Guide to Setting up a Trading Company (FICE, Wholesale and Retail Shop) in Shenzhen, China

Introduction to Foreign Invested Commercial Enterprise (FICE)

From 1 December 2004, a new investment vehicle has been made available to foreign investors as the Chinese government is allowing and encouraging foreign investors to set up "Foreign Investment Commercial Enterprises" (FICEs) in China to conduct wholesale, retail and other permitted businesses. This type of business entity possesses the total right of trade and business. It can conduct import/export activities by itself, independent of the local import and export company and does not require the setting up of a manufacturing company.

Furthermore, from 1 March 2006, FICEs are permitted by law to apply and obtain approval documents from the Shenzhen Burea of Trade and Industru in the Shenzhen City, instead of from Ministry of Commerce in Beijing.

The FICE is normally in the form of a Limited Liability Company wholly owned by one of more foreign investors (both foreign individuals and corporations). It is a legal person. The foreign investor has sole responsibility for its profits and losses. The liability is limited to the amount of registered capital injected into the entity. The FICE is able to implement strategies that effectively conform to the interests of its overseas parent company. To carry on different trading businesses, it must have the required permits and certificates.

To establish a FICE (for the business of importing, exporting, wholesaling, retailing and distribution) in Shenzhen, a foreign investor has to submit the necessary incorporation documents to various authorities for registration. It is advisable for the foreign investor to entrust an authorised consulting body or agency to handle the tedious submission and application processes.

Definition of Investor of a FICE

The foreign investor may be a foreign company, enterprise, economic organisation, or a natural person.
(1) For a company/enterprise, the Certificate of Incorporation, Bank Reference Letter, and latest Audit Report (if the company/enterprise has been in existence for more than a year) are required.
(2) For a natural person, the Identity Certificate and Bank Reference Letter are required.

Note:

(1) The Certificate of Incorporation/Identity Certificate has to be certified by a Notary Public and the Chinese Embassy in the investor’s country.
(2) The Bank Reference Letter is issued by the bank in which the foreign investor has a working or trading account and has to be signed by an authorised bank officer.

Capital Contribution

A FICE’s minimum registered capital has to conform to relevant provisions of the Company Law. In accordance with prevailing laws and regulations, the minimum registered capital required for a wholesale and retailing business are RMB500,000 and RMB300,000 respectively.

In addition, the registered capital has to match the actual business activities.

The amount of the initial capital contribution cannot be less than 15% of the registered capital or the minimum statutory amount of registered capital. The initial registered capital must be contributed and remitted to China within 3 months after the date of incorporation.

The investor is allowed to contribute registered capital in cash, in kind, or in the form of technology/intellectual property rights, or other non-monetary properties that may be assessed on the basis of currency. The amount of the capital contribution in cash can be no less than 30% of the registered capital.

Scope of Business of a FICE in Shenhen

According to the "Administrative Measures on Foreign Investment in Commercial Fields", a FICE can undertake the following business activities:

• Wholesale: Sale of goods and provision of relevant auxiliary services to retailers, industrial, commercial and institutional users, and other wholesalers;
  - For FICEs engaged in the wholesale business, commodity import and export are allowed.
  
• Retail: Sale of goods and provision of auxiliary services for individual or collective consumption at a fixed location or via television, telephone, mail order, Internet or vending machines;
  - For FICEs engaged in the retail business, import of commodities for marketing and purchase of domestically-made products for export are allowed.
  
• Commission Agency: Sales agents, brokers, auctioneers or other wholesalers selling another wholesaler’s goods and providing relevant auxiliary services based on a contract to gain commission fees;
  
• Franchising: Authorising others to use one’s own trademark, trade name, business model, or business method etc. by signing a contract in exchange for remuneration or franchising fees.

Shenzhen FICE Registration Procedures

Step 1: Deciding the name of the company

The Chinese name should be in the following format:

• First part - company name;
  
• Second part - activity;
  - If the company is in the retail business, it has to use the Chinese words "shang mao", meaning "business and trade");
  - If it is in the wholesale business, it has to use the Chinese words "mao yi", meaning "trade").
  
• Third part - Shenzhen;
  
• Fourth part - company structure.

For example: Kaizen Trading (Shenzhen) Limited

Use of "China", "Sino" and "International" are not permitted in the Chinese name unless permission is given, although they are permitted in the non-Chinese name.

