How to Setup A Joint Venture In China in 2022

A Joint Venture is a business arrangement in which two or more parties agree to pool their resources to accomplish a specific task.
Local partner helps if actitivy is restricted
Local partner can offer tangible benefits such as well-established distribution channels.

China Joint Venture Company Registration in 2022.

There are two main reasons to enter into a Joint Venture with a Chinese partner.

When entering certain industries, it is required to have a local partner according to the restrictions in China.
When a local partner can offer tangible benefits such as well-established distribution channels, government relations (locally known as guanxi) or other assets that would be relatively inefficient for the foreign investors to acquire on its own.

A foreign investor can formulate a Joint Venture in China. A joint venture is formed through partnering with a Chinese investor or Chinese company owner, both liable for the profits and losses and the management of the company.

China has two types of joint ventures. An equity joint venture and co-operative or contractual joint ventures.

Find out more about starting a Joint Venture in China.

There are two main types of Joint Venture you can start in China.

Equity Joint Venture.

Either than formulating a WFOE, an equity joint venture is the second most favored by foreign investors. Foreign investors choose equity joint ventures because they are the most favorable or preferred by the Chinese Government and local Chinese businesses. This must be because a Chinese investor or partner must have the majority shares of the company (51% or more).

Foreign investors choose this company type to tap into the manufacturing, technology capability, and capacity already existing in China and its established distribution and client base. The parties involved pull manufacturing and consumer markets together for profit, having individual strengths that will marry well and therefore choose to form a joint venture. Each party’s strengths must be stipulated when registering to prove its validity.

Smaller foreign businesses often want to access more significant partners’ resources, such as a strong distribution network, specialist employees, and financial resources. In this respect, a Joint Venture would be the perfect option.

Co-Operative or Contractual Joint Venture.

A Joint Venture JV offers a flexible way to conduct business with a Chinese partner. For example, in a co-operative or contractual joint venture that is a limited liability company, the foreign investor usually takes on the role of a minor shareholder within the company but not always.

No minimum contribution is required from the foreign companies establishing a company in China as an equity joint venture EVJ. The foreign investor’s contributions do not have to be monetary; their expertise, education, services, or experience could serve as their contribution. It differs mainly from the Equity Joint Venture in that the foreign investor may repatriate his original investment before the expiration of the Joint Venture.

The JV capital contributions and setup costs are subject to the type of joint venture incorporated. The minimum amount of capital needed is RMB 30 000 for each of the investors, yet, this depends on the shareholders at large when they start the company registration.

Starting a Joint Venture in China, start with Corporation China.

How to Setup a Joint Venture in China.

Depending on your business scope, we can advise you whether a Joint Venture is the best option. We will gladly answer your questions and find the right solution for your company. Compared to registering a business in most Western countries, registering a business in China is challenging work filled with paperwork and bureaucratic red tape. Completing the registration process without a qualified agency is time-consuming and challenging. Corporation China is a government-licensed registration agency that provides business registration services. We offer practical solutions for corporate formation with our extensive knowledge and background, guaranteeing results for our clients.

Why set up a Joint Venture?

Take advantage of your local partner’s existing facilities and workforce.

The ideal partner in a joint venture is one that has resources, skills and assets that complement your own. The joint venture has to work contractually, but there should also be a good fit between the cultures of the two organizations.

A good starting place is to assess the suitability of existing customers and suppliers with whom you already have a long-term relationship. You could also think about your competitors or other professional associates.

Before you consider signing up for a joint venture, it’s important to protect your own interests.

This should include drawing up legal documents to protect your own trade secrets and finding out whether your potential partner holds intellectual property rights agreements. Also, it’s worth checking to see whether they have other agreements in place, either with their employees or consultants.

Corporation China will help you handle with legal procedures, go through non-stop bureaucracy, while you do your business in China. Just let us know what do you need and get a proposal with more detailed specific information.

 Corporation China Marco Pearman-Parish interview.

Corporation China’s CEO Marco Pearman Parish interview with the GM of Swiss Grand Hotel, Emile Aver on how a JV can succeed in China, and the sucess of Swiss hotel.

WHAT ARE THE KEY CONSIDERATIONS WHEN SETTING UP A CHINA JOINT VENTURE?

How does a Joint Venture work?

According to the Chinese Company Law, the simplest way on how to setup a Joint Venture in China can be either a limited liability company or a joint stock company. Under the Law, China Joint Ventures must change their organizational structure to a 3-tier type structure.

The management of a structure might be more complex as the business environment in China can be challenging, and it will have to deal with a different culture.

 

INVESTOR SHAREHOLDER AGREEMENT

Foreign investors must be careful in defining the rights and responsibilities of the shareholders during the setup phase.The shareholder agreement outlines the critical agreements between the shareholders, such as the equity investment and the profit share ratios. This Investor agreement must be made in accordance with Chinese legislation and prepared before applying for the China Joint Venture Business License.

Joint Venture Company Structure

ARTICLES OF ASSOCIATION

The Articles of Association is like the company ‘constitutional’ document which establishes the rules of governance of the China joint venture, including business scope, the powers and responsibilities, amount of registered capital, board of directors rules, legal representatives, and supervisors of the company.

JV BUSINESS SCOPE

The business scope serves as an official description of the activities the company plans to engage in. The business scope is accessible via the China company registry of the Chinese Administration for Market Regulation (AMR).A JV can only carry out the activities specified in its business scope.

BOARD OF DIRECTORS

The management of a Joint Venture is carried out by the Board of Directors and can be either an Executive Director or a Board of Directors. The following rules apply to JV’s:

The board shall comprise no less than three and no more than 13 members for a limited liability company.
The board shall comprise no fewer than 5 and no more than 19 members for a joint-stock company.