The Ministry of Foreign Trade and Economic Cooperation Order of the Ministry of Foreign Trade and Economic Cooperation of the People’s Republic of China No. 6 Rules for the Implementation of the Law of People’s Republic of China on Chinese-foreign Contractual Joint Ventures approved by the Minister of the Ministry of Foreign Trade and Economic Cooperation, Wu Yi September 4, 1995 Rules for the Implementation of the Law of People’s Republic of China on Chinese-foreign Contractual Joint Ventures Chapter I General Provisions Article 1 These rules have been formulated in accordance with the Law of the People’s Republic of China on Chinese-foreign Contractual Joint Article 2 The establishment of Chinese-foreign Contractual Joint Ventures (hereinafter referred to as joint ventures) in the territories of Article 3 The joint ventures can, according to the law, independently undertake their operations and management and business activities within Article 4 The joint ventures referred to here include those with and without Chinese legal person status. Special provisions in Chapter 9 of Article 5 Departments in charge of the Chinese operators shall be in charge of the joint ventures. If a joint venture has two or more Chinese The departments in charge of the joint venture shall provide consultation and assistance in related affairs of the joint ventures. Chapter II Establishment of the Joint Ventures Article 6 The establishment of a joint venture shall have the approval of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) or The establishment of joint ventures in the following occasions shall be examined and approved by the departments or local governments 1. The total investment to the venture is within the range of those that should be examined and approved by the departments or local 2. The capital has been raised by the applicants themselves and whose construction and production facilities do not need to be balanced 3. The export of its products does not need a quota or export license from departments in charge of the State, or when a quota or export 4. Other circumstances that should be examined and approved by the departments or local governments authorized by the State Council as Article 7 The following documents shall be presented by the Chinese partners in applying for the establishment of a joint venture. 1. project proposal of the joint venture together with the approval documents of department in charge; 2. the feasibility study report as prepared by all sides involved in the joint venture, together with approval documents of departments 3. the joint venture’s agreements, contracts and articles of association as signed by the cooperators’ legal representatives or authorized 4. the partners business licenses, registration documents, capital credibility reports and other valid documents of the legal representatives. 5. a roster of the Chairman and Deputy Chairmen of the Board of Directors, members of the Board of Directors or a name list of the Chairman 6. other documents as deemed necessary by the examination and approval departments. The previously listed documents, except documents submitted by the foreign partners as stated in item 4, shall have Chinese versions. The examination and approval departments shall decide whether or not approve the establishment within 45 days since the date when Article 8 The approval documents shall be issued by the MOFTEC if the joint ventures are approved by the MOFTEC or departments authorized by The approval documents of joint ventures approved by the local governments shall be issued by the approving local governments and The joint ventures established after approval shall register with the administrative departments in charge of industry and commerce Article 9 Applications on the establishment of joint ventures will not be approved in one of the following occasions: 1. The proposed joint venture would make harm to China’s sovereignty or social welfare; 2. The proposed joint venture would make harm to China’s national security; 3. The proposed joint venture would cause pollution to the environment; 4. Other occasions those are against the laws or administrative rules and regulations and the State’s industrial policy. Article 10 The joint venture cooperation agreements referred to in this set of detailed rules are the written document jointly formulated by The joint venture contracts referred to in this set of detailed rules are the written documents jointly formulated by the partners The joint venture articles of association referred to in this set of detailed rules are the written documents jointly formulated by If there are discrepancies between the joint venture’s cooperation agreement and its articles of association on the one hand and the The partners of the joint venture may choose not to formulate a cooperation agreement. Article 11 The joint ventures’ agreements, contracts and articles of association shall enter into force as of the date of the issuance of the Article 12 The joint ventures’ contracts shall include the following data: 1. post_title, place of the registration, residence and names, post_titles and nationalities of the legal representatives of the partners. (If 2. the joint venture’s name, site and scope of operation; 3. total investment, registered capital, investment by each partner or forms and terms of cooperation; 4. the transfer of investment by each partner and other cooperative terms; 5. the distribution of the profits or products as well as the sharing of the risks and losses; 6. the cooperation of the joint venture’s Board of Directors or Joint Management Committee, the distribution of the members of the board 7. major equipment, production technologies adopted and their sources; 8. arrangements on the sales of the joint venture’s products inside China and overseas; 9. arrangements on the income and expenditure of foreign exchange; 10. operation term dismissal and liquidation of the joint venture; 11. other obligations and responsibilities of the partners in case of violation of the contracts; 12. principles guiding the management of the joint venture’s