Step 2: Reservation and Application of Approval of Use of Company Name

Prior to any of the following applications, the investor should reserve a name for its prospective FICE with the Shenzhen Administration of Industry and Commerce.

Step 3: Registration of Approval Certificate

After completion of the Name Approval Notification, the Approval Letter and Approval Certificate are the next to be registered.
(1) For a FICE intending to be in the retail business, approval from the Shenzhen Economic Committee is required. The Articles of Association, Feasibility Report, Lease Agreement of the proposed store, etc. should be submitted at the time of application. For FICEs not in the retail business, the registration procedure starts from item (2) below.
(2) The foreign investor has to apply using similar documents such as the Articles of Association, Feasibility Report etc for the Approval Letter and Approval Certificate from the Shenzhen Administrative Bureau for Trade and Industry. The municipal approval authority will review all documentation.
(3) If the documents are in order, the authority is able to approve and issue the certificates in 5 working days.

Step 4: Registration of Business Licence

Within 30 days of obtaining the Approval Certificate, the foreign investor will need to register and apply for a Business Licence for the FICE from Shenzhen Administrative Bureau for Industry and Commerce. The foreign investor is also required to submit similar documentation to the Shenzhen Bureau of Trade and Industry for approval and filing.

Once the Business Licence is issued, the FICE is deemed to be a legal person duly organised and existing under PRC laws. It will have full operational rights to operate a business in China within the scope of its Business Licence.

Step 5: Registration of Organisation Code Registration Certificate

This is purely a procedural step. The Organisation Code Bureau will issue certificates within 1-3 working days.

Step 6: Registration of Tax Registration Certificate

Once your Organisation Code Registration Certificate is approved, you may apply for a Tax Registration Certificate at the Shenzhen local tax authority. At the same time, you should also apply for the company seal and legal representative seal. Together with the Approval Certificate, Business Licence and other documents, the formal application form affixed with the seals should be submitted to the authority for examination and approval.

Step 7: Other Certificates

• Statistics Registration Certificate issued by the Statistics Bureau;
  
• Foreign Exchange Registration Certificate issued by the Foreign Exchange Supervision Bureau;
  
• Finance Registration Certificate issued by the Finance Bureau;
  
• Customs Registration Certificate issued by the Customs Bureau.

Others

Having obtained approval from the tax and foreign exchange authorities, you are legally entitled to open USD Capital and RMB Basic Accounts. You may then proceed with capital injection, capital verification and certificate renewal.

Materials required for Application for Registration of a FICE in Shenzhen

Before submitting an application to the Goverment for approval and registration, the following materials should be readily available:

• Name and address of the FICE;
  
• Lease agreement of the FICE;
  
• An application for establishment of the FICE;
  
• Feasibility Report covering items such as technological process, equipment, raw material supply, market survey, economic results, infrastructure facilities, expected profitability, etc;
  
• Articles of Association of the proposed FICE;
  
• Catalogue of import and export commodities being applied for by the FICE;
  
• Names of the proposed chairman and members of the FICE board of directors and their appointment letters;
  
• Original Bank Reference Letter of issued by the banker of the investor (shareholder) of the FICE;
  
• Original Certificate of Incorporation of the FICE investor;
  
• Latest Audit Report of the investor (shareholder) of the new FICE;
  
• Other documents as may be required by the approval authority.

Expanding the Scope of Business of a FICE to include Retailing Business

Existing foreign investment commercial enterprises could apply to expand its scope of business so as to engage in retailing business. When applying to establish a store have to meet the following conditions:

(1) Meet relevant regulations on urban development and urban commercial development;

(2) Participate on time and pass the joint annual review on foreign investment enterprises;

(3) The registered capital of the enterprise has been paid up.

• An application letter;
  
• Articles of Association modified accordingly;
  
• Feasibility Report pertaining to opening of the store;
  
• Board’s Resolutions on opening of the store;
  
• Lease Agreement of the store and a copy of the Real Estate Certificate (landlord);
  
• Capital Verification Report of the FICE;
  
• Copy of latest Audit Report of the FICE;
  
• Copy of the Incorporation Certificate of the FICE investor;

Time Frame and Governmental Charges

The processing time is within 60 working days if all supporting documents and additional information are provided.

The total government charges for the establishment of a FICE in Shenzhen are estimated to be between USD250 and USD350.

The total government charges for establishment of a FICE and a store together are estimated to be between USD400 and USD500.

Ready to proceed? Please check out our Shenzhen Trading Company Registration Package.

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