Reference Format for Articles of Association of Chinese-Foreign Joint Venture

Chapter 1 General Provisions

Article 1 The articles of association are made in accordance with Law of People’s Republic of China on Chinese-Foreign Equity Joint Ventures and other relevant laws and regulations, and contract made and signed in       _________ on ___________ by and between                              (China) (hereafter referred to as Party A) and                             (       ) (hereinafter referred to as Party B) to establish the joint venture of                               Co., Ltd.

Article 2 Name of joint venture is                                      Co., Ltd.

                English Name:____________________________________________.

                 Domicile:_______________________________________________.

Article 3 Name and legal address of Party A and Party B are as follows:

         Party A:

         Registered in               ______________________       , China

         Legal address: __________________________________(*registered office)

         Legal representative: _______________________(*name, title, and nationality)

          Party B:

         Registered in   ______________________________________   , China

         Legal address: __________________________________ (*registered office)

         Legal representative: ______________________(*name, title, and nationality)

 Any changes of the above shall be duly reported to the joint venture and the other party to the contract, otherwise the joint venture and the other party shall bear no legal obligations to any consequences arising.

Article 4 The joint venture is company of limited liability.

Article 5 The joint venture is Chinese corporation under the jurisdiction and protection of Chinese laws, and all activities thereof shall be in accordance with regulations of Chinese laws, statutes, and relevant ordinance.

Chapter 2 Purpose and Scope of Business

Article 6 The business purpose of Party A and Party B to the joint venture is in conformity with the wish of enhancing the economic cooperation and technical exchanges, to improve the products quality, develop new products, and gain competitive position in the world market in quality and price by adopting advanced and appropriate technology and scientific management method, so as to boost economic returns and ensure satisfactory economic benefits for all investors.

Article 7 Scope of business of the joint venture:

Article 8 The joint venture shall, after put into operation, gain a production scale of            , at least reach ________   .

Article 9 The marketing policy and export proportion are as follows:

Chapter 3 Total Investment and Registered Capital

Article 10 The total investment of the joint venture is USD       0,000.

   The registered capital of the joint venture is USD       0,000.

Article 11 Party A subscribes for an investment of USD       0,000, accounting   % of the registered capital, and Party B subscribes for an investment of USD       0,000, accounting   % of the registered capital.

Article 12 Party A and Party B shall pay their investment in time in accordance with the term, way and amount prescribed therein.

Article 13 15 days after Party A and Party B pay any of the installments, the joint venture shall employ public certified accountants of China to verify capital and issue capital verification report. And the joint venture shall issue capital contribution certificate to investors within 30 days after receipt of capital verification report, and report to the original company registration authority and Administration of Industry and Commerce for records.

Article 14 the adjustment of registered capital or total investment shall be reported to the company registration authority for approval. The joint venture shall not decrease its registered capital within term of joint operation.

Article 15 In case either Party to the joint venture intends to assign all or part of his investment subscribed to a third party, the consent shall be obtained from the other party to the joint venture, and the other party has pre-emptive right under equal conditions.

Article 16 An increase or assignment of the registered capital shall be determined and approved unanimously by the board of directors and submitted to the company registration authority for approval, and an amendment registration shall be carried out with the Administration of Industry and Commerce.

Article 17 the joint venture may obtain loans from abroad to balance the difference between registered capital and total investment and provide current capital for production.

Neither party shall establish creditor’s right in the form of mortgage or impawn with all or part of its equity in the joint venture without the written consent from the other party to the joint venture.

        Chapter 4 Board of Directors

Article 18 The date of issue of the business license shall be the date of establishment of the board of directors. And the board of directors is the highest organ of authority.

Article 19 The board of directors shall be composed of    directors, of which    directors are appointed by Party A, and   directors are appointed by Party B. The board of directors shall have one chairman of the board, appointed by Party   ,    vice chairman (chairmen), appointed by Party   . Each term of directors, board chairman and vice chairman shall be 4 years (each term may not exceed 3 years for cooperative business), and they may continue to serve their posts if they are re-appointed by the appointer.

In case either party to the joint venture shall appoint or reshuffle directors, it shall notify the other party to the joint venture in written form and report to the Administration of Industry and Commerce for records.  

Article 20 The board of directors shall determine all key matters of the joint venture, including:

1) revising the articles of association;

2) determining the division of the joint venture and its merger with another economic organization;

3) determining the dissolution or termination of the joint venture;

4) determining the increase of registered capital and total investment of the joint venture and assignment of shares of the joint venture;

5) investment of the joint venture in other economic organizations;

6) establishing branch or other subsidiary;

7) distributing annual profit after tax of the joint venture;

8) making allocations to the three funds;

9) determining key financial expenditures;

10) determining the company’s annual and long-term production plan, sales plan and other development plans.

