CHINA SCIENCE AND TECHNOLOGY
NEWSLETTER
The Ministry of Science and Technology
People's Republic of China
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August 10,2001 |
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IN THIS ISSUE
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* Regulations on the Implementation of the Law of the People's Republic
of China on Chinese-Foreign Equity Joint Ventures |
Regulations on the Implementation of the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures
Promulgated by the State Council on September 20,1983, revised by the State Cou ncil on January 15, 1986 and December 21, 1987 respectively, and revised on the basis of the Regulations on the Implementation of the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures on July 22, 2001
Chapter I General Provisions
Article 1
The Regulations are enacted to facilitate the smooth enforcement of the Law of t he People's Republic of China on Joint-Venture Enterprises (hereinafter referred to as the Law on Joint- Venture Enterprises).
Article 2
A joint-venture enterprise (hereinafter referred to as joint ventures) establish ed on the territories of China is a legal person in China and is subject to the jurisdiction of Chinese laws and enjoys the protection thereof.
Article 3
A joint-venture enterprise established on China's territories shall be able to p romote China's economic development and raise the scientific and technological level for the benefit of the socialism modernization construction.
The sectors where a joint-venture enterprise is encouraged, permitted, restricte d or prohibited by the State shall confirm with the relevant state regulations on foreign investment orientation and guidance catalog for foreign investment domains.
Article 4
Applications for establishing a joint-venture enterprise shall not be approved i f it involves any of the following activities:
1) Detriment to China's sovereignty;
2) Violation of Chinese laws;
3) Nonconformity with the requirements of China's economic development;
4) Environmental pollution;
5) Evident inequity in the agreements, contracts, and articles of association si gned, impairing the rights and interests of one of the parties.
Article 5
A joint-venture enterprise has the right to independently conduct business opera tions and management within the domain as prescribed by Chinese laws and regulations, and by the agreement, contract and articles of association of the joint ventures. The competent authorities shall provide support and assistan ce.
Chapter II Establishment and Registration
Article 6
The establishment of a joint-venture enterprise in China is subject to the examination and approval of the Ministry of Foreign Trade and Economic Co-operation of the People's Republic of China (hereinafter referred to as the MOFTEC). Upon approval, an Approval Certificate shall be issued by the MOFTEC.
The people's governments in the provinces, autonomous regions and municipalities under the direct jurisdiction of the Central Government or the competent authorities under the State Council have the power to examine and approve the establishment of the joint ventures that comply with the following conditions:
1) The total amount of the investment is within the limit prescribed by the State Council and the source of capital of the Chinese party has been proved ascertained.
2) No additional allocation of raw materials by the State is required and the national balance as to fuel, power, transportation, foreign trade export quotas is kept unaffected.
The joint ventures established in accordance with this Article shall deposit their file with MOFTEC for record. MOFTEC and the people's governments in the provinces, autonomous regions and municipalities under the direct jurisdiction of the Central Government or the competent authorities under the State Council hereinafter referred to as approving authorities.
Article 7
When applying for the establishment of a joint-venture enterprise, both Chinese and foreign parties shall submit the following documents to the approving authorities:
(1) A written application for the establishment of the join venture;
(2) The feasibility report jointly prepared by both parties;
(3) Joint-venture agreement, contract and articles of association signed by representatives authorized by the parties to the venture;
(4) List of candidates for chairperson and vice-chairperson of board of directors and directors nominated by the parties to the venture;
(5) Other documents prescribed by the approving authorities.
The aforesaid documents shall be written in Chinese. The documents mentioned in 2), 3) and 4) may concurrently be written in a foreign language agreed upon by the parties to the venture. Both languages are of same effect.
When discovering inappropriateness with the documents submitted, the approving authorities shall require for amendments within a prescribed time limit.
Article 8
Upon receipt of all the documents stipulated in Article 7, the approving authorities shall, within 3 months, decide whether to approve or disapprove the application.
