Chapter 1 General Provisions
Article 1. The Regulations hereunder are formulated with a view to facilitating the implementation of the Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment (hereinafter referred to as the Law on Chinese-Foreign Joint Ventures).
Article 2. Joint ventures using Chinese and foreign investment (hereinafter referred to as joint ventures) established within China's territory in accordance with the Law on Chinese-Foreign Joint Ventures are Chinese legal persons and are subject to the jurisdiction and protection of Chinese law.
Article 3. Joint ventures established within China's territory should be able to promote the development of China's economy and the raising of scientific and technological levels for the benefit of socialist modernization.
The industries in which the establishment of joint venture is encouraged, permitted, restricted or prohibited shall follow the provisions of the state on guiding the direction of foreign investment and the guiding catalog of foreign-funded industries.
Article 4. Applicants to establish joint ventures shall not be granted approval if the project involves any of the following conditions:
(1) Detriment to China's sovereignty;
(2) Violation of Chinese law;
(3) Nonconformity with the requirements of the development of China's national economy;
(4) Environmental pollution;
(5) Obvious inequity in the agreements, contracts and articles of association signed, impairing the rights and interests of one party.
Article 5. A joint venture has the right to do business independently within the scope of the provisions of Chinese laws, decrees, and the agreement, contract and articles of association of the joint venture. The departments concerned shall provide support and assistance.
Chapter 2 Establishment and Registration
Article 6 The establishment of a joint venture in China is subject to the examination and approval of the Ministry of Foreign Economic Relations and Trade of the People's Republic of China (hereinafter referred to as the Ministry of Foreign Economic Relations and Trade). Certificates of approval are to be issued by the Ministry of Foreign Economic Relations and Trade.
The State Council shall authorize the people's governments of the provinces, autonomous regions, and municipalities directly under the Central Government or the relevant departments under the State Council with the power to examine and approve the establishment of joint ventures that meet the following conditions:
(1) The total amount of investment is within the limit of power to examine and approve authorized by the State Council and the source of capital of the Chinese participants has been ascertained;
(2) No additional allocations of raw materials by the state will be needed and the national balance in the aspects of fuel, power, transportation and foreign trade export quotas will not be affected.
The joint venture established after being approved according to the preceding paragraph shall be reported to the Ministry of Foreign Trade and Economic Cooperation for record.
The Ministry of Foreign Trade and Economic Cooperation, and the people's governments of the provinces, autonomous regions, and municipalities directly under the Central Government or the relevant departments under the State Council authorized by the State Council will hereinafter be referred to as “the examination and approval authority.
Article 7. When applying for the establishment of a joint venture, the Chinese and foreign participants in the joint venture shall jointly submit the following documents to the examination and approval authority:
1) Application for the establishment of a joint venture;
2) The feasibility study report jointly prepared by the participants;
3) Joint venture agreement, contract and articles of association signed by the representatives authorized by the participants;
4) List of candidates for chairman, vice-chairman and directors appointed by the participants; and
5) Other documents stipulated by the examination and approval authority. The aforesaid documents shall be written in Chinese. Documents (2), (3) and (4) may be written simultaneously in a foreign language agreed upon by the participants. Both versions are equally authentic.
Should anything inappropriate be found in any of the documents submitted, the examination and approval authority shall demand an amendment to it within a limited time.
Article 8. Upon receipt of the documents stipulated in Article 7 of these Regulations, the examination and approval authority shall, within three months, decide whether to approve or disapprove them.
Article 9. The applicant shall, within one month after receipt of the certificate of approval, register with the administrative bureau for industry and commerce (hereinafter referred to as registration and administration office) in accordance with the relevant provisions of the state. The date on which its business license is issued shall be regarded as the date of the establishment of a joint venture.
Article 10. The "joint venture agreement" mentioned in these Regulations refers to a document agreed upon by the parties to the joint venture on some main points and principles governing the establishment of a joint venture.
