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From Nseurope

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 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 substantial 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.

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 couple of shareholders could 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 must have a Chairman, but need to have not have a Vice Chairman. If both are used, nevertheless, then if the foreign investor selects the Chairman, the Chinese celebration must pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings must be held when a year, and a quorum is 2/3 of the directors. For Equity Joint Ventures, unanimous consent of the board is required for amendment of the Articles of Association, boost or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is significantly much 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 nicely-developed as in many Western nations. Correspondingly, the market place for directors and officers liability insurance coverage is not particularly properly-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 cause losses to the firm. Directors, supervisors and senior management personnel can be held liable if they trigger losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures need to appoint a Basic Manager, one or far more Deputy Common Managers, and a Finance Manager. Although not required for other FIEs, this is typical practice for these enterprises as well. If a Chinese investor nominates the Common Manager of an EJV, a foreign investor may nominate the Deputy Basic Manager, and vice versa.

Common Manager: The Basic 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 need to be listed in the Articles of Association even if Chinese law does not demand the appointment of a Basic Manager (as in the case of WFOEs). The Common Manager is charged by law with responsibility for formulating a management system 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 might appoint one or more Deputy Basic Managers (EJVs are essential to appoint at least 1).

Finance Manager: An Equity Joint Venture is needed to appoint one particular or a lot more accountants to help the Basic Manager with finances. This is also frequent practice for other FIEs.

Supervisors

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