Article 9
The applicant shall, within one month as of the receipt of the Approval Certificate, register with the administrative authorities for industry and commerce (hereinafter referred to as Registrar) in accordance with relevant state provisions. The date of the issuance of its business license is the date of the formal establishment of the joint venture.
Article 10
The “joint-venture agreement” mentioned in the Regulations refers to the document agreed upon by the parties to the joint venture on some major points and principles governing the establishment of the joint venture; “Joint-venture contract” refers to the document agreed upon and concluded by the parties to the joint venture on their mutual rights and obligations; “Articles of association” refers to the document agreed upon by the parties to the joint venture specifying the purpose, organizational principles and method of management of the joint venture in compliance with the principles of the joint-venture contract. Where the joint-venture agreement comes into conflict with the contract, the latter shall prevail.
The parties to the joint venture may agree to sign the contract and articles of association only, without signing an agreement.
Article 11
A joint-venture contract shall include the following main items:
(1) The names, the countries of registration, the legal representatives to the joint venture, and the names, positions and nationalities of the legal representatives thereof ;
(2) The name of the joint venture, its legal address, purpose and the domain and scale of business;
(3) The total amount of investment and registered capital of the joint venture, amount, proportion and forms of investment to be contributed by each party to the joint venture, the time limit for the contribution, provisions on incomplete contributions, and assignment of equity;
(4) The proportion of profits to be shared and losses to be borne by each party;
(5) The composition of the board of directors, the distribution of the seats of irectors, and the responsibilities, terms of reference and means of recruitment of the general manager, deputy general manager and other high-ranking management.
(6) The main production equipment and technology to be employed and their source of supply;
(7) The ways and means of purchasing raw materials and selling finished products.
(8) Principles governing the handling of finance, accounting and auditing;
(9) Provisions on labor management, wages, welfare, and labor insurance;
(10) The tenure of the join venture, its dissolution and liquidation procedures;
( 11) The liabilities for the breach of contract;
(12) Ways and procedures for settling disputes between the parties to the joint venture;
(13) The language (s) employed by the contract and the conditions for an effective contract.
The attachments to the contract of a joint venture shall be equally authentic as the contract itself.
Article 12
Chinese laws shall be applicable to the conclusion, validity, interpretation, execution of the joint- venture contract and to the settlement of disputes.
Article 13
The articles of association of a joint venture shall include the following mainitems:
1) Name of the joint venture and its legal address;
2) Purpose, business domains and tenure of the joint venture;
3) Names, countries of registration and legal addresses of the parties, and names, positions and nationalities of the legal representatives;
4) The total amount of investment of the joint venture, its registered capital, the investment and equity proportion of the parties, the provisions on stocks assignment, the proportion of profits and losses distributed between the parties;
5) The composition of board of directors, terms of reference and rules of procedures, term of office of directors, the responsibilities of chairperson and vice-chairperson's;
6) The establishment of management body, rules for handling routine affairs, the responsibility of the general manager, deputy general manager and other senior management;
7) Principles on financial affairs, accounting and auditing system;
8) Dissolution and liquidation;
9) Procedures for amending the articles of association.
Article 14
The agreements, contracts and articles of association of the joint ventures shall come into effect upon the approval of the approving authorities. The same is true to the amendments thereof.
Article 15
The approving authorities and registrar administration shoulder the responsibility of monitoring and inspecting the implementation of the contracts and articles of association of the joint ventures.
Chapter III Forms of Organization and Registered Capital
Article 16
A joint venture shall be the corporation of limited liabilities.
Each party to the joint venture is of the liability to the joint venture confined by the respective capital contributions to it.
Article 17
The total amount of the investment of the joint ventures including loans shall be the sum of funds invested in basic construction and the working capital needed by the production prescribed by the contracts and articles of association of the joint venture.
Article 18
The registered capital of the joint ventures shall be the total capital registered at the Registrar when establishing the joint venture, and shall be the total amount of the investment subscribed by the parties to the joint venture.
The registered capital of the joint ventures shall be expressed in RMB, or in a foreign currency agreed upon by the parties to the joint venture.
