The Complete Guide to the Roles and Responsibilities of a Legal Representative and a Supervisor in a WFOE in China

After signing an agreement with our clients for WFOE registration in China, we issue a formal invoice. At this stage, we anticipate that our clients will make a payment for the service, allowing us to commence the process.

Upon receiving full payment for the WFOE registration, we provide our clients with a detailed questionnaire. This document requests all the necessary information about the company, business activity, founders (shareholders), and executives (including the company director and supervisor). We request that our clients complete the questionnaire and return it to us via email.

1. Company Name Choices: In China, WFOE names should follow this structure: [Place of Registration] + [Chosen Name] + [Business Direction] + Co., LTD. For example, Shanghai Silk Road International Trading Co., LTD, or for a consultancy company: Shanghai Silk Road Consulting Co., LTD. An alternative structure is: [Chosen Name] + [(Place of Registration)] + [Business Direction] + Co., LTD. For example: Silk Road (Shanghai) International Trading Co., LTD. Please note, in China, a company’s Chinese name is considered its main name. If our clients know Chinese, we ask for name choices in both Chinese and English, following the above structure. If not, English name choices will suffice, and we will select a corresponding Chinese name based on similar sounds. Avoid city, country, and historical names, as they’re typically disallowed. Also, we discourage direct translations of the English name due to high likelihood of them being taken. We recommend selecting similar-sounding Chinese characters to avoid delays. The Chinese name does not need to have a specific meaning, as meaningful characters are often taken.

2. Company’s Legal Person (Company Director): The legal person is an individual and cannot be a corporate entity. Please prepare their full name (as on the passport), a copy of their passport (not ID), along with their address, phone number, and email address.

3. Company’s Supervisor: The company supervisor is a separate individual from the company director, meaning they cannot be the same person. Please provide their full name (as on the passport), a copy of their passport (not ID), and their address, phone number, and email address.

4. Company’s Shareholder(s): Shareholders are the owners of the company and can be both individuals or corporate entities. Both the company director and supervisor can be shareholders. There can be up to 50 shareholders. Whether an individual or corporate shareholder, full information is required: full names, contact details, address, and either passport copies (for individual shareholders) or a full set of company documents (for corporate shareholders).

5. Company’s Business Activity: What products and/or services does the company plan to sell? Please prepare a detailed list.

6. Company’s Registered Capital: The registered capital is the amount the founders plan to invest in the company over a span of 30 years or more. The amount varies depending on the activity and place of registration. We recommend $300,000 for international trading companies and $100,000 for consultancy companies, as examples. The registered capital amount is usually suggested by the local government.

7. Full Contact Details for All Involved Executives and Shareholders: We need the complete contact details for all executives and shareholders. This includes addresses, emails, and phone numbers.

Once we receive the completed WFOE registration questionnaire, we review it carefully and follow up with our clients accordingly. If there’s any missing information, or if the company requires additional permits or licenses based on its planned products or services, we will inform the client. If everything is in order, we prepare the application documents, attach our clients’ documentation, and submit the WFOE registration application. The estimated waiting period for feedback from the government on the registration application is approximately 10 business days. Please note that timeframes in China are approximate due to government bureaucracy.

Once the WFOE registration application is submitted, the government generally responds within 10 business days. If approved, they will issue the company’s structural documents, which the founders (shareholders) and executives (director and supervisor) are required to sign with a black gel pen and mail back to us (Note: In China, only black gel pens are acceptable for signing legal documents; other colors and ballpoint pens are not accepted). We then submit the signed documents to the company registrar and await the business license. The waiting period for the business license is roughly 10 business days unless expedited service was purchased. With expedited service, a business license can be obtained within 2-5 business days. Contact us for more details about the expedited service.

Once we secure the WFOE business license, we will contact our clients and the bank to schedule an appointment to open a corporate bank account for the company. Please note, the company director must be present in China to open a corporate bank account and their citizenship should not be among the countries sanctioned in the bank’s system. Alongside being present, the director needs to provide a Chinese phone number linked to their passport and a second person’s passport and phone number linked to this second person’s passport. This second person can be anyone in China (provided their citizenship isn’t among the sanctioned countries) with a Chinese phone number. This requirement is due to the banks’ need to issue online banking devices that require two people’s information. Legally speaking, this second person doesn’t have any rights or obligations regarding the company’s finances or bank account. While this might seem unusual, it remains a requirement, so we advise clients to identify such an individual in China before opening a bank account. The bank account opening process takes around 5-6 hours, and we recommend our clients exercise patience during this process.

After your WFOE bank account is opened, we’ll proceed to contact the customs department to initiate the process for the e-port device (if you’re registering an international trading WFOE focused on import/export. Note that e-port isn’t required for consultancy or other types of companies). This process typically takes about 5 business days, and we’ll mail the e-port device to our clients once it’s secured.

Yes, following the acquisition of the e-port for the WFOE, we’ll register the company with the tax department. This process generally takes around 14 business days, and it requires the company director to visit the tax office in person for ID verification.

