Equity Joint Ventures (EJV)
There are specific requirements for the management structure of a joint venture but either party can hold the position as chairman of the board of directors. A minimum of 25% of the capital must be contributed by the foreign partner(s). There is no minimum investment for the Chinese partner(s) unless it is required by law for special industries. Minimum registered capital is RMB100,000 or above. Equity can include cash, buildings, equipment, materials, intellectual property rights, and land-use rights but cannot include labor. The value of any equipment, materials, intellectual property rights, or land-use rights must be approved by government authorities before the joint venture can be approved.
EJV can be managed by both Sino/Foregin partners, The Board of Directors comprises 3 directors which will made decision on behalf of the Company. The appointment of Director is determined by both Sino/Foregin partners according to their respective invested capital.
Sino-Foreign Cooperative Joint Venture (CJV)
Under Sino-Foreign Cooperative Joint Venture, parties may operate as separate legal entities and bear liabilities independently rather than as a single entity. A CJV may also be registered as a limited liability entity resembling an Equity Joint Venture in operation, structure, and status as a Chinese legal entity. According to the partnership agreement, the cooperative parties can have respective obligations and rights, risk and title of ownership after the cooperative period. Details should be discussed between the parties.
The contributions made by the investors are not required to be expressed in a monetary value and can include excluded in the equity joint venture process can be contributed such as labor, resources, and services. Profits in a cooperative venture are divided according to the terms of the cooperative venture contract rather than by investment share, allowing a more flexible schedule for return on investment in cases where one investor provides cash while the other party’s investment is primarily in kind.
Greater flexibility in the structuring of a cooperative venture is also permissible including the structure of the organization, management, and assets. There is no term for unlimited terms in cooperative ventures, but also no provisions for the term of the duration. The term of the cooperative venture contract may be renewed subject to the consent of the parties involved and approval from the examination and approval authorities. The foreign investor is permitted to withdraw their registered capital or a portion thereof from the cooperative venture during the duration of the cooperative venture contract.
Advantages of EJV and CJV
- Share of resources
- Able to report duty indepdently;
- Able to carry business, no limitations as just a representative office;
- Foreign party can use Sino party’s resource, faster start up.
Procedure for Application of EJV and CJV
- Certificate of incorporation and business certificate of the investor
- Bank reference letter issued by investor’s banker within 6 months before the application (2 set)
- Board resolution of investor
- Copy of passport, 2 photos, Hong Kong ID card or special pass of the legal representative
- Rental agreement (Original)
- Details of investors, say Annual Return (AR1), passport copy of directors and shareholders
- Appointment letter of the Chairman and board members
- Feasibility study and Memorandum and Articles of Association of the EJV and CJV
- Authorization letter for business registration
Time Required for the Application
Around 30-40 working days.
Upon completion of the registration, you can get the required license and able to carry business in China.