The Legal Issues Related To Foreign Investment Trade And Retail Business
Trade and retail business belong to the different ways of distribution
. They support the product manufacturer product consuming procedure.. Mastering the enormous distribution channel and network will not only influence consumer, but also control manufacturers. In the face of huge market in China, many foreign investors are eager to enter the field of trade and retail business. But before Chinese government promulgated the Measures for the Administration on Foreign Investment in Commercial Fields in 2004, foreign investment are strictly restricted. There have been many restrictions on it, for example, foreign investors cannot have the single proprietorship in this field. So there was comparatively few foreign invested enterprises acquired business license. After the Measures for the Administration on Foreign Investment in Commercial Fields getting effective from December 11th, 2004, on the premise of approval, Chinese government permits foreign investors have the single proprietorship in the trade and retail business, and there is no restriction on the investment locality, including both the domestic trade and the imp. & exp.. Businesses. According to the Measures for the Administration on Foreign Investment in Commercial Fields, the investment subject in this field includes both foreign companies and enterprises and foreign individuals. Whereas those subjects shall carry out the trade and retail business activities through foreign-funded enterprises established within China rather than through other forms to carry out the business activities in the field of trade and retail business. There is no special demand for the lowest registered capital that investors invest in business enterprises, the same as domestic enterprises of a kind. All of them are based on Company Law of the People's Republic of China, Order of the President No.29 (Revised edition 1999): registered capital for a company mainly engaging in trade business shall be RMB500,000 up, and for a company mainly engaging in retail sales, RMB300,000 up.
Foreign investors shall pay attention to the following legal issues if they want to engage in Trade and retail business in China:
1st, Enterprise Types
What types of enterprises foreign investors shall set up when engaging in Trade and retail business in China shall directly relate to their future business and store development. According to the article 18 in Measures for the Administration on Foreign Investment in Commercial Fields, under the circumstance that the same foreign investor opens more than 30 stores accumulatively within China, if the goods it manages include books, newspapers, magazines, automobiles, drugs, pesticides, agricultural films, fertilizers, refined oils, food, vegetable oil, sugar, cotton, and other commodities, and the above commodities are of different brands and come from different suppliers, the proportion of capital contribution of the foreign investors shall not exceed 49%. Namely in those fields, if the same foreign investor opens more than 30 stores, he cannot run them in the form of wholly foreign-owned enterprise. Furthermore, since China used to restricts foreign capital in the field of distribution for long time, many domestic retail enterprises have grown up in such good market environment. They have a strong marketing network and a good sales channel, foreign investors can absorb these enterprises to reduce the cost of setting up the sales channel. Foreign investors can choose a good consultative agency or law firm to help solve the integration problems.
2ed, Approval Procedure
Establishing a foreign-funded commercial enterprise which undertake trade or retailing business shall be approved by relevant government authorities. To get the approval procedure, when register in Beijing, applicant shall submit following documents to Beijing Municipal Commercial Bureau:
1.Application letter;
2.Feasibility study report signed by all investors;
3.Contract, articles of association (for a foreign-funded commercial enterprise, only the articles of association shall be submitted) and the attachment;
4.Bank creditability letter of all investors, registration certificate (photocopy), certificate of the legal representative (photocopy), if the foreign investor is an individual, his/her identity certificate shall be provided;
5.The audit report of all investors in the recent one year, which is audited by accountant firms;
6.The evaluation report on state-owned assets invested into the Sino-equity joint venture or contractual joint venture commercial enterprises by Chinese investors;
7.Catalogues of import and export commodities of the planned foreign-funded commercial enterprise;
8.Name list of the members of the board of directors of the planned foreign-funded commercial enterprise and the power of attorney for directors of each investor;
9.Notice of pre-approval of the enterprise name as issued by the administrative department for industry and commerce;
10.The certificate documents (photocopy) of the use right of the land used for the planned store and (or) house lease agreement (photocopy);
11.The documents of statement in conformity with the requirements for city development and urban commercial development as issued by the competent commerce department of the government at the locality of the store;
12.Lease agreement and property right of lessor;
13.Other documents as required .
Beijing Municipal Commerce Bureau shall, after making preliminary examination on the document submitted, report to the Ministry of Commerce within one month from the date of receiving all the application documents. The Ministry of Commerce shall make decision on whether to approve the application within 3 months from the date of receiving all the application documents. If it approves the establishment, the Certificate of Approval for Foreign-funded Enterprises shall be issued; otherwise , the reasons for non-approval shall be explained.
3rd, Feasibility Study Report
Feasibility study report might be the most important document among the aforementioned document list. Feasibility study report is the focal point to commerce department to approval, therefore it must be prepared carefully. It shall include prospect of project, economic benefit, development forecast and product analysis etc.
by: Sino-Link Consulting
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