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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 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 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.

Number of Directors: The board of directors of both Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are needed to appoint among three and 13 directors. FIEs with couple of shareholders may possibly be in a position 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 require not have a Vice Chairman. If both are utilized, nonetheless, then if the foreign investor selects the Chairman, the Chinese party need to select the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings must be held as soon as a year, and a quorum is two/3 of the directors. For Equity Joint Ventures, unanimous consent of the board is required for amendment of the Articles of Association, enhance 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 needs are governed by the WFOEs Articles of Association.

Director & Officer Liability: Director and officer liability law and enforcement is not as well-developed as in several Western nations. Correspondingly, the market for directors and officers liability insurance coverage is not specifically nicely-created either. The Chairmans role 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 lead to 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 need to appoint a Common Manager, one or a lot more Deputy General Managers, and a Finance Manager. Though not required for other FIEs, this is frequent 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.

General Manager: The General Manager is charged with day-to-day operation and may 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 need the appointment of a General Manager (as in the case of WFOEs). The Common 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 should be employed and dismissed by the board of directors) and implementing board resolutions and investment and organization plans.

Deputy Common Managers: A Foreign Invested Enterprise may appoint a single or more Deputy General Managers (EJVs are needed to appoint at least 1).

Finance Manager: An Equity Joint Venture is required to appoint one or a lot more accountants to assist the General Manager with finances. This is also widespread practice for other FIEs.

Supervisors

LLCs are essential to have supervisory boards, although this is often ignored in practice by WFOEs and Joint Ventures. [ We're Listening To You]