Article 19
A joint venture shall not, within its tenure, reduce its registered capital.
When needs arising for such reduction in the context of total investment volume and production scale, the said reduction shall be approved by the approving authorities.
Article 20
When a party to the joint venture intends to assign its investment subscribed wholly or partially to the third party, such a transfer shall be approved by the other party to the venture and approved by the approving authorities. The change of equity holding shall be registered at the Registrar.
When a party to the joint venture assign its stocks wholly or partially, the other party to the joint venture has the priority for the purchase.
When a party to the joint venture assign its investment subscribed to the third party, the terms of assignment shall not be more favorable than those to the other party to the joint venture.
When violation of the above mentioned provisions occurs, the assignment shall be deemed void.
Article 21
The addition and reduction of the registered capital of a joint venture shall be endorsed by the meeting of board of directors and approved by the approving authorities. The changes thus occurred shall be registered at the Registrar.
Chapter IV Initial Capital Contributions
Article 22
The parties to a joint venture may contribute their capital in the form of currencies, or in the forms of structures, working premises, equipment or other materials, industrial property rights, proprietary technologies, or a right to the use of cite. When contributing in the forms of structures, working premises, equipment or other materials, industrial property rights, proprietary technologies, the assessed values shall be determined by the parties to the joint venture in the principle of fairness and reasonableness, or by the third party agreed upon by the parties to the joint venture.
Article 23
When contributed in a foreign currency by the foreign party, the currency shall be converted into RMB according to the basic exchange rate quoted by the People's Bank of China on the day when the payment is made or converted into the foreign currency agreed upon.
The RMB cash contributed by Chinese party, when being converted into a foreign currency, the conversion shall be made according to the basic exchange rate quoted by the People's Bank of China on the day when the payment is made.
Article 24
When contributed in the form of equipment or other materials by the foreign party, the contribution shall be the one needed by the production of the joint venture.
The pricing of the equipment or other materials mentioned in the Article shall not be higher than the international market rating for similar equipment and materials at the time.
Article 25
When contributed in the form of industrial property rights or special technologies by the foreign party, one of the following conditions shall be met:
1) Able to remarkably improve the performance and quality of the existing products and production efficiency;
2) Able to remarkably save raw materials, fuels and power.
Article 26
When contributed in the form of industrial property rights or proprietary technologies by the foreign party, relevant data on the said industrial property rights or special technologies, including the copy of patent certificate or trademark registration certificate, validity status and associated technical specifications, practical values, grounds for price evaluation and the price evaluation agreement jointly signed with the Chinese party shall be submitted as the attachments to the joint venture's contract.
Article 27
When contributed in the form of equipment or other materials, or industrial property rights, or proprietary technologies by the foreign party, such contributions shall be approved by the approving authorities.
Article 28
The parties to the joint venture shall make the full payment to their respective investments provided by the contract within the prescribed time limit. The party who has unpaid contribution within the prescribed time limit or has paid partial contribution, shall pay the interest for the delayed payment or penalty provided by the contract.
Article 29
Upon the payment of the full contributions by the parties to the joint venture, the joint venture shall issue the certificate for initial capital contributions on the basis of the capital verification report provided by Chinese certified public accountants. The certificate of contributions shall bear the following items: the name of the joint venture, the year, month and day of the establishment of the joint venture, the name of the parties and their respective contributions, the year, month and day when such contributions are made, and the year, month and day of the issuance of the certificate of contribution.
Chapter V Board of Directors and Management
Article 30
The board of directors is the supreme authorities of the joint venture that determines all the major issues relating to the joint venture.
Article 31
The board of directors shall consist of no less than 3 persons in number. The distribution of director seats shall be proportional to the capital contributions made by the parties to the joint venture.
The office term of the directors is four years, though the renewal of the term can be granted upon the delegation of the parties to the joint venture.
Article 32
The board of directors shall convene its meeting at least once a year, called upon and presided over by the chairperson of the board. When the chairperson cannot call upon the meeting, the vice chairperson or other directors can be delegated by the chairperson to call upon and preside over such a board meeting. When receiving a motion raised by one third of the directors, the chairperson may convene a temporary board meeting.
