Key Positions & Responsibilities in a WFOE

Last updated: Feb 2022
Regulations Guide to WFOE Establishment, Registration & Liquidation

Every WFOE has mandatory positions that must be filled by the appropriate personnel. PTL Group specializes in company registration in China. We make sure that China company registration is done right, and is supported by extensive operational support for registered entities. This is where our knowledge and expertise really make a difference.

Key Positions & Responsibilities in a WFOE

Mandatory positions in a China WFOE

Shareholders

Whether individuals or legal entities, shareholders raise and inject the WFOE’s registered capital. In fact, they are the sole authoritative figure to approve additional capital injection into the WFOE. By the way, capital injections are not subject to Corporate Income Tax payment, as the income is not the result of commercial operation revenue.

Shareholders hold the highest level of authority in a China WFOE. Therefore, they get to determine the company’s objectives, outline its policies and decide how to man the key positions of the WFOE. Usually, the shareholders will be the same as in the WFOE’s mother company.

Executive Director / Board of Directors

Normally, the Board consists of an odd number of Directors (1,3,5, etc.). A single director is the Executive Director, but in the event of 3 or above, a chairman should be appointed.

These individuals are responsible for developing and implementing the company’s agenda as dictated by the shareholders. They operate as the shareholders’ execution arm and carry out decisions on their behalf. The directory members are appointed by the shareholders. Their term is valid for 3 years and they can be re-appointed.

Legal Representative

The legal representative is the employee who possesses the legal authority to execute the powers and duties of the company, and is accountable for them. Consequentially, this individual is a key figure involved in all aspects of the company’s operations and serves in practice as one of the company’s executives.

The main point to emphasize is that the legal rep is personally liable for everything and anything that happens with the WFOE. That is to say, the legal rep carries the legal responsibility in the event of improper conduct by the WFOE, and he or she will be persecuted by the authorities and face the consequences.

The legal representative comes into play in one of the following scenarios:

  • The legal representative serves as the Chairman of the Board.
  • The legal representative serves as the sole Managing Director.

The Financial Person in Charge

This individual is one of two WFOE officials who are responsible in cases of improper finance handling, discrepancies, delay in reports submission, or signing on policy changes.

While this person doesn’t execute the CFO’s duties, it is advisable that he or she has a basic background in finance. Also, this position doesn’t need to be filled by a Chinese national, yet it would save invaluable time if this role holder can read Chinese.

Filling this position requires a real-name authentication process by submitting an original ID and providing a local phone number for ongoing communication with the tax bureau.

Read more about financial services in China and explore the CFO’s various obligations in the comprehensive financial guide for foreign companies in China

The Tax Bureau Contact Person

The Tax bureau contact person is the first employee who liaises between the WFOE and the tax bureau. This person is not authorized to execute any financial activities other than buying invoices, tax declarations, and document submission and collection. For the real-name verification process and the ongoing communication with the tax bureau, the tax bureau contact person must have a local phone number in China, and should be able to read Chinese.

While in many cases companies opt to outsource this position, in some areas (for example, Suzhou and Guangzhou) the local regulations stipulate that the position must be filled by one of the WFOE’s employees.

Recommended positions in a China WFOE

General Manager

The general manager administers the company’s day-to-day operations. This position can be concurrently manned by one of the Board members or the Managing Director. However, the dual role puts an enormous amount of power in the hands of one individual.

The general manager’s responsibilities are as follows:

  • Supervising business operations and manufacturing processes, and reporting to the Board.
  • Attending Board meetings.
  • Devising specific policies and basic management systems.
  • Deciding on new hirings or terminations.
  • Any other responsibilities specified in the company’s Article of Association.

Supervisor

The simple responsibility of the supervisor is to monitor the activities and performances of the senior managers. Their job is to oversee key personnel performances and to ensure there is no abuse of power. In this regard, in light of the stricter enforcement in China in recent years, appointing a supervisor for a WFOE is highly recommended.

In order to avert a conflict of interest, the supervisors are not allowed to serve in any managerial position within the company (i.e. one of the positions mentioned above). This is precisely why at least two people are required for a WFOE registration. However, shareholders and employees in lower positions, whether or not residing in China, can act as supervisors.

Chinese law provides supervisors with an array of powers and access to the company’s documentation. They are allowed to:

  • Inspect the company’s finances.
  • Recommend hirings or terminations.
  • Advise Board gatherings.
  • File lawsuits against “corrupt” officials.

Data compliance officer

The data compliance officer position was born to meet the need of ensuring the WFOE’s compliance with the developing “data-protection legal framework” in China (e.g., China’s Personal Information Protection Law, Data Security Law, etc.). The data compliance officer’s duty is to keep up-to-date with the mechanisms of these laws, and ensure the company is 100% compliant with all the national and local regulations. It is recommended to designate someone who is located in China, and who can closely follow any development and be contacted in person when needed.

Alongside the mandatory positions that must be filled in any process of company registration in China, it is wise to give some thought to the other positions, as well. Before starting a business in China, make sure you consult with a professional and experienced service provider. At PTL Group, we will support and guide you before, during, and after your China company registration.

Last updated: February 2022

At PTL Group, we specialize in registering and managing foreign-owned entities in China. Get in touch today and let us support your China operations.