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From Ibstudy
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 important 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 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 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.
Quantity of Directors: The board of directors of each Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are needed to appoint amongst 3 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 have to be proportionate to capital contributions. The board need to have a Chairman, but need not have a Vice Chairman. If both are used, however, then if the foreign investor selects the Chairman, the Chinese celebration need to choose the Vice Chairman, and vice versa.
Meetings: Joint venture board meetings need to be held once a year, and a quorum is two/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 drastically 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 effectively-developed as in a lot of Western nations. Correspondingly, the marketplace for directors and officers liability insurance coverage is not particularly nicely-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 organization. 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 need to appoint a General Manager, one or more Deputy Basic Managers, and a Finance Manager. Despite the fact that not essential for other FIEs, this is frequent practice for these enterprises as well. If a Chinese investor nominates the Common Manager of an EJV, a foreign investor might nominate the Deputy Basic Manager, and vice versa.
Common 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 Basic Manager ought to be listed in the Articles of Association even if Chinese law does not demand 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 technique for the enterprise production, operations and management, employment and termination of staff (except these that must be employed and dismissed by the board of directors) and implementing board resolutions and investment and enterprise plans.
Deputy General Managers: A Foreign Invested Enterprise could appoint a single or far more Deputy Common Managers (EJVs are essential to appoint at least one).
Finance Manager: An Equity Joint Venture is needed to appoint one particular or a lot more accountants to help the General Manager with finances. This is also widespread practice for other FIEs.
Supervisors
LLCs are needed to have supervisory boards, although this is usually ignored in practice by WFOEs and Joint Ventures. [ We're Listening To You]
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