The registered capital shall generally be represented in Renminbi, or may be in a foreign currency agreed upon by the parties to the joint venture. Article 22
A joint venture shall not reduce its registered capital during the term of the joint venture. Article 23
If one party to the joint venture intends to assign all or part of its investment subscribed to a third party, consent shall be obtained from the other party to the joint venture, and approval from the examining and approving authorities is required. When one party assigns all or part of its investment to a third party, the other party has preemptive right. When one party assigns its investment subscribed to a third party, the terms of assignment shall not be more favourable than those to the other party to the joint venture.
No assignment shall be effective should there be any violation of the above stipulations. Article 24
Any increase, assignment or other disposal of the registered capital of a joint venture shall be approved at a meeting of the board of directors and submitted to the original examining and approving authorities for approval. Registration procedures for changes shall be handled at the original registration administration office.
Chapter IV Ways of Contributing Investment Article 25
Each joint venturer may invest in cash or may contribute buildings, factory premises, equipment or other materials, industrial property, preprietary technology, or right to the use of a site, appraised at appropriate prices, as investment. If the investment is in the form of buildings, premises, equipment or other materials, industrial property or proprietary technology, the prices shall be determined through
consultation by the parties to the joint venture on the basis of fairness and reasonableness, or they shall be evaluated by a third party accepted and invited by the parties to the joint venture. Article 26
The foreign currency contributed by the foreign joint venturer shall be converted into Renminbi according to the exchange rate quoted by the State Administration of Foreign Exchange Control of the People's Republic of China (hereinafter referred to as the State Administration of Foreign Exchange Control) on the day of its submission or be cross exchanged into the foreign currency as agreed upon.
Should the cash Renminbi contributed by the Chinese joint venturer be converted into foreign currency, it shall be converted according to the exchange rate quoted by the State Administration of Foreign Exchange
Control on the day of its submission. Article 27
The machinery, equipment and other materials contributed as investment by the foreign joint venturer shall meet the following conditions: (1) they are indispensable to the production of the joint venture;
(2) China is unable to manufacture them, or can manufacture them only at too high a price, or their technical performance and time of availability cannot meet the requirement;
(3) the price fixed shall not be higher than the current international market price for similar equipment or materials. Article 28
The industrial property or proprietary technology contributed by the foreign joint venturer as investment shall meet one of the following conditions:
(1) capable of manufacturing new products urgently needed in China or products suitable for export;
(2) capable of markedly improving the performance, quality of existing products and raising productivity;
(3) capable of notably saving raw materials, fuel or power. Article 29
Foreign joint ventures who contribute industrial property or proprietary technology as investment shall present relevant documentation on the industrial property or proprietary technology, including protocopies 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 joint ventures. All these shall serve as an annex to the contract. Article 30
The machinery, equipment or other materials, industrial property or
proprietary technology contributed by foreign joint venturer as investment shall be examined and approved by the department in charge of the Chinese joint venturer and then submitted to the examining and approving authorities for further approval. Article 31
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 shall be subject to a payment of investment on arrears or a compensation for the loss as defined in the contract. Article 32
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 to them investment certificates, which include the following items: name of
the joint venture; date, month and year of the establishment of the joint venture; names of the joint venturers and the investment contributed; date, month and year of the contribution of the investment; and date, month and year of the issuance of investment certificates.
Chapter V Board of Directors and Management Structure Article 33
The highest authority of the joint venture shall be its board of directors, which shall decide all major issues concerning the joint venture.
Article 34 [*1]
The board of directors shall consist of no less than three members. The distribution of the number of directors shall be determined through consultation by the parties to the joint venture with reference to the proportions of investment contributed. The directors shall be appointed by the parties to the joint venture. The chairman of the board shall be appointed by the Chinese joint venturer and its vice-chairman by the foreign joint venturer.
The term of office for the directors is four years. Their term of office may be renewed with the re-appointment by the parties to the joint venture. Article 35
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 a director to call and preside over the meeting. The chairman may convene an interim meeting on the suggestion of more than one-third of the directors.
A board meeting requires a quorum of over two-thirds of the directors. Should a director be unable to attend, he may make a proxy authorizing someone else to represent him and vote in his stead.
A board meeting shall usually be held at the location of the joint venture's legal address. Article 36
Decisions on the following items shall be made only after being
unanimously agreed upon by the directors present at the board meeting: (1) amendment to the articles of association of the joint venture; (2) suspension or dissolution of the joint venture;
(3) increase in or assignment of the registered capital of the joint venture;
(4) merger of the joint venture with other economic organization.
Decision on other matters may be made according to the rules of procedure stipulated in the articles of association. Article 37
The chairman of the board is the legal representative of the joint venture. Should the chairman be unable to perform his duties, he shall authorize the vice-chairman of the board or a director to represent the joint venture. Article 38
A joint venture shall establish a management office which shall be
responsible for the day-to-day management and operations. The management office shall have a general manager and several deputy general managers who assist the general manager in his work. Article 39
The general manager shall carry out the decisions of the board meeting and organize and conduct the day-to-day management and operations of the joint venture. Within the scope of authorization by the board, the general manager shall, externally, represent the joint venture, and internally, have the right to appoint and dismiss his subordinates and exercise other powers as authorized by the board. Article 40
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 or foreign citizens.
At the instance 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 managerial 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 get involved in other economic organizations' commercial competition against their own joint venture. Article 41
In case of graft or serious dereliction of duty on the part of the general manager, deputy general managers or other high-ranking managerial
personnel, they may be dismissed at any time by a decision of the board of directors. Article 42
Establishment of branch offices (including sales offices) outside China or in regions of Hong Kong or Macao is subject to approval by the MOFERT.
Chapter VI Introduction of Technology Article 43
The introduction of technology mentioned in this Chapter refers to the acquisition of necessary technology by the joint venture by means of technology transfer from a third party or a joint venturer.
Article 44
The technology to be introduced to 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 45
The right of the joint venture to do business independently shall be maintained when concluding such technology transfer agreements, and relevant documentations shall be provided by the technology exporting
party with reference to the provisions of Article 29 of these Regulations. Article 46
The technology transfer agreements concluded by a joint venture shall be examined and agreed to by the department in charge of the joint venture and then submitted for approval to the examining and approving authorities.
Technology transfer agreements shall comply with the following stipulations:
(1) Fees for the use of technology shall be fair and reasonable. Payments are generally made in royalties, and the royalty rate shall not be higher than the obtaining standard international rate, which shall be calculated on the basis of net sales of the products turned out with the relevant technology or in other reasonable ways agreed upon by both parties.
(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 not longer than 10 years.
(4) After the expiration of a technology transfer agreement, the
technology importing party shall have the right to continue to use the technology.
(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 under Chinese law and regulations shall be included.
Chapter VII Right to the Use of Site and Fees Article 47
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