finance, accounting and auditing; 13. the settlement of disputes between/among the partners; 14. the procedures of revising the joint ventures’ contracts. Article 13 The joint venture’s articles of association shall include the following items: 1. the name and site of the joint venture; 2. the scope of operation and cooperation term of the joint venture; 3. the names, register sites, residence of the partners as well as the names, post_titles and nationalities of their legal representatives 4. the total investment, registered capital and investment of each partner of the joint venture and the form and term of cooperation; 5. the distribution of the profits or products as well as the sharing of the risks and losses; 6. the composition, responsibilities and the rules of procedures of the joint venture’s Board of Directors or Joint Management Committee; 7. the setup, responsibilities, rules of procedures of the joint venture’s management and the power, responsibilities, recruitment and 8. provisions on recruitment, training, formulation of employment contracts, salary, social insurance, welfare, job safety and health 9. financial, accounting and auditing systems of the joint venture; 10. the dismissal and liquidation of the joint venture; 11. the procedures on revising the joint venture’s articles of association. Chapter III Organization and Registered Capital Article 14 Joint ventures with Chinese legal person status shall be limited liability companies. The partners shall share responsibilities within The joint venture shall have liability for its debts with all of its capital. Article 15 The total investment of the joint venture refers to the total capital input needed under the production and operation scope as set Article 16 The joint venture’s registered capital refers to the total amount of capital registered by the partners with the administrative departments The joint venture’s registered capital shall not decrease during term of cooperation. Decreases that are truly warranted by the change Chapter IV Investment and Cooperative Means Article 17 The partners shall, in line with the related laws, administrative regulations and provisions of the joint venture’s contracts, invest Article 18 The partners’ investment or cooperative means could be currencies, or material objects or industrial rights, special technologies, The Chinese partners’ investments or cooperative means, if they are State fix assets, shall undergo assets assessment in accordance For joint ventures with Chinese legal person status, the foreign partners’ investment shall normally be no less than 25% of the total Article 19 The partners shall use their properties or property rights as investments or cooperative means and they shall not have the investments Article 20 The partners shall, in line with the needs of the joint venture’s production and operation and in accordance with related laws and If the partners fail to provide the required investment or cooperative means as stipulated under the contract, the administrative Article 21 The side that fails to provide investment or cooperative means in accordance with the joint venture’s contracts shall bear the violation Article 22 After the provision of the investments and the cooperative means by the partners, the joint venture shall issue investment certification 1. the name of the joint venture; 2. the establishment date of the joint venture; 3. the names of the partners; 4. the description of the investments or cooperative means rendered by the partners of the joint venture; 5. the date of the investments or cooperative means rendered by the partners of the joint venture; 6. the serial number and issuing date of the investment certification. Copies of the investment certification shall be submitted to the examination and approval departments as well as the administrative Article 23 The transfer of all or parts of the property rights as set under the contracts among the partners of the joint venture or between The examination and approval departments shall decide on whether or not to approve the transfer within 30 days after the receipt of Chapter V Organizational Setup Article 24 The joint venture shall have a Board of Directors or a Joint Management Committee as its executive authority, which decides on the Article 25 The number of members of the Board of Directors or Joint Management Committee shall be no less than three and the distribution of Article 26 Members of the Board of Directors or the Joint Management Committee shall be named or dismissed from the partners themselves. The Article 27 The term of the members of the Board of Directors or Joint Management Committee shall be stipulated under the joint venture’s articles Article 28 Meetings of the Board of Directors or the Joint Management Committee shall be convened at least once each year and be chaired by chairman. A meeting of the board of directors or joint management committee should be participated by more than two-thirds of the directors Meetings of the Board of Directors or the Joint Management Committee shall be notified 10 days before a meeting. The Board of Directors or the Joint Management Committee may vote through communications. Article 29 The following items can only be approved with the unanimous agreement of the members: 1. the revision of the joint venture’s article of association; 2. the increase or decrease of the joint venture’s registered capital; 3. the dismissal of the joint venture; 4. the mortgage of the joint venture’s assets; 5. the merger, division and change of organization structure of the joint venture; 6. other items that can only be approved with the unanimous agreement of all members of the Board of Directors or the Joint Management Article 30 Other matters other than stipulated in these rules concerning the discussion and voting procedures shall be covered in the joint venture’s Article 31 Chairman of the Board of Directors or the Joint Management Committee is the legal representative of the joint venture. If the chairman Article 32 The joint venture shall have one general manager in charge of daily operation and management of