"Joint venture contract" refers to a document agreed upon and concluded by the parties to the joint venture on their rights and obligations. "Article of association" refers to a document agreed upon by the parties to the joint venture indicating the purpose, organizational principles and method of management of a joint venture in compliance with the principles of the joint venture contract.
If the joint venture agreement conflicts with the contract, the contract shall prevail.
If the parties to the joint venture agree to sign only a contract and articles of association, the agreement can be omitted.
Article 11. The joint venture contract shall include the following main items:
(1) The names, the countries of registration, the legal address of parties to the joint venture, and the names, professions and nationalities of the legal representatives thereof;
(2) Name of the joint venture, its legal address, purpose and the scope and scale of business;
(3) Total amount of investment and registered capital of the joint venture, investment contributed by the parties to the joint venture, each party's investment proportion, forms of investment, the time limit for contributing investment, stipulations concerning incomplete contributions, and assignment of investment;
(4) The ratio of profit distribution and losses to be borne by each party;
(5) The composition of the board of directors, the distribution of the number of directors, and the responsibilities, powers and means of employment of the general manager, deputy general manager and high-ranking management personnel;
(6) The main production equipment and technology to be adopted and their source of supply;
(7) The ways and means of purchasing raw materials and selling finished products;
(8) Principles governing the handling of finance, accounting and auditing;
(9) Stipulations concerning labor management, wages, welfare, and labor insurance;
(10) The duration of the joint venture, its dissolution and the procedure for liquidation;
(11) The liabilities for breach of contract;
(12) Ways and Procedures for settling disputes between the parties to the joint venture;
(13) The language used for the contract and the conditions for putting the contract into force.
The annex to the contract of a joint venture shall be equally authentic with the contract itself.
Article 12. The formation of a joint venture contract, its validity, interpretation, execution and the settlement of disputes under it shall be governed by the Chinese law.
Article 13. Articles of association shall include the following main items:
(1) The name of the joint venture and its legal address;
(2) The purpose, business scope and duration of the joint venture;
(3) The names, countries of registration and legal addresses of parties to the joint venture, and the names, professions and nationalities of the legal representatives thereof;
(4) The total amount of investment, registered capital of the joint venture, each party's investment proportion, stipulations concerning the assignment of investment, the ratio of profit distribution and losses to be borne by parties to the joint venture;
(5) The composition of the board of directors, its responsibilities, powers and rules of procedure, the term of office of the directors, and the responsibilities of its chairman and vice-chairman;
(6) The setting up of management organizations, rules for handling routine affairs, the responsibilities of the general manager, deputy general manager and other high-ranking management personnel, and the method of their appointment and dismissal;
(7) Principles governing finance, accounting and auditing;
(8) Dissolution and liquidation;
(9) Procedures for amendment of the articles of association.
Article 14. 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.
Article 15. The examination and approval authority and the registration and administration office are responsible for supervising and inspecting the execution of the joint venture contracts and articles of association.
Chapter 3 Form of Organization and Registered Capital
Article 16. A joint venture is a limited liability company.Each party to the joint venture is liable to the joint venture within the limit of the capital subscribed by it.
Article 17. The total amount of investment (including loans) of a joint venture refers to the sum of capital construction funds and the circulating funds needed for the joint venture's production scale as stipulated in the contract and the articles of association of the joint venture.
Article 18. The registered capital shall generally be presented in total amount of investment registered at the registration and administration office for the establishment of the joint venture. It should be the total amount of investment subscribed by parties to the joint venture.
The registered capital shall generally be presented in Renminbi, or may be in a foreign currency agreed upon by the parties to the joint venture.
Article 19. A joint venture shall not reduce its registered capital during the term of the joint venture. If it is needed to reduce the registered capital because the total amount of investment and the production and business scale, etc, have changed, the approval from the examination and approval authority must be obtained.
Article 20. If one party to the joint venture intends to assign all or part of his investment subscribed to a third party, consent shall be obtained from the other party to the joint venture, and the party shall submit the assignment to the examination and approval authority for approval, and shall go through the registration procedures for changes with the registration and administration office.
When one party assigns all or part of his investment to a third party, the other party has pre-emptive right.
