Joint Venture (JV)

Joint Ventures are the most commonly practiced methods of conducting foreign business in Shanghai. There are 2 types of Joint Ventures, both requiring the cooperation of a foreign and Chinese partner. The procedure for initiating a JV relationship is a relatively simple one, find a Chinese business partner and enter into negotiations. Of course, the relevant paperwork and government notification at certain steps of the process is required.

Equity Joint Venture

Definition

• An EJV is a foreign investment vehicle requiring a partnership with a Chinese company. It functions as both a corporation and a partnership, in the sense that a board of directors and a general management office will be present, but the directors are appointed by the partners, in proportion to the capital investment of each party.
  
  
• It is a limited liability legal person entity.
  
  
• Power is concentrated at the board level

Capital Investments

•  The Foreign Company must contribute at least 25% of the registered capital to qualify as a FIE (Foreign Invested Enterprise)
  
  
• Capital contributions may include:

  1 - Cash
  2 - Patented and non-patented technology
  3 - Materials
  4 - Equipment
  5 - Land
  6 - Other property rights
  7 - Investment Proceeds (Released through liquidation, share transfer, capital reduction, etc..)

Letter of Intent

• The Letter of Intent is basically the project proposal
  
  
• The Letter of Intent shall include, among other things:

  1 - The name and business nature of the Chinese partner
  2 - The name and business nature of the Foreign partner
  3 - The purpose of cooperation
  4 - The business scope and scale
  5 - The capital contribution of each partner
  6 - Total investment estimation
  7 - The cooperation contract
  8 - The credibility investigation of the foreign partner

Feasibility Study

• The Feasibility Study must be approved by the relevant planning and development authorities
  
  
• It basically states the feasibility of the intended Sino-Foreign Joint Venture
  
  
• The Study must include, among other things:

  1 - The name, legal address, purpose and scale of the Joint Venture
  2 - The term for cooperation
  3 - The approval certificate for the project proposal
  4 - Copies of the business licenses of each party

Chinese Partner 

 Without a doubt, finding the Chinese partner that shares your company’s same goal and business objectives is the most important step in your process of investing in Shanghai. If you do not share the same ideas and business prospectives, then the time and money invested in the registration process, may all be in vain. Sinefun will locate a legal entity Chinese partner that will suit your needs and ideas. You, as shall we, will take into consideration your specific demands and needs.

 

Contractual Joint Venture

Definition

• A true CJV is a Joint Venture where both parties are responsible for making its own contributions, paying its own taxes and bearing its own liability risks. This involves meeting certain requirements to establish a PRC (People’s Republic of China) legal person
  
  
• Being that the former type of CJV is very rare in these times, most CJV relationships are based on “legal person” endeavor in which a separate business entity is established. This is a contractual arrangement between parties that sets forth each parties’liability, limited to the capital contribution.

Capital Investments

• A CJV party, similar to an EJV party, must contribute a declared sum of registered capital, in many forms.
  
  
• Instead of, or in addition to contributing to the registered capital, a CJV party may contribute “cooperative conditions.” These may consist of:

  1 - Market Access rights
  2 - Supplying certain services
  3 - Other cooperation that shall promote the business aspect

Letter of Intent

(see above)

Feasibility Study

(see above)

Chinese Partner 

(see above)

The above information constitutes a general overview of the business registration process in China and is intended to give our potential clients an idea of the said process. For more information and cooperation prospects, contact