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Frequently Asked Questions (FAQs)

Q:What is a Joint Venture ("JV") ?
A: A Joint Venture is a business arrangement in which the participants create a new business entity or official contractual relationship and share investment and operation expenses, management responsibilities, and profits and losses.
The Chinese authorities encourage foreign investors to use this form of company in order to obtain exposure to advanced technology and new management skills. In return, foreign investors can enjoy low labour costs, low production costs and a potentially large Chinese market share. Joint Ventures are sometimes the only way to register in China if a certain business activity is still controlled by the government. e.g. Restaurants, Bars, Building and Construction, Car Production, Cosmetics etc.

Q: What is a Wholly Foreign-Owned Enterprise ("WFOE")
A: A wholly foreign-owned enterprise is a business entity formed in China entirely with foreign capital, it is totally under foreign control and does not have any formal Chinese ownership participation. For a foreign company to be able to issue receipts and export goods from China, it must be able to legally registered as a local company or a WFOE. A WFOE is set up as limited liability entity and represents separate legal persons and taxed according to local legislation.

WFOE's can generally control their own governance through the articles of association and the normal minimum paid up share capital starts from 1 million RMB (approximately US$140,000), however, some provinces offer lower capital requirements in order to attract more foreign investment. Many foreign investors find this type of company attractive because of the full control and 100 percent ownership.

Q: What does a Representative Office stand for?
A: A Rep. Office is an entity involved in business activities, which do not result in direct profits being made by the office. They are not allowed to operate as partnerships or sole proprietorships in China as they are not recognized as legal persons. However, they are allowed and encouraged to conduct "indirect operational activities" such as liaison for business purposes, introduction of products, market research and technology exchange. These activities should be preparatory and supplementary activities, market research on the local market, providing business information and supplying sales for the headquarters. The foreign enterprise applying for the Rep. Office must be legally registered in its country of origin for at least 12 months. The simplest and most cost effective method of establishing a useful business presence in China is the Rep Office. The choice for an initial Rep office will normally be determined by basic market and product research in China. The high profile cities of Shanghai, Beijing, Guangzhou, and Shenzhen are the most likely choices for the Rep office. It should be noted that more than one Rep office can be established in China by a foreign entity.

Q: What is the privilege of the representative office?
A:There are several different mechanisms available to the foreign investor when considering establishing operations in China. If you just need a local presence to manage services or goods being sold by your parent, or wish to co-ordinate sourcing activities or conduct marketing to `get a feel' for the domestic market, then you can establish a Representative Office (RO). So Representative Offices (ROs) are established by foreign companies to engage in business liaison, product promotion, market research, exchange of technology and other permitted activities in China. ROs are not allowed to directly engage in operational activities. The AIC usually specifies in the Business Scope, as shown in the Business License of ROs, that a RO should not engage in direct operational activities. Therefore, ROs are not a form of foreign investment in China. However, some ROs are engaged in operations in a lawful or tacitly permitted way and constitute one of the direct foreign Investment forms in China. It is of key importance to note that a representative office (RO) is not a separate legal entity. Rather, it is an extension of its parent company. A representative office may only engage in non-profit making activities. It has the freedom to carry out the following functions: Conduct research and survey for its parent company in the local market; Liaise with local and foreign contacts in China on behalf of the parent; Conduct research and provide data and promotional materials to potential clients or trading partners; Act as a coordinator for the parent company's activities in China; Make travel arrangements for parent company representatives and potential Chinese clients; Other non-direct profit making business activities.

Q: What is an advanced hi-tech enterprise?
A: a manufacturing enterprise which is in conformity with the state's industrial guidance and which adopts internationally advanced and applicable process for manufacturing . technology, and equipment, whose product's quality and technology take the lead in the domestic market, can be acknowledged as an advanced hi-tech enterprise. In getting that name, a foreign invested company should first apply to Beijing foreign investment commission and get verified after examination. Examinations will be carried out every year.

Q:What Are the Procedures to Incorporate in Hong Kong?
A:(1). Complete our order form online.
(2). Pay the service fees according to our payment instructions.
(3). Wait for the result of company name check by us.
(4). Receive a set of incorporating documents by courier.
(5). Sign all documents according to the instructions and send them back to us.
(6). Receive a company kit by courier containing the certificate of incorporation, business registration certificate, statutory book, share certificates, company chop, common seal and M&A booklets.

Q:How Can I Open a Bank Account in Hong Kong?
A:The procedure and the kind of documents required by each bank is somehow different. Please contact the bank directly to get more detail information.
Some banks required certified true copy of corporate documents for opening of bank account. We can provide them to you if needed.
The following is a list of major banks in Hong Kong. You can contact them for more information.
HSBC
Citibank
Standard Chartered Bank
Bank of China
Bank of East Asia 

Q:What Should I Name My Company?
A:Choose the name of your company carefully. It is very important that you portray the image you want for your new company. You are also required to avoid using any company name which may be too similar to any existing company or trademark.
A company name can be in English, in Chinese, or both in English and Chinese.
In cases where the liability of members is limited, whether limited by shares or guarantee, the name must end with "Limited".
A proposed company name cannot be the same as any of the existing name registered at the Companies Registry.

ATA——Global Corporate Solution Provider,Value Investment & Strategic Development.

 
Source:ATAHK Group Author:cindy Time:2009-1-21
 
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