With the development of the world economic integration trend, more and more foreign companies have taken a fancy to the big market of China. And they have chosen to carry out business activities in China. So, WFOE is getting more and more popular with foreign investors. If you want to own a WFOE, let’s get to know what the WFOE structure is.
Before we get in WFOE structure, first be clear in what is a WFOE.
WFOE is wholly foreign-owned enterprises. Foreign companies, enterprises and other economic organizations or individuals invest WFOE all on their own. If you need a comprehensive information about WFOE，you can check Wholly foreign-owned enterprise on Wikipedia.
Besides, enterprises established according to Chinese laws.
If you are interested in relevant laws, please visit How much do you know about a foreign company in china
Moreover, according to China’s legal regulations on WFOE, it must be conducive to China’s economic development.
And China encourages WFOE adopting international advanced technologies and equipment.
China encourages WFOE in producing exported products.
WFOE structure, generally a limited liability company, or a one-person company.
As for foreign companies, enterprises or other economic organizations， their branches in China are not WFOE.
Additionally, foreign investment can contribute to instalments.
Starting from the day when the business license is issued, the first phase of funds should be paid within 90 days. This part of the funds should be no less than 15% of the principal. Likewise, the last fund should be paid within 2 years.
In addition to land, foreign investors own 100% of the company’s investment.
Can be an investment by a foreign investor or by several foreign investors.
Has no Chinese investors.
WFOE operates independently and there’s no Chinese party participates in management.
Enterprises operate according to the company’s regulations. Meanwhile, there is no interference from Chinese parties.
WFOE is self-financing.
When the enterprise terminates, the WFOE shall announce and liquidate in time, according to legal procedures.
Compared with other forms of company, the advantages of WFOE are:
In the first place, it can be a complement to its global strategy for its parent company.
Moreover, It has a stronger operating capacity in business.
And the surplus can be settled in RMB
Likewise, It is free to convert between RMB and USD
Of course, it can outbound remittance to the parent company
In light of relevant regulations, it can give customers invoices.
It is also conducive to protecting its intellectual property rights and patented technologies.
Furthermore, there are no special requirements for import and export licenses.
Besides, WFOE has all the personnel management rights
It is more efficient in the management, development and operation of the company.
The business scope of all industries in China is very strict and precise.
In this manner, wholly foreign-owned enterprises can only carry out business activities within their permitted business scope.
Relevant departments will indicate the business scope of the company on the business license. Therefore, if you need to modify it, you need to apply and obtain approval.
Of course, the approval department can grant a wider business scope through certain consultations.
If WFOE reinvests the profits after paying income tax in China, it can apply for a refund of part of the income tax paid for the reinvestment in accordance with national regulations.
China will not nationalize and levy WFOE except in a particular situation.
According to WFOE classification, characteristics, and policies in China, let’s take a look at the WFOE structure.
The shareholder council of a limited liability company consists of all shareholders. It’s the most powerful part of the WFOE structure. The shareholder council has a lot of powers. So, so the company should select the personnel carefully.
Next, Let figure them all one by one.
Generally, the chairman convenes and presides over the meeting.
When the chairman cannot perform his duties or does not perform his duties, the vice-chairman presides over.
On the other hand, when the vice-chairman cannot perform his duties or does not perform his duties, more than half of the directors recommend a director to preside.
And for companies without a board of directors, convene and preside over the shareholders’ meeting by the executive director.
About the board of directors, it has three to thirteen people.
And Board members may include company employee representatives.
By the way, the employees of the company elect representatives through democratic elections.
The director has a chairman, and WFOE can appointment a vice-chairman.
Additionally, elect the chairman and vice chairman according to the company’s regulations.
As to the term of appointment, the company’s regulations decide how long the chairman serves. And the period shall not exceed three years.
When the term of directors expires, the board of directors shall vote a new one. It is one person and one vote for re-election.
In the following situations, the original director shall still perform the duties of a director according to the relevant laws, administrative regulations and the company’s regulations.
The original director shall still perform the duties of the director, according to the provisions of laws, administrative regulations and the company’s regulations.
The board decided to hire or fire managers.
And the manager is responsible to the board of directors, and exercises the following items:
A company with a small number of shareholders or a small scale may have an executive director without a board of directors.
Executive directors can also be company managers.
Has other rights according to the company’s regulations.
Another WFOE structure is a one-person limited liability company.
In general, WFOE is classified according to the type of industry engagement.
For example Production WFOE, Consulting Services WFOE, Commercial WFOE
Meanwhile, the business scope of WFOE is according to Chinese relevant laws.
Moreover, compared to other forms of company, it has a lot of advantages.
For WFOE structure, It has shareholder council, the board of directors, manager, executive director, the board of supervisors, and corporate finance and accounting.
In addition, it can also be a one-person limited liability company.
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