Introduction
Equity joint ventures are governed by the Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment promulgated in 1979 and last amended in 2002.
The equity joint venture law requires that the foreign partner to the venture contribute at least 25 percent of the registered capital. There is usually no upper limit on the foreign partner's contributions except where Chinese law requires the Chinese partner to have a minimum ownership (i.e. restricted industries).
Parties may contribute their respective capital to the equity joint venture in the form of cash, capital goods, industrial property rights, and other assets. Commonly, the Chinese partner will contribute cash, land development or clearance fees and land use rights while the foreign partner commonly contributes cash, construction materials, technology, equipment and machinery. All contributions must first be approved by the relevant Chinese authorities and later certified in a report from a Chinese-registered CPA firm.
The partners to an equity joint venture have joint management of the venture. The board of directors, which must comprise of at least three members, has the authority to make all major decisions concerning the venture. The joint venture partners are responsible for appointing the board members, and representation must be in proportion to each party's respective ownership interest in the venture. Under the Chinese Joint Venture Law, either party may elect the chairman. If one side assumes the post of chairman, the other side will have the right to appoint the vice-chairman. The procedures for registration are similar to those of a Wholly Foreign Owned Enterprise (WFOE).
Registered Share Capital
For the equity joint venture enterprises, the registered capital is required as much as RMB1,000,000 (about USD120,500). In China the paid-up capital is equal to registered capital, Investors or shareholders must pay the their shares to the specific bank, which should be audited by the certified public accountant.
Registration Procedures
| Step |
Description |
| (1) |
Obtaining the necessary work permits and resident permits for the legal representatives, etc. |
| (2) |
Obtaining approval and relevant certificate by Foreign Economic and Trade Bureau |
| (3) |
Researching and obtaining approval for the company name of JVE from Industrial and commercial registration office. |
| (4) |
Obtaining approval or certificates from various authorities such as the Planning Bureau, the Foreign Economic and Trade Bureau, the Industrial And Commercial Registration Office, the Statistics Bureau, the National Taxation Administration Bureau, the Local Taxation Administration Bureau, the Public Security Department, the Environmental Protection Bureau. the foreign Exchange Administration Bureau and the Customs etc. |
| (5) |
Opening necessary bank accounts, obtaining a report of corporate capital verification issued by a Chinese certified public accountant(CPA). Be ready with the original copy for check-up. |
| (6) |
Obtaining the necessary work permits and resident permits for the legal representatives, etc. |
|