When one party assigns his investment subscribed to a third party, the conditions given shall not be more favourable than those given to the other party to the joint venture.
No assignment shall be made effective should there be any violation of the above stipulations.
Article 21. Any increase, reduction of the registered capital of a joint venture shall be approved by a meeting of the board of directors and submitted to the examination and approval authority for approval. Registration procedures for changes shall be dealt with at the registration and administration office.
Chapter 4 Ways of Contributing Investment
Article 22. Each participant to a joint venture may contribute cash or buildings, premises, equipment or other materials, industrial property, know-how, right to the use of a site as investment, the value of which shall be ascertained. If the investment is in the form of buildings, premises, equipment or other materials, industrial property or known-how, the prices shall be ascertained through consultation by the parties to the joint venture on the basis of fairness and reasonableness, or evaluated by the third party agreed upon by parties to the joint venture.
Article 23. The foreign currency contributed by the foreign participant shall be converted into Renminbi according to the base exchange rate announced by the People's Bank of China on the day of its submission or be cross exchanged into a predetermined foreign currency.
Should the cash Renminbi contributed by the Chinese participant be converted into foreign currency, it shall be converted according to the base exchange rate announced by the People's Bank of China on the day of the submission of the funds.
Article 24. The machinery equipment and other materials contributed as investment by the foreign participant shall be indispensable to the production of the joint venture.
The price fixed for the machinery and other materials referred to in the preceding paragraph shall not be higher than the current international market price for the similar equipment or materials.
Article 25. The industrial property or know-how contributed by the foreign participant as investment shall meet one of the following conditions:
(1) Capable of improving markedly the performance, quality of existing products and raising productivity;
(2) Capable of notable savings in raw materials, fuel or power.
Article 26. Foreign participants who contribute industrial property or know-how as investment shall present relevant documentation on the industrial property or know-how, including photocopies of the patent certificates or trademark registration certificates, statements of validity, their technical characteristics, practical value, the basis for calculating the price and the price agreement signed with the Chinese participants. All these shall serve as an annex to the contract.
Article 27. The machinery, equipment or other materials, industrial property or know-how contributed by foreign participants as investment shall be submitted to the examination and approval authority for approval.
Article 28. The parties to the joint venture shall pay in all the investment subscribed according to the time limit stipulated in the contract. Delay in payment or partial delay in payment will be subject to a payment of interest on arrears or a compensation for the loss as defined in the contract.
Article 29. After the investment is paid by the parties to the joint venture, a Chinese registered accountant shall verify it and provide a certificate of verification, in accordance with which the joint venture shall issue an investment certificate, which includes the following items: name of the joint venture; date, month and year of the establishment of the joint venture; names of the participants and the investment contributed; date, month and year of the contribution of the investment; and date, month and year of issuance of the investment certificate.
Chapter 5 Board of Directors and Management Office
Article 30. The highest authority of the joint venture shall be its board of directors. It shall decide all major issues concerning the joint venture.
Article 31. The board of directors shall consist of no less than three members. The distribution of the number of directors shall be ascertained through consultation by the parties to the joint venture with reference to the proportion of investment contributed.
The term of office for the directors is four years. Their term of office may be renewed with the consent of the parties to the joint venture.
Article 32. The board of directors shall convene at least one meeting every year. The meeting shall be called and presided over by the chairman of the board. Should the chairman be unable to call the meeting, he shall authorize the vice-chairman or other director to call and preside over the meeting. The chairman may convene an interim meeting based on a proposal made by more than one-third of the directors.
A board meeting requires a quorum of over two-thirds of the directors. Should the director be unable to attend, he shall present a proxy authorizing someone else to represent him and vote for him.
A board meeting shall generally be held at the location of the joint venture's legal address.
Article 33. Decisions on the following items shall be made only after being unanimously agreed upon by the directors present at the board meeting:
(1) Amendment of the articles of association of the joint venture;
(2) Termination and dissolution of the joint venture;
(3) Increase or reduction of the registered capital of the joint venture;
(4) Merger or division of the joint venture.
