The Joint Venture (JV)
Pros
- An ideal partner who is honest and entrepreneurial can help to bring in and promote business opportunities, negotiate the best price and deal with various authorities.
- Help to bring with the enterprise a first-class workforce and facilities.
- Help to the protection of the joint venture and gives good market access and excellent local contacts.
Cons
- Lack of information about the prospective Chinese partner and his company can put your JV at risk.
- Difficult to retain a comprehensive overall control.
Ways of getting around the disadvantages
- Obtain credit check on your prospective Chinese partner to reduce risk. (For more details of this service please visit our Chinese Company Credit Report ).
- Seek from reputable accountancy agents to check company accounts at regular intervals.
- Try to build up a good personal friendship with your Chinese partner/team.
Establish a Joint Venture in China
There are two kinds of Joint Ventures in China , namely an Equity Joint Venture (EJV) or Contractual Joint Venture (CJV).
The EJV is a separate legal entity and has its own assets and liabilities. Each partner is entitled to share the profits according to its shares in the company. The non-Chinese investors must contribute a minimum of 25% of the venture's registered capital to qualify as a so-called Foreign Invested Enterprise ("FIE"), which carries certain benefits, such as tax exemptions.
The CJV is organized by means of contract that can be formed in two ways. One is a purely contractual arrangement where each party agrees to undertake certain obligations and provide a certain amount of capital. The agreement sets out the objectives of the venture but the partners are not protected from the liability of the joint venture. The rights and obligations strictly follow the contract.
The second type of CJV is only available if the venture satisfies the statutory requirements for appointing a Chinese legal person. The venture is treated as a separate limited liability entity, and liability is limited to its total capital. The sharing of profits can be governed totally by agreement between the parties and need not be shared by the proportions of the investment.
Both types of joint ventures must obtain approval from the authorities.
The Chinese Partner
Although due diligence is difficult to be checked, it is still important to credit check the potential Chinese business partners before setting up a Joint Venture. It is also important to find out if the Chinese partner can contribute to the joint venture with his own strength, including technology, knowledge, local connections, experiences in the industry and capital etc.
JV Requirements
Requirements are different according to the different locations. Here is an example of Setting up a JV in Guangdong Province .
Basic Requirements and Procedures
- Letter of Intent, stating the objectives and operational functions etc.
- Feasibility Study. The feasibility study must be approved by the competent planning authority, namely the local planning and development commission.
- Registration of the company name
- Submission of Joint Venture Contract, articles of Association and schedules
- Approval by the authorities of the Registration
- Completion of the Establishment
- Organization documents of the JV
- Register with Customs Duties and Taxes
- Register of the transferring of Equity
JV Maintenance
Accounting records are required to be kept in Chinese or Chinese and English.
Annual audit by a local auditor is required.
We can help you to set up your JV in China, work out the whole process and take care of all issues involved, and provide regular update of progress by stages.
We can also help you with accounting status, looking after your account on a monthly basis and file them on time with related local authorities.
Our Fees
Fees vary according to the location of your Joint Venture and your requirements. Please feel free to Obtain a Quote with your desired location of your Joint Venture and your requirements.
To understand how we quote, please see Fees and Quotes .
Please visit our Resource Centre for information on:
A Brief Introduction to the Development of China Development Zones
Lists of China National Economic and Technological Development Zones
Advantages and Characteristics of National Economic and Technological Development Zones
Policies on Foreign Investment
Provision on Guiding Foreign Investment Direction
Tax Policies Concerning Foreign Enterprises in China
Examination and Approval on the Foreign Establishment
Catalogue of Encouraged Foreign Investment Industries