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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 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 considerable 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 both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are necessary to appoint amongst three and 13 directors. FIEs with few shareholders might 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 need to have a Chairman, but need to have not have a Vice Chairman. If both are utilized, however, then if the foreign investor selects the Chairman, the Chinese party should choose the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings should 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 needed for amendment of the Articles of Association, boost or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is considerably 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 well-developed as in a lot of Western nations. Correspondingly, the marketplace for directors and officers liability insurance is not especially nicely-developed either. The Chairmans role 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 trigger losses to the firm. Directors, supervisors and senior management personnel can be held liable if they cause losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures have to appoint a General Manager, 1 or a lot more Deputy General Managers, and a Finance Manager. Even though not essential 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 might nominate the Deputy Common Manager, and vice versa.

General 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 must be listed in the Articles of Association even if Chinese law does not need the appointment of a Common Manager (as in the case of WFOEs). The Basic Manager is charged by law with duty for formulating a management method 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 one particular or far more Deputy General Managers (EJVs are required to appoint at least a single).

Finance Manager: An Equity Joint Venture is needed to appoint one or a lot more accountants to assist the General Manager with finances. This is also common practice for other FIEs.

Supervisors

LLCs are required to have supervisory boards, despite the fact that this is typically ignored in practice by WFOEs and Joint Ventures. [ We're Listening To You]

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