Registered Capital of WFOE or investment Capital of Wholly Foreign Owned Enterprise
It can be easily confusing to understand the concept of registered capital for a Wholly Foreign Owned Enterprise in China, as the principle is very different to share capital.
Registered capital refers to the total amount of funds or capital contributions by the shareholders of the Wholly Foreign Owned Enterprise (WFOE). These contributions must be registered with the authorities and will be stated on the company’s Business License. This investment must be paid to a for this purpose special opened investment bank account.
When the total planned capital is being assessed by the registering government department, it will look at what is needed in refers to the projected amount of funds necessary for the WFOE to attain the production or operational capacity.
Excluding for some certain WFOE’s, such as insurance companies and banks, etc., Owners may pay registered capital in installments. The Company Regulation allows payments of registered capital by shareholders of a limited liability company (WFOE) to be complete by installments. The first payment must be at least a minimum of 15% or more of the total planned investment capital.
Besides cash payments also the option of obtaining registered capital can be made by tangible and intangible assets. These assets can be financially estimated and legally transferred to the newly formed company, such as physical things, intellectual property rights, or land-use rights, etc.
The current regulation principally allows investors to contribute up to as much as 70 percent of the entire registered investment capital in the form of the above-mentioned non-cash assets. Non-cash investments must be valued by assessed and permitted by government authorities.
The company’s registered investment capital is important to the day to day operations of the company. The higher level of the registered investment the more the company will be trusted. The reason for this being is because the level of the registered investment capital determines the credibility of a company.