Things You Should Know about Registered Capital (Tips for WFOEs)
By Victor Tu   Date:2018-09-11   Read:2070   [ Return ]

Ukee Ye, Victor Tu

 

1. How much should your registered capital be?

Registered capital shows the size of a company and its ability to pay debt. It will influence the possibility for the company to raise money from public and from banks. For a limited liability company, register capital also bears the company’s legal responsibility for its creditors.

 

Currently, China has no statutory minimum registered capital amount for Wholly Foreign Owned Enterprises (WFOEs) but it requires that “the amount of registered capital of a foreign invested enterprise shall match the company’s operational scale.” Which allows investors to decide the proper capital amount for their company.

 

2. When do you pay the registered capital?

Before the new Company Law came out, it was set that foreign investors need to deposit 15-20% of the full amount of registered capital within 90 days from the issuing date of the business license. While the amended Company Law only requires the registered capital to be paid within 30 years start from the business license issuing date ("7 Rules on China WFOE Registered Capital | China Law Blog", 2018).

 

Despite the generous time the law grants, you do have to pay the full amount at some point within the time period. In the case of winding down your company, you may be required by the government to deposit the full amount of registered capital first. And if you want to pay dividend to yourself, you need to pay the registered capital first.

 

3. What do you do after you change your registered capital?

A company can change the registered capital amount after the company has been fully registered and in operation (we will have other articles about how to change the registered capital of a company in later articles). However, a few things you need to do after you change the amount of registered capital.

 

  1. Once you change your registered capital (amount or currency or both), your business license changes accordingly. When you get the new license, the final step you need to do is go to the bank if you have already opened your basic account, capital account and other bank accounts that related to your company. As all the company bank accounts that you have are based on the old information you provided and they need to be updated in accordance with your new business license.

  2. Apply for the bank to change the registered capital amount if you only changed the “amount”, say, from 30,000.00 USD to 40,000.00 USD. If you changed both “amount and currency” (for example, you changed your registered capital from 40,000.00 USD to 100,000.00 RMB) the bank needs also to apply for the Foreign Exchange Administration Office to change the registered capital currency on your company record they held.

  3. In the case of changing the capital currency (eg: from 40,000.00 USD to 100,000.00 RMB), you need to open another capital account in order to receive your capital. If your original registered capital is in USD and you probably already have a USD capital account; but because you changed your registered capital currency to RMB and especially if you are going to pay the money in other currencies, say EUROs, you need to open a EURO capital account.

  4. After you get your new capital account, you can pay your registered capital into that account. Make sure the receiving account information is correct (bank name, address, swift code, etc.), the company English name is the same with the official one ( usually the one on your company stamp). If your company doesn’t have an English name, make sure you tell the bank the English name you are going to use while transferring the money and get their approval. Also, you need to confirm how much money you need to transfer (in the case of transferring EURO or other currencies while the registered capital is RMB). The bank will tell you an approximate amount you need to transfer and maybe ask the sending bank to pay the processing fee, so that the right amount of registered capital will enter into the capital account. When you transfer, please set the remark relate to “capital”, such as “capital investment”.

 

If you have any questions related to registered capital or other issues related to your company, please feel free to contact us.

Victor & Truman, CAPs

Direct:+86(0574)2788 3475

Mobile:+86 139 57861900

Email:victort.tu@victortruman.com

Website: http://www.victortruman.com/

 

 

Reference list

7 Rules on China WFOE Registered Capital | China Law Blog. (2018). Retrieved from https://www.chinalawblog.com/2018/06/7-rules-on-china-wfoe-registered-capital.html