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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 power 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 considerable 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.

Quantity of Directors: The board of directors of each Wholly Foreign Owned Enterprises (WFOEs) and Joint Ventures are needed to appoint in between three and 13 directors. FIEs with few 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 should be proportionate to capital contributions. The board need to have a Chairman, but need not have a Vice Chairman. If both are utilized, nonetheless, then if the foreign investor selects the Chairman, the Chinese celebration need to pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings should be held after 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, enhance or reduction of the Registered Capital, merger or division, and termination and dissolution. The law is drastically 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 a lot of Western nations. Correspondingly, the market for directors and officers liability insurance is not particularly nicely-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 business. 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 must appoint a Common Manager, one particular or much more Deputy Basic Managers, and a Finance Manager. Although not needed for other FIEs, this is widespread practice for these enterprises as effectively. If a Chinese investor nominates the General Manager of an EJV, a foreign investor could nominate the Deputy Basic Manager, and vice versa.

Basic 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 Common Manager must 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 responsibility for formulating a management method for the enterprise production, operations and management, employment and termination of employees (except these that need to 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 may appoint 1 or more Deputy General Managers (EJVs are essential to appoint at least one).

Finance Manager: An Equity Joint Venture is essential to appoint one or far more accountants to assist the Common Manager with finances. This is also common practice for other FIEs.

Supervisors

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