Corporate Structure of China Company

Decide an Available China Company Structure

In accordance with the company law of the Peoples Republic of China and relevant regulations for the implementation of the law of foreign invested enterprises promulgated in 26th, October of 2018, and voted through the sixth session of the standing committee of the 13th National People’s Congress. In order to regulate the behavior of the enterprises and organizations, to protect the legitimate rights and interests of shareholders and creditors, maintain social and economic order, the second legal catalog stipulates, a legal registered enterprise must set up and appoint effective organizational institution to take responsibility for its rights and obligations.

The regulations and rules apply to all local businesses and organizational types such as private companies, LLC ( limited liability company ), LLP ( limited liability partnership ), WFOE ( wholly foreign owned enterprise ) known as WOFE ( wholly owned foreign enterprise ) and FICE ( foreign invested commercial enterprise ), JV ( joint venture business between foreign shareholder and Chinese partnership ), domestic invested enterprise, subsidiary company, offshore company, stock company and group company, etc.

A reasonable corporate structure decided by shareholder(s) of China company for ensuring the smooth development of business. Most Chinese limited companies are owned by shareholders ( actual capital contributors, investors ).

An available Chinese corporate structure must include 4 key positions, shareholder(s), supervisor and executive director ( known as the legal representative ) and an accountant.

Therefore, shareholders of China company have the rights to vote corporate directors, legal representative, supervisor, financial management teams and other optional positions depending on corporate decisions. That means all key positions appointed by shareholder(s).

Required positions of key corporate structure

1st is shareholder(s):

You have to decide who the shareholder is, according to company laws, you have to decide 1 shareholder at least. If have 2 or more shareholders, all of you have to work out Chinese corporate shares, and take responsibility for corporate limited liabilities ( debts ) and also can get benefits ( profit dividends ).

Chinese shareholders can be individuals (Chinese or nonresidents), and existed corporations and business entities (Chinese companies or foreign enterprises).

2nd is executive director:

Executive director known as legal representative, only one person ( individual ) can be the executive director appointed by shareholder(s), certainly, one shareholder also can be the legal representative voted by the board of shareholders in terms of Chinese corporate laws.

For an executive director also can be a local resident or a foreigner (no nationality restrictions).

3rd is a supervisor:

As a senior executive secretary appointed by shareholder(s) to supervise the daily operations, check situations of taxation and bank records on behalf of shareholder(s). In order to limit the power, the supervisor cannot be the executive director (legal representative). A supervisor also does not have the nationality restrictions.

4th is financial manager:

The Chinese corporate accountant must be a Chinese person to operate daily tax records and annual inspection and audit. At the initial stage of the enterprise, you can look for a third party accounting firm to operate the daily accounting and bookkeeping. Exactly as SMEsChina is providing that.

Above mentioned 4 key structure must be set up by your decisions, and you have to prepare authentic legal documents to verify their legitimacy and submit related files to Chinese market and supervision department ( known as industrial and commercial administration bureau ) to verify and get an approval. ( ++++What required documents have to prepare, you can read the following contents collected by SMEsChina teams ).

Responsibilities of Organizational Key Institution

1). Shareholders:

Can participate in major decisions and selecting key managers, as corporate owners have the rights appoint directors and supervise positions, decide to issue initial shares to increase the registered capital of the company and applying for dissolving corporation by voting. Board of shareholders of the corporation as the highest authority needs to take responsibility for debts, and implement profit distribution.

2). Legal representative ( executive director ):

As a legal person appointed by shareholder(s) who in charge of internal affairs, civil activities and daily organizational production and operation activities. Take responsibility for his or her signature on different situations such as, purchasing contracts, selling agreements, employment contracts or other legal instruments.

3). Corporate supervisor:

As a member of the company’s supervisory organ, in charge of supervising tax records and senior executives, according to his (her) supervisory responsibilities.

4). Financial manager:

In charge of financial accounting, providing financial analysis reports, preparing budgets, costs and funds, providing strong supporting for corporate strategies of decision-making.

In order to ensure the smooth development of Chinese business, key institution must comply with the regulations and laws for corporate running and operations, pay taxes in accordance with the local tax laws.

Other Optional Structural Positions

1). Board of directors:

If the corporate type is a JV ( joint venture business operated by a Chinese shareholder and foreign owner together ), a joint venture must set up the board of directors appointed by the shareholders, member of directors must include 3 people at least. Other corporate types do not need to set up the board of directors, such as WFOE, FICE, sole trader etc. Board of directors voted by the board of shareholders and as the business decision-making institution to carry out strategic plannings and take responsibility for shareholders of the corporation.

2). General manager:

Also is an optional position according to Chinese company laws, you may flexible set up this position depends on corporate decisions. In charge of daily management and implement the strategic decisions of the board of directors, complete all the targets assigned by the board of directors, and report the implementation to the board of directors.

Requirements and Documents to Indentify These People

If you have everything to set up a private company with different corporate structure, you must prepare related requirements for setting up an available corporate structure and send these proved files to SMEsChina office, we will submit these documents to the local government office providing the process of verification, and get an approval for your China company registration through submitting required documents of different corporate structure.

By this link, <Prepare Required Documents to Register a Company>, you may start to prepare required documents for these positions of key structure.

If you did not find an associated explanation for your Chinese corporate organizational structure, you can get in touch with our online consultants, contact us right now.

FAQs of Corporate Structure of Chinese Corporations

According to Chinese laws on business registration of enterprises, you have to set up required positions as corporate and organizational structure. Shareholder ( 1 at least ), and legal representative ( known as executive director ) and supervisor, no nationality restrictions.

Of course, depends on your decision, but you have to ask your Chinese friend providing original ID to the local government office to verify and get an approval. But in the future, you have to ask your friend to provide assistance, such as opening a corporate bank account, apply for keys of internet banking, go to the immigration office to identify foreign staff system (working visa), and other required affairs on behalf of your Chinese corporation.

All registered information, include investment capital, registered address, business activities, shareholder(s), legal representative, supervisor, or other optional positions will be listed on public websites, also all changed information will be listed.

According to Chinese laws, one person can not be approved to get 2 positions ( legal representative and supervisor ), that means legal representative and supervisor cannot be the same person, because the supervisor cannot supervise self on daily operations.

Depending on shareholder’s decision, legal representative and supervisor, general manager and financial manager can be appointed by shareholder(s), also can be removed by shareholder(s). Shareholders can sign new appointment documents and submit to the local market and supervision department to apply for the changing procedure. Around 3 – 4 weeks get a new approval, and all changed information will be updated by public websites.

1). Shareholder(s), can be individuals ( 16 age at least ) or existed enterprises ( legally registered in China or other countries ).
2). Legal representative and supervisor, 16 age at least, can provide a valid and legal identification. No nationality restrictions.
3). Finance manager must be a Chinese who has obtained the certificate of accounting qualification.

Depending on your exact situations for business scope (commercial activities). Besides of special supervisory industries you have to be interviewed by officials from different supervisory departments and offices, such as food, business, trade in dangerous chemicals, liquor and alcoholic beverage, or other businesses with special industries.

General industries do not need to interview, but you have to prepare valid identification documents and provide them to local government offices to obtain an approval for your corporate key structure of China company.

All of above information for guidance on deciding corporate structure to set up an available and reasonable structure of China company, collected by SMEsChina teams according to the Law of the People’s Republic of China on Business Regulations of Registration, in accordance with the Detailed Rules for the Implementation of the Law of the People’s Republic of China on Foreign Invested Enterprises and other relevant and officially promulgated laws and regulations of the People’s Republic of China published by SAMR.

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