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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 energy to legally bind the enterprise and bears significant duty 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 chosen 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 important 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 needed to appoint amongst three and 13 directors. FIEs with handful of shareholders may possibly be in a position 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 used, nonetheless, then if the foreign investor selects the Chairman, the Chinese celebration must select the Vice Chairman, and vice versa.
Meetings: Joint venture board meetings have to be held as soon as 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, improve or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is significantly much more flexible for Wholly Foreign Owned Enterprises - board meetings and quorum specifications are governed by the WFOEs Articles of Association.
Director & Officer Liability: Director and officer liability law and enforcement is not as nicely-created as in numerous Western nations. Correspondingly, the market place for directors and officers liability insurance is not especially nicely-created either. The Chairmans part 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 lead to losses to the firm. Directors, supervisors and senior management personnel can be held liable if they trigger losses to the enterprise by violating laws and/or the Articles of Association.
Management
Equity Joint Ventures should appoint a Basic Manager, one particular or much more Deputy Common Managers, and a Finance Manager. Even though not essential for other FIEs, this is frequent practice for these enterprises as well. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor could nominate the Deputy Common Manager, and vice versa.
Common Manager: The Common Manager is charged with day-to-day operation and might be a foreign national if the enterprise so chooses. The responsibilities of the General Manager ought to be listed in the Articles of Association even if Chinese law does not require the appointment of a Common Manager (as in the case of WFOEs). The General Manager is charged by law with responsibility for formulating a management program for the enterprise production, operations and management, employment and termination of employees (except those that have to be employed and dismissed by the board of directors) and implementing board resolutions and investment and organization plans.
Deputy Basic Managers: A Foreign Invested Enterprise may possibly appoint a single or far more Deputy Basic Managers (EJVs are needed to appoint at least one particular).
Finance Manager: An Equity Joint Venture is essential to appoint one particular or far more accountants to help the Basic Manager with finances. This is also widespread practice for other FIEs.
Supervisors
LLCs are essential to have supervisory boards, though this is typically ignored in practice by WFOEs and Joint Ventures. [ We're Listening To You]