The board meeting requires a quorum of over two thirds of directors. Should a director be unable to be present, he may make a proxy authorizing someone else to represent him or her and vote in his or her stead.
The board meeting usually shall be held at the location of the joint venture's legal address.
Article 33
The following events shall be determined upon the unanimous agreement of the directors present at the board meeting:
1) Amendment to Articles of Association;
2) Termination or dissolution of the joint venture;
3) Addition or reduction of the registered capital of the joint venture;
4) Mergers or division of the joint venture.
Decisions on other matters can be made in accordance with the rules of procedures provided in the Articles of Association.
Article 34
Chairperson of the board of directors is the legal representative of the joint venture. In the event where the chairperson cannot perform his duty, vice chairperson or other directors shall be delegated to be the representative of the joint venture.
Article 35
A joint venture shall establish its operational management, responsible for the management of daily operational activities. The operational management shall consist of a general manager and a number of deputy general managers. The deputy general manager assists the general manager in performing his duty.
Article 36
General manager implements the resolutions adopted by the board meetings,organizes and directs the routine operational management of the joint venture. Within his power authorized by the board of directors, general manager may represent the joint venture to appoint or dismiss his inferiors and exercise other duties authorized by the board of directors.
Article 37
At the invitation of the board of directors, the position of general manager and deputy general manager can either be filled by Chinese nationals or expatriates.
At the instance of the board of directors, chairperson, vice chairperson or directors can concurrently be general manager, deputy general manager or other senior management.
When dealing with important issues, general manager shall consult with deputy general manager(s).
General manager or deputy general manager shall not concurrently hold the posts of general manager or deputy general manager of other economic organizations, and shall not involve in the competition of other economic organizations against the joint venture where he or she is working for.
Article 38
In the event where malpractice or serious negligence of duty is accused of, general manager, deputy general manager and other senior management can be removed from the post anytime upon the resolution of the board meeting.
Article 39
When establishing its subsidiaries including sales branches overseas or in Hong Kong and Macao , the joint venture shall submit its application to MOFTEC for approval.
Chapter VI Technology Import
Article 40
The technology import referred hereto in the Regulations is the desired technologies obtained from the third party or the joint venture parties by means of technology transfer.
Article 41
The technologies imported by the joint venture shall be so applicable and advanced as to make the products of remarkable social and economic benefits domestically or of competitiveness over the international market.
Article 42
When preparing the technology transfer agreement, the independent operational management right of the joint venture shall be maintained, and in accordance with the provision of Article 26 of the Regulations, the technology exporter shall be requested to provide relevant data.
Article 43
The technology transfer agreement signed by the joint venture shall be submitted to the approving authorities for approval.
The technology transfer shall meet the following provisions:
1) Technology use fees shall be fair and reasonable;
2) Except otherwise agreed upon, the technology exporter shall not make any restrictions on the area, quantity and price of export made by the technology importer.
3) The term of technology transfer usually shall not be longer than 10 years;
4) Upon the expiration of the technology transfer agreement, the technology importer shall have the right to continue using the said technology;
5) The undersigned parties of the technology transfer agreement shall have reciprocal conditions for exchange of improved technologies;
6) The technology importer has the right to procure desired equipment, components and raw materials from the sources where he or she believes appropriate;
7) No irrational restrictive clauses forbidden by the Chinese laws and regulations shall be contained in the technology transfer agreement.
Chapter VII Site Use Right and Fees
Article 44
When using the site, the joint venture shall be in line with the principle of efficient use of land. When desiring for a site, the joint venture shall submit the application to the land authorities at municipal (county) level where the joint venture is located and acquire the site use right, upon the approval, through signing of the contract. The contract signed shall specify the acreage, location, purpose of use, contracted term, site use right fees (hereunder referred to as site use fees), mutual rights and obligations and penalty on contract violation.