11) determining guaranty or loans provided by the joint venture;

12) determining basic setup of the joint venture, including the establishing of posts of managerial staff;

13) determining the internal bylaw of the joint venture;

14) determining the appointment, dismiss and remuneration of high-level managerial staff;

15) determining the appointment of certified accountants, comptrollers, and lawyers;

16) launching lawsuit or arbitration for the joint venture;

17) determining sales of fixed assets of the joint venture;

18) determining other matters demanding decisions of the board.

  4、合营公司的分立及与其他经济组织的合并；

The following matters shall be determined by unanimous approval of directors present at the meeting of board of directors:

1)Revising the articles of association;

2)Closing down and dissolution of the joint venture;

3)Readjusting the registered capital of the joint venture;

4)Determining the division of the joint venture and its merger with another economic organization;

5)Assigning of equities of one or more parties the joint venture;

6)Impawning equities of one or more parties the joint venture;

7)Mortgaging assets of the joint venture;

8)Matters regarded by the board of directors as demanding the unanimous approval by directors present at the meeting;

Other matters may be determined and approved by a majority or simple majority.

Article 21 Board chairman is the legal representative of the joint venture, where the chairman is unable to perform his duties due to any special reason, the vice-chairman or another director may be appointed by the chairman as representative; where the chairman does not appoint specifically and can not perform his duties, the vice chairman shall perform the duties for him.

Article 22 Meeting of board of directors shall be held at least once a year, called and presided over by the board chairman. Upon proposal of one-third or more of the directors, the chairman shall call an interim meeting with minutes kept in record.

Notice for calling a meeting of board of directors shall include time, venue and schedule of the meeting, and shall be given to all directors 30 days in advance in written form.

Article 23 The meeting of board of directors (including interim meeting) shall not be held without    directors attending. (*over 2/3 of all directors), and every director is entitled to one vote.

Article 24 All parties are obliged to ensure that directors appointed by them attend the meeting of the board of directors in person. Where a director is unable to attend the meeting for cause, he may issue a written proxy entrusting another director to attend in his behalf.

Article 25 If directors appointed by one or more parties does not attend the meeting and does not entrust other directors to attend in his behalf, resulting in the board of directors fail to make resolution on laws and regulations and key issue or matter prescribed in the contract and articles of association within    days, then the other parties may make written notification to directors not attending the meeting and one or more parties appointing them urging them to attend the meeting on a stipulated date according the legal addresses of the parties.

Article The above notice should be sent out in the form of double registered letter 60 days in advance, and make it clear that the notified shall tell if he will attend the meeting in written reply within at least 45 days after the notification issued. In case the notified does not send reply to the hand of notifier after 45 days, or replies that he will no attend, then the notified shall be regarded as abstain from voting. Upon receiving the return receipt of the registered letter, the appointed director(s) and other directors may convene special meeting of the board of directors, even if the number of directors attending the meeting does not reach the quorum, yet effective can still be made on key issues or matters of the company upon the unanimous approval to all directors attending the meeting.

For matters calls for decision of the board of directors, the chairman may seek written consent of all directors of the board of directors, and the case of directors constituting quorum consent in written form shall be regarded as approval by the board meeting of in traditional sense.

Article 27 Directors hold no post in the management and control agency shall not receive salaries from the company. The joint venture shall bear all expenses relating to holding of the meeting of board of directors.

Chapter 5 Management and Control Agency

Article 28 The joint venture shall have management and control agency responsible for daily management control, which shall have one general manager recommended by Party   ;    deputy general managers, of which   are recommended by Party A, and   are recommended by Party B. Deputy general managers and general manager are appointed by the board of directors with a term of    years, who may be reappointed.

Article 29 The general manager is obliged to implement resolutions adopted by the board and arrange and manage the company's production and operation; the deputy general managers shall assist the general manager and exercise necessary authorities of the general manager within normal scope of daily operation then he is absent. Key matters calls for joint decision by the general manager and deputy general managers.

Scope of authorities of general manager and deputy general manager shall be considered and decided by the board of directors.

The operation control agency may have several department managers, respectively responsible for various departments, attend to matters delivered by the general manager or deputy general managers, and are accountable to the general manager and deputy general managers.

Article 30 The general manager, deputy general manager and other all managers shall perform their duties in earnest, and shall not concurrently serve as managers or employers in other form of other companies.

In case the general manager or deputy general manager engage in malpractice or severely neglect his duty, he may be removed at any time upon resolution of the board of directors.

