04.08.10 21:30 Age: 9 yrs
Trial Measures First Allows Green-Field Joint Ventures with Chinese Individuals
Recently, Shanghai established The Trial Measures on Establishment of Sino-Foreign Equity Joint Venture Enterprises and Sino-Foreign Cooperative Joint Venture Enterprises invested by Domestic Nature Persons in Pudong New District ("Trial Measures"). The Trial Measures consists of ten articles concerning the regulation of domestic nature persons investigating on Sino-Foreign Joint Ventures, and takes effect on May 1, 2010.
Sino-foreign joint ventures are a popular investment vehicle for foreign investors doing business in China. It has two forms, the equity joint ventures or cooperative joint ventures. According to current Chinese law and regulations, only Chinese companies or other economic organizations can become shareholders of Sino-foreign joint ventures. There is an exception for Chinese individuals investigating on Sino-foreign joint ventures in the case of mergers and acquisitions. The individual Chinese shareholders can stay on as shareholders when the company is transformed into a Sino-foreign joint venture. In practice, some local authorities have also approved green-field joint ventures with individual Chinese investors. However, the legality of domestic nature persons being shareholders of Sino-foreign joint ventures has never been admitted by law.
Now, for the first time establishment of green-field joint ventures with Chinese individuals will be officially allowed, that’s why the Trial Measures has brought so much attention. According to the Trial Measures, the joint ventures with Chinese individual shareholders shall engage in business within the categories as provided by the Guideline Catalogue on Foreign Investment Industries. There are also some general rules in other statutes such as the PRC Company Law.
“Although the Trial Measure is only tested in a limited region and for a trial term of 2 years, we can see it as a first step for the expansion of the measures and expect that the Sino-foreign joint ventures with Chinese individuals will be permitted all over China.” commented John Lee, Senior Attorney at Lehman, Lee & Xu.
Lehman, Lee & Xu is a prominent Chinese corporate law firm and trademark and patent agency. The firm has also been recognized as one of the top full service and intellectual property firms in China by several international magazines. It now has offices in Beijing, Shanghai, Shenzhen, Hong Kong, Macau, and Mongolia. The firm is managed by Mr. Edward Lehman, a leading expert on corporate law with over twenty years of practice experience in Mainland China.
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