Viewpoint | A Brief Analysis of the Establishment Process of Foreign Investment Enterprises
Published:
2024-07-26
The purpose of this article is to provide you with a detailed analysis of the key steps of each step from the initial preparation to the formal operation of foreign-invested enterprises, so as to help you and your customers enter the Chinese market efficiently and in compliance. This article will delve into the comprehensive process of setting up foreign-invested enterprises and provide readers with a preliminary guide to investing in China.
Today, foreign investment has become an important force in promoting the economic development of various countries. For international investors interested in expanding their business in this dynamic land of China, it is particularly important to understand and master the establishment process of foreign-invested enterprises. The purpose of this article is to provide you with a detailed analysis of the key steps of each step from the initial preparation to the formal operation of foreign-invested enterprises, so as to help you and your customers enter the Chinese market efficiently and in compliance. This article will delve into the comprehensive process of setting up foreign-invested enterprises and provide readers with a preliminary guide to investing in China.
Foreign Investment in the Era of 1. Foreign Investment Law
On January 1, 2020, the "the People's Republic of China Foreign Investment Law" and its implementing regulations came into effect, marking the end of China's "Three Foreign Investment Laws" (I. e., the "the People's Republic of China Foreign Investment Enterprise Law", the "the People's Republic of China Chinese-Foreign Equity Joint Venture Enterprise Law" and The "the People's Republic of China Chinese-Foreign Cooperative Enterprise Law") era has come to an end, and the market has gradually transitioned from the era of the three foreign investment laws to the era of foreign investment law.
The Foreign Investment Law cancels the titles of "Sino-foreign joint ventures" and "Sino-foreign cooperative enterprises" and is uniformly attributed to foreign investment; the case-by-case examination and approval and filing system for foreign investment is abolished, and the management system of "negative list of national treatment before admission" is adopted, that is, foreign investment outside the negative list is managed in accordance with the principle of consistency between domestic and foreign investment and national treatment, while investment in the list is prohibited or restricted in accordance with the negative list; indirect investment is directly regulated within the scope of the Foreign Investment Law. Compared with the era of the three laws of foreign investment, foreign investment under the Foreign Investment Law is not only more convenient in terms of procedures, but also clearer and more concise in terms of supervision.
2. the specific process of starting a foreign-invested enterprise.
1. Pre-procedure for document authentication, notarization and translation
If the company's shareholders or promoters are from a foreign country, their subject qualification documents or identity certificates must first be notarized by the notary office of the country where they are located, and submitted to the Chinese embassy (consulate) in that country for certification. However, if there is no diplomatic relations between the country and China, these documents should first be certified by the embassy (consulate) of a third country that has diplomatic relations with China in that country, and then by the Chinese embassy in that third country. The embassy (consulate) conducts secondary certification.
For documents issued by overseas territories of certain countries, the process is slightly different. These documents must first be notarized in their territories, then certified by the country's diplomatic agency, and finally final certification by the Chinese embassy (consulate) in the country.
In addition, if a foreign natural person chooses to invest and set up an enterprise in China, when the identity document submitted by him is a People's Republic of China foreigner's permanent residence ID card, the document does not need to be notarized or authenticated. If the identity document submitted is a passport that has passed the visa of the Chinese embassy (consulate) and has been confirmed by the Chinese entry and exit administration department, it does not need to be notarized after checking the original.
On March 8, 2023, China formally acceded to the Convention on Cancellation of Certification Requirements for Foreign Official Documents (Convention Abolishing the Requirement of Legalization for Foreign Public Documents). Article 3(1) of the Convention stipulates, "In order to prove the authenticity of the signature, the identity of the signatory of the document when signing, and to confirm the authenticity of the seal on the document when necessary, the only formality that may be required is the issuance of an additional certificate under article IV by the competent authority of the State issuing the instrument". According to this article, the circulation of official documents between China and other States parties to the Convention will no longer require the traditional consular certification, but only need to apply for an "additional certificate" (Apostilla) to be sent to the mainland of China for use; after the author's search, the Chinese embassies and consulates in the States parties to the Convention have basically issued notices to suspend consular certification services. Therefore, foreign investors from States parties to the Convention do not need to go through the cumbersome consular authentication business, but only need to go through additional certificates and fair procedures with the local competent authorities.
