Implementing Provisions for the Law of the PRC on Sino-Foreign Cooperative Enterprises

Implementing Provisions for the Law of the People’s Republic of China on Sino-Foreign Cooperative Enterprises 19950807 Chapter I General Provisions Article1 The present Provisions are formulated in accordance with the lao of the People’s Republic of China on Sino-Foreign Cooperative Enterprises. Article2 The establishment of a Sino-foreign cooperative enterprise(hereinafter referred to as the cooperative enterprise)within the territory of the People’s Republic of China shall conform to the policies concerning the development and industry of the State,and observe the State’s regulations for the guidance of rhe orientation of foreign investment. Article3 A cooperative enterprise shall conduct its business and management operations independently in accordance with lao within the scope of the ratified agreement of the enterprise,contract,and articles of association,and be free from interference from anyorganization or persons. Article4 A cooperative enterprise means a cooperative enterprise which has obtained the status of a Chinese legal person in accordance with law or a cooperative enterprise without the status of a legal person.The cooperative enterprise without the status of a legal person shall abide by the specific stipulations in Chapter IX of the present Provision. Article5 The competent authority of the cooperative enterprise is the competent authority on the side of the Chinese partner.Where a cooperative enterprise involves more than two Chinese partners,the examination and approval authority shall decide upon one competent quthority through consultation with relevant departments,unless otherwise presctibed by law and administrative regulations.The competent authority of the cooperative enterprise shall conduct coordination and provide assistance in accordance with law to a cooperative enterprise with regard to relevant issues. Chapter II Establishment of Cooperative Enterprises Article6 The establishment of a cooperative enterprise shall be submitted to the examination and approval of department authorized by the Ministry of Foreign Trade and Econmic Cooperation or by the State Council,and of the local People’s Government. The establishment of a cooperative enterprise under the following circumstances shall be submitted to examination and approval of the department authorized by the State Council or the local People’s Government: 1.The total investment is within the investment quota specified by the State Council to be submitted to the examination and approval of the department authoried by the State Council or the local People’s Government; 2.Self-raised fund with no need for the State to balance the conditions for construction and production; 3.The export of the products do not require the obtainment of export quota and license issued by the relevant competent authorities of the State,or although the obtainment of such quota and license is required,the approval of the relevant competent authorities of the State has been obtained prior to the submission of the project proposal; 4.Other circumstances which are specified by law or administrative regulations to be submitted to the examination and approval of the department authorized by the State Council or of the local People’s Government. Article7 The following documents shall be submitted to the of examination and approval authority by the Chinese partner for the establishment of a cooperative enterprise: 1.The project proposal of establishment of a cooperative enterprise together with the document of approval from the competent authority; 2.Feasibility study report jojntly composed by all the parties of the cooperative together with the documents of approval from the competent authority; 3.The agreement,contract and articles of association of the cooperative enterprise signed by the legal representatives or the authorized representatives of all the parties of the cooperation; 4.The business licenses or the certificates of registration,credit certigicates and the valid documents of certification of the legal representatives of all the partees in the cooperation;where the foreign partner is a natural person,the valid documents of certification for his/her identity,resume and credit shall be supplied; 5.The list of candidates agreed upon through consulatation of all the parties in the cooperation for the presidency and vece presidency of the board of directors,directorship,or the chairmanship and deputy chairmanship of the joint administrative committee,and the mimbership therof;and 6.Other documents required by the examination and approval authotity. The documents listed in the above paragraph,except the documents supplied by the foreign partner listed in Item4,shall be submitted in the language of Chinese;the documents listed in Item2,Item3 and Item5 may be submitted together with a version in a foreign language agreed upon by all the parties of the cooperation. The examination and approval authorities shall reach a decision of approval or disapproval within 45 days starting from the date when all the specified documents are received;where the examination and approval authorities consider the documents submitted insufficient or inappropriate,they are entitled to demand all the parties of the cooperation to supplement or amend within the designated period of time. Article8 The Ministry of Foreign Trade and Economic Cooperation shall issue certificates of approval to the cooperative enterprises established with the approval of the deparments authorized by the Ministry of Foreign Trade and Econmic Cooperation and the State Council. The relevant local People’s Governments authorized by the State Council,and report for record the relevant documents of approval to the Ministry of Foreign Trade and Economic Cooperation within 30 days starting from the date of approval. Article9 Approval shall not be granted to the application for the establishment of the cooperative enterprise under one of the following circumstances: 1.Where the State sovereignty or the public interest is damaged; 2.Where the security of the State is jeopardized; 3.Where polllution and damage will be caused to the enveronment;or administrative regulations or the policies of industry of the State. Article10 The term "agreement of a cooperative enterprise"referred to in the present Provisions means the written document which is formulated after all the parties of the cooperation reach an agreement