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In the December issue we overviewed the seven legal forms for foreign direct investment into China and compared five of these forms in detail， namely： representative office （RO）， wholly foreign-owned enterprise （WFOE）， equity joint venture（EJV）， cooperative joint venture （CJV） and foreign-invested partnership （FIP）. This month we focus on the procedures to establish these legal vehicles. Although a CJV can be in the form of an incorporated entity or a contractual cooperation arrangement （i.e. a non-legal person）， we will only discuss CJVs that are legal persons because non-legal person CJVs are not as commonly used in practice as legal person CJVs.
step one： name verification A foreign investor must first apply to the State Administration for Industry and Commerce or its local branches （AIC） to have the name of its China entity verified and approved. The verified name will be valid for six months， but an extension may be granted， if necessary.
step Two： MoFCoM and other approvals Pre-registration approvals must be obtained to set up a WFOE/EJV/CJV. The Ministry of Commerce （MOFCOM） or its local branches are the main approval authorities. MOFCOM approval can take between a few weeks to a few months， depending on the complexity of the investment and accuracy of the application. Further， industry-specific approvals may be required if a WFOE/EJV/CJV is to operate in certain industries. For example， a telecommunications EJV must obtain approval from the Ministry of Indus- try and Information Technology or its branches.
Pre-registration approval generally is not needed for an RO， unless otherwise required under PRC law.
step Three： AiC registration Registration with the AIC is required to set up a WFOE/EJV/CJV/FIP/RO. As discussed earlier， an RO or an FIP may generally apply for registration with AIC directly， while a WFOE/EJV/CJV must do so within 30 days after receiving preregistration approval. Once an entity is registered， the AIC will issue a certificate of registration to an RO or a business license to a WFOE/EJV/CJV/FIP.
step Four： post-registration Formalities Registration with specific government bodies is required within 30 days after AIC registration. The main registrations may be completed with the following bodies：
The relevant tax bureaus；
The relevant foreign exchange authorities；
The relevant Customs authorities（if the entity engages in import and export activities）；
The relevant labor bureaus； and The statistics bureaus.
step Five： Capital contribution There is no registered capital requirement for an RO， but a foreign investor in a WFOE/EJV/CJV must commit to a minimum capital contribution when it applies to MOFCOM for approval. This amount is listed in the business license of the entity as the registered capital. Although the minimum registered capital for a limited liability company is only around $5，000 under the PRC Company Law， in practice， the approval authorities tend to require a higher amount. Each contribution of registered capital must be verified by a qualified verification institution， and a verification report must be issued and submitted to the competent AIC.
A foreign investor of a WFOE/EJV/CJV can make the capital contribution in one lump sum within six months after the business license has been obtained. Alternatively， an initial contribution of at least 15 percent of the total registered capital can be made within three months after the business license has been obtained， with the remainder contributed within two years （five years for a China holding company）. Failure to pay the registered capital within the prescribed period may result in the invalidation of the pre-registration approvals and registration.
A capital contribution may be in the form of cash or non-cash assets （e.g. industrial assets， land use rights， intellectual property or other propriety rights）. For a WFOE/EJV/CJV， a cash contribution must be at least 30 percent of the registered capital and the value of non-cash assets must be appraised and verified. For a WFOE， an intellectual property contribution generally should not exceed 20 percent of the registered capital. For an EJV/CJV， an intellectual property contribution can be as high as 70 percent of the registered capital. For an FIP， labor services can be contributed by partners in addition to cash and non-cash assets contributions， although the partnership agreement should stipulate how such services will be valued.
step one： name verification A foreign investor must first apply to the State Administration for Industry and Commerce or its local branches （AIC） to have the name of its China entity verified and approved. The verified name will be valid for six months， but an extension may be granted， if necessary.
step Two： MoFCoM and other approvals Pre-registration approvals must be obtained to set up a WFOE/EJV/CJV. The Ministry of Commerce （MOFCOM） or its local branches are the main approval authorities. MOFCOM approval can take between a few weeks to a few months， depending on the complexity of the investment and accuracy of the application. Further， industry-specific approvals may be required if a WFOE/EJV/CJV is to operate in certain industries. For example， a telecommunications EJV must obtain approval from the Ministry of Indus- try and Information Technology or its branches.
Pre-registration approval generally is not needed for an RO， unless otherwise required under PRC law.
step Three： AiC registration Registration with the AIC is required to set up a WFOE/EJV/CJV/FIP/RO. As discussed earlier， an RO or an FIP may generally apply for registration with AIC directly， while a WFOE/EJV/CJV must do so within 30 days after receiving preregistration approval. Once an entity is registered， the AIC will issue a certificate of registration to an RO or a business license to a WFOE/EJV/CJV/FIP.
step Four： post-registration Formalities Registration with specific government bodies is required within 30 days after AIC registration. The main registrations may be completed with the following bodies：
The relevant tax bureaus；
The relevant foreign exchange authorities；
The relevant Customs authorities（if the entity engages in import and export activities）；
The relevant labor bureaus； and The statistics bureaus.
step Five： Capital contribution There is no registered capital requirement for an RO， but a foreign investor in a WFOE/EJV/CJV must commit to a minimum capital contribution when it applies to MOFCOM for approval. This amount is listed in the business license of the entity as the registered capital. Although the minimum registered capital for a limited liability company is only around $5，000 under the PRC Company Law， in practice， the approval authorities tend to require a higher amount. Each contribution of registered capital must be verified by a qualified verification institution， and a verification report must be issued and submitted to the competent AIC.
A foreign investor of a WFOE/EJV/CJV can make the capital contribution in one lump sum within six months after the business license has been obtained. Alternatively， an initial contribution of at least 15 percent of the total registered capital can be made within three months after the business license has been obtained， with the remainder contributed within two years （five years for a China holding company）. Failure to pay the registered capital within the prescribed period may result in the invalidation of the pre-registration approvals and registration.
A capital contribution may be in the form of cash or non-cash assets （e.g. industrial assets， land use rights， intellectual property or other propriety rights）. For a WFOE/EJV/CJV， a cash contribution must be at least 30 percent of the registered capital and the value of non-cash assets must be appraised and verified. For a WFOE， an intellectual property contribution generally should not exceed 20 percent of the registered capital. For an EJV/CJV， an intellectual property contribution can be as high as 70 percent of the registered capital. For an FIP， labor services can be contributed by partners in addition to cash and non-cash assets contributions， although the partnership agreement should stipulate how such services will be valued.