Decision on other items shall be made according to the rules of procedure stipulated in the articles of association of the joint venture.
Article 34. The chairman of the board is the legal representative of the joint venture. Should the chairman be unable to exercise his responsibilities, he shall authorize the vice-chairman of the board or other director to represent the joint venture.
Article 35. A joint venture shall establish a management office which shall be responsible for daily management. The management office shall have a general manager and several deputy general managers who shall assist the general manager in his work.
Article 36. The general manager shall carry out the decisions of the board meeting and organize and conduct the daily management of the joint venture. The general manager shall, within the scope empowered him by the board, represent the joint venture in outside dealings, have the right to appoint and dismiss his subordinates, and exercise other responsibilities and rights as authorized by the board within the joint venture.
Article 37. The general manager and deputy general managers shall be engaged by the board of directors of the joint venture. These positions may be held either by Chinese citizens or foreign citizens.
At the invitation of the board of directors, the chairman, vice-chairman or other directors of the board may concurrently be the general manager, deputy general managers or other high-ranking management personnel of the joint venture.
In handling major issues, the general manager shall consult with the deputy general managers.
The general manager or deputy general managers shall not hold posts concurrently as general manager or deputy general managers of other economic organizations. They shall not have any connections with other economic organizations in commercial competition with their own joint venture.
Article 38. In case of graft or serious dereliction of duty on the part of the general manager, deputy general managers or other high-ranking management personnel, the board of directors shall have the power to dismiss them at any time.
Article 39. Establishment of branch offices (including sales offices) outside of China or in Hongkong or Macao is subject to approval by the Ministry of Foreign Trade and Economic Cooperation.
Chapter 6 Acquisition of Technology
Article 40. The acquisition of technology mentioned in these Regulations refers to the necessary technology obtained by the joint venture by means of technology transfer from a third party or participants.
Article 41. The technology acquired by the joint venture shall be appropriate and advanced and enable the venture's products to display conspicuous social economic results domestically or to be competitive on the international market.
Article 42. The right of the joint venture to do business independently shall be maintained when making technology transfer agreements, and relevant documentation shall be provided by the technology exporting party in accordance with the provisions of Article 26 of these Regulations.
Article 43. The technology transfer agreements signed by a joint venture shall be submitted for approval to the examination and approval authority.
Technology transfer agreements shall comply with the following stipulations:
(1) Expenses for the use of technology shall be fair and reasonable.
(2) Unless otherwise agreed upon by both parties, the technology exporting party shall not put any restrictions on the quantity, price or region of sale of the products that are to be exported by the technology importing party.
(3) The term for a technology transfer agreement is generally no longer than ten years.
(4) After the expiration of a technology transfer agreement, the technology importing party shall have the right to use the technology continuously.
(5) Conditions for mutual exchange of information on the improvement of technology by both parties of the technology transfer agreement shall be reciprocal.
(6) The technology importing party shall have the right to buy the equipment, parts and raw materials needed from sources they deem suitable.
(7) No irrational restrictive clauses prohibited by Chinese law and regulations shall be included.
Chapter 7 Right to the Use of Site and its Fee
Article 44. Joint ventures shall practise economy in the use of land for their premises. Any joint venture requiring the use of a site shall file an application with local departments of the municipal (county) government in charge of land and obtain the right to use a site only after securing approval and signing a contract. The acreage, location, purpose and contract period and fee for the right to use a site (hereinafter referred to as site use fee), rights and obligations of the parties to a joint venture and fines for breach of contract should be stipulated in explicit terms in the contract.
Article 45. If the Chinese participant already has the right to the use of site for the joint venture, the Chinese participant may use it as part of its investment. The monetary equivalent of this investment should be the same as the site use fee otherwise paid for acquiring such site.
Article 46. The standard for site use fee shall be set by the people's governments of the province, autonomous region or municipality directly under the central government where the joint venture is located according to the purpose of use, geographic and environmental conditions, expenses for requisition, demolishing and resettlement and the joint venture's requirements with regard to infrastructure, and filed with the Ministry of Foreign Economic Relations and Trade and the state department in charge of land.
