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Most Foreign Invested Enterprises (FIEs) are governed by a board of directors and senior management. An exception exists for Cooperative Joint Ventures that the parties have chosen not to incorporate (these are governed by a management committee).

Powers: The Chairman, as the legal representative of the enterprise, has the power to legally bind the enterprise and bears considerable responsibility for its acts and

omissions. Most of the powers and func...

Board of Directors

Most Foreign Invested Enterprises (FIEs) are governed by a board of directors and senior management. An exception exists for Cooperative Joint Ventures that the parties have selected not to incorporate (these are governed by a management committee).

Powers: The Chairman, as the legal representative of the enterprise, has the energy to legally bind the enterprise and bears substantial responsibility for its acts and

omissions. Most of the powers and functions of the board are set forth in the Articles of Association and in the Joint Venture Contract.

Quantity of Directors: The board of directors of each Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are essential to appoint in between 3 and 13 directors. FIEs with handful of shareholders may be capable to convince the examination and approval authority to dispense with the board of directors and use an executive director.

Membership: In an Equity Joint Venture (EJV), board membership need to be proportionate to capital contributions. The board have to have a Chairman, but need not have a Vice Chairman. If both are utilized, even so, then if the foreign investor selects the Chairman, the Chinese celebration need to select the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings need to be held when a year, and a quorum is 2/three of the directors. For Equity Joint Ventures, unanimous consent of the board is necessary for amendment of the Articles of Association, enhance or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is substantially much more versatile for Wholly Foreign Owned Enterprises - board meetings and quorum requirements are governed by the WFOEs Articles of Association.

Director & Officer Liability: Director and officer liability law and enforcement is not as properly-created as in several Western nations. Correspondingly, the market for directors and officers liability insurance coverage is not especially properly-developed either. The Chairmans function as the enterprises legal representative encumbers him with each civil and criminal liability for the acts and/or omissions of the enterprise. Directors can be held liable for board resolutions that are illegal or that contravene the Articles of Association and trigger losses to the business. Directors, supervisors and senior management personnel can be held liable if they lead to losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures need to appoint a General Manager, 1 or more Deputy Basic Managers, and a Finance Manager. Although not essential for other FIEs, this is common practice for these enterprises as effectively. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor may possibly nominate the Deputy General Manager, and vice versa.

General Manager: The General Manager is charged with day-to-day operation and could be a foreign national if the enterprise so chooses. The responsibilities of the Common Manager need to be listed in the Articles of Association even if Chinese law does not require the appointment of a General Manager (as in the case of WFOEs). The Common Manager is charged by law with duty for formulating a management system for the enterprise production, operations and management, employment and termination of employees (except these that need to be employed and dismissed by the board of directors) and implementing board resolutions and investment and business plans.

Deputy Common Managers: A Foreign Invested Enterprise might appoint a single or more Deputy Basic Managers (EJVs are necessary to appoint at least 1).

Finance Manager: An Equity Joint Venture is essential to appoint 1 or much more accountants to assist the Common Manager with finances. This is also widespread practice for other FIEs.

Supervisors

LLCs are required to have supervisory boards, despite the fact that this is often ignored in practice by WFOEs and Joint Ventures. PureVolume™