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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 selected 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 needed to appoint amongst three and 13 directors. FIEs with couple of shareholders may possibly 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 must be proportionate to capital contributions. The board need to have a Chairman, but want not have a Vice Chairman. If both are employed, nonetheless, then if the foreign investor selects the Chairman, the Chinese party need to pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings need 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 essential for amendment of the Articles of Association, improve or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is substantially far 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 effectively-developed as in numerous Western nations. Correspondingly, the marketplace for directors and officers liability insurance is not particularly effectively-developed either. The Chairmans part as the enterprises legal representative encumbers him with both 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 company. 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 have to appoint a Common Manager, 1 or more Deputy General Managers, and a Finance Manager. Though not required for other FIEs, this is widespread practice for these enterprises as well. If a Chinese investor nominates the General Manager of an EJV, a foreign investor might nominate the Deputy General Manager, and vice versa.

Common 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 Basic Manager must be listed in the Articles of Association even if Chinese law does not demand the appointment of a General Manager (as in the case of WFOEs). The Common Manager is charged by law with responsibility for formulating a management system for the enterprise production, operations and management, employment and termination of staff (except these that should be employed and dismissed by the board of directors) and implementing board resolutions and investment and company plans.

Deputy General Managers: A Foreign Invested Enterprise may appoint 1 or much more Deputy General Managers (EJVs are required to appoint at least a single).

Finance Manager: An Equity Joint Venture is essential to appoint 1 or more accountants to help the General Manager with finances. This is also typical practice for other FIEs.

Supervisors

LLCs are required to have supervisory boards, even though this is often ignored in practice by WFOEs and Joint Ventures. [ We're Listening To You]

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