concerning the principles and the main issues of the establishnent of the cooperative enterprise. The term "contract of a cooperative enterprise"referred to in the present Provisions means the written document which is formulated after all the parties of the cooperation reach an agreement concerning the mutual rights and obligations in the estavlishment of the cooperative enterprise. The term"articles of association of a cooperative enterprise"referred to in the present Provisions means the written document, agreed upon by all the parties of the cooperation,specifying such issues as the organizational principles of the cooperative enterprise,modes of managment,etc.in accordance with the stipulations of the contract of the cooperative enterprise. Where the contents of the agreement or the articles of association of the cooperative enterprise disagree with the contract of the cooperative enterprese,the contract of the cooperative enterprise shall be followed.It is not compulsory for the parties of the cooperation to conclude an agreement of the cooperative enterprise. Article11 The agreement,the contract and articles of association of the cooperative enterprise shall be effective from the date of the issuance of the certificate of approval by the examination and approval authority.Any important alterations to the agreement,the contract and the articles of association thereof within the term of the cooperation shall be subject to the ratification of the exmination and approval authority. Article12 A contract of a cooperative enterprise shall make an explicit entry of the following items: 1.The names,places of registration,residences of all the parties of the cooperation and the names,professional titles,nationalities of the ligal representatives(if a foreign partner is a natural person,his/her name,nationality and residence shall be required); 2.The name,the address and the scope of business of the cooperative enterprise; 3.The total investment and the registered capital of the cooperative enterprise,and the ways and the time limit of the investment or of the supply of cooperateve conditions of each party of the cooperation; 4.The investment of each party or the transfer of the supplied cooperative conditions; 5.The distribution of the proceeds or products,and the sharing of resks and deficiencis of each party of the cooperation; 6.The organization of the board of directors or the joint administrative committee and the distribution of the quota of the directors of the board or the menbers of the administrative committee;the responsibilities of the general manager and other high-level administrators and way of the appointment and dismissal thereof; 7.The main production equipment and technology to be adopted,and the sources thereof; 8.Arrangements for sales of the products for domestic and international markets; 9.Arrangements for receipts and expenditure in foreign exchange of the cooperative enterprise; 10.The duration of the cooperative enterprise,the dissolution and liquidation thereof; 11.Other obligations of all the parties of the cooperation and the liabilities for the violation of the contract; 12.Principles for the handing of finance,accounting and auditing; 13.The handing of the disputes between the parties of the cooperation;and 14.The procedure for the amendment of the contract of the cooperative enterprise. Article13 The articles of association of a cooperative enterprise shall make an explicit entry of the following items: 1.The name and the address of the cooperative enterprise; 2.The scope of business and the duration of the cooperation of the cooperative enterprise; 3.The names,places of registration,residences of all the parties of the cooperation,and the names,professional titles,nationalities of the ligal representatives(if a foreign partner is a natural person,his/her name,nationality and residence shall be required); 4.The total investment and the registered capital of the cooperative enterprise,ways and the time limit of the investment or of the supplu of cooperative conditions of each party of the cooperation; 5.The distribution of the proceeds or products,and the sharing of risks and deficiencies of cach party of the cooperation; 6.The organization,authorities,rules of procedure of the board of directors or the administrative committee of the cooperative enterprise,the term of office of the directors of the board or of the members of the administrative committee,the responsibilities of the president,and the vice president of the board or of the chairman and the deputy chairman of the administrative committee; 7.The establishment of management organizations and their authorities,their rules for handing the routine affairs,the responsibilities of the general manager and other highranking administrators,and ways of their appointment and dismissal; 8.Regulations concerning such items of administration of labour as employment,training,labour contract,wage earnings,social insurance,welfare benefits,occupational safety,sanitation,etc.; 9.The system of finance,accountiong and auditing of the cooperative enterprise; 10.Procedures for the dissolution and liquedation of the cooperative enterprise;and 11.Procedures for the amendment og the articles of association of the cooperative enterprise. Chapter III Form of Organization and Registered Capital Article14 A cooperative enterprise which hao obtained the status of a Chinese ligal person is a limited liability company;each party of the cooperation shall be liable for the cooperative enterprise within the limit of its investment or the cooperative conditions which it has provided,unless otherwise prescribed in the contract of the cooperative enterprise. A cooperative enterprise shall be liable for the debts of the enterprise with all its assets. Article15 The term"total investment of a cooperqtive enterprise"refers to the total sum of the funds needed to be invested in line with the scale of the production and management specified by the contract and article of association of the cooperative enterprise. Article16 The term"registered capital of a cooperative enterprise"refers to the sum of the capital registered at the administrative authority for industry and commerce,and subscrebed by each party in the cooperation for the purpose of the establishment of a cooperative enterprise.The registered capital shall be represented in Renminbi,or may be represented a freely conbertible foreign currency agreed upon by all the parties in the convertible foreign