Indeed, the final step in the WFOE registration is the foreign currency permission application. This process typically takes around 7 business days and necessitates a visit to the relevant government department. After securing the foreign currency permission, the WFOE can commence its operations.

On the whole, the complete process for WFOE registration can span anywhere between 4 and 8 weeks. As we mentioned earlier, all timeframes are approximations due to the inherent unpredictability of government bureaucracy. Although these factors are beyond our control, we will do our absolute best to expedite the process.

The legal representative must exercise their powers in accordance with the company’s articles of association and regulations. They must conduct activities strictly within the approved business scope, operate in accordance with the law, and safeguard the interests of the company without seeking personal gain.

A company supervisor is responsible for checking the company’s finances, supervising the performance of directors and senior executives, proposing the removal of those who violate laws or the company’s regulations, demanding corrections when directors and senior managers act against the company’s interests, and bringing lawsuits against directors and senior managers if necessary.

Supervisors without a board of supervisors have the power to inspect the company’s finances, supervise directors and senior managers, suggest removal of those who violate laws or the company’s regulations, demand corrections when directors and senior managers act against the company’s interests, propose to hold an extraordinary general meeting of shareholders, and initiate lawsuits against directors and senior managers if necessary.

The Board of Supervisors has the power to check the company’s finances, supervise directors and senior executives, propose the dismissal of those who violate laws or the company’s regulations, require directors and senior managers to make corrections when their behavior damages the company’s interests, propose to convene an extraordinary meeting of shareholders, make proposals to the shareholders meeting, and bring lawsuits against directors and senior managers.

Yes, according to Article 54 of the “Company Law”, supervisors may attend board meetings as non-voting delegates and raise questions or suggestions on resolutions of the board of directors.

If supervisors find abnormalities in the company’s business operations, they may conduct investigations. If necessary, they may hire an accounting firm to assist them in their work, and the company shall bear the expenses.

The legal representative must abide by the enterprise’s articles of association, faithfully perform their duties, and safeguard the interests of the enterprise. They must not use their position and authority within the enterprise to seek personal gain.

No, a legal representative must conduct civil activities strictly within the approved business scope.

A supervisor has the authority to supervise the performance of directors and senior executives in the company, and propose the removal of those who violate laws, administrative regulations, the company’s articles of association, or resolutions of the shareholders’ meeting.

Yes, the final round of revisions for the Company Law of the People’s Republic of China is anticipated to take place in August 2023.

According to the Chinese Company Law of 2006, the liquidation or sale of a China WFOE is typically carried out by the company’s shareholders or the board of directors. The role of the supervisor in this process is primarily focused on overseeing the company’s operations, checking the company’s finances, and ensuring compliance with laws and regulations.

While the supervisor does not have the direct authority to initiate or carry out the liquidation or sale of the company, they play an important oversight role during these processes. They are responsible for monitoring the actions of the board of directors and senior executives to ensure that the liquidation or sale is conducted in accordance with the law and in the best interests of the company.

It is important to note that specific procedures and requirements for the liquidation or sale of a China WFOE may vary depending on factors such as the company’s articles of association, the applicable laws and regulations, and any contractual agreements in place. Therefore, it is recommended to consult with professionals like JR & Firm familiar with Chinese company law and seek appropriate guidance specific to your situation.

According to the Chinese Company Law of 2006, the Legal Representative (aka Legal Person) of a China WFOE does not have the unilateral authority to liquidate or sell the company. The decision to liquidate or sell a China WFOE typically lies with the company’s shareholders or the board of directors.

The Legal Representative has important responsibilities in representing the company and exercising its powers in accordance with the articles of association and regulations. However, major decisions such as liquidation or sale usually require the approval of the shareholders or the board of directors, as stipulated in the company’s governing documents and relevant laws.

It is essential to follow the specific procedures and requirements outlined in the company’s articles of association, as well as comply with the applicable laws and regulations governing the liquidation or sale of a China WFOE. Seeking legal advice and guidance from professionals like JR & Firm familiar with Chinese company law is highly recommended to navigate these processes accurately and in compliance with the law.

According to the Chinese Company Law of 2006, the supervisor of a China WFOE does not have inherent access to the company’s bank accounts. The primary responsibility of the supervisor is to oversee the company’s operations, check the company’s finances, and ensure compliance with laws and regulations.

On the other hand, the Legal Representative (Legal Person) of a China WFOE typically has the authority to manage and access the company’s bank accounts. As the legal representative, they are entrusted with the overall management and operation of the company, including financial matters.

However, it is important to note that the specific access and control over the company’s bank accounts can be regulated through the company’s internal policies, articles of association, and relevant agreements. These documents may define the roles and responsibilities of individuals within the company regarding financial matters and access to bank accounts.

To accurately determine the specific access rights and responsibilities related to a China WFOE’s bank accounts, it is advisable to review the company’s internal documents, including the articles of association, and seek legal advice from professionals well-versed in Chinese company law and regulations.