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The Importance of Conducting Regular Compliance Reviews of your WOFE or JV in China
Once your China company has been established, it will likely go through a process of approvals and licensing and thereafter begin conducting business operations.
However, the China company will need to ensure it continues to comply with a number of various compliance obligations during its existence, including (without limitation):
1. Holding board / shareholders meetings / taking minutes of such meetings;
2. Ensuring local and foreign employees contracts / terms are in accordance with local regulations; and
3. Ensuring compliance filings are kept up to date with the company, accounting and tax authorities / bodies.
We regularly recommend our clients to conduct yearly or bi-yearly corporate compliance checks for their China company to ensure that the employees / managers on the ground are ensuring the China company is complying with its legal obligations and – where gaps are identified – remedial measures are put into place / processes for the future.
As China’s new Company Law came into force on July 1st, 2024, there is no better time than now to identity any compliance issues and resolve the same. In addition, if there is an exit strategy for the China company (e.g. M&A deal), it will save considerable hassle down the line if the company's compliance is in good order.
To find out more about our China compliance services, please contact us at info@procosecasia.com
Can you get your profit out of China?
It has been a question asked by our clients so many times. Many MNCs and SMEs invested huge amount of money in China with the hope to make money and send it back to their shareholder.
Generally speaking, companies are set up to generate profits which will – eventually – be distributed to the company’s owners from time to time by way of dividend distribution.
China operates no different, however – unlike other jurisdictions – the process by which a China company can effectively declare and distribute dividends to its owners is not necessarily straightforward and will require some thought, planning and time.
Here are some tips we think are useful to consider before planning to declare a dividend distribution from a China company:
1. Compliance and accounting: from Day 1 of your operations in China, please keep all your accounting in compliance! File monthly and annually your VAT/financial statements and annual audit. When you wish to repatriate your profits, the Chinese government will check in details all your filing.
2. Paperwork: various documents need to be prepared and submitted both to the China bank and tax authorities before the dividend distribution can be completed.
For example, a set of audited financial statements will need to be prepared confirming the retained / available profits of the China company for distribution.
3. Calculation: the dividend distribution amount will be subject to deductions, including what is known as a statutory reserve.
4. Tax: it is a requirement that the appropriate amount of tax is paid on the proposed dividend amount less the statutory reserve. This is currently taxed at 10%
To find out more about our China company incorporation and annual maintenance services, please contact us at info@procosecasia.com
Thinking of Issuing Shares in your Singapore Company?
Whether a Singapore company is a single shareholder or multiple shareholder owned company, there are certain universal procedural requirements to be aware of for issuing additional shares by the Singapore company.
The power to issue shares, unless otherwise provided for in the Singapore company’s constitution, is vested with the board of directors.
However, it is important to note that before the board of directors exercise their powers to approve the issuance of additional shares by the Singapore company that the shareholders at general meeting firstly approve the board of directors to exercise such powers.
If this is not done, then any issuance of shares approved by the board of directors of the Singapore company will be void and the shareholders can recover the purchase price paid for those shares from the Singapore company.
To find out more about our Singapore company incorporation and annual maintenance / compliance services, please contact us at info@procosecasia.com
Share Certificates: Still as Important as they Once Were in Singapore?
In many jurisdictions worldwide, a shareholder typically receives a share certificate from a company which evidences the class / number of shares held in the company he / she / it has subscribed or received shares in.
In Singapore, the share certificate was – until early 2016 – good evidence to prove a shareholder’s ownership of shares in a Singapore company.
This changed, however, on January 3rd, 2016, when the Registrar of the Accounting and Corporate Regulatory Authority (“ACRA”) became responsible for creating and maintaining an electronic register of members for all Singapore private companies.
Since then, the ACRA electronic register of members – and not the share certificate (or otherwise) – has become “prima facie evidence of the truth of any matters which are by this Act directed or authorised to be entered or inserted in the register of members.”
Therefore, if you need to evidence your ownership of shares in a Singapore private company, providing a copy of the latest ACRA electronic register of members of the Singapore private company is sufficient.
Procosec Asia has been providing Singapore company incorporation and annual compliance services – including the provision of expert company secretarial services – to our clients since 2016.
To find out more about our Singapore company incorporation and annual maintenance / compliance services, please contact us at info@procosecasia.com
A Singapore company cannot be formed without agreeing to a document called a Constitution. In some countries. this document is known as the Articles of Association or the By-Laws of the Company. The Constitution of a company is a set of rules detailing the relationship between the company, its directors and shareholders.
Since the Constitution is an important document lasting for the life of a company, it can usually be amended only when shareholders holding at least 75% voting rights pass a special resolution.
However, you can protect the alterability of your Constitution by including an entrenching provision.
An entrenching provision explicitly included in the Constitution, for example, can require that 100% of the company’s shareholders approve any change to the company’s Constitution. This prevents the Constitution to be amended without unanimous consent of the shareholders.
We highly recommend that you include this provision in your Constitution and if this clause is not currently part of your Constitution, we suggest you to add such provision by way of a unanimously passed resolution of the company’s shareholders.
Should you have any questions, please feel free to contact us at info@procosecasia.com