1. COMPANY REGISTRATION
1.2 Branch Office
1.1 What is Representative Office (RO) ?
A representative office is an office established by a company to conduct marketing and other non-transactional operations, generally in a foreign country where a branch office or subsidiary is not warranted. Representative offices are generally easier to establish than a branch or subsidiary, as they are not used for actual “business” (e.g. sales) and therefore there is less incentive for them to be regulated.
A representative office enables clients to visit an domestic office where the main office is abroad. The office may only carry out non-profit activities (e.g. providing information to clients and prospects, maintaining contacts with clients, prospects and main office). Therefore, tasks such as signing a contract on behalf of the company and invoicing (profit-activities) are not allowed.
An approved representative office is allowed to carry out the following activities:
• Plan or coordinate business activities
• Gather and analyse information or undertake feasibility studies on investment and business opportunities in the country
• Identify sources of raw materials, components or other industrial products
• Undertake research and product development
• Act as a coordination centre for the corporation’s affiliates, subsidiaries and agents in the region
An approved representative office is not allowed to carry out the following activities:
• Engage in any trading (including import and export), business or any form of commercial activity
• Lease warehousing facilities; any shipment/ transhipment or storage of goods must be carried out through a local agent or distributor
• Sign business contracts on behalf of the foreign corporation or provide services for a fee
• Participate in the daily management of any of its subsidiaries, affiliates or branches in the country
• Conduct any business transaction or derive income from its operations
1.2 Definition of Branch Office
A smaller, remotely located office that is separate from a company’s corporate headquarters.
When you find yourself and your employees traveling frequently to a specific locale, it may be time to consider opening a branch office there. That will reduce the need to travel and greatly improve your coverage of the remote office. For many locations, such as international markets many time zones away, a branch office may be the only feasible way to serve a particular market.
Most branch offices are comprised of smaller divisions of different aspects of the company such as human resources, marketing, accounting, etc. A branch office will typically have a branch manager who will report directly to, and take orders from, a management member of the main office.
Numerous business factors are contributing to the rise of the branch office and the need to empower the many and varied employees who work there:
• Globalization of the world’s markets: Businesses are reaching out to customers around the world, and many have opened offices in major cities to gain a worldwide presence.
• The trend toward mergers and acquisitions: Newly combined companies often leave offices in their original, disparate geographic locations.
• Cultural requirements: Most large organizations need local personnel who understand the culture and language of a given region.
• Desire to hire a more diversified group of employees: Many businesses like to expand their pool of employee prospects across geographic boundaries.
1.3 What is Wholly Foreign Owner Enterprise (WFOE)?
The Wholly Foreign Owned Enterprise (WFOE or WOFE) is a Limited liability company wholly owned by the foreign investor(s). The Wholly Foreign Owned Enterprise, abbreviated WFOE, is a common investment vehicle for mainland China-based business. [1] The unique feature of a WFOE is that involvement of a mainland Chinese investor is not required, unlike most other investment vehicles. [1] WFOEs are limited-liability corporations organized by foreign nationals and capitalized with foreign funds. This can give greater control over the business venture in mainland China and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner. [2][3] Such problems often include profit not being maximised, leakage of the foreign firm’s intellectual property and the potential for joint venture partners to set up in competition against the foreign firm. However, WFOEs often have difficulty building up the necessary personal relationships or ‘guanxi’ which are of great importance in conducting business in mainland China.[2][3]
WFOEs are often used to produce the foreign firm’s product in mainland China for later export to a foreign country. They do not automatically have right to distribute their products in mainland China, though a recent variant (the Foreign Invested Commercial Enterprise WFOE) has the ability to do so.
WFOE’s are among the most popular corporate models for non-PRC investors due to their versatility and unique advantages.
Such advantages[4] include:
• the ability to uphold a company’s global strategy free from interference by Chinese partners (as may occur in the case of joint ventures)
• total management control within the limitations of the laws of the PRC
• the ability to both receive and remit RMB to the parent company overseas
• increased protection of trademarks and intellectual property, in accordance with international law
• shareholder liability limited to original investment
1.4 Define Joint – Venture (JV)
A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.
The JV parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They both exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.
When two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are “co-venturers”.
The venture can be for one specific project only – when the JV is referred more correctly as a consortium (as the building of the Channel Tunnel) – or a continuing business relationship. The consortium JV (also known as a cooperative agreement) is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, rental agreements, for ‘‘one-time’’ contracts. The JV is dissolved when that goal is reached.
A joint venture is not to be taken lightly. For a businessperson to embark on a joint venture, he or she needs to be committed and willing to work cooperatively with the other party involved. A person involved in a joint venture can no longer make all of the decisions for the business alone. For it to be truly a “joint venture,” there has to be 100% commitment from both sides.
When determining whether or not to embark on a joint venture, it is important to ensure both parties are a match with the projected client base
A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.
The JV parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They both exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.
When two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are “co-venturers”.
The venture can be for one specific project only – when the JV is referred more correctly as a consortium (as the building of the Channel Tunnel) – or a continuing business relationship. The consortium JV (also known as a cooperative agreement) is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, rental agreements, for ‘‘one-time’’ contracts. The JV is dissolved when that goal is reached.
A joint venture is not to be taken lightly. For a businessperson to embark on a joint venture, he or she needs to be committed and willing to work cooperatively with the other party involved. A person involved in a joint venture can no longer make all of the decisions for the business alone. For it to be truly a “joint venture,” there has to be 100% commitment from both sides.When determining whether or not to embark on a joint venture, it is important to ensure both parties are a match with the projected client base.