Article 45
The site use right needed by a joint venture, when possessed by the Chinese party, can be used as the contribution made by the Chinese party to the joint venture. Its assessed price shall be the same as the payment to acquiring the use right of a similar site.
Article 46
The site use fees shall, in accordance with the purpose of use, geographic and environment condition, land acquisition, dismantling and settlement expenses and the requirements of joint venture on the infrastructures, be determined by the people's government at provincial, autonomous regional and municipal level where the joint venture is physically located, and the site use fee standards thus regulated shall be deposited with MOFTEC and the national land authorities for record.
Article 47
The joint venture engaged in agriculture or animal husbandry, when endorsed by the people's government in provinces, autonomous regions and municipalities under the direct jurisdiction of the Central Government where the joint venture is physically located, can make the site use fee payment to the local land authorities in the percentage of its business revenues.
When engaged in development projects in the economically undeveloped areas, the payment of site use fees, upon the approval of the local government, can enjoy special preferential rating.
Article 48
The site use fees shall not be subject to the readjustment within five years from the start of using the said site. When called for such readjustment as the result of economic development, the changed demand and supply and geographic environment, the interval for such readjustment shall not be shorter than three years.
Site use fee as part of the investment by the Chinese joint venture shall not be subject to readjustment within the tenure of the contract.
Article 49
Upon acquiring the site use right in accordance with Article 44 of the Regulations, the joint venture shall pay its site use fee annually starting from the time prescribed by the contract. In the first calendar year, the fee calculation shall be so made that a half-year payment is collected for the site use time exceeding half a year and the exemption is granted to the site use time recorded less than half a year. When the site use fee is changed within the term of contract, the payment shall be made in accordance with the new standards starting from the calendar year effective of such readjustment.
Article 50
A joint venture, in addition to acquiring its site use right in accordance with the provisions of this Chapter, may acquire site use right according to other relevant state regulations.
Chapter VIII Procurement and Sale
Article 51
A joint venture has the right to determine on its own whether to procure in China or overseas its desired equipment, raw materials, fuels, components, transportation tools and office necessities (hereinafter referred to as goods).
Article 52
A joint venture may, unrestrictedly in terms of quantity, procure its desired office and routine goods when such procurement takes place in China.
Article 53
The Chinese Government encourages the joint venture to sell its products in international market.
Article 54
A joint venture has the right to export its products, or entrust the sales agencies of its foreign party or Chinese foreign trade firms for commissioned sale or sale.
Article 55
The join venture, when importing equipment, components, raw materials and fuels desired by its own production activities within the business domain defined by the contract, and provided by the state for import permit, shall prepare an import plan once a year and submit the application once half a year. When contributed by the foreign party in the form of equipment or other materials, such imported contribution can be directly granted with import permit by presenting the approval document issued by the approving authorities. When importing the goods beyond the domain prescribed by the joint venture contract and subject to the licensing regulated by the state, the joint venture shall file an application for such import.
The joint venture may independently export its manufactured goods. When exporting the goods subject to the licensing regulated by the state, the joint venture shall submit the export application once every year according to its annual export plan.
Article 56
When procuring goods and paying the fees for water, electricity, gas, heating, goods transportation, labor service, engineering design, consultation, advertisement and etc in China, the joint venture enjoys the same treatment as other domestic enterprises.
Article 57
In the economic transactions between the joint venture and other economic organizations in China, the joint venture shall bear the economic liabilities and solve the disputes according to the provisions of relevant laws, and the contract undersigned by the interesting parties.
Article 58
A joint venture shall, in accordance with the Statistics Law of the People's Republic of China and China's provisions on foreign capital utilization statistics system, provide statistics data and submit statistics statement.
Chapter IX Taxation
Article 59
A joint venture shall, in accordance with the provisions of relevant laws of the People's Republic of China, make the payment to the taxes.
Article 60
The staff of the joint venture shall pay the income tax according to Personal Income Tax Law of the People's Republic of China.
Article 61
A joint venture, when importing the following goods, may enjoy tax relief or exemption according to relevant provisions of the Chinese tax law.
