Setting up a company / opening a business in China: Company formation steps, online information on how to register and form a company in China. Setting up a business in Shanghai,...
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Traveler's Guide

Setting up a Company in China

The following text is a detailed summary of the bureaucratic and legal obstacles that a business person / an entrepreneur needs to deal with in order to incorporate and register a new firm in China. The text outlines the steps required in setting up a commercial business or industrial firm with up to 50 employees and start-up capital of ten times the per-capita gross national income of the economy (GNI).

1. Obtain a notice of pre-approval of the company name
The applicant, who can be a representative designated by all the shareholders, or the agent entrusted by all the shareholders, can receive the application for the company name pre-approval from the local Administration of Industry and Commerce (AIC), or the applicant can otherwise download the form from AIC’s Web site. Once completed, the application form needs to be signed by all shareholders of the company. Together with the business licences or other registration certificates (if the shareholders are companies or other eligible entities), the application form and the photocopy of the identity card of the individual shareholders shall be filed with the AIC. Enterprise / business name registration must follow the amended version of State Administration of Industry and Commerce (SAIC) regulations (that is, the new Enterprise Name Registration Administration Implementing Measures, or Qi ye ming cheng deng ji guan li shi shi ban fa), effective July 1, 2004. According to the new registration regulations, the proposed company / business name can be approved or rejected on the spot, if the applicant goes straight to the AIC. This is implemented in practice and is newly regulated by Article 24 of the previously mentioned measures. However, the proposed company / business name will be approved or rejected within 15 days, if the application is made through mail, fax, email, etc.

2. Open a preliminary bank account; deposit fund in the account and obtain the certificate of deposit
The Company Law was amended on October 27, 2005, and it came into effective on January 1, 2006.

  • Article 26 lowers the minimum capital requirement to CNY 30,000. Once the prerequisited initial capital contribution is paid, the shareholders may pay off the other capital contributions, if any, within 2 years after setting up the company, according to this article. It is important to note that the required initial capital contribution is at least 20% of the intended company’s registered capital and will not be less than the legal requirement for the registered capital for certain industries.
  • According to this article, Article 27 provides the form of the capital contribution, and if the initial capital contribution is in cash, the shareholders must (a) open a preliminary bank account after receiving pre-approval of the company / business name; and (b) deposit the initial capital contribution into the bank account. The shareholder must transfer the property title of the assets to the company and the value of such assets must be evaluated, if the initial capital contribution is in nonmonetary assets. It then needs to be verified by legally established verification institutes. The amended Company Law allows shareholders to contribute up to 70% of the registered capital of a limited liability corporation in “nonmonetary assets that can be monetarily valued and legally transferred.”

3. Obtain capital verification report from an auditing firm
An auditing firm needs to prepare a report that certifies the company / business capital. These are some of the documents required for registration.

4. Obtain registration certification "business license of enterprise legal person" with SAIC or local equivalent
The company needs to file a completed application form along with the following documents, in order to receive registration certification:

  • Lease or other proof of company office.
  • Notice of approval of company name.
  • Capital verification certificate or appraisal report.
  • Representation authorization.
  • Articles of association, executed by each shareholder.
  • Identification documents of officers and identity cards of shareholders.
  • Identification documents (certifying name and address) of the supervisors, officers and directors and appointment documents.
  • Identification documents of the company’s legal representative and appointment documents.
  • If the initial contribution is in nonmonetary assets, the document authorizing transfer of the property title of such assets.
  • Additional documents may also be needed by the authorities.

Once the AIC has received all documents, they should reach a decision to approve or not approve the company registration, within 15 working days. Once registered, the company can open formal bank accounts, apply for taxation registration and progress to have its seal carved.

Application forms may be downloaded from the local government authorities’ Web sites, in accordance with the new administrative regulations. Depending on the type of application, statutory time limits were put in place for acceptance of application documents and for registration decision making. Generally, once the application has been received , the decision will usually be made within 15 days. Since documentation requirements for company registration were standardized, the Registry now has to publicly display them.