The requirement for an additional certificate is in fact the maximum limit that the destination country may require when going through the relevant formalities (the utmost level of formalities that may be imposed). However, the need for this additional certificate is optional, I .e. the destination State has the right to decide whether to adopt further simplification measures, including a complete exemption from the requirement for Hague certification or any other formalities. This means that the destination country has a certain degree of flexibility and autonomy when dealing with relevant documents. At present, our country requires an additional certificate.
The competent authorities responsible for issuing additional certificates vary from country to country. For example, the competent authority in China is the Ministry of Foreign Affairs of China, and the Ministry of Foreign Affairs of China entrusts local foreign affairs offices to issue additional certificates. The competent authority in the UK is the Ministry of Foreign Affairs, National Association and Development Affairs (Foreign, Commonwealth and Development Office,FCDO) and the competent authority in Japan is the Ministry of Foreign Affairs (The Ministry of Foreign Affairs), which shall prevail.
After the completion of notarization and certification, the relevant documents need to be translated and stamped by a translation company with corresponding translation qualifications.
2. Business registration of enterprises
At present, thanks to the policy of actively attracting investment in various places, foreign investment in China has been very convenient. Many places provide "one-window" services for foreign-invested enterprises, sharing the same window and process with domestic-funded enterprises, that is, at the level of industrial and commercial registration, there is no substantial difference between foreign-funded enterprises and domestic-funded enterprises. Take Shandong Province where the author is located as an example, log on the website of Shandong Provincial People's Government, select "Enterprise Open One Window Pass" in the drop-down, and select the corresponding enterprise type in the step of "Enterprise Name Independent Declaration" (for example, select "Foreign Investment Enterprise", Optional "Joint Venture (Joint Venture of Foreign Investment Enterprise)" or "Investment (Investment of Foreign Investment Enterprise), here it is recommended to choose joint venture, this is because the Chinese partners of foreign-invested enterprises can provide convenience for the enterprises in the subsequent operation and management in China), and then follow the system prompts to complete the operation step by step.
3. Foreign Exchange Registration
At present, foreign exchange registration for direct investment in foreign exchange for foreign investment upfront costs and capital is handled by banks. According to the Notice of the State Administration of Foreign Exchange on Further Simplifying and Improving the Foreign Exchange Management Policy for Direct Investment, the two administrative examination and approval items of foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment are canceled, and the foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment are directly examined and handled by banks in accordance with this notice and the attached Guidelines for the Operation of Foreign Exchange Business for Direct Investment, the State Administration of Foreign Exchange and its branches exercise indirect supervision over the foreign exchange registration of direct investment through banks.
Foreign investors should first go to the bank in the place of registration to go through the relevant foreign exchange registration procedures for direct investment, and obtain the business registration certificate (stamped with the special seal for banking business), as the basis for the opening of accounts under direct investment and the exchange of funds and other follow-up business.
4. Licensing in accordance with the regulatory requirements of their industry
In addition to business licenses, foreign-invested enterprises need to apply for licenses in accordance with the regulatory requirements of their industries to conduct specific business in China. If export enterprises need to go through customs registration, according to the specific types of goods they export, they may also need to apply for export licenses.
3. epilogue
At this point, the establishment process of foreign-invested enterprises is basically over. The establishment process of foreign-invested enterprises is cumbersome and complicated. Each step needs to be comprehensively considered in combination with the specific situation of the enterprise, and requires careful preparation and careful implementation. At the same time, please continue to pay attention to our public number. We will continue to provide you with the latest policy interpretation, market trends and practical experience sharing on foreign-invested enterprises.
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