1) Equipment, components and other materials (other materials refer to the materials needed by the joint venture for the construction of the factory (plant), installation and fixing the equipment. The same below) contributed by the foreign party as the contribution in accordance with the provision of the contract;
2) Equipment, components and other materials imported with the funds from the total investment by the joint venture;
3) Equipment, components and other materials imported by the joint venture with its additional capital, whose supply cannot be guaranteed by the domestic sources, upon the approval of the approving authorities;
4) Raw materials, supporting materials, components, parts and packing materials imported by the joint venture for manufacturing its export oriented products.
The above mentioned goods enjoying tax relief exemption, when approved for the domestic sale or the use on the products for domestic sale, shall pay the tax or pay the tax evaded according to laws.
Article 62
Export goods manufactured by the joint venture, except for those restricted by China for export, shall enjoy tax relief, exemption and refund according to relevant provisions of Chinese tax law.
Chapter X Foreign Exchange Control
Article 63
Foreign exchange affairs of a joint venture shall be dealt with in accordance with the Regulations on Foreign Exchange Control of the People's Republic of China and relevant by-laws.
Article 64
A joint venture may open its foreign exchange account and RMB account at the banks on the Chinese territories by showing its business license. The bank who opens the said accounts shall supervise the account status.
Article 65
When opening its foreign exchange account overseas or in Hong Kong or Macao, a joint venture shall submit the application to the State Foreign Exchange Control or its branches for approval. The joint venture shall submit its cash payment and receipt statement and its statement of account to the State Foreign Exchange Control or its branches.
Article 66
The subsidiaries established by the joint venture at abroad or in Hong Kong or Macao shall submit its annual balance sheets and earning statement, through the joint venture, to the State Foreign Exchange Control or its branches.
Article 67
To meet the need of its business activities, the joint venture may apply for loans in foreign exchange and/or RMB with the banking institutions on the Chinese territories, or may apply for foreign exchange loans from overseas banks or the banks in Hong Kong or Macao according to the relevant provisions of the state.
The loan borrowed shall be filed with the State Foreign Exchange Control or its branches for record.
Article 68
After paying taxes according to the law and deducting the expenses in China, the remaining part of their income of the salaries and other justified income of the expatriate staff and the staff of Hong Kong and Macao origin of the joint venture can be remitted abroad according to the relevant state regulations,
Chapter XI Fiscal Matters and Accounting
Article 69
A joint venture shall, in accordance with the provisions of Chinese relevant laws on fiscal and accounting system, institute its fiscal and accounting system in consideration of its own development and file it with the local treasury and tax authorities for record.
Article 70
A joint venture shall appoint chief accountant to assist general manager on fiscal and accounting activities. A deputy chief accountant can be appointed when necessary.
Article 71
A joint venture (unless it is a smaller one) shall appoint an auditor to examine and audit the financial receipt and expenses and account books and then submit the report to the board of directors and general manager.
Article 72
The fiscal year of a joint venture shall coincide with the calendar year, i.e. from January 1st to 31st December of the Gregorian calendar.
Article 73
A joint venture shall adopt an accounting system in line with the internationally used accrual basis and debit and credit accounting system. All the vouches, receipts and account statement shall be written in Chinese, or in a foreign language agreed upon by the parties of the joint venture.
Article 74
A joint venture shall, in principle, use RMB as a standard accounting currency, though it may also use a foreign currency as the standard accounting currency when agreed upon by the parties to the joint venture.
Article 75
In addition to book keeping in standard accounting currency, the account of a joint venture shall be recorded in the actually paid currency when the currency in cash, bank deposit, other currency items, credits and debts, earnings and expenditures is not in the conformity with the standard accounting currency.
The differences resulted from the exchange rate conversion into the standard accounting currency shall be recorded in exchange rate account for gains and losses.
The surplus of foreign currency resulted from the exchange rate fluctuation shall be dealt with in the annual balance accounting in accordance with relevant Chinese laws and fiscal and accounting regulations.
