Please refer to below information:
• Brief Introduction of Joint Venture (JV)
• Documents Required & Registration Procedures of JV


A Joint Venture shortly referred to as JV, defined as the two companies jointly invested capital generally, own equity stake, share the profits, spending, risk and control of the company respectively.
The Chinese authorities encourage overseas investors to use this company form so as to receive wide exposure to advanced technology and new management skills. In return, foreign investors enjoy low labor cost, low production cost and a potentially large Chinese market share. Joint Ventures are sometimes the only way to register in China if a certain business activity is still controlled by the government. E.g. Restaurants, Bars, Buildings and Construction, Car Production, Cosmetics etc. There are 2 types of Joint Venture:

1- EJV (Equity Joint Venture)
Equity joint ventures are the second widely used mode which foreign companies enter the Chinese market and the preferred manner for cooperation where the Chinese government and Chinese businesses are concerned.  The business structure for an EJV is a separate limited liability company (LLC). Joint ventures are usually established to exploit the market knowledge, preferential market treatment, and manufacturing capability of the Chinese side along with the technology, manufacturing, and marketing experience of the foreign partner. Normally operation of a joint venture is limited to a fixed period of time from thirty to fifty years. In the circumstance an unlimited period of operation can be approved, especially when the transfer of advanced technology is involved. Profit and risk sharing equivalently in a joint venture are proportionate to the equity of each partner in the joint venture, except scrap the contract. 

Share holdings in a joint venture are usually non-negotiable and cannot be transferred without Chinese government’s approval. And investors are restricted from withdrawing registered capital during the valid period of the joint venture contract. Regulations surrounding the transfer of shares with only the approval of the board directors and without government authorities’ approval will probably develop over time as the size and the number of international joint ventures grow.

It is better that foreign exchange accounts are balanced so as to remit profits abroad so that the repatriated foreign exchange is balanced out by exports from the joint venture. With the elimination of foreign exchange certificates and the further opening of the Chinese market, this requirement is becoming more and more flexible..

There are particular requirements for the management structure with a joint venture. However either party can be the chairman of the board of directors, but foreign partner(s)’ minimum investment must not less than 25%. There is no minimum investment for the Chinese partner(s).

Joint venture permissible debt to equity ratio is managed depending on the size of the joint venture. Under the situation of the sum of debt and equity is less than US$ 3 million, equity must reach 70% of the total investment. In joint ventures where the sum of the debt and equity is more than US$ 3 million but less than US$ 10 million, equity must constitute at least half of the total investment. In cases of the sum of the debt and equity is more than US$ 10 million but less than US$ 30 million, 40% of the total investment must be in the form of equity. When the total investment exceeds US$ 30 million, at least a third of the sum of the debt and equity must be equity.  The purpose of using equity is that it is the standard method for distributing ownership of a company.

Equity can be cash, buildings, equipment, materials, intellectual property rights, and land-use rights but cannot be labor. The value of any equipment, materials, intellectual property rights, or land-use rights must get the permission of government authorities before the joint venture can be approved.

After a joint venture registered, the entity is considered as a Chinese legal entity and must abide by all Chinese laws. As a Chinese legal entity, a joint venture is free to hire Chinese  and protected from the interference by government employment industries as long as they abide by Chinese labor law. Joint ventures are also able to purchase land and build their own buildings.



2- CJV (Cooperative Joint Venture)
In a Sino-Foreign Cooperative Venture (also known as Contractual Joint Venture), the parties involved may operate as separate legal entities and bear liabilities independently rather than as a single entity. A cooperative venture may also be registered as a limited liability entity resembling an equity joint venture in operation, structure, and status as a Chinese legal entity.
Better flexibility under the structure of a cooperative venture is also permissible including the structure of the organization, management, and assets. There is no article for unlimited terms in cooperative ventures, but also no provisions for the term of the duration. The term of the cooperative venture contract may be renewed subject to the consent of the parties involved and approval from the examination and approval authorities. The foreign investor is permitted to withdraw their registered capital or a portion thereof from the cooperative venture during the duration of the cooperative venture contract.

Key Issues  Regarding a Joint Venture
The principal differences between an EJV and a CJV can be simply summarized from below four aspects:
A: Different company organization Form
B: Different capital contribution
C: Different profits and losing sharing
D: Different attribution after the expiry of the enterprises property

Please refer to the following details of the differences between EJV and CJV.

- For an EJV:
1, The organization form of joint venture is a limited liability company (LLC), enjoy a Chinese legal person status.
2, CJV can use monetary investment, non-monetary buildings, factories, machinery, equipment or other materials, industrial property, non-patented technology, land-use rights etc. All these capital contribution expressed in total monetary value terms and finally converted into equity.
3, According to the investment capital proportion in the enterprise registered, Joint venture parties will take profits, risks and losses.
4, After the contract terms expires, settling debts, enterprise's surplus property generally according to the investment proportion distribution of the parties to the joint venture

- For a CJV:
1, There are two organized types in a CJV: (a) conform to the legal person and obtain the status of Chinese legal person legally (shortly CJV), is the organization form of a limited liability company. (b) Does not have legal conditions of cooperative enterprises (called a Non-Legal-Person Cooperative Enterprises), in the form of an unlimited liability.
2, Capital contribution of the parties expressed in total monetary value terms, aimed to provide cooperative conditions, which are not in the form of currency , neither calculate into equity.
3, According to agreed contract in the enterprise registered, Joint venture parties will take profits, risks and losses.
4, After the contract terms expires, settling debts, enterprise's surplus property generally according to the signed contract to the joint venture. If foreign partners agreed in advance recovering investment within the time limit, then contract terms expires, surplus property of a cooperative enterprise shall be owned by the Chinese partners

Capitalization of JV
(A) The concepts of authorized and issued capital are not used in connection with Sino-foreign joint ventures. Instead, the concepts of "registered capital" and "total investment" are employed. Under applicable PRC law, registered capital is defined as the total amount of capital contributions subscribed by the parties and registered with the Chinese authorities. Thus, the term "registered capital" refers to the parties' equity in the Joint venture. The concept of "total investment", on the other hand, includes both registered capital and external borrowings.
(B) Pursuant to regulations promulgated by the SAIC, certain minimum equity requirements are placed on joint ventures.

Minimum Equity

If a party intends to transfer all or part of its interests with the registered capital of the joint venture company to a third party, then each other party enjoy a per-preemptive right to purchase the equity interest proposed to be transferred. As the equity transfer also requires the joint venture contract amendment and articles of association, which in turns requires the signature of each party, each party in effect holds absolute consent rights to any transfer generally. All transfers of registered capital require a unanimous approval of the company board of directors and approval by the original government authority which approved the joint venture contract and articles of association before.