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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 considerable 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 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 significant 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.

Number of Directors: The board of directors of both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are necessary to appoint between three and 13 directors. FIEs with handful of shareholders could 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 should be proportionate to capital contributions. The board have to have a Chairman, but want not have a Vice Chairman. If both are employed, even so, then if the foreign investor selects the Chairman, the Chinese celebration need to pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings must be held when a year, and a quorum is 2/three of the directors. For Equity Joint Ventures, unanimous consent of the board is essential for amendment of the Articles of Association, boost or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is substantially much more flexible 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-developed as in many Western nations. Correspondingly, the market place for directors and officers liability insurance is not specifically nicely-developed either. The Chairmans role 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 result in losses to the business. Directors, supervisors and senior management personnel can be held liable if they result in losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures should appoint a Basic Manager, a single or far more Deputy Basic Managers, and a Finance Manager. Even though not required for other FIEs, this is typical practice for these enterprises as effectively. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor could nominate the Deputy Basic Manager, and vice versa.

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

Deputy Common Managers: A Foreign Invested Enterprise might appoint one particular or far more Deputy Basic Managers (EJVs are needed to appoint at least a single).

Finance Manager: An Equity Joint Venture is essential to appoint one or far more accountants to assist the Basic 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 usually ignored in practice by WFOEs and Joint Ventures. [ We're Listening To You]

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