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From Minang

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 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 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 important duty 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.

Number of Directors: The board of directors of both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are essential to appoint in between three and 13 directors. FIEs with handful of shareholders may 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 must have a Chairman, but need not have a Vice Chairman. If each are employed, nevertheless, then if the foreign investor selects the Chairman, the Chinese party should pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings must be held after 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, increase or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is significantly more flexible for Wholly Foreign Owned Enterprises - board meetings and quorum specifications are governed by the WFOEs Articles of Association.

Director & Officer Liability: Director and officer liability law and enforcement is not as properly-created as in many Western nations. Correspondingly, the market for directors and officers liability insurance is not specifically effectively-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 trigger losses to the business. 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 should appoint a Basic Manager, a single or much more Deputy Common Managers, and a Finance Manager. Although not essential for other FIEs, this is typical practice for these enterprises as effectively. If a Chinese investor nominates the Common Manager of an EJV, a foreign investor may possibly nominate the Deputy Basic Manager, and vice versa.

Common 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 should 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 General 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 those that have 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 possibly appoint one or more Deputy Common Managers (EJVs are needed to appoint at least a single).

Finance Manager: An Equity Joint Venture is required to appoint one particular or far more accountants to help the Basic Manager with finances. This is also frequent 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]