Article 76
The principles on distribution of profits after the payment of the taxes prescribed by the Income Tax Law of the People's Republic of China for Foreign Invested Enterprises and Foreign Businesses are as follows:
1) Funds shall be retained for reserve funds, staff bonuses and welfare funds, enterprise development fund. The proportion of such retention shall be decided upon by the board of directors.
2) The reserve funds, in addition to its use in making up the losses of the joint venture, may be employed to increase the capital and expand the production of the venture, upon the approval of the approving authorities;
3) After the retention of three funds prescribed in 1) of this Article, the board of directors may decide to distribute the distributable profits in accordance with the investment contributed by each of the parties to the joint venture.
Article 77
Profits shall not be distributed without making up for the losses of the previous fiscal year. The undistributed profits of the previous fiscal year may be carried on into the profit distribution of this fiscal year.
Article 78
A joint venture shall submit its quarterly and annual account statements to the parties of the joint ventures, local taxation and treasury authorities.
Article 79
To prove their validity, the following documents, certificates and account statements of the joint venture shall be verified and certified in written statement by certified accountants registered in China:
1) Certificate on capital contributions of the parties to the joint venture (the investment contributed in the form of materials, site use right, industrial properties, proprietary technologies shall be attached with the assessed price list for such properties and associated agreements undersigned by the parties to the joint venture);
2) Annual account statement of the joint venture;
3) Liquidation account statement of the joint venture.
Chapter XII Staff
Article 80
The employment, recruitment, dismissal and resignation of the staff of the joint venture, and their salaries, welfare, labor insurance, labor protection and labor discipline shall be dealt with according to the relevant state provisions on labor and social security.
Article 81
The joint venture shall organize the professional and technical training of the staff and establish strict examination system so as to make them meet the needs of modern industry for production and management skills.
Article 82
The salary and incentive system of the joint venture shall be in accord with the principle of distribution according to his or her work, and more pay for more work.
Article 83
The salaries of senior management such as general manager, deputy general manager, chief engineer and deputy chief engineer, chief accountant and deputy chief accountant, auditor shall be determined by the board of directors.
Chapter XIII Trade union
Article 84
The staff of the joint venture are entitled to the establishment of the grass-roots trade union organization and organizing trade union activities according to Trade Union Law of the People's Republic of China and Statute of Trade Union of China.
Article 85
The trade union of the joint venture is the representative in the interest of staff and is entitled to signing labor contract and supervising the implementation of the contract on behalf of the staff.
Article 86
The basic tasks of the trade union are to protect the democratic rights and material benefits of the staff, assist the enterprise to arrange and use welfare and incentive funds in a rational manner; organize the staff to learn the knowledge of politics, sciences, technologies and professionalism, organize arts and sports activities, teach the staff to observe labor disciplines and strive to fulfill the economic tasks assigned by the venture.
Article 87
When discussing major issues such as development plan, production activities at the meeting of board of directors, the representative of the trade union has the right to hear the meeting and reflect the views and requirements of staff.
When the board of directors studying the issues such as reward and penalty, salary system, welfare, labor protection and insurance, the representative of the trade union can attend the discussion and the board shall listen to the views of the trade union and win for its cooperation.
Article 88
The joint venture shall provide positive support for the activities of the trade union. The joint venture shall, in accordance with the provisions of Trade Union Law of the People's Republic of China, provide necessary space and facilities for the trade union's operation, meeting and organizing collective activities on welfare, culture and sports.
The joint venture shall pay for the trade union funds on a monthly basis in a proportion of 2% of the total salaries of the staff.
The trade union fees shall be used by the trade union of the venture according to relevant trade union budget management methods provided by the All-China Federation of Trade Union.
Chapter XIV Tenure, Dissolution and Liquidation
Article 89
The tenure of the joint venture shall be determined upon in accordance with the Interim Regulations on the Tenure of the China-Foreign Equity Joint Ventures.
