Establishment of Franchising Enterprises and Procedures for Opening Stores

The establishment procedures are the same as those for foreign-invested wholesale enterprises. Under existing policies, FIEs engaging in commercial franchising are treated in the same way as domestic enterprises with regard to establishment requirements, rights and obligations, information disclosure, advertising and publicity etc, but are different in terms of establishment procedures. Approval procedures carried out by the examination and approval authorities are merely a matter of formality.

FIEs that are qualified to engage in franchising should apply to their original examination and approval authorities for permission to add “engaging in commercial activities in the form of franchising” to their business scope and submit the necessary documents, including information disclosure document, sample of franchising contract and operation manual of franchising. The examination and approval authorities will make a decision in writing on whether or not to approve the application within 30 days after receiving the complete set of application materials. Upon obtaining approval and completing the necessary formalities in respect of change of registration details with the industry and commerce administration, the FIEs may start their franchising business.

The following documents must be submitted when applying for permission to add “engaging in commercial activities in the form of franchising” to a company’s business scope:

1. Application letter and resolution of the board of directors.
2. Corporate business licence and Certificate of Approval of Foreign-Invested Enterprises (photocopy).
3. Agreements on the modification of contracts and articles of association (for foreign enterprises, only the modified articles of association are required).
4. Relevant documents showing compliance with Article 7 of the Measures.
5. Basic information reflecting the provisions of Article 17 of the Measures.
6. Sample of franchising contract.
7. Operation manual of franchising.

FIEs are not allowed to engage in any business under the prohibited category as specified in the Catalogue for the Guidance of Foreign Investment Industries in the form of franchising.

Where patent licensing is involved in franchising, patent licensing contracts should be signed in accordance with the related provisions of the Patent Law of the PRC and its implementation rules, and record filing formalities should be completed in accordance with the provisions of the Measures for the Administration of Record Filing of Licensing Contracts for the Implementation of Patents. Before conducting franchising activities, the franchiser should handle matters relating to the trademark licensing contract in line with the provisions of the Trademark Law of the PRC and its implementation rules.

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Establishment of Retail Enterprises and Procedures for Opening Stores

The approval procedures for foreign-invested commercial retail enterprises are the same as those for wholesale enterprises.

Stores opened by foreign-invested commercial enterprises engaging in retail in the provincial-level administrative region where they are located are approved by the local provincial-level commerce department and the applications are forwarded to MOFCOM for the record. For the opening of stores in another province, the opinions of the commerce department of that province have to be sought. The provincial-level commerce department in charge will send a letter to its counterpart in the place where the store is to be located seeking its opinion. During this process, the enterprise should cooperate by supplying the necessary documents.

Provincial-level commerce departments may grant approval to the establishment of the following stores, with the applications forwarded to MOFCOM for the record:

1. Stores with a business area of less than 3,000 sqm each and not exceeding three in number; the foreign investor may not open a total of more than 30 similar stores through its foreign-invested commercial enterprise in China;
2. Stores with a business area of less than 300 sqm each and not exceeding 30 in number; the foreign investor may not open a total of more than 300 similar stores through its foreign-invested commercial enterprise in China;
3. Stores whose scope of business does not include television, telephone, mail order, Internet and the sale of automatic vending machines;
4. Stores not engaging in tobacco retailing, and not selling chemical fertilisers

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Establishment of Wholesale Enterprises (Distribution in China)

Application Procedures

1. Examination and Approval of Project Proposals, Contracts and Articles of Association

The Chinese party (in the case of a wholly foreign-owned enterprise, the foreign investor or its appointed Chinese agency which is qualified to provide foreign investment consultation services) must submit to the local foreign economic and trade authorities the feasibility study report, contract, articles of association and other documents required. Trademark and trade name licensing contracts, technology transfer contracts, management contracts, service contracts and other legal documents signed by foreign-invested commercial enterprises should be submitted at the same time as annexes to the contract (in the case of wholly foreign-owned commercial enterprises, as annexes to the articles of association).

2. Registration at the industry and commerce administration

Foreign-invested wholesale enterprise granted approval to set up should complete its registration formalities at the industry and commerce administration within one month after obtaining the approval certificate issued by the provincial-level foreign economic and trade authorities.

3. Tax registration

After its incorporation, the enterprise should have an official seal made at the local public security bureau, apply for enterprise code from the technical supervision bureau, and complete tax registration formalities at the tax registration department.

Documents Required

Documents Required for Examination and Approval of Feasibility Study Reports, Contracts and Articles of Association

• Feasibility study reports, contracts, articles of association (for foreign commercial enterprises, only articles of association required) signed by the investing parties, together with annexes to these documents.
• Bank credit proofs of the investing parties, registration certificates (photocopy) and legal representatives’ certificates (photocopy). Personal identification papers are required if the foreign investors are individuals.
• The latest annual audit reports of all investing parties.
• Evaluation report on the state-owned assets to be invested by the Chinese party in a Sino-foreign equity or contractual joint venture commercial enterprise.
• Import/export commodity catalogues of the proposed foreign-invested commercial enterprise.
• Application and approval papers of the feasibility study.
• Names of members of the board of directors of the proposed foreign-invested commercial enterprise and their letters of appointment.
• Notification on pre-approval of enterprise name issued by the industry and commerce administration.
• Land-use right certificates (photocopy) and/or tenancy agreements (photocopy), except for stores with a business area of less than 3,000 sqm.
• Document proving compliance with the requirements of urban development and urban commercial development issued by the commerce department where the proposed stores are to be located.
• Letter of attorney signed by the legal representatives for documents not signed by the legal representatives.
• Other relevant documents.

Application for Changes

Existing foreign-invested commercial enterprises should submit applications to the original examination and approval authorities for permission to engage in wholesaling or retailing business, open branches or change partners in accordance with regulations governing foreign-invested enterprises. The following documents must be submitted when making application:

• Application form.
• The modified contract and articles of association if modifications are involved.
• Feasibility study report on the opening of stores.
• Resolution of the board of directors on the opening of stores.
• The latest annual audit report of the enterprise.
• Capital verification report (photocopy).
• Registration certificates of the investing parties (photocopy) and certificates of the legal representatives (photocopy).
• Land-use rights certificates (photocopy) and/or tenancy agreements (photocopy) for the proposed stores, except for stores with a business area of less than 3,000 sqm.
• Document proving compliance with the requirements of urban development and urban commercial development issued by the government where the proposed stores are to be located.
• Letter of attorney signed by the legal representatives for documents not signed by the legal representatives.

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China’s Installed Wind Power Capacity Surges 101% in H1

China’s on-grid wind power capacity surged 101% year on year to 11.81 million kilowatts in the first half of this year, the official Xinhua News Agency reported.

The surge in installed wind power capacity reflects the country’s effort to increase its reliance on renewable energy, said Shu Yinbiao, vice general manager of the State Grid Corp. He added that the State Grid is actively carrying out other programs to promote the development of new energy. The works include the construction of a research center for wind and solar power generation.

Shu suggested the government map out a long-term wind power development plan, launch new national technical standards for new energy and enhance the accurate prediction of power generation.

China’s wind power sector has developed fast in recent years due to the government’s supportive measures. The country’s installed wind power capacity amounted to 12 million kilowatts as of the end of 2008, ranking fourth in the world following the U.S., France and Spain.

Source: Xinhua.net

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