Getting In:            Considerations and Structures for            Entering the Chinese MarketJack YongPartner
First Things• Chinese law• Tax considerations• Not one-size-fits-all                                         2
Preliminary Considerations•   Why do you want to be in China?•   What do you want/need to do in China?•   Can you do it al...
Due Diligence• Areas of due diligence• Challenges and options• Taxes and incentives                                       ...
Checking the Catalogue•   Encouraged•   Permitted•   Restricted•   Prohibited                                          5
Types of Vehicles• Representative Offices (RO)• Wholly Foreign Owned Enterprises (WFOE)• Joint Ventures  • Equity Joint Ve...
Representative Office (RO)•   Not a separate legal entity•   Generally restricted from direct activities•   No registered ...
Wholly Foreign Owned Enterprise (WFOE)• Independent legal entity• Can enter into contracts• Minimum registered capital dep...
Equity Joint Venture (EJV)• Typical for long-term ventures• Usually limited liability• Foreign investor must contribute at...
Contractual Joint Venture (CJV)• Suitable for short-term or limited purpose  ventures• Can be registered as a limited liab...
Foreign-Invested Partnership Enterprise (FIPE)• No MOFCOM approval• General and limited partnerships• SOEs, public compani...
Structures(besides going it alone)• Contract Manufacturing• Distribution• Licensing and Agency• Joint Venture             ...
Contract Manufacturing• Pros and cons• Risk of IP transfer, competition• Contracting with party outside China• Watching ow...
Distribution•   Distributor buys, takes title and resells•   Hong Kong traders•   Domestic distributors•   Pros and cons• ...
Licensing and Agency• Agent helps finds customers and earns  commission• You contract with the customers and are liable to...
Joint Ventures•   Purpose•   Exclusivity•   Governance, control and management•   Dispute resolution•   Funding and distri...
Getting Out:            Exits and Dispute ResolutionJack YongPartner
Liquidation•   Why have a plan•   Differences among structures•   Creating a team•   Gathering information•   Execution   ...
Getting Funds Out• Reserve requirements• Foreign exchange controls• Withholding taxes                                     ...
Dispute Resolution•   Options•   Arbitration•   Court system•   Early strategic considerations                            ...
Thank YouJack YongTel: 604-443-7698Email: jack.yong@gowlings.commontréal  ottawa  toronto  hamilton  waterloo regio...
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Getting In: Considerations and Structures for Entering the Chinese Market

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Getting In: Considerations and Structures for Entering the Chinese Market by Jack Yong

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Getting In: Considerations and Structures for Entering the Chinese Market

  1. 1. Getting In: Considerations and Structures for Entering the Chinese MarketJack YongPartner
  2. 2. First Things• Chinese law• Tax considerations• Not one-size-fits-all 2
  3. 3. Preliminary Considerations• Why do you want to be in China?• What do you want/need to do in China?• Can you do it alone?• If not, what kind of partner do you need?• What kind of staffing and presence do you need, and what can you afford? 3
  4. 4. Due Diligence• Areas of due diligence• Challenges and options• Taxes and incentives 4
  5. 5. Checking the Catalogue• Encouraged• Permitted• Restricted• Prohibited 5
  6. 6. Types of Vehicles• Representative Offices (RO)• Wholly Foreign Owned Enterprises (WFOE)• Joint Ventures • Equity Joint Venture (EJV) • Contractual Joint Venture (CJV)• Foreign-Invested Partnership Enterprise (FIPE) 6
  7. 7. Representative Office (RO)• Not a separate legal entity• Generally restricted from direct activities• No registered capital required• Tax based on RO expenditures• Basic RMB bank account• No direct hiring• 3 year operation term 7
  8. 8. Wholly Foreign Owned Enterprise (WFOE)• Independent legal entity• Can enter into contracts• Minimum registered capital depending on business type and scope• Many business activities• More taxes applicable• Need a basic RMB bank account and a foreign currency account• Can employ directly• No limits on operation term 8
  9. 9. Equity Joint Venture (EJV)• Typical for long-term ventures• Usually limited liability• Foreign investor must contribute at least 25% of registered capital• Partners share in investment, management, profits and liabilities• Only way to establish business for certain industries 9
  10. 10. Contractual Joint Venture (CJV)• Suitable for short-term or limited purpose ventures• Can be registered as a limited liability company, but not mandatory• Unlike EJV, profits, liabilities and losses can be allocated in a proportion different than equity contributions• Also more flexibility for removing investment before expiry of term 10
  11. 11. Foreign-Invested Partnership Enterprise (FIPE)• No MOFCOM approval• General and limited partnerships• SOEs, public companies, public welfare institutions and social organizations may not be general partners• No minimum registered capital• Similar advantages and disadvantages as partnerships here 11
  12. 12. Structures(besides going it alone)• Contract Manufacturing• Distribution• Licensing and Agency• Joint Venture 12
  13. 13. Contract Manufacturing• Pros and cons• Risk of IP transfer, competition• Contracting with party outside China• Watching own relationships• Non-competition and allocation of rights to improvements• Term• Due diligence• Opportunity re non-core IP 13
  14. 14. Distribution• Distributor buys, takes title and resells• Hong Kong traders• Domestic distributors• Pros and cons• Governing law• Regulatory approvals• Exclusivity• Distributor obligations• Proprietary rights• Term and termination 14
  15. 15. Licensing and Agency• Agent helps finds customers and earns commission• You contract with the customers and are liable to them• Be specific with instructions and authorization• Exclusivity• Commissions• IP 15
  16. 16. Joint Ventures• Purpose• Exclusivity• Governance, control and management• Dispute resolution• Funding and distributions• Restrictions on transfer• Exit strategies• Aligning interests 16
  17. 17. Getting Out: Exits and Dispute ResolutionJack YongPartner
  18. 18. Liquidation• Why have a plan• Differences among structures• Creating a team• Gathering information• Execution 18
  19. 19. Getting Funds Out• Reserve requirements• Foreign exchange controls• Withholding taxes 19
  20. 20. Dispute Resolution• Options• Arbitration• Court system• Early strategic considerations 20
  21. 21. Thank YouJack YongTel: 604-443-7698Email: jack.yong@gowlings.commontréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  moscow  london

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