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[ESTABLISHING A BUSINESS ENTITY IN CHINA]
a) Business activities ROs are not permitted to directly engage in business activities; but are only permitted to engage in: (i) market investigation, displays, and promotion activities in connection with the products or services of their foreign parent enterprises; and (ii) liaison activities in connection with products sales, services provision, domestic procurement, and domestic investment by their foreign parent enterprises. b) Representatives The foreign parent enterprise of an RO shall appoint one chief representative, and one to three representatives to the RO. c) Capital There is no requirement to make any capital contribution when establishing an RO. The working capital that an RO needs for carrying out the permitted activities are provided by its foreign parent enterprise. 2) Company A foreign-invested company may be established in the form of either a limited liability company or a company limited by shares. A company has a legal personality and possesses independent corporate assets. As one of the most popular structure choices, the company attracts investors mainly because it provides investors with limited liability protection and the investors are only liable for the amount of their committed investment to the company.
a) Limited Liability Company (“ LLC ”) - Limited liability
The shareholders’ liability is limited to the aggregate subscription price of their subscribed capital.
- Capital
◼ The registered capital of an LLC is the total subscribed capital of all the shareholders, which shall be registered with the AMR upon formation. Any subsequent increase or reduction of the registered capital subscribed to by a shareholder requires a change of the LLC’s registration information with the AMR. Although in most cases, the registered capital of an LLC is subscribed to by an investor at its face value, it is possible that an investor subscribes for registered capital at a premium. ◼ The shareholders do not have to contribute their subscribed registered capital in full at the time of the subscription. Except as otherwise required by law for some special cases, the shareholders may schedule their contribution of subscribed registered capital as agreed among themselves. ◼ In addition to the registered capital, a foreign-invested LLC shall also have a “total
ILN Corporate Group – Establishing a Business Entity Series
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