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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 significant 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 power 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 each Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are necessary to appoint among three and 13 directors. FIEs with couple of shareholders might be able 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 have to have a Chairman, but require not have a Vice Chairman. If each are utilized, nonetheless, then if the foreign investor selects the Chairman, the Chinese celebration must select the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings have to be held as soon as a year, and a quorum is 2/3 of the directors. For Equity Joint Ventures, unanimous consent of the board is necessary for amendment of the Articles of Association, increase or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is considerably far 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 effectively-developed as in several Western nations. Correspondingly, the market for directors and officers liability insurance coverage 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 organization. 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 must appoint a General Manager, one or far more Deputy Common Managers, and a Finance Manager. Though not required for other FIEs, this is typical practice for these enterprises as well. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor may possibly nominate the Deputy Basic Manager, and vice versa.

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

Deputy Basic Managers: A Foreign Invested Enterprise may appoint 1 or a lot more Deputy Common Managers (EJVs are necessary to appoint at least 1).

Finance Manager: An Equity Joint Venture is necessary to appoint one or much more accountants to help the General Manager with finances. This is also common practice for other FIEs.

Supervisors

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