Guidance on WFOEs (Wholly Foreign Owned Enterprises), EJVs (Equity Joint Ventures) and CJVs (Cooperative Joint Ventures), as well as Contractual Joint Ventures.

You have to decide a company type before starting the procedure of business registration, today, SMEsChina prepares a guidance on the difference and requirements among EJVS, CJVS, and WFOEs for setting up a limited company. Also, if you need a local lawyer to get more details of wholly foreign owned enterprise and joint venture, you may contact SMEsChina online lawyers at once.

Definitions of EJVS CJVS and WFOEs

EJVs, CJVs and WFOEs included different management structure and core positions in accordance with the Chinese company laws and relevant implemented regulations and rules.

What is Chinese EJVs

EJVS, as well as equity joint ventures in China, the main form of expression is, parties of the joint venture can enjoy the profits after taxation and acceptance of risk depending on each proportion of shares. The form of equity investment can be cash, equipment, plant, technology, land tenure or other monetary units. Corporate risks and profits based on equity. It is characterized by joint investment, joint operation, joint risk and profit sharing.

Definition of a Chinese WFOE, WOFE or a FICE

Wholly foreign owned enterprises (WFOE), or WOFE ( wholly owned foreign enterprises), or FICE (foreign invested commercial enterprises), 3 appellations are the same situation, mean the Chinese company’s shares wholly owned by foreign investors (shareholders, owners). Currently, WFOE is the most popular investment tool for foreign investors to jump into the Chinese market. No nationality restrictions for foreign owned enterprises to set up a business in China, the shareholder(s) of the company can be oversea existed brands and companies, or nonresidents (oversea individual shareholder). Foreign shareholder(s) as the owner(s) to enjoy the 100% profits.

What is a CJV in China

CJVs, known as cooperative joint ventures, as well as contractual joint ventures, the main form of expression is similar to equity joint ventures (EJVs). But there are still have fundamental differences, cash investment, equipment, land, technology and labor provided by all parties shall not be used as capital stock, the distribution of profits is based entirely on the cooperative agreements signed by the parties. The contractual joint venture is contractual. The Chinese and foreign parties do not take the amount of investment or equity as the basis for profit distribution, but specify the rights and obligations of each party by signing a contract.

Brief List of Difference Among EJVS, CJVS and WFOEs

DifferenceEJVCJVsWFOEs
Joint Venture WayIn equity joint venture, both parties of the joint venture shall jointly invest and operate, and jointly assume risks and losses according to their respective proportion of capital contribution.The Chinese and foreign parties shall not take the amount of investment or equity as the basis for profit distribution, but shall specify the rights and obligations of each party by signing a contractForeign individual investors or institutional investors participate in the management of the company, appoint the management teams, enjoy profit sharing
Organizational formFor a limited liability company with all the property owned by joint partiesCan be a limited company, also can be the enterprise that does not have Chinese legal person qualificationOwned by foreign shareholder(s) and as a limited liability company in China
Investment recovery methodIn the joint venture, the foreign joint venture can only recover its own capital when it is dissolved in accordance with the lawThe foreign party may recover its investment first under certain conditionsRecover the investments depending on foreign shareholder’s decision
Administrative organThe board of directors and the board of directors shall direct the operation and management bodies below, and the board of directors shall be the highest authorityThe board system can be adopted, the joint management committee system can be adopted, and the entrusted management system can be adoptedWholly decided by foreign owners (shareholders)
Profit distribution methodNet profit shall be distributed in proportion to the equity of each partyProfits shall be distributed in the manner and proportion as agreed upon in the contractWholly decided by foreign owners (shareholders)

Requirements of Setting up JVs or WFOEs

Documents ListEJVsCJVsWFOEs
Chinese Shareholder(s)Original approved business license and company stampOriginal approved business license and company stampNone
Foreign shareholder(s)Certified certificate of registration of foreign companyCertified certificate of registration of foreign companyCertified certificate of registration of foreign company
Board of directorsAppointment and removal documents and proof of identity (foreigners provide copies of passports, Chinese provide original ID card)Appointment and removal documents and proof of identity (foreigners provide copies of passports, Chinese provide original ID card)Not mandatory
Executive director (legal representative)Appointed by shareholders, nonresidents provide passport certified by the Chinese embassy, Chinese provide original ID cardAppointed by shareholders, nonresidents provide passport certified by the Chinese embassy, Chinese provide original ID cardAppointed by shareholders, nonresidents provide passport certified by the Chinese embassy, Chinese provide original ID card
SupervisorAppointed by shareholders, nonresidents provide passport copy, Chinese provide original ID cardAppointed by shareholders, nonresidents provide passport copy, Chinese provide original ID cardAppointed by shareholders, nonresidents provide passport copy, Chinese provide original ID card

Other Guidance of Setting up a Chinese Company

After you deciding to launch a business as a wholly foreign owned enterprise or joint venture, you have to decide the register information as following steps to get started.

Steps:Topics of Study:Links of Reference:
Step 1Decide what types of company, depends on your key structure of corporation (shareholder’s structure).Selecting a company type
Step 2How to choose an available company name with bilingual for your private limited company.Naming rules and requirements
Step 3List detail business activities from 10 industrial categories.Selecting business scope
Step 4Set up the registered capital for your limited company.Company registered capital
Step 5Set up core people of your local corporation, and key positions.Decide corporate structure
Step 6Required documents you have to prepare in your country.Documents required to register a company
Step 7Prepare notarization and authentication documents issued by China embassy.Notarization and authentication documents
Step 8Download application forms and legal files and after filling and signing, courier to SMEsChina offices.Company formation documents download

Timetable of Set up a WFOE or Joint Venture

Description of Each Step:Time Required:
Chinese company name submit, search and obtain approval3 working days
Download and signature of the required documents of company formation (see below) and courier to SMEsChina5 working days
Obtain the certificate of foreign owned (investment) enterprise and the certificate of business registration (known as: business license)5 working days
Apply for the company stamps (known as corporate seals) and obtain approval2 working days
Open a local corporation bank account and internet banking5 working days

Ready to Start and Launch a Business in China? So Are We.

SMEsChina teams focus on the growth of enterprise and providing a variety of business solutions in the area of strategy consultancy, WFOE setting up services, business registration, company formation, incorporation of domestic invested enterprise, finance and audit services, HR and payroll, corporate bank account, resident permit, immigration and visa, trademarks and legal compliance.

China is attracting more and more foreign companies, SMEs,entrepreneurs, startups, brands to invest and establish their business entities through reforming various laws and regulations actively. More than 47 million companies and small medium enterprises have registered their business entities in mainland China and over 3.5 million new enterprises are incorporated during each financial year with comfortable process of registering companies. Here SMEsChina is sharing our knowledge and business insights to global enterprises and companies for better learning the regulations and rules of China corporations running and corporate maintaining. All reference and guidance collected by SMEsChina Teams in accordance with the latest implemented laws of the People’s Republic of China on Wholly Foreign-Owned Enterprises ( WFOE ), Joint Venture ( JV ) and Limited Liability Company ( LLC ), Limited Liability Partnership ( LLP ), and other relevant and officially promulgated regulations and rules on the corporation formation and registration of industrial and commercial enterprises and related IP laws, immigration and resident policies ( VISA ), tax laws.

SMEsChina teams happy to work around you and look after your daily China operations confidently and smoothly. Check if setting up a private company is right for you, if you have everything to set up a business in Mainland China, you can get in touch with our teams to get more useful information and online guidance.

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