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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 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 significant 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 each Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are needed to appoint between 3 and 13 directors. FIEs with couple of shareholders might 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 need to be proportionate to capital contributions. The board have to have a Chairman, but need not have a Vice Chairman. If each are utilised, nonetheless, then if the foreign investor selects the Chairman, the Chinese party must select the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings need to 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 necessary for amendment of the Articles of Association, boost or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is drastically far more flexible 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-created as in numerous Western nations. Correspondingly, the industry for directors and officers liability insurance is not especially properly-developed either. The Chairmans function 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 lead to losses to the organization. Directors, supervisors and senior management personnel can be held liable if they lead to losses to the enterprise by violating laws and/or the Articles of Association.

Management

Equity Joint Ventures must appoint a Basic Manager, one particular or more Deputy Common Managers, and a Finance Manager. Despite the fact that not needed for other FIEs, this is typical practice for these enterprises as effectively. If a Chinese investor nominates the Basic Manager of an EJV, a foreign investor may possibly nominate the Deputy Basic Manager, and vice versa.

General 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 Basic Manager need to 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 Basic Manager is charged by law with duty for formulating a management program for the enterprise production, operations and management, employment and termination of employees (except those that must be employed and dismissed by the board of directors) and implementing board resolutions and investment and enterprise plans.

Deputy General Managers: A Foreign Invested Enterprise may appoint 1 or a lot more Deputy General Managers (EJVs are required to appoint at least one particular).

Finance Manager: An Equity Joint Venture is needed to appoint 1 or a lot more accountants to help the Common Manager with finances. This is also common practice for other FIEs.

Supervisors

LLCs are essential to have supervisory boards, although this is typically ignored in practice by WFOEs and Joint Ventures. website