Article 47. Joint ventures engaged in agriculture and animal husbandry may, with consent of the people's government of the local province, autonomous region or municipality directly under the central government, pay a percentage of the joint venture's operating revenue as site use fees to the local department in charge of land.
Projects of a development nature in economically undeveloped areas shall receive special preferential treatment in respect of site use fees with consent of the local people's government.
Article 48. The rates shall not be subject to adjustment in the first five years beginning from the day the land is used. After that the interval of adjustment shall not be less than three years according to the development and changes in geographic and environmental conditions.
Site use fee as part of the investment by the Chinese participant shall not be subject to adjustment during the contract period.
Article 49. The fee for the right to the use of site obtained by a joint venture according to Article 44 of these Regulations shall be paid annually from the day to use the land stipulated in the contract. For the first calendar year, the venture will pay a half-year fee if it has used the land for over six months; if less than six months, the site use fee shall be exempt. During the contract period, if the rates of site use fees are adjusted, the joint venture shall pay it according to the new rates from the year of adjustment.
Article 50. A joint venture may obtain the right to the use of site not only according to the relevant provisions of the state but also according to the provisions of this Chapter.
Chapter 8 Purchasing and Selling
Article 51. In its purchase of required machinery, equipment, raw materials, fuel, parts, means of transport and things for office use, etc. (hereinafter referred to as materials), a joint venture has the right to decide whether it buys them in China or from abroad.
Article 52. The amount of materials needed for office and daily life use for joint ventures purchased in China is not subject to restriction.
Article 53. The Chinese Government encourages joint ventures to sell their products on the international market.
Article 54. A joint venture has the right to export its products itself or entrust sale agencies of the foreign participant or Chinese foreign trade corporations with sales on a commission or distribution.
Article 55. Within the scope of operation stipulated in the contract, a joint venture can import machinery, equipment, parts, raw materials and fuel needed for its production. A joint venture shall make a plan every year for items on which import licenses are required by the stipulation of the state, and apply for them every six months. For machines, equipment and other objects a foreign participant has contributed as part of his investment, the foreign participant can apply directly for import licenses with documents approved by examination and approval authority. For materials to be imported exceeding the stipulated scope of the contracts, separate application for import licenses according to state regulations is required.
A joint venture has the right to export its products by itself, for those export licenses are required by the stipulation of the State, the joint venture shall make an export plan every business year and apply for them every six months.
Article 56. The price of materials purchased in China by joint ventures and the fees paid for water, electricity, gas, heat, goods transportation, service, engineering, consultation and advertisement etc, shall enjoy the equal treatment with that enjoyed by the other domestic enterprises.
Article 57. A joint venture and other Chinese economic organizations shall, in their economic exchanges, undertake economic responsibilities and settle disputes over contracts in accordance with relevant law and the contract concluded between both parties.
Article 58. A joint venture shall provide statistical documents and submit statistical forms according to the Statistics Law of the People's Republic of China and to the provisions on the statistics system of utilization of foreign investment of China.
Chapter 9 Taxes
Article 59. Joint ventures shall pay taxes according to the stipulations of relevant laws of the People's Republic of China.
Article 60. Staff members and workers employed by joint ventures shall pay individual income tax according to the Individual Income Tax Law of the People's Republic of China.
Article 61. Taxes of the
following imported materials of joint ventures shall be exempted or reduced according to the relevant provisions of Chinese tax laws:
(1) Machinery, equipment, parts and other materials (materials here and hereinafter mean required materials for the joint venture's construction on the factory site and for installation and reinforcement of machines,) which are part of the foreign participant's share of investment according to the provisions of contract.
(2) Machinery, equipment, parts and other materials imported with funds which are part of the joint venture's total investment.
(3) Machinery, equipment, parts and other materials imported by the joint venture with the additional capital under the approval of examination and approval authority on which China cannot guarantee production and supply.
(4) Raw materials, auxiliary materials, components, parts and packing materials imported by the joint venture for production of export goods.
