Dear Mr Eagle,
We would like to establish a wholly owned foreign invested enterprise on the mainland, however, there will be several foreign shareholders in the company. Can you tell us whether this will be a problem for company registration/establishment?
Dear Sir/Madam,
Generally, the same requirements will apply in establishing a wholly foreign owned company with many shareholders, as compared to an enterprise with a single shareholder, provided they are all foreign individuals or companies. The difference is, generally, that there will be more documents to submit (i.e. certificates of incorporation, passports) in the approval process.
Further, the articles of association will become much more important, and you will likely experience the same difficulties as you would in a joint venture with a Chinese partner. In this regard, many investor groups will sign a shareholders' agreement to set out the basic understanding between the parties.
In many instances, we advise individuals who will be investing into China as a group to establish an entity in an offshore jurisdiction in which shares may be easily transferred between the parties. This holding company will then act as the single shareholder into China, allowing for simple transfer of shares between the parties offshore, as well as a number of other advantages, which can be obtained through the use of an offshore vehicle, generally.
Do you need any clarification or introduction on legal matters? See contact list below.
LEHMAN, LEE & XU
10-2 Liangmaqiao Diplomatic Compound
No 22 Dongfang East Road, Chaoyang District, Beijing 100600 China
Tel: +8610 8532-1919
Fax: +8610 8532-1999
Email: asklehman@lehmanlaw.com
Website: http://www.lehmanlaw.com
(China Daily 04/27/2006 page16)
