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Corporate Governance in China


WFOE
 

  • Directors: The day-to-day management of a WFOE is governed by a board of directors, composed of between 3 and 13 directors (if the WFOE has relatively few shareholders or is small in size, governance can be ensured by one executive director only). The term of office of the directors is 3 years. Directors are empowered to call shareholders' meetings, implement shareholders' decisions, formulate the company's annual budget, dividend distribution plans and other major plans for approval by the shareholders, approve the company's internal management structure and rules, and appoint senior officers of the company.
 
  • Supervisors: A WFOE must have a board of supervisors composed of at least 3 supervisors or alternatively 1 or 2 supervisors without a board if the WFOE has relatively few shareholders or is small in size. Supervisors shall be appointed by the shareholders, but when a WFOE has a board of supervisors, at least one third of the supervisors must be employee representatives who shall be elected by the WFOE’s employees.
 
  • Additional Managers: The general manager, deputy general managers and financial manager shall be appointed by the board of directors. Other senior officers can be appointed in accordance with the articles of association of the WFOE.
 
  • Legal Representative: Either the general manager or chairman of the board of directors (or the executive director, as the case may be) can be appointed as the legal representative of the WFOE.
 
JOINT-VENTURES
 
Equity Joint-Ventures (EJV)
 
  • Directors: The board of directors of an EJV is composed of between 3 and 13 directors. The term of office of directors is 3 years. There is no shareholders’ meeting in an EJV.
 
  • Supervisors: EJV are required to have a board of at least 3 supervisors (or one or two supervisors without a board under certain circumstances). Supervisors shall be appointed by the shareholders. The term of office of the supervisors is 3 years. Supervisors can, among other tasks, inspect the financial accounts of the company, supervise the management of the company and, upon request by the shareholders, bring legal actions against directors or senior managers of the company if their conduct is in contravention of the law or the company's articles of association resulting in losses to the company.
 
  • Additional Managers: A general manager and deputy general manager can be appointed by the board of directors. Other senior officers can also be appointed in accordance with the articles of association of the EJV.
 
  • Legal Representative: Either the general manager or chairman of the board of an EJV can be designated as its legal representative.
 
Cooperative Joint-Ventures (CJV)
 
  • Directors: If a CJV is incorporated as a limited liability company, it must have a board of directors composed of between 3 and 13 directors., while if the CJV is not incorporated, it is required to have a joint management committee having not less than 3 members. As in an EJV, there is no shareholders’ meeting in a CJV.
 
  • Supervisors: When a CJV is incorporated as a limited liability company, it is required to have a board of supervisors (or one or two supervisors without a board under certain circumstances). The rules for the appointment, terms of office, and functions of supervisors are the same as those for an EJV.
 
  • Additional Managers: Typically, a CJV will have a general manager who is appointed by the board of directors or the joint management committee.
 
  • Legal Representative: If the CJV is incorporated as a limited liability company, either the general manager or the chairman of the board can be its legal representative. Where the CJV is established as a non-legal person business entity, the chief of the joint management committee should be its legal representative.

October 2015

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