Setting up a Wholly Foreign Owned Enterprise (WFOE), as the head-office (e.g. Holdings/Group Management WFOE) in China, can be a lengthy and complex process. Once a WFOE is set up, opening up branch offices is the easiest way to expand and much less bureaucratic and expensive than setting up a new WFOE. From our experience, this structuring strategy adopt to retail or F&B industry to expand to local markets in China.
Foreign investors can exit subsidiaries by selling their shares in the China company or transferring their shares in the parent company. A transfer of shares must be approved by the original approval authority, although this kind of approval generally is routine. If the share transfer is made from foreign investors to a Chinese investor, who then converts the foreign entity into a domestic company, the later-formed domestic company should satisfy the requirements for establishing a domestic company under Company Law, rather than under Foreign Investment Entities (FIE) law.