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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 energy 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 energy 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 both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are essential to appoint in between three and 13 directors. FIEs with few shareholders could 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 need to have a Chairman, but need not have a Vice Chairman. If each are used, however, then if the foreign investor selects the Chairman, the Chinese party have to pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings need to be held as soon as a year, and a quorum is 2/three of the directors. For Equity Joint Ventures, unanimous consent of the board is required 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 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 many Western nations. Correspondingly, the market for directors and officers liability insurance coverage is not specifically effectively-developed either. The Chairmans function 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 trigger losses to the firm. Directors, supervisors and senior management personnel can be held liable if they cause losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures have to appoint a Common Manager, a single or more Deputy General Managers, and a Finance Manager. Despite the fact that not necessary for other FIEs, this is frequent practice for these enterprises as nicely. If a Chinese investor nominates the General Manager of an EJV, a foreign investor might nominate the Deputy General 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 Common Manager must be listed in the Articles of Association even if Chinese law does not require the appointment of a General Manager (as in the case of WFOEs). The Basic Manager is charged by law with responsibility for formulating a management technique for the enterprise production, operations and management, employment and termination of staff (except these that need to be employed and dismissed by the board of directors) and implementing board resolutions and investment and company plans.

Deputy General Managers: A Foreign Invested Enterprise might appoint one or far more Deputy Basic Managers (EJVs are needed to appoint at least a single).

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

Supervisors

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

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