RO (Representative Office)

"Many firms choose to set up a Representative Office in order to gain experience and a better understanding of the size and potential of the Chinese market. We can help you lay out your long-term goals and establish a Representative Office, which will facilitate your other business operations and help to oversee your WFOEs or JVs."

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Application Process

Where the parent company is engaged in trading or manufacturing operations, the application for the establishment of the representative office should be submitted to the Ministry of Commerce (MOFCOM) or its local bureau at the provincial or municipal level. In some specialized industries (e.g. banking, insurance, legal, accounting, airline, media, etc.) the parent company has to apply for approval from the relevant Chinese government authority with jurisdiction over that industry.

All applications for the establishment of a representative office must be submitted through a designated Chinese agent (often known as a Foreign Enterprise Services Company or “FESCO”) in the locality where the proposed representative office is to be established. This local agent must be authorized by MOFCOM to handle representative office applications. The Chinese agent must submit the following documentation on behalf of the foreign investor:
an application letter signed by the Chairman of the Board or the General Managerhead office incorporation documentsan original bank reference letter attesting to the company’s financial standinga letter appointing the chief representative to the representative office as well as the chief representative’s resume showing his/her work experience and educational/professional qualifications, copies of his/her identification, passport and photosa copy of the lease agreement for the representative office’s premises from an approved unit (e.g., a hotel or commercial building, etc.).

If the application is approved, an approval permit is normally issued to the representative office within one month after submission of the application. Having obtained the approval permit from MOFCOM, the foreign investor must apply to the provincial State Administration for Industry and Commerce (SAIC) for a business registration certificate, as well as complete other post-registration formalities, within a specified period of time.

Registration

Once the documents have been submitted to the relevant approval authority, the approval authority will review the documents and decide whether it will approve the establishment of a RO. This process usually takes about 30 days. If the request is approved the chief representative of the RO must pick up the Approval Certificate for the Representative Office from the approval authority and go through the formalities of registration within 30 days after the approval date. These formalities include filling in of a registration form and the payment of the registration fee, which has to be done at the provincial State Administration for Industry and Commerce (SAIC).

Following this, the foreign company will obtain the Registration Certificate for the Representative Office. If a foreign company does not complete the registration formalities within the 30 day deadline, it will have to return the Approval Certificate for revocation. After the registration has been completed, the RO will be issued with a license, usually valid for a period of 1 to 3 years, after which it must be renewed.

Once the license is received, the Representative Office must then register with banks, the public security bureau, tax authorities, etc. The hiring of employees must also be done through specific state-approved foreign services companies (FESCO). The registration of a representative office is required in order to lawfully employ Chinese nationals, to open a bank account, to import office equipment without an import license, to import personal effects duty-free, to display signs with the company name, to obtain direct telecommunication lines, or to use business cards that identify the company’s presence in China. Additionally, the company’s representative would be unable to obtain a multiple entry visa or legally rent an apartment without a commercial domicile registration booklet. This booklet is obtainable only after the registration of the representative office is complete.

The State Administration for Industry and Commerce stipulates that foreign representatives must register a representative office within six months of establishing a business presence in China. Those who have not obtained approval or have not gone through the procedures for registration will not be permitted to undertake business operations for the home office.

The failure to comply with these registration requirements will result in the imposition of a 10,000 RMB fine, and in serious cases may result in the involved party being prohibited from engaging in further business activity in China. The SAIC enforces the above regulations through random checks and through informants in related Chinese companies.

Conclusion

There are numerous benefits related to the establishment of a representative office. In most cases the purpose that the office serves is to present an image to prospective Chinese customers and partners. The location and furnishings of a representative office is important as the prospective Chinese partner/company, often unable to visit the home office of a foreign company, is only able to judge the viability of a company based on their operations in China. Furthermore, the establishment of a representative office is an effective tool for demonstrating to the Chinese partner/customer their long- term commitment to the China market. Examples hereof include the renting of an office space, the employment of Chinese personnel, the opening of bank accounts in name of the company, etc.

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