Laws of the People's Republic of China

PROVISIONS ON THE CAPITAL CONTRIBUTION
BY PARTIES TO SINO-FOREIGN EQUITY JOINT VENTURES

  (Approved by the State Council on December 30, 1987
and promulgated by the Ministry of Foreign Economic
Relations and Trade, and the State Administration
of Industry and Commerce on January 1, 1988)

 

SUBJECT: EQUITY JOINT VENTURES

ISSUING-DEPT: MINISTRY OF FOREIGN ECONOMIC RELATIONS & TRADE

ISSUE-DATE: 01/01/1988

IMPLEMENT-DATE: 03/01/1988

LENGTH: 1458 words

TEXT:

[Article 1] These Provisions are hereby formulated in order to protect the lawful rights and interests of the parties to equity joint ventures (hereinafter referred to as "joint ventures") and maintain social economic order according to the Law of the People's Republic of China on Equity Joint Ventures, and other relevant Laws and Regulations.

[Article 2] In accordance with the provisions of the joint venture contract, capital contribution to the joint venture shall be in currency owned by the joint venture partners, or in kind which have not been used as security interests for guarantee purposes, industrial property and patented technology.

In case of contributing investment in kind or using industrial property and patented technology as investment, the joint venture partners shall provide evidence showing their ownership and power of appointment.

[Article 3] No joint venture partner shall use loans, leased equipment and other property obtained in the name of the joint venture as its investment to the joint venture.üü No joint venture partner is allowed to use property and equity of the joint venture or property and equity owned by another joint venture partner as guarantee for its capital contribution to the joint venture.

[Article 4] Joint venture partners shall agree in the joint venture contract a time schedule that each partner should follow in making their capital contribution to the joint venture.üü In accordance with the relevant regulations, the joint venture shall issue investment certificates to the joint venture partners and certificates shall be submitted to the original examination and approval authority and the administration of industry and commerce for the record.

In case the joint venture contract stipulates that capital contribution to the joint venture shall be made in one time, all partners to the joint venture shall do so within six months upon the issuance of the joint venture's business licence.

In case the joint venture contract stipulates that capital contribution to the joint venture shall be made in several installments, the first installment made by each partner shall not be less than 15% of their respectively agreed amount of investment.üü All joint venture partners shall make their agreed amount of capital contribution to the joint venture for the first installment within three months upon the issuance of the joint venture's business licence.

[Article 5] If joint venture partners have failed to make the required amount of their respective investment according to the timetable stipulated in Article 4 of these Provisions, the joint venture shall be regarded as "dissolved voluntarily".üü The approval certificate of joint venture shall automatically become invalid.üü The joint venture should go through the cancellation procedures with and submit its business licence to the administration of industry and commerce.üü For those who fail to do so, the administration of industry and commerce shall have the right to revoke their business licence and make a public announcement of the revocation.

[Article 6] After the first installment, if all joint venture partners have failed partially or totally to make the required amount of their respective investment as long as three months after the time period stipulated in the joint venture contract, the administration of industry and commerce shall, together with the original examination and approval authority, issue a notice requiring all the joint venture partners to make their capital contribution within one month.

If the parties concerned still fail to make the required amount of their respective investment after the time period stipulated in the notice mentioned in the above paragraph, the original examination and approval authority shall have the right to revoke the approval certificate of joint venture.üü After the revocation, the joint venture shall go through the cancellation procedures with and submit its business licence to the administration of industry and commerce.üü The joint venture shall also settle all its claims and debts.üü The administration of industry and commerce shall have the right to revoke the joint venture's business licence and make a public announcement of the revocation if the joint venture has failed to go through the cancellation procedures and submit its business licence as required.

[Article 7] A joint venture partner shall be regarded as "breaching the contract" if agreed amount of investment has not been made within the stipulated period of time.üü The other partner(s) who has fulfilled the capital contribution obligations shall inform and urge the breaching partner to fulfill its obligations for capital contrabution within one month.üü If the breaching partner continue to breach its obligation, the breaching partner shall be regarded "voluntarily withdrawing" from the joint venture and "voluntarily surrendering" all its rights under the joint venture contract.üü The abiding partner shall then apply to the original examination and approval authority for either dissolving the joint venture or looking for new partner to undertake the obligations and rights of the breaching partner as stipulated in the original joint venture contract.üü The abiding partner is entitled to make claim for compensation as result of the breaching partner's failure to fufill its obligations for capital contribution.

The partial capital contribution made by the breaching partner according to the joint venture contract shall be settled or liquidated by the joint venture.

In case the abiding partner has failed to apply to the original examination and approval authority for dissolving the joint venture or looking for new partner according to the first paragraph of Article 7 of these Provisions, the original examination and approval authority shall have the right to revoke the approval certificate of the joint venture.üü After the revocation, the joint venture shall go through cancellation procedures with and submit its business licence to the administration of industry and commerce.üü For those who fail to do so, the administration of industry and commerce have the right to revoke their business licences and make a public announcement of the revocation.

[Article 8] Partners to a joint venture which has obtained its business licence prior to the implementation of these Provisions are required to fufill their obligations for capital contribution within two months starting from the date of implementation of these Provisions if they have not done so as required in the time schedule agreed in the joint venture contract.

If a joint venture partner has not fufilled its obligation for capital contribution required in the above paragraph, provisions contained in Article 5, Article 6 and Article 7 of the present Provisions shall apply.

[Article 9] Partners to a joint venture which has obtained its business licence prior to the implementation of these Provisions shall sign an additional agreement specifying the time table for capital contribution according to the requirements of these Provisions within two months starting from the date of implementation of these Provisions if the original joint venture contract does not contain a provision dealing with this matter and they have not made the required amount of their respective investment.üü The additional agreement shall be submitted to the original examination and approval authority for approval.üü After approval is granted, the additional agreement shall be submitted to the administration of industry and commerce for the record.

The original examination and approval authority shall have the right to revoke the approval certificate of joint venture if the joint venture partners have failed to sign an additional agreement and make the required amount of their respective investment within two months stipulated in the above paragraph and their failure has caused a delay in construction and operation of the joint venture for six months starting from the date of issuance of its business licence.üü After the revocation, the joint venture shall go through the cancellation procedures with and submit its business licence to the administration of industry and commerce.üü For those who fail to do so, the administration of industry and commerce shall have the right to revoke their business licences and make a public announcement of the revocation.

[Article 10] Matters concerning the capital contribution made by parties to Sino-foreign contractual or cooperative joint ventures shall be handled with reference to these Provisions.

[Article 11] These Provisions shall come into force on March 1, 1988.