Article 31 The plan for the department of the joint venture and the structure of the company's internal management shall be prepared by the general manager and deputy general managers, and decided by the board of directors. Other departments and setup of posts other than the managerial staff are decided by the general manager and deputy general manager.

Article 32 In case top-level managerial personnel engage in malpractice or severely neglect his duty, he may be removed at any time upon resolution of the board of directors.

Chapter 6 Financial and Accounting Affairs

Article 23 The joint venture shall establish its financial and accounting system and carry out financial management under the general management in accordance with the relevant national statutes, administrative regulations and the stipulations of the finance authority.

Article 34 The join venture shall adopt calendar year as its accounting year, the first accounting year commence on the date of issue of business license, and terminate on December 31 of the current year.

Article 35 The accounting vouchers, accounting books and statements of the joint venture shall be written in Chinese. If written in English, notes shall be made in Chinese.

The joint venture takes RMB as base book keeping base currency. Conversion between RMB and other currencies are computed at the middle rate issued by the State Administration of Foreign Exchange on the date of generating.

Article 37 The joint venture shall establish foreign exchange accounts in the Bank of China or other banks approved by it to engage in foreign exchange operations.

Article 38 The joint venture adopts accrual system and debit and credit accounting system prevailing in the world to maintain its accounts.

Article 39 The preparation of balance sheet, profit appropriation statement and profit and loss statement shall be organized by the general manager and submit to the board meeting for review in the first 3 months of every business year

Article 40 All parties to the joint venture shall be entitled to employ comptroller to consult the accounting books of the joint venture at their own expenses upon promise of secrecy in advance. And the joint venture shall provide convenience for consulting.

Article 41 The board of directors of the joint venture shall determine the depreciation life of its fixed assets in accordance with Enforcement regulations of PRC on Income Tax Imposed on Foreign Invested Enterprises and Foreign Enterprises

Article 42 the foreign exchange matters of the joint venture shall be attended to in accordance with laws and regulations of PRC on foreign exchange administration, and the joint venture shall maintain balance between income and expenditure on its own.

Chapter 7 Profit Distribution

Article 43 The joint venture shall make allocations to the reserve fund, enterprise expansion fund and staff and workers’ bonus and welfare fund from profit after payment of income tax. The allocation of not less than 15 percent of profit after tax to the reserve fund shall be determined by the board of directors.

Article 44 After the company has paid various taxes and made allocation to various funds, the distribution of the remainder of the profit shall be determined by the board of directors in line with the actual state of the enterprise within 4 months after the ending of every accounting year, and profit is distributed to investors in proportion to their contribution to the registered capital.

Dividend distribution shall not be made before the company's loss from the previous year is covered, and profit from the previous year can be distributed together with that of the current year.

Article 45 Various types insurances of the joint venture shall be covered by insurance companies within China, and type of risks, insurance value, and insurance term shall be considered and determined by the board of directors meeting according to regulations of the insurance company.

Article 46 The join venture shall urge its staff and workers from home and abroad to pay income tax in accordance with Individual Income Tax Law of PRC.

Article 47 Legal profits, other lawfully earned income, and capital after liquidation of the investors’ from the joint venture may be transferred abroad.

After paying personal income tax, salaries and other legitimate income of foreign staff of the joint venture may be transferred abroad.

The joint venture may assist to convert profits received by foreign investors and salaries of foreign staff and workers paid with RMB into foreign exchange.

           Chapter 8 Workers

Article 48 The recruiting, employing, dismissing, resigning, welfare, labor protection and labor discipline shall be handled in accordance with Regulation of PRC on Labor Management of Chinese-Foreign Equity Joint Ventures and its enforcement regulations.

No child labor shall be employed by the joint venture.

Article 49 Workers put needed by the joint venture may be recommended by local labor department, upon consent of the labor department, the joint venture shall publicly select through examinations on the basis of their qualifications.

The joint venture shall enter into labor contract with the employed workers and report to local labor management department for record.

Article 50 The joint venture is entitled to give punishment of warning, recording a demerit, and decrease of wages to workers violate bylaw of the joint venture and labor discipline, and may dismiss workers with gross mistakes. Dismissal of workers shall be reported to local labor department for record.

Article 51 The wage and welfare of workers shall be determined by the board of directors in light of specific circumstances of the joint venture referring to relevant regulations of China.

The joint venture shall raise wages of the workers appropriately with the development of production and upgrading of workers’ professional qualifications and technical levels. 

         Chapter 9 Labor Union

Article 52 Workers of the joint venture are entitled to establish grass-roots trade union and carry out trade union activities in accordance with Labor Union Law of PRC.

