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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 energy to legally bind the enterprise and bears considerable 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 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 necessary to appoint amongst three and 13 directors. FIEs with handful of shareholders might 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 should have a Chairman, but want not have a Vice Chairman. If each are employed, however, then if the foreign investor selects the Chairman, the Chinese celebration should pick the Vice Chairman, and vice versa.
Meetings: Joint venture board meetings need to be held after a year, and a quorum is 2/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 substantially 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 nicely-created as in many Western nations. Correspondingly, the market for directors and officers liability insurance is not particularly well-created 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 have to appoint a Common Manager, 1 or more Deputy General Managers, and a Finance Manager. Despite the fact that not essential for other FIEs, this is common practice for these enterprises as well. If a Chinese investor nominates the General Manager of an EJV, a foreign investor may possibly nominate the Deputy Common Manager, and vice versa.
General Manager: The Basic Manager is charged with day-to-day operation and might 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 call for the appointment of a Common Manager (as in the case of WFOEs). The Common Manager is charged by law with duty for formulating a management system for the enterprise production, operations and management, employment and termination of staff (except those that should be employed and dismissed by the board of directors) and implementing board resolutions and investment and business plans.
Deputy Common Managers: A Foreign Invested Enterprise could appoint 1 or more Deputy General Managers (EJVs are necessary to appoint at least a single).
Finance Manager: An Equity Joint Venture is necessary to appoint 1 or more accountants to assist the General Manager with finances. This is also typical 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]
