How to Structure Your Business in China

Hao Wang

Questions from Business Clients• What if I do not plan to make any investment now,

but I still need to do business in China?• I know there is a market for our products and I am

ready to go. What do I do next?• I would like to start an on-line gaming business in

China, but I heard there are restrictions relating to foreign ownership.

Structure Options

• Representative office

• Wholly-Owned Foreign Enterprise

• Sino-Foreign Joint Venture

• Trust structure

Representative Office

• Liaison and communication

• Easy to set up

• Restrictions on direct recruitment of local staff

• Tax for cost center

• Rep office plus local partner

WOFE

• Guidance on Foreign Investment in different industries

• Total investment vs. registered capital

• Holding your subsidiaries in China via an investment company

WOFE [Part One: Industry Guidance]

• Mechanism used for macro economic control

• Different editions published at different times reflect policy orientation at time of publication

• Encouraged, restricted and prohibited categories

WOFE [Part Two: Total Investment vs. Registered Capital]

• Total investment=registered capital+debt• Ratio• Why registered capital matters

* name, e.g.. XYZ(China) Co., Ltd.

* match business operation scale

* capital increase approval• Injection schedule

Joint Venture

• Why a JV is needed * Restrictions on equity percentage held by foreigners

* Difficulties in setting up a WOFE (e.g. banks)

* Regulatory hurdles in foreign mergers & acquisitions

• Two forms of JV

• Sweet or sour marriage?

Trust Structure• Type(s) of Angelo-Saxon trusts that are

recognized under PRC Trust Law 2001

• Commercial trusts are widely used as investment vehicles

• Savvy foreigners use trust structure to get around regulatory hurdles (e.g., on-line gaming business)

Legalmall: One Stop Shop for Doing Business in China

• Legal Document Templates• Company Search: find who you are dealing with

in China• Service: Set up a company in Beijing/ HK• Ask a Lawyer• FAQ: tips you need to know

Legalmall: a platform to find Clients from China

• Chinese clients seek answers from attorneys from multiple jurisdictions

• Chinese clients check foreign partners background information

• Chinese clients need foreign legal templates

Thank You!Wh@rayyinlawyer.com