Setting Up A Share Capital Company In China

Foreign Invested Companies Limited by Shares (FICLS)

The establishment of a Foreign Invested Company Limited by Shares (also known as a joint stock company) was designed to accommodate investors seeking to issue shares to the public or to list on the Shanghai, Shenzhen or foreign stock exchanges (under Chinese foreign investment law nomenclature, the Hong Kong Stock Exchange qualifies as a foreign stock exchange. Consequently, the establishment of FICLS is subject to stricter conditions than the establishment of Equity Joint Ventures, Cooperative Joint Ventures, and Wholly Foreign Owned Enterprises so far, applications for the establishment of FICLS have been denied more often than not. Although an FICLS may be set up directly, a Joint Venture is eligible to convert to an FICLS after three profitable years if it meets the conditions set forth below.

The Registered Capital of an FICLS must be no less than 5 million RMB (about US$ 625,000). There be at least 5 shareholders, and 25% foreign shareholding is required. Like the Equity Joint Venture, profits and liquidated net assets must be distributed in proportion to shareholding.

Promoters
At least two...