode of capital contribution, supervision over capital injection, domestic investment, status of offices, and other customs and forex issues related to capital contribution. These include: lowering the market entry threshold for foreign investors in accordance with law; streamlining approval and registration procedures; improving the investment environment such as offering more options for capital contribution, more choice of currency and more channels for capital injection; streamlining the alteration, registration and approval procedures; cancelling the restriction on domestic investment by existing enterprises; cancelling the registration, verification and transfer procedures for the establishment of branch companies; and cancelling the registration requirement of offices. The opinions also deal with topics such as: standardising the governance structure of FIEs according to law; standardising registration filing requirements and procedures; strengthening supervision and management of FIEs such as company type, form of establishment, governance structure, deadlines for establishment and alteration registration; standardising the required documentary proof of foreign investor identity; strengthening supervision over capital injection and excess participation in restricted and prohibited industry sectors; and improving other mechanisms such as liquidation and cessation.