Article 53 The labor union of the joint venture represents the interest of the workers, its task is to safeguard workers’ lawful rights and interests in accordance with law, assist the joint venture to arrange and use appropriately workers bonus and welfare fund, organize the workers to study political, technological and professional knowledge, carry out art and sport activities, educate workers to observe labor discipline, and try to fulfill various economic tasks of the joint venture.

Article 54 The labor union of the joint venture may enter into collective labor contract with the joint venture on workers’ behalf and supervise the performance of the contract.

Article 55 When the joint venture considers and decides upon matters such as their rewards and punishments, wages, benefits, labor protection, and labor insurance, the representative(s) of the labor union shall be entitled to attend the meetings, and the joint venture shall hear the opinions of the labor union and obtain cooperation with the labor union.

Article 56 The joint venture shall support the work of its labor union, and provide necessary buildings and facilities for the labor union to work, hold meetings, and conduct workers collective welfare, cultural and sport activities in accordance with Labor Union Law of PRC.

Article 57 The joint venture shall allocate 2 percent of the total accrued salaries to labor union fund every month, which shall be used by the labor union in accordance with management method on labor union fund enacted by All-China Federation of Trade Unions. 

Chapter 10  Term, Termination and Liquidation

Article 58 The business term of the joint venture shall continue for   years after the date of issue of business license.

Article 59 In case Party A and Party B all agree to extend joint operation term, written application shall be made to the original company registration authority upon resolution of the board of directors meeting at least 6 months prior to expiration of the business term.

Article 60 The joint operation contract may be terminated and joint venture dissolved in advance due to the following causes other than expiration of business term .

1.the contract cannot be performed because of the Force Majeure cases;

2.the joint venture cannot continue operation because of losses;

3.it is unnecessary for the contract to continue because of substantive breaches of contract by one or more parties;

4.the two parties hereto agrees that the joint venture does not realize the aim of operation, and has no future for development;

5. Other causes terminating the contract prescribed by the contract, articles of association, related laws and regulations. 

When the joint venture is to be dissolved, the board of directors shall submit written application to competent authority. When board of directors can not make effective resolution on dissolution of the enterprise because of directors of one or more parties does not attend or call board of directors meetings for over 2 years and no effect is presented after at least 3 written notification of urge by other shareholders, other shareholders may apply for dissolution of enterprise to the original company registration authorities under notarization of notary authority of China or witnessed by lawyers.

Article 61 The joint venture shall be liquidated upon dissolution and the liquidating committee shall be composed of at least 3 people, which shall be elected from directors by the board of directors or employed from related professional personnel.

In case the joint venture cannot organize a liquidating committee, the board of directors or investors, creditors may apply to the original company registration authority for special liquidation.

The joint venture shall not carry out new business operations in the period of liquidation.

Article 62 The liquidating committee shall liquidate the joint venture in accordance with Liquidation Methods for Foreign Invested Enterprises.

The evaluation and pricing of the assets of the joint venture shall be conducted by China Certified Accountants employed by the liquidating committee.

The investors have pre-emptive right to purchase the assets of the joint venture under equal qualifications.

Article 63 After the liquidation of the joint venture, it shall apply for registration of cancellation of business license.

Chapter 11  Bylaw

Article 64 The joint venture enact the following bylaws through the board of directors

1.Operation control system, including authorities and working procedures of various management departments under it;

2.Regulations for workers;

3.Labor and remuneration system;

4.Systems of attendants, promotion, rewards and punishments of workers;

5.Workers’ welfare system;

6.Financial system;

7.Liquidating procedure upon dissolution of the company

8. Other necessary regulations and rules.

          Chapter 12 Supplementary Provisions

Article 65 The articles of association shall be written in Chinese and    versions. The languages in question shall be equally authentic. In the event of any discrepancy between the two versions, the Chinese version shall prevail.

The articles of association shall be made in    originals, each investors, the company registration authority and the Administration of Industry and Commerce shall respectively have one.

Article 66 Matters not mentioned in the articles of association shall be attended to in accordance with prescriptions of the contract, resolutions of the board of directors, and provisions of relevant laws and regulations of People’s Republic of China. In case of any discrepancy between it and the joint operation contract, the contract shall prevail.

Article 67 The articles of association shall come into force upon approval of ___________________ Economic and Foreign Trade Commission. So does the revised version.

Article 68 The articles of association is signed in __________, China by authorized representatives of Party A and Party B on __________, 199  .

Party A:                              Party A:

**** ____Company                        **** _____Company

Legal representative: ______________      Legal representative:____________________

Authorized representative:_________      Authorized representative:________________

This format is only for reference, no reprinting shall be made without the authorization of China Foreign Invested Net.