Recently, I received some emails from overseas friends asking, “I want to set up a company in China, what shall I do?” Well, first and foremost, hire a lawyer to help you get up and running.
Setting up a foreign company in China isn’t easy. No matter how many articles are out there guiding you on how to register a company step by step, it will be quite stressful for you to do it on your own. This is not only because of the language barriers and complicated process but also due to the many legal issues involved. On the other hand, with the help of lawyers, we will guide you through the process, save you lots of time, and help you avoid potential risks.
In this article, we will explain three potential legal issues related to business setup.
- Name a Chinese company.
There are some rules to follow when giving a name to a Chinese company. Regardless of the form of registration, the name of the new company must be in Chinese. The structure of a company name consists of four elements: a) registered administrative area, b) trade name, c) business industry, d) forms of enterprise organization.
As you can see, the most essential and unique element is the trade name, which can be regarded as a company name provided that the trade name has certain market awareness and is well known to the public, such as “Apple” or “Nike.” When choosing a trade name, however, it’s not random. We should conduct conflict research in the official trademark database to see if there are any same or similar word marks already registered nationwide. This is a very important step that might be overlooked by other agencies. If a trade name you adopt is a registered word mark and therefore protected by China’s IPR laws, you could be served with a subpoena sooner or later. It’s a risk nobody wants to take.
You start to own a trademark the minute you use it with your goods or service, but you have to apply to register it with the authorities if you want protection of your trademark under China’s Intellectual Property Laws.
From our perspective, it’s advisable to register your company name as a trademark as soon as you file to establish a subsidiary in China.
- Customizing the Articles of Association.
The Articles of Association (AOA) are considered a contract between the company and its shareholders. These articles typically regulate how the company will be organized, the responsibilities of directors, how to distribute shares, dividends, and voting rights among the shareholders, and other important matters. The document is so crucial that it is often referred to as the company’s constitution.
While other agencies might simply download a standard format of AOA online, we have the ability to tailor the AOA to your specific needs. Whether it is to align with the company’s objectives, exert control over the company, or establish fiduciary duties for the management team, we can customize the Articles of Association accordingly.
- Notarized and Certified Documents.
The requirements for notarized and certified documents depend on the types of foreign investors. If the foreign investor is an individual, submitting a notarized passport will suffice. However, if the shareholder is a company incorporated outside of China, it is mandatory to provide a copy of the notarized and attested business license to identify the investor’s status.
You may feel unsure about how to go through the certification procedure. Don’t worry; by working with us and our partner law firms around the globe, we will strive to achieve your goals.
In conclusion, setting up a company in China requires careful consideration of legal and regulatory aspects. Hiring a qualified lawyer can significantly ease the process and mitigate potential risks. Customizing the Articles of Association to align with your company’s objectives is essential for a smooth operation. Ensuring that all necessary documents are notarized and certified is crucial for foreign investors to establish a strong foundation. With our expertise and support from our partner law firms worldwide, we are dedicated to helping you achieve your business goals in China.
