Shenzhen Company Formation Service
Hotline: 86-755-82143348, Email: amyhuang@citilinkia.com
One interesting feature of a Wholly Foreign Owned Enterprise is that your Registered Capital investment can be in the form of a deposit, the balance being made over 2-years.
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Registered Capital and Total Investment Quota
(I) Registered and paid up capital
Despite the fact you may be reading many times about a minimum investment of RMB 1M (~ +/- USD 160K), reality is, it varies greatly, though, a Registered Capital of US$ 140,000 is a decent investment capital for almost every type of WFOE.
The registered capital is the amount that its required to run the business until it can break even - the minimum registered capital is a guideline only. If, for instance, you look at a minimum registered capital RMB 30,000 (which, unlike Hong Kong, is impossible to establish a WFOE in Shenzhen) this means you will run out of money pretty soon, which leads to increased costs in reapplying for permission to increase capital, additional licensing fees and renewals of business Licenses and so forth. A WFOE needs and draws funding via it’s registered capital until it is able to support itself from its own cash flow.
However the amount of registered capital needed is also dependent upon factors like scope of business and location. In reality, local authorities will review the feasibility study report (and check the lease contract) approve the investment on a case-by-case basis; reduced registered capital can be negotiated in some cases.
The minimum registered capital guides for various industries and locations in Shenzhen are available upon application through Shenzhenbiz21. This does however not indicate that certain larger economic zones call for either larger or smaller (minimum) registered capital. The minimum registered capital numbers as below for instance: Beijing, Shanghai, and Guangzhou, are a guide only and indicate already great differences between zones:
Beijing: RMB 100 000
Shanghai: RMB 500 000 - 1 million
Guangzhou: RMB 500 000 - 1 million
Paid-Up Registered Capital
One great WFOE feature is the fact that your Registered Capital needn’t to be paid in full with your WFOE registration initial. It can be made up by paying a Paid-up Capital upon your WFOE registration with the rest being invested over a period of time.
The WFOE Paid-up Capital could be as little as 20% of the registered capital. The balance may be remitted within 2 years after the WFOE registration. You should note, however, that the greater the WFOE registered capital and the faster you are prepared and planning to fully Pay-Up your registered capital installments, the greater your chances of securing a smooth WFOE set-up and successful operation.
Paid-Up Registered vs. Investment Quota
Registered Capital is the amount of funding that the Chinese government requires foreign investors to contribute to their projects in Shenzhen (e.g. WFOE’s). The Chinese government sets requirements for the minimum amount of registered capital to start a business.
Registered Capital must be of an amount greater than the minimum requirement of the Shenzhen Company Law (currently set at RMB 100,000). The Registered Capital can only come from the foreign investors. It must be actually paid into the company bank account before being verified by an independent certified accounting agency in Shenzhen. The amount of registered capital can be increased but official procedures will be required. Registered Capital must be no less than 70% of the Total Investment Quota. However, this ratio may be decreased when the amount of Registered Capital exceeds US$ 3 million.
The actual amount of Registered Capital required is subject to the final approval of the regulatory authority. These Chinese officials have the right to require a business to increase the amount of Registered Capital if they deem the minimum Registered Capital amount as insufficient for the requirements of the start-up business as detailed in the project description, and as written in the application documents. The final amount of Registered Capital required is sometimes a result of negotiations with the appropriate officials during the registration process.
Important Note:
Registered Capital can be paid by installments of up to two years. This does not conflict with the above statement, as it applies to the WFOE set-up stages only.
Since the Total Investment Quota is the total amount of funds planned to be contributed to the project over its life-span, it is therefore not necessary to have it fully deposited in the bank. The excess amount of a Total Investment Quota over the Registered Capital can come from sources other than the foreign investors listed in the Articles of Association; for example, it can be borrowed from banks or other sources either inside Shenzhen or from overseas. This amount can be increased but the relevant Chinese authorities must approve any additional amounts of Total Investment Capital.
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling Shenzhen hotline at 86-755-82143348, or emailing to amyhuang@citilinkia.com.