China Company Start-up Checklist, Part III

Please read "China Company Start-up Checklist" Parts I and II before reading this article.

The following activities should also be undertaken as soon as possible after receiving the Business License:

(1) Obtain any Necessary Construction Permits

Procedures will vary according to locality and type of construction, but required documentation will likely include an Environmental Impact Assessment. Details can be provided to you by your examination and approval authority. Check on this early in the Project Approval stage ? advance preparations might need to be undertaken at that time.

(2) Recruiting Chinese Employees

This can be undertaken with the assistance of the Administrative Office of Foreign Invested Enterprises at the municipal Labor Bureau. Foreign Invested Enterprises are generally allowed to undertake independent recruitment and hiring (note that restrictions exist for Representative Offices).

(3) Recruiting Foreign Employees

Non-Chinese Nationals: Enterprises that wish to employ non-resident foreigners (on F, L, G or C visas) must apply to the Foreign Employment Administration Office of the local Labor Bureau to obtain work permits for them. A trip abroad (Hong Kong is OK) may be required.

The usual procedure is a follows:

(1) The enterprise applies for and receives approval to employ foreign nationals. Such Such approval is usually freely given to Foreign Invested Enterprises.

(2) If abroad, the foreign national applies for a work visa at a Chinese embassy or consulate in his home country (this might also be done from Hong Kong).

(3) Foreign national enters China and registers with the local Public Security Bureau (the police) within 24 hours of his arrival.

(4) Foreign national undergoes a half-day medical examination at a designated clinic in China (a small fee is required). The report should be issued to the foreign national within 48-72 hours.

(5) Employer applies for a work permit on behalf of the foreign national. Required documents include (i) completed application form (ii) passport copies, (iii) photos, (iv) resume, (v) copies of any applicable occupational licenses, (vi) medical examination report, and (vii) employment contract.

(6) Once the Work Permit is issued, the foreign national applies for an receives an Alien Residence Permit (this document is separate from the passport).

(7) Employer registers the foreign national with the local and national tax bureaus.

(8) Foreign national registers with the Customs Bureau of personal items are being shipped from abroad.

Taiwan, Hong Kong, or Macau Residents: The employer must apply to the Employment Administration Office for Compatriots from Taiwan, Hong Kong and Macau of the Local Labor Bureau in order to obtain Work Permits for residents of these areas.

Note 1: Bureau Addresses - The exact office addresses of the bureaus and departments listed above have not been included because most of them are local and because they may vary according to the location and nature of the project and the amount of money you are investing. For details, please seek the counsel of an experienced local consultant or attorney.

Note 2 - Subsequent Changes: Changes in the enterprise?s registered information are only effective upon the approval of the registration authorities. If a Foreign Invested Enterprise wishes to move to a new site, shift production, increase, decrease or transfer its Registered Capital, extend the term of the Joint Venture Contract, etc., Chinese foreign investment law requires that the enterprise immediately register these changes with the local office of the State Administration of Industry & Commerce. If any of the information on the Business License changes (such as change of identity of the Chairman of the Board of Directors or the General Manager), these changes must be immediately registered and the Business License must be amended.

Note 3: Additional Procedures: The above list of procedures is not necessarily exhaustive ? additional procedures may be required depending on your industry, your locality, the nature of your project, etc. An example is registration procedures required for being admitted to an industrial park (if your project wishes to be located in one), which vary somewhat from park to park.

Startup procedures for a WFOE are generally the same as those for establishing Joint Ventures, except that in a Wholly Foreign Owned Enterprise, Chinese foreign investment law requires that an authorized agent be entrusted to submit the application and approval documents in lieu of a Chinese partner using a Letter of Entrustment issued by the foreign investor (an agent must be a Chinese individual or entity, but could include lawyers and corporate registration services). The authorized agent performs the functions that the Chinese partner in a Joint Venture performs with respect to the examination and approval process. For example, the agent must submit the Project Proposal with a Letter of Entrustment instead of a Letter of Intent.

A simple rule of thumb for converting this website?s instructions on establishing a Joint Venture to establishing a Wholly Foreign Owned Enterprise is that wherever the instructions require the use of a Joint Venture contract, a Wholly Foreign Owned Enterprise may use its Letter of Entrustment, and where the instructions require the Chinese partner to submit its own information, this information is omitted from the requirements. A Shareholders? Agreement may be required at the project approval stage if there is more than one foreign investor; however, it may be governed by foreign law.

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David Carnes is licensed to practice law in California. He speaks and reads Mandarin Chinese and has several years experience working with Chinese law firms and Sino-American joint ventures. Check out his website, China Legal Bulletin, at http://www.lunaticwisdom.com/blog1.