Foreign-invested joint stock companies


Also known as companies limited by shares, this format, unlike the other joint venture formats, issues stock. It was created in 1995 but has not been utilized extensively by foreign investors (Kodak is an exception) who are more familiar and comfortable with the EJV/CJV and WFOE laws, since the corporate governance burden placed on FSJCs is greater compared to that placed on other foreign invested joint ventures . As a vehicle for foreign investment, therefore, the FSJC has a short track record. This joint venture vehicle may be more appropriate now that FIEs are contemplating listing on the China stock exchanges to access capital. Most listed companies in China are joint stock companies. The investor's ownership interest in, and liability in relation to, the company is measured by shares of stock held rather than by registered capital. Joint venture companies may convert to FJSCs but it is not clear whether WFOEs may do so. On inquiry to MOFTEC, MOFTEC replied that since under Article 75 of the Company Law at least half of the five or more promoters of a FJSC must be domiciled in China, conversion of a WFOE into a FJSC was not possible. This explanation appears to conflict with Article 15 of the Provisional Regulations of the Ministry of Foreign Trade and Economic Cooperation on Certain Issues Concerning the Establishment of Foreign Investment Companies Limited By Shares which sets out the process for conversion of a foreign owned enterprise into a company limited by shares. Strict compliance with Article 75 and Article 15 is possible, therefore it is difficult to see their logic in this. But if this is MOFTEC's position, a conversion is not possible regardless of the logic used, as MOFTEC's approval is required.




Doing Business with China
Doing Business with China
ISBN: 1905050089
EAN: 2147483647
Year: 2003
Pages: 648
Authors: Lord Brittan

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