Taxes shall be pursued and payable according to regulations when the above-mentioned duty-free or duty-reduced imported materials are approved for sale inside China or switched to the production of items to be sold on the Chinese domestic market.
Article 62. Except those export items restricted by the state, the taxes of products of a joint venture for export will be reduced, exempted or returned according to the relevant provisions of Chinese tax laws.
Chapter 10 Foreign Exchange Control
Article 63. All matters concerning foreign exchange for joint ventures shall be handled according to the Regulations on Foreign Exchange Control of the People's Republic of China and relevant regulations.
Article 64. With the business license, a joint venture can open foreign exchange deposit accounts and Renminbi deposit accounts with domestic banks. The bank handling the account of the joint venture exercises supervision of receipts and expenditures.
Article 65. A joint venture shall get permission from the General Administration of Foreign Exchange Control or one of its branches to open a foreign exchange deposit account with an overseas bank or one in Hongkong or Macao, and report to the State General Administration of Foreign Exchange Control or one of its branches its foreign exchange receipts and expenditures, and provide account sheets.
Article 66. The sub-division set up by a joint venture in foreign countries or in Hongkong or Macao shall submit its annual statement of assets and liabilities and annual profit report to the State General Administration of Foreign Exchange Control or one of its branches through the joint venture.
Article 67. A joint venture can apply to domestic financial institutions for foreign loans and Renminbi loans according to its business needs, and can also borrow foreign exchange as capital from banks abroad or in Hong Kong or Macao, and shall go through the procedures for registration or record-keeping with the State General Administration of Foreign Exchange Control or one of its branches.
Article 68. After foreign staff and workers and staff and workers from Hongkong or Macao have paid income tax on their salaries and other legitimate incomes according to the law, they can purchase foreign exchanges and remit outside China the remaining foreign exchange after deduction of their living expenses in China according to the relevant provisions of the state.
Chapter 11 Financial Affairs and Accounting
Article 69. Procedures for handling financial affairs and accounting of a joint venture shall be formulated in accordance with China's relevant laws and procedures on financial affairs and accounting, and in consideration of the conditions of the joint venture, and then being filed with local financial departments and tax authorities.
Article 70. A joint venture shall employ a treasurer to assist the general manager in handling the financial affairs of the enterprise. If necessary a deputy treasurer can be appointed.
Article 71. A joint venture shall (small venture may not) appoint an auditor to be responsible for checking financial receipts, payments and accounts, and to submit reports to the board of directors and the general manager.
Article 72. The fiscal year of a joint venture shall coincide with the calendar year, i.e. from January 1 to December 31 on the Gregorian calendar.
Article 73. The accounting of a joint venture shall adopt the internationally used accrual basis and debit and credit accounting system in their work. All vouchers, account books, statistic statements and reports prepared by the enterprise shall be written in Chinese. A foreign language can be used concurrently with mutual consent.
Article 74. Principally joint ventures shall adopt Renminbi as the standard currency. In keeping accounts, however, another currency can be used through consultation by the parties concerned.
Article 75. In addition to the use of standard currency to record accounts, joint ventures shall record accounts in currencies actually used in payments and receipts, if such currencies in cash, bank deposits, funds of other currencies, creditor's right, debts, gains, expenses, etc. are inconsistent with the standard currency in recording accounts.
Joint ventures using a foreign currency in accounting shall work out a report of financial affaires and accounts in Renminbi.
The losses and gains of the standard currency used in the accounts caused by differences in exchange rates in the course of remittances shall be recorded in the year's losses and gains accounts. If the exchange rates change, the remaining sum on the book of related foreign exchange accounts shall be handled according to China's relevant laws and procedures on financial affairs and accounting on the settling day at the end of each year.
Article 76. Principles of profit distribution after payment of taxes in accordance with the Income Tax Law of the People's Republic of China concerning Joint Ventures with Chinese and Foreign Investment are as follows:
(1) Allocations for reserve funds, bonuses and welfare funds for staff and workers and expansion funds of the joint venture. Proportion of allocations is decided by the board of directors.