currency agreed upon by all the parties in the cooperation. A cooperative enterprise shall not reduce its registered capital during the term of cooperation. However, where there is an actual need for reduction owing to changes in the total investment, the scale of the productive operation, etc., such reduction shall require the ratification from the examination an approval authority. Chapter IV Investment and Cooperative Conditions Article17 Each patty to the cooperation shall invest in or supply cooperative conditions to the cooperative enterprise in accordance with the stipulations of law and administrative regulations, and the agreement of the contract of the cooperative enterprise. Article18 Investment or cooperative conditions contributed by each party in the cooperation may be represented in cash or in kind or in such proprietary rights as industrial property rights, land use right, etc. Assets evaluation shall be executed in accordance with the stipulations of the relevant laws and administrative regulations with regard to a Chinese partner’s contribution of investment or cooperative conditions which belong to the state-owned assets. A foreign partner’s investment shall generally not be less than 25%of the registered capital in the cooperative enterprise which has obtained the status of a Chinese legal person in accordance with law. With regard to a cooperative enterprise which has not obtained the status of a legal person, the specific requirements concerning investment or cooperative conditions contributed to the cooperative enterprise by each partner in the cooperation shall be stipulated by the Ministry of Foreign Trade and Economic Cooperation. Article19 Each partner in the cooperation shall use its own assets or proprietary rights for investment or as cooperative conditions; mortgage or other forms of security shall not be placed on such investment or cooperative conditions. Article20 Partners in the cooperation shall agree in the contract of the cooperative enterprise upon the term of time for investment or cooperative conditions contributed by each partner in the cooperation on the basis of the needs of productive operation and in accordance with the stipulations of the relevant laws and administrative regulations. Where partners in the cooperation do not contribute investment or provide cooperative conditions in accordance with the agreement of the contract of the cooperative enterprise, the administrative Authority for industry and commerce shall set a time limit on the implementation; where the implementation is not executed at the expiration of the time limit, the examination and approval authority shall repeal the certificate of approval of the cooperative enterprise, and the administrative authority for industry and commerce shall revoke the business license of the cooperative enterprise, and give a public notice. Article21 The partner which does not contribute investment or provide cooperative conditions in accordance with agreement of the contract of cooperative enterprise shall be liable for the violation of the contract to other partners who have contributed investment or provided cooperative conditions in accordance with the agreement of the contract of the cooperative enterprise. Article 22 After each partner in the cooperation has contributed investment or cooperative conditions, a certificate of verification shall be provided by an Chinese registered accountant; the cooperative enterprise shall issue thereupon to each partner in the cooperation a certificate of investment. A certificate of investment shall contain explicitly the following entries: 1.The name of the cooperative enterprise; 2.The date of the establishment of the cooperative enterprise; 3.The names of each partner in the cooperation; 4.The contents of investment or cooperative conditions provided by each partner in the cooperation; 5.The date on which each partner in the cooperation provides investment or cooperative conditions; and 6.The serial number of the certificate and the date of verification and issuance thereof. A duplicate copy shall be submitted to the examination and approval authority and the administrative authority and the administrative authority for industry and commerce. Article23 Where a transfer of all or parts of the rights belonging to a partner according ro the contract of the cooperative enterprise is to be made between the partners in the cooperation,or such transfer shall require the written consent of the other partners in the cooperation,and be subject to the approval of the examination and approval authority. The examination and approval authority. The examination and approval authority shall reach a decision of approval or disapproval with 30 days starting from the date of the reception the relevant documents of the transfer. Chapter V Organization Article24 Acoopertative enterprise shall establish a board of directors or a joint administrative committee.The board ofdirectors or the joint administrative committee is the institution of authority of the coopetative enterprise,and it shall decide te important issues of the cooperative enterprise in accordance with the stipulations of the articles of association of the cooperative enterprise. Article25 The voard of directors or the joint administrative committee shall consist of no less than three members,and the distribution of rhe quota shall be decide upon through consultation by the Chinese and foreign partners with reference to a partner’s investment or its provision of cooperative conditions. Article26 Directors of the board or members of the joint administrative committee shall be appointed or dismissed by each partner independently.The way of appointing the president,vice-president of the board or the chairman,deputy chairman of the joint administrative committee shall be prescribed by the articleof association of the cooperative enterprise;where one party of the Chinese and foreign partners holds the offices of the president of the board and the chairman of the committee,the other party shall hold the offices of the vice-president,and the deputy chairman. Article27 The term of office for a director of the board or a member of the committee shall be prescribed by the articles of association of the cooperative enterprise;however,each term shall not exceed three years.A director of the board or a member of the committee may renew the term of office when she/he is reappointed by the appointing party at the expiration of the term of office.