Joint Venture (“JV”)

JV is the type of company which allows the Chinese partner participation. In the past, Chinese Government encouraged more this type of company to be setup as it could bring in new technologies, skills, management and knowledge to China. In general, JV is the fastest way for setting up a company in mainland China. Same as WFOE and Representative Office, business nature is required to be approved by the Government prior to the registration. There are two types of joint ventures in China (1) Equity Joint Venture and (2) Co-operative Joint Venture. (1) Equity Joint Venture Mainland China Company Registration This type of joint venture is commonly used in manufacturing industry, whereas a limited liability company is set up for such purpose in general. In essence, the distribution of profits of equity joint venture is subject to the percentage of total capital invested. If the foreign partner invested 49% of total invested capital into JV, it will receive 49% dividends. (2) Cooperative joint ventures Cooperative Joint Ventures are more flexible. They can be established either as a limited liability company or as a non-legal person; whereas subject to unlimited liability. If it is not a limited liability company, the JV partners will be liable for any losses that the JV has incurred. We highly recommend Cooperative Joint Ventures to be established in form of limited liability companies. Prior to the registration of a JV company, a Joint Venture Agreement must be in place, specifying the scope of business, total capital investment amount, share percentage, period of license, distribution of profits and termination arrangements. All the JV companies contain a period of license. If the JV company has achieved the date of completion and the JV license is not renewed, the JV parties are required to follow the Joint Venture Agreement to distribute the profits.