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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 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 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 necessary to appoint among three and 13 directors. FIEs with few 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 must 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 celebration must pick the Vice Chairman, and vice versa.

Meetings: Joint venture board meetings need to be held once a year, and a quorum is 2/3 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 considerably far more flexible for Wholly Foreign Owned Enterprises - board meetings and quorum specifications are governed by the WFOEs Articles of Association.

Director & Officer Liability: Director and officer liability law and enforcement is not as properly-developed as in a lot of Western nations. Correspondingly, the market place for directors and officers liability insurance coverage is not especially properly-created either. The Chairmans role 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 cause losses to the company. 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 should appoint a General Manager, 1 or more Deputy Common Managers, and a Finance Manager. Even though not needed 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 nominate the Deputy General Manager, and vice versa.

Basic 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 Common Manager ought to be listed in the Articles of Association even if Chinese law does not need the appointment of a Basic Manager (as in the case of WFOEs). The General Manager is charged by law with duty for formulating a management method for the enterprise production, operations and management, employment and termination of employees (except these that must be employed and dismissed by the board of directors) and implementing board resolutions and investment and company plans.

Deputy Common Managers: A Foreign Invested Enterprise might appoint 1 or much more Deputy Common Managers (EJVs are necessary to appoint at least a single).

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

Supervisors

LLCs are needed to have supervisory boards, despite the fact that this is typically ignored in practice by WFOEs and Joint Ventures. PureVolume™