  • If an application is filed (by letter, fax, telex, email, telegraph, or electronic data exchange), in accordance with Article 52, the Company Registry are required to decide whether to accept the application, within 5 days of receipt of the relevant application documents and materials. The Registry must inform the applicant, within 5 days, of all contents subject to corrections and supplementation, if application documents and materials are incomplete, or if applications do not meet the statutory requirements.
  • In accordance with Article 54, if the organ in charge of company registration must certify the application materials and documents, it should decide whether to approve the registration within 15 days of acceptance, and in other cases, the organ must decide whether to approve the registration straight away or within 15 days of acceptance.
  • If the organ approves company registration, it should order a “notice on approval for establishment registration” and advise the applicant to collect its company / business license within 10 days, according to Article 55.

5. Obtain the approval to make a company seal from the police department
The registration file will contain the duplicate of the business license (the original and one copy), if all the shareholders are individual investors. It will also contain the legal representative’s identification card. A notice will be issued to the company / business to make the company seal, if registration is given approval.

6. Make a company seal
To generate the company seal, the company will allocate a company who possess a Shanghai Special Industry Permit (company seal carving). Depending on the quality and the design of the company seal, this process costs CNY 70–300.

7. Obtain the organization code certificate issued by the Quality and Technology Supervision Bureau

Within 30 days of receiving the business license, the company must apply for the organization code certificate. They need to file a fully completed application form with the Shanghai Organization Code Management Center (a branch of the Quality and Technology Supervision Bureau). The following documents should also be included:

  • Identity card of the legal representative (one copy).
  • Business license (original and one copy).

8. Register with the local statistics bureau
The buiness must apply for statistics registration by sending a completed statistics registration form to the local statistics bureau, within 30 days of receiving the company license. The following documents should also be included:

  • Organization code certificate (one copy).
  • Company license (one copy).

9. Register for local and state tax with the tax bureau
Since 2004, with the enforcement of the Administration Measures of Tax Registration, issued by the State Taxation Bureau, the procedures for tax registration have been made easier. Company founders need to file tax registration just once, to either of the two existing taxation authorities (the local taxation bureau and state taxation bureau). Once the registration application has been received, the statutory time limit is 30 days.

The tax registration form and the initial tax reporting forms need to be filed by the company. As well as these forms, the company sends the following documents for review:

  • Organization code certificate (original and one copy).
  • Business / company license duplicate ((original and one copy).
  • Taxation personnel identity card (original and one copy).
  • Legal representative identity card (original and one copy).
  • Business / company seal and financial seal.
  • Receipt(s) for rent paid and office lease agreement.
  • One original copy of bank-issued account-opening certificate and articles of association.
  • photocopy of property ownership certificate
  • land use right certificate
  • capital verification report
  • commitment letter regarding the authenticity of the documents provided.

10. Open a formal bank account of the company and transfer the registered capital to the account
Depending on each bank’s practice, the documents and the procedures required for opening a company / business bank account and transferring the registered capital to it may change.

11. Apply for the approval to purchase or print financial receipts / invoices
The company needs to apply separately to the required authorities (that is, the local and state taxation offices) for authorization to issue and purchase financial receipts / invoices, after registering for state or local taxes and receiving the tax registration certificate. If the taxation authority agrees to grant the company such qualification, upon reviewing the documents listed below, the taxation authority will supply the invoice purchasing book:

  • Identity card of taxation personnel (one copy).
  • Tax registration certificate (one copy).
  • Models of invoice seal.
  • Application forms.

12. Purchase uniform invoices
In order to purchase uniform invoices, the business / company must obtain and send an application form, along with the authorization book (from Procedure 10) to the taxation office.

The VAT and ordinary invoices are published by the tax authority for antiforgery reasons (with some exceptions), and taxpayers can buy these from the tax authority.

13. File for recruitment registration with local career service center
A new business / company is required to register with the local career service office, sponsored by the local government, within 30 days of recruiting new employees. The required application forms can be obtained from the local career service center or electronically downloaded, and then completed and sent in.

14. Register with Social Welfare Insurance Center
The company is required to register for the payment of employee social insurance with the local social insurance office, within 30 days of company establishment. They can do this by sending a completed social insurance registration form. The following documents should also be included:

  • Duplicate of business license (original and one copy).
  • Organization code certificate (original and one copy).
  • Company seal.

The authorities will issue a notice to open a social insurance account for the company, once all documents have been verified. The company then needs to apply to open a special account at the designated bank. The local social insurance office will grant the social insurance registration card to the company on receipt of account opening notification from the bank.