the joint venture as well as the Board The joint venture’s general manager shall be recruited or dismissed by the Board of Directors or the joint Management Committee. Article 33 The general manager and other senior managerial staff can be either Chinese nationals or foreign nationals. Members of the Board of Directors or the Joint Management Committee can concurrently hold the position of the general manager or other Article 34 The general manager or other senior managerial staff, if incompetent or involving in graft or having serious dereliction of duty, Article 35 If a joint venture decides to entrust someone other than the partners to manage the operation of the venture, it shall have the unanimous The joint venture shall submit the resolution of the Board of Directors or the Joint Management Committee on the entrustment as well Chapter VI Purchase of Goods and Materials and Sales of Products Article 36 A joint venture can formulate its own production plans in accordance with its operation scope and production scale as approved by Government departments must not force the joint ventures to implement production and operation plans formulated by the government Article 37 A joint venture can independently decide to purchase in China or overseas machinery equipment, raw materials, fuels, components and Article 38 The State encourages the joint ventures to sell their products on the international market. The joint ventures can sell their products The joint ventures set the prices of their products for themselves according to the law. Article 39 The import of machinery, equipments, components and parts as well as other goods and materials by the foreign partner as investment Article 40 The joint ventures must not export their products in prices obviously lower than reasonable international prices; neither can they Article 41 The joint venture shall sell its products in accordance with related provisions as stipulated in the approved cooperation contract. Article 42 In importing and exporting commodities that require State quota and import/export licenses, the joint ventures shall duly apply for Chapter VII Distribution of Incomes and Recovery of Investment Article 43 The Chinese and foreign partners of the joint ventures can get a part of the profits, products and other means in distribution of If the income is distributed in the form of products or other means, tax shall be levied in accordance with provisions under the tax Article 44 When the operation term as set in the joint venture’s contract expires, if the joint venture’s fixed assets have been set to be handed 1. Aside from the distribution in accordance with the investment and/or cooperative means rendered, the foreign partner can increase 2. With the examination and approval of the finance and taxation authorities in accordance with related taxation regulations, the foreign 3. Other investment recovery measures approved by the examination and approval departments and finance and taxation departments. When the foreign partners recover investment during the operation term as described in the previous paragraphs, the Chinese and foreign Article 45 In applying for recovering investment in advance through means as described in Items 2 and 3 of Article 44 , the foreign partner shall The foreign partner cannot recover its investment in advance before the losses of the joint venture are settled. Article 46 The joint ventures shall, in line with related provisions of Chinese laws, commission registered Chinese accountants to audit and Chapter VIII Operation Team and Dissolution of the Joint Venture Article 47 Operation term of a joint venture shall be decided through consultation by the Chinese and foreign partners and specified in the contract. In case the operation term of the joint venture expires, it can be extended through agreement of the partners. The extension proposal If the extension is approved, the joint venture can go through the formalities of changing the original registration with the approval If the joint venture’s contract stipulates that foreign partners recover their investment in advance and the recovery is made, the Article 48 A joint venture is dissolved under one of the following circumstances: 1. The operation term expires; 2. The joint venture’s operation cannot continue due to big losses or as a result of forces majeure; 3. The joint venture’s operation cannot continue as a result of the failure by one or more partners to execute the obligations stipulated 4. Other conditions that can lead to dissolution emerge; 5. The joint venture is ordered to close because it violates laws or administrative regulations and rules. In the circumstances stated in Items 2 and 4, the joint venture’s Board of Directors or Joint Management Committee shall make the Article 49 The liquidation of the joint venture shall be handled in accordance with related State laws and administrative regulations and rules Chapter IX Special Provisions on Joint Ventures without Legal Person Status Article 50 For joint ventures without legal person status, their partners shall shoulder civil responsibilities in accordance with related provisions Article 51 Joint ventures without legal person status shall register their partners’ investment and cooperative means rendered with administrative Article 52 For joint ventures without legal person status, partners of the ventures shall separately own the investment and/or cooperative means The investments and cooperative means rendered by the partners of a joint venture without legal person status shall be put under the Article 53 Joint ventures’ without legal person status shall establish joint management setups comprising representatives designated by respective The joint management setup shall decide on all major issues of the venture. Article 54 Joint ventures without legal person status shall keep unified accounting books at the site of the ventures; the partners shall also Chapter X Supplementary Provisions Article 55 The formulation, effectiveness, interpretation, implementation and settlement o
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