(2) Reserve funds can be used to make up the losses of the joint venture, and with the consent of examination and approval authority, to increase the joint venture's capital for production expansion.
(3) After the funds described in (1) of this article have been deducted and if the board of directors decides to distribute the remaining profit, it should be distributed according to the proportion of each participant's investment.
Article 77. Profits cannot be distributed unless the losses of previous years have been made up. Remaining profits from previous year (or years) can be distributed together with that of the current year.
Article 78. A joint venture shall submit quarterly and annual fiscal reports to the participants, the local tax authority, and financial department.
Article 79. Only after being examined and certified by an accountant registered in China can the following documents, certificates and reports be considered valid.
(1) Certificates of investment from all parties to a joint venture (lists of assessed value signed and agreed upon by all parties to the joint venture shall be attached to documents on investments involving materials, site use rights, industrial property and know-how);
(2) Annual fiscal reports of the joint venture;
(3) Fiscal reports on liquidation of the joint venture.
Chapter 12 Staff and Workers
Article 80. The employment, recruitment, dismissal and resignation of staff and workers of joint ventures, and their salary, welfare benefits, labour insurance, labour protection, labour discipline and other matters shall be handled according to the state provisions related to labor and social security.
Article 81. Joint ventures shall make efforts to conduct professional and technical training of their staff and workers and establish a strict examination system so that they can meet the requirements of production and managerial skills in a modernized enterprise.
Article 82. The salary and bonus systems of joint ventures shall be in accordance with the principle of distribution to each according to his work, and more pay for more works.
Article 83. Salaries and remuneration of the general manager, deputy general manager(s), chief engineer and deputy chief engineer(s), treasurer and deputy treasurer(s), auditor and other high-ranking officials shall be decided upon by the board of directors.
Chapter 13 Trade Union
Article 84. Staff and workers of a joint venture have the right to set up grass-roots trade unions and carry on trade union activities in accordance with the Trade Union Law of the People's Republic of China and the Articles of Association of Chinese Trade Union.
Article 85. Trade unions in joint ventures are representatives of the interests of the staff and workers. They have the power to represent the staff and workers to sign labour contracts with joint ventures and supervise the execution of these contracts.
Article 86. The basic tasks of the trade unions in joint ventures are: to protect the democratic rights and material interests of the staff and workers pursuant to the law; to help the joint ventures with the arrangement and rational use of welfare and bonus funds; to organize political, professional, scientific and technical studies, carry out literary, art and sports activities; and to educate staff and workers to observe labour discipline and strive to fulfill the economic tasks of the enterprises.
Article 87. Trade union representatives have the right to attend as nonvoting members and to report the opinions and demands of staff and workers to meetings of the board of directors held to discuss important issues such as development plans, production and operational activities of joint ventures.
Trade union representatives have the right to attend as nonvoting members of meetings of the board of directors held to discuss and decide on awards and penalties to staff and workers, salary systems, welfare benefits, labour protection and labour insurance, etc. The board of directors shall heed the opinions of the trade unions and win its cooperation.
Article 88. A joint venture shall actively support the work of the trade union, and, in accordance with stipulations of the Trade Union Law of the People's Republic of China, provide housing and facilities for the trade union's office work, meetings, and welfare, cultural and sports activities. Each month the joint venture shall allot an amount of money totaling 2 percent of all the salaries of the joint venture's staff and workers as trade union's funds, which the trade union of the joint venture shall use according to the relevant managerial rules for trade union funds formulated by the All China Federation of Trade Unions.
Chapter 14 Duration, Dissolution and Liquidation
Article 89. The duration of a joint venture shall be implemented according to the Interim Provisions on the Duration of Joint Ventures Using Chinese and Foreign Investment.
Article 90. A joint venture may be dissolved in the following situations:
(1) Termination of duration;
(2) Inability to continue operations due to heavy losses;
(3) Inability to continue operations due to the failure of one of the contracting parties to fulfill the obligations prescribed by the agreement, contract and articles of association;
(4) Inability to continue operations due to heavy losses caused by force majeure such as natural calamities and wars, etc.;
(5) Inability to obtain the desired objectives of the operation and at the same time to see a future for development;
(6) Occurrence of other reasons for dissolution prescribed by the contract and articles of association.
