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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 power to legally bind the enterprise and bears substantial 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 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 both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are essential to appoint in between 3 and 13 directors. FIEs with handful of shareholders could 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 should be proportionate to capital contributions. The board must have a Chairman, but need to have not have a Vice Chairman. If each are employed, nonetheless, then if the foreign investor selects the Chairman, the Chinese party must choose the Vice Chairman, and vice versa.
Meetings: Joint venture board meetings should be held when a year, and a quorum is two/three of the directors. For Equity Joint Ventures, unanimous consent of the board is needed 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 a lot more versatile for Wholly Foreign Owned Enterprises - board meetings and quorum needs are governed by the WFOEs Articles of Association.
Director & Officer Liability: Director and officer liability law and enforcement is not as effectively-created as in numerous Western nations. Correspondingly, the market for directors and officers liability insurance is not specifically properly-developed 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 business. Directors, supervisors and senior management personnel can be held liable if they lead to 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. Although not needed for other FIEs, this is frequent practice for these enterprises as nicely. If a Chinese investor nominates the General Manager of an EJV, a foreign investor could nominate the Deputy General Manager, and vice versa.
Basic Manager: The Common Manager is charged with day-to-day operation and may possibly 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 General Manager is charged by law with duty for formulating a management technique for the enterprise production, operations and management, employment and termination of employees (except these that must be employed and dismissed by the board of directors) and implementing board resolutions and investment and organization plans.
Deputy General Managers: A Foreign Invested Enterprise could appoint one or much more Deputy Common Managers (EJVs are necessary to appoint at least one particular).
Finance Manager: An Equity Joint Venture is essential to appoint a single or more accountants to help the General Manager with finances. This is also widespread practice for other FIEs.
Supervisors
LLCs are necessary 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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