Laws of the People's Republic of China

The Ministry of Foreign Economic Relations and Trade

Circular of the Ministry of Foreign Economic Relations and Trade Concerning Legal Questions Raised During the Course of Operating a Chinese-foreign Equity Joint Ventures

WaiJingMaoFaZi [1987] No.26

December 17, 1987

To the end of September 1987, 3,986 Chinese-foreign equity joint ventures have been established with the approval of the Chinese government since the implementation of the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures and its Implementing Regulations. During the course of operating Chinese-foreign equity joint ventures, several questions have been raised by the various regions which are hereby clarified:

1.

Issues concerning the replacement of a certificate of approval

In implementing a contract of a Chinese-foreign equity joint venture, changes to the address of a joint equity enterprise, joint equity partners, total amount of investment, business scope, installation of the board of directors and the chairperson or vice-chairpersons of the board of directors frequently occur and involve the contents of the approved agreement, contract and articles of association and the issued certificate of approval. The provisions of Article 17 of the Regulations for the Implementation of the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures stipulates: "The agreement, contract and articles of association shall come into force after being approved by the examination and approval authority. The same applies in the event of amendments. " Therefore, any amendment to the main contents of an agreement, contract or articles of association shall be subject to approval by the original examination and approval authority. Following approval, a new certificate of approval shall be issued under the number of the original certificate of approval, and the original certificate of approval shall be recovered. The procedures for amendment of registration shall then be carried out with the original registration authority by presenting the new certificate of approval.

2.

Issues concerning whether or not the general manager or deputy general manager(s) of a Chinese-foreign equity joint venture shall be permitted to hold posts concurrently as general manager or deputy general manager(s) of other economic organizations.

The provisions of Article 40 of the Regulations for the Implementation of the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures stipulates: "The general manager or deputy general manager shall not hold posts concurrently as general manager or deputy general manager of other economic organizations. They shall not have any connections with other economic organizations in commercial competition with their own joint venture."

At present, some foreign general managers of some Chinese-foreign equity joint ventures are concurrently holding the post of general manager in an overseas enterprise in violation of Chinese laws, and this shall be prevented. "Other economic organizations" as stipulated in Article 40 of the Detailed Regulations for the Implementation of the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures shall include economic organizations both inside and outside China.

3.

Issues concerning the limits of authority on examination and approval of an increase of investment in Chinese-foreign equity joint ventures.

An approved Chinese-foreign equity joint venture which needs to increase investment for the purposes of production and operations shall, if the sum of the increased investment and the total amount of the original investment exceeds the limits of authority of the original examination and approval organ, and if the additional investment is part of the same project, submit an agreement to increase investment together with the original document of approval to the Ministry of Foreign Economic Relations and Trade for examination and approval.

Matters on the above-mentioned issues concerning Chinese-foreign contractual joint venture enterprises and foreign trade enterprises which have already been approved shall be handled with reference to the aforesaid principles.