In cases described in (2), (3), (4), (5) and (6) of the preceding paragraph, the board of directors shall make an application for dissolution to the examination and approval authority; in the case described in (3), the party performing the contract shall make an application to the examination and approval authority.
In the situation described in (3) of this article, the party that failed to fulfill the obligations prescribed by the agreement, contract and articles of association shall be liable to the losses thus caused.
Article 91. Liquidation shall be conducted upon announcement of the dissolution of a joint venture. The joint venture shall set up a liquidation commission according to the provisions of the Liquidation Measures of Foreign Funded Enterprises, which shall be responsible for the matters of liquidation.
Article 92. Members of a liquidation committee are usually selected among directors of a joint venture. In case the directors cannot serve or are unsuitable to be members of the liquidation committee, the joint venture may invite accountants and lawyers registered in China to do the job. When the examination and approval authority deems necessary, it may send personnel to supervise the process.
The liquidation expenses and remuneration to members of the liquidation committee shall be paid in priority from the existing assets of the joint venture.
Article 93. The tasks of the liquidation committee are: to conduct thorough check of the property of the joint venture concerned, its creditors' rights and liabilities; to work out the statement of assets and liabilities and the list of property; to put forward a basis on which property is to be evaluated and calculated: and to formulate a liquidation plan. All these shall be carried out upon approval of the board of directors.
During the process of liquidation, the liquidation committee shall represent the joint venture concerned to sue and be sued.
Article 94. Joint venture shall be liable to its debts with all of its assets. The remaining property after the clearance of debts shall be distributed among parties to the joint venture according to the proportion of each party's investment unless otherwise provided by agreement, contract and articles of association of the joint venture.
At the time when a joint venture is being dissolved, its net assets or remaining property, after the deduction of the undistributed profit, various funds and liquidation expenses of the joint venture, that exceeds the registered capital is liquidation income, on which income taxes shall be levied according to law.
Article 95. On completion of the liquidation of a dissolved joint venture, the liquidation committee shall submit a liquidation report approved by a meeting of the board of directors to the examination and approval authority, go through formalities for nullifying its registration and hand in its business license to the registration authority.
Article 96. After dissolution of a joint venture, its account books and documents shall be left in the care of the Chinese participant.
Chapter 15 Settlement of Disputes
Article 97. Disputes arising over the interpretation or execution of the agreement, contract or articles of association between the parties to the joint venture shall, if possible, be settled through friendly consultation or mediation. Disputes that cannot be settled through these means may be settled through arbitration or courts of justice.
Article 98. In accordance with the relevant written agreement on arbitration, the participants may carry out arbitration at arbitration agencies in China, or at other arbitration agencies.
Article 99. If there is no written arbitration agreement between the parties to a joint venture, each side of the dispute can file a suit with the Chinese People's Court.
Article 100. In the process of solving disputes, except for matters in dispute, parties to a joint venture shall continue to carry out other provisions stipulated by the agreement, contract and articles of association of the joint venture.
Chapter 16 Supplementary Provisions
Article 101. The Chinese office in charge of visas shall give convenient service by simplifying procedures for staff and workers from foreign countries or from Hong Kong and Macao (including their family members) who frequently cross Chinese borders.
Article 102. Chinese staff and workers going abroad for study tours, business negotiations or training shall go through the procedures for going abroad (cross border) according to the relevant provisions of the state.
Article 103. Staff and workers from foreign countries or from Hong Kong and Macao working for a joint venture can bring in needed means of transport and items for office use, paying taxes according to the relevant provisions of Chinese tax laws.
Article 104. Joint ventures set up in the special economic zones shall abide by the laws and administrative regulations otherwise provided, if any.
Article 105. The regulations shall come into force on the day of promulgation.
Source: Ministry of Commerce
