Setting Up a Representative Office in China: Restrictions
A Representative Office should take special care when performing the following activities:
Billing Procedures: A Representative Office may neither collect money for its parent company nor invoice clients directly - this must be handled by the parent company. This is a tricky and ambiguous area, and it would be wise to subject your Representative Office's billing procedures to the scrutiny of a competent professional in China to ensure that it is not operating outside of its scope of business.
Signing Contracts: All contracts must be signed by the parent company, although a Representative Office can negotiate contracts that are later signed by its parent company.
Employing Staff: Unlike Joint Ventures and Wholly Foreign Owned Enterprises, a Representative Office cannot directly hire employees - it must use an authorized human resources agency. Although most of these agencies are affiliated with local governments, a few are private. Many Representative Offices get around some of the inevitable inconveniences by independently seeking employment candidates, having the HR agency 'refer' these candidates to them, negotiating salary, etc. directly with these candidates and then having the HR agency make the official hiring referral to the Representative Office. The HR agency would then take a percentage of the employee's salary each month. Although the above-described flexibility with the rules is common, it is best not to go any further in treating the HR agency as a formality because a number of Representative Offices that have tried to skirt these requirements have been closed.
A draft Labor Contract Law is widely expected to be enacted soon. Assuming that the enacted law is identical to the draft that is currently in circulation, Representative Offices will be allowed to contract directly with employees during the employees' first year of service.
Activities Outside the Normal Scope of the Parent Company: Even though corporations in Western countries are generally allowed to participate in "any lawful activity", in China a Representative Office is conceived of as part of the overseas parent company and must act within the parent company's usual scope of business rather than opening up an entirely new business for its parent company (see this site's section on "Scope of Business" in the "Glossary" section for further details on the "scope of business" concept in China.
Related Tags: china, chinese, law, wofe, fdi, foreign investment, representative office, restrictions
David Carnes is licensed to practice law in California. He speaks and reads Mandarin Chinese and has several years experience working with Chinese law firms and Sino-American joint ventures. Check out his website, http://www.lunaticwisdom.com/blog1/ China Legal Bulletin. Your Article Search Directory : Find in Articles
Recent articles in this category:
- Bookkeeping Outsourcing: the Unique, Competitive and Dynamic Advantage
Bookkeeping outsourcing is the intelligent bookkeeping business service which provides accounting s - Understanding Cultural Differences in Offshore Outsourcing
In a recent Accenture study, cultural issues were listed as one of the main reasons for problems in - Outsource Asp.net Application Development
Software development companies today, provide post maintenance services to build up healthy relatio - Accounting Outsourcing - to Fulfill Your Accounting Needs
Ever business is multidimensional and there are various departments that work together to ensure t - Cleaning Equipment, South Africa, Office Clean
Our offices are vulnerable to disease and illness purely because of the diverse nature of the peopl - Bookkeeping Nyc for an Easy Management of Accounting Transactions
Managing account books is an important consideration for all businesses, no matter large or small. - Outsourced Accounting - for the Smooth Working of an Organization
Optimum utilization of money is crucial for the success of every business organization, no matter b - Outsource Php Programmers
Change is the way of life and adaptation is necessary in this ever changing world. Organizations a - Ten Potential Opportunities in a Time of Crisis
There's no doubt that these are trying times - and very few doubts that they will continue to be s - Ahoy Alloy!
What exactly is an alloy? Since alloys are part of our daily lives, it's important that we have som
Most viewed articles in this category:
- Advantages of Offshore Outsourcing in Information Technology
Offshore Outsourcing - Leverage Information Technology at Cost-effective PricesToday's businesses th - Increase Your Bottom Line By Importing From China
If you are a merchant looking to source your product at much lower cost, have you considered import - Grow Your Business by Outsourcing
Outsourcing conjures up images of large corporate organizations and tenders for jobs such as cleanin - Welcome Back to Your Life - Outsourcing and the Entrepreneur
Do you remember your kids’ names?Ok, maybe that last one is a bit extreme, but let’s fac - Cheap Sourcing - is it the New Purchasing Game in Town or is it the Most Ancient Practice on Earth
I was invited to participate in a round table discussion along with senior colleagues from the large - Top 5 Myths about EAP
1) You must find an EAP in your city or state. Finding an EAP in your home city or state makes littl - Who to Outsource in Today's Competitive Marketplace? An Idea About Where India and China Stand?
Outsourcing! Dazed of its popularity? But do you really know why outsourcing is the most highlightin - Business Globalization
However, the hostile sides can be clearly differentiated. While employers and businesses celebrate b - Tax Return Online Helps you Calculate your Tax Returns Promptly
Preparing taxes can be quiet difficult for you, if you do not have a proper knowledge about calculat - Accountant New Jersey is the Best Option you Can Opt for Financial Issues
A business, however big or small it is, is determined and known by its finances. Apt accounting is t