Article 90
A joint venture may be dissolved in the following situations:
1) Termination of the tenure;
2) Inability to continue the operation due to heavy losses;
3) Inability to continue the operation due to the failure of one of the contracting parties not to be able to fulfill the obligations prescribed in the agreement, contract and articles of association;
4) Inability to continue the operation due to heavy losses caused by force majeure such as natural disasters and wars;
5) Failure to obtain the desired object of the operation and no prospects for future development;
6) Occurrence of other reasons for dissolution as prescribed in the contract and articles of association.
In cases described in 2), 4), 5) and 6) of this Article, the board of directors shall make application for dissolution with the approving authorities for approval.
In the situation described in 3) of this Article, the party who has failed to fulfill its obligations prescribed in the agreement, contract, and articles of associations shall be liable for the losses arising therefrom.
Article 91
Upon announcement of the dissolution of a joint venture, liquidation shall be instituted. The joint venture shall establish the liquidation committee according to the Methods on Liquidation of Foreign Invested Enterprise. The liquidation committee shall be responsible for liquidation matter.
Article 92
Members of a liquidation committee shall generally be selected from among the directors of a joint venture. In case the directors cannot serve or are unsuitable to be members of the liquidation committee, the joint venture may invite accountants and lawyers registered in China to do the job. When the approving authorities deems necessary, it may send personnel to supervise the process.
The liquidation expenses and remuneration for the members of the liquidation committee shall be given priority in the disbursements from the existing assets of the joint venture.
Article 93
The tasks of the liquidation committee are: to conduct thorough investigation of the property of the joint venture concerned, its credits and debts; to work out the statement of assets and liabilities and its property inventory; to put forward a basis on which its property is to be evaluated and calculated; and to formulate a liquidation plan. All these shall be carried out upon the approval of the board of directors.
During the process of liquidation, the liquidation committee shall represent the joint venture concerned in initiating legal action or responding thereto.
Article 94
A joint venture shall be liable for its debts with all of its assets. The remaining assets after the discharge of debts shall be distributed among the parties to the joint venture in proportion to each party's investment unless otherwise provided for in the agreement, contract and articles of association of the joint venture.
At the time when a joint venture is being dissolved, the portion of its net assets or remaining property that exceeds the value added to its registered capital is regarded as profit on which income tax shall be levied according to the law.
Article 95
On the completion of the liquidation of a dissolved joint venture, the liquidation committee shall submit a liquidation report to the board of directors for adoption before reporting to approving authorities and going through formalities for canceling its registration and handing in its business license to the original registration authorities.
Article 96
After the dissolution of a joint venture, its account books and documents shall be left in the custody of the former Chinese party.
Chapter XV Settlement of Disputes
Article 97
Disputes arising over the interpretation or execution of the agreement, contract or articles of association between the parties to the joint venture shall, if possible, be settled through friendly consultation or mediation. If these means prove futile, the disputes shall be subject to arbitration or judicial settlement.
Article 98
Parties to a joint venture may, in accordance with the relevant written agreement, apply for arbitration with Chinese arbitration agency or with other arbitration agencies.
Article 99
In the absence of a written agreement on arbitration between the parties to a joint venture, either party may institute legal proceedings at a Court of Justice in China.
Article 100
In the process of settling disputes, except for matters in dispute, parties to a joint venture shall continue to implement other provisions stipulated by the agreement, contract and articles of association of the joint venture.
Chapter XVI Supplementary Provisions
Article 101
The Chinese authorities in charge of visas shall provide facility by simplifying procedures for staff from foreign countries or from Hong Kong or Macao (including their families) who have frequent needs for entry and exit into and out of China.
Article 102
The Chinese staff of a joint venture, when going abroad on study tour, business, study or training, shall go through the formalities for going abroad provided by relevant state regulations.
Article 103
Staff from foreign countries or from Hong Kong or Macao working for a joint venture may bring in needed means of transport and office equipment with payment of taxes prescribed by relevant China laws on taxes.
Article 104
Joint ventures established in the special economic zones shall comply with the provisions otherwise provided, if any, in the laws and administrative by-laws.
Article 105
The Regulations shall be brought into force as of the date of promulgation.
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