Joint ventures with chinese companies offer one of the most effective ways for western companies to tap the massive china market. In a sino-foreign joint venture, the Chinese company usually brings the labour, land use rights and factory buildings, while the foreign company delivers the necessary technology and key equipment, as well as the capital. If the joint venture is based on a cooperative contract in which issues like the terms of cooperation, the allocation of earnings, the ownership of property upon the termination of the contract, the sharing of risks and losses, etc are laid down, it is called a cooperative joint venture (CJV). Whereas a sino-foreign Equity Joint Venture (EJV) is a limited liability company, the share holdings in which are usually non-negotiable and cannot be transferred without approval from the Chinese government. Investors are restricted from withdrawing registered capital during the life of the equity joint venture contract.
As the investment regulation and business environment changes in China, less and less foreign investor use joint venture as the investment vehicle. RO and WFOE are now most commonly used.
JV is fading out because of the practical difficulties in :
picking the proper China partner management technology transfer profit sharing, etc.
shenzhen is one of the best choices for doing business in China. Situated in The Pearl River Delta, Shenzhen is the first Special Economic Zone since China carried out reform and open-door policy 30 years ago. Shenzhen has an area of 1953 square km’s and a population of more than 10 million. Shenzhen is the best city both for living and working in China, as well as the fastest growing city in the world. In Shenzhen you can enjoy the sound infrastructure and the intensive industrial chain for trading, manufacturing and value investment. Since Shenzhen is bordering Hong Kong, you can also take great advantage and opportunity from the “one country, two systems” policy.
There are three primary differences between an EJV and a CJV:
While an EJV is always a legal person, and thus a limited liability company, a CJV can be a legal as well as a non-legal person. The latter option means the partners of the joint venture would be personally liable for any losses the company might make in the future.
In an EJV the division of profits has to take place equivalent to the ratio of the capital contributions made by the parties, while the profit division in a CJV can take place according to the parties’ wishes. A CJV is thus a lot more flexible than an EJV.
In a CJV a party may, besides contributing registered capital, provide for so-called cooperative conditions, e.g. market access rights.
Before applying for the establishment of a joint venture, the following documents have to be at hand:
The necessary work and resident permits for the legal representatives:
The approval and corresponding certificate from various relevant authorities like the Planning Bureau, the Public Security Department, the Foreign Economic and Trade Bureau, etc.
The approval from the Industrial and Commercial Registration Office to use a certain company name
A report of corporate capital verification issued by a Chinese public accountant .
After all the above documents are obtained, you shall go through the following procedure:
Firstly, the proposal for the establishment of an EJV has to be submitted to the relevant examination and ratification authorities. Once the proposal has been approved work can start on researching the project feasibility.
As soon as the research on the project feasibility has been completed, the reports thereon have to be submitted. Once they are approved, the parties involved can start negotiations on the signing of the legal documents, such as the contract or the articles of corporation of the company.
As soon as the negotiations are completed successfully, the contract and the articles of corporation of the company to be finished have to be submitted to the relevant departments of the Ministry of Foreign Trade and Economic Cooperation. Once they have approved the documents, they will issue the Approval Certificate for Enterprises with Foreign Investment.
With the issued Approval Certificate, the investors will have to go to the State Administration of Industry and Commerce to complete the registration procedure for the company.
To simplify the establishment of a business in China for foreign companies, municipalities and provinces have established so-called foreign investment service centers, which offer foreign investors a complete service from the first consultation on how to open a company in China to the obtainment of the approval from the government.