Company Formation
  • 1Standard production
  • 2Formula design
  • 3The whole quality inspection
  • 4Close service
  • 5Word of mouth to witness
  • 6A reasonable price
Joint Venture Incorporation
Current Location: Home > Company Formation > Joint Venture Incorporation

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

Total Investment

(% of Total Investment)

<= US$3 Million


US$3 - US$10 Million

50% or US$2.1 Million (whichever is higher)

US$10 - 30 Million

40% or US$5 Million (whichever is higher)

>US$30 Million

33.3% or US$12 Million (whichever is higher)

PRC laws controlled joint ventures require that the foreign party contribute no less than 25% of the registered capital.
(C) Capital injection by the parties constituting their capital contribution may take a variety of forms including cash, machinery, equipment and intangible property, such as proprietary technology, trademarks and other industrial property rights. According to a news promulgated by SAFE and effective as of 1 April 2003, subject to Safe's approval, a foreign party may also use the assets obtained by way of early recoupment of investment, liquidation, share transfer, capital reduction etc. from FIEs it has previously invested in. Furthermore, the Chinese partner may contribute the right to use a site and regard this as part of its contribution. There are, however, decided restrictions on in kind contribution by a party. For example, the technology contributed as registered capital by a party generally should not surpass 20% of the total registered capital (but this can be increased with approval for certain encouraged projects) or 50% of an individual investor's capital contribution. The contribution of proper valuation problems can often be a big obstacle in joint venture negotiation.
Once got the approval of joint venture contract, the parties must do capital injection to their subscribed registered capital amounts within the time limits set out in the contract. If paid in lump sum, the registered capital contributions must be made within six (6) months of the issuance of the business license for the joint venture. If the subscribed registered capital injection is in installments, the first installments, which must not be less than 15% of the total subscribed registered capital, must be made within three (3) months following issuance of the business license. The balance is to be contributed in accordance with a schedule agreed by the parties, provided that the parties must complete all such contributions within the following time limits (calculated from issuance time of the business license) depending on the total amount of registered capital with the joint venture company:

Registered Capital (US$M)

Contribution Time Limit


1 year

>0.5 but <=1.0

1.5 years

>1.0 but <=3.0

2 years

>3.0 but <=10.0

3 years


subject to approval with reference to actual condition

(D) China law allow joint ventures to borrow funds from either Chinese or foreign banks in excess of the parties' capital contributions. Shareholder loans from the foreign party are also permitted. (Chinese partners will not likely to have a sufficiently broad scope of business to permit them to provide shareholders loans.) All such loans should be registered with SAFE and should not exceed the difference between the registered capital amount and the total investment amount.

Transfers of Equity Interests in Joint Ventures

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.

(A) Tax Havens as OHCs
Many foreign investors tend to the use of tax haven jurisdictions, typically the British Virgin Islands ("BVI"), the Cayman Islands, Anguilla and so forth as OHCs for China investments.
From the foreign investor’s perspective the main advantage is low or zero rates of tax on funds once they reach the tax haven or on disposals of shares in OHCs located in the tax haven. On the other hand, tax havens do not have any DTTs to reduce the tax withheld at the China end, so the tax required to be withheld in China before a remittance of funds out by EJV (other than for dividends) by way of payment of loan interest, royalties etc. will be the maximum applicable rate under Chinese law and policy at the time, thus giving a substantially reduced amount on arrival at the tax haven.
The location of OHCs, as can be seen from the above, is not always simple and is a decision that will be determined by a large number of variables on a case-by-case basis. Often foreign investors will make the decision based on the internal policies or on the basis of advice from their own in-house or external tax advisers.

(B) Offshore Structures
The entity to be used by the foreign investor as the offshore investment holding company ("OHC") for its investment in the EJV will be determined by a number of elements. One of the main considerations of driving choice of OHC is tax-efficiency. In this respect the foreign party needs to be clear whether there is a double tax treaty ("DTT") covering the types of revenue streams that are likely to be coming out of the EJV as between the PRC and the jurisdiction where the OHC is established. DTTs generally cover loan interest, dividends and distributions, income taxes, royalties and capital gains. The tax treatment of dividends tend to be less important in terms of determining the location of the OHC because, at present, China exempts dividends by FIEs to their foreign shareholders from withholding and other taxes (although this could change as the Post-WTO leveling of the playing field progresses, as Chinese parties do not benefit from such an exemption). There are proprietary software programs for determining the most tax-efficient jurisdiction under the applicable DTTs, based on a specific set of input parameters which you provide with.
A number of industries in China, notably the telecommunications, fund management, banking, venture capital and many others require foreign investors to meet certain qualification requirements which may prevent from using a special purpose vehicle ("SPV") as the OHC. This needs to be considered as an industry-by-industry, case by case basis. It may be possible, in some cases, such as under the Foreign Invested Venture Investment Enterprise Administrative Regulations to use an affiliated entity to satisfy the qualification requirements where there is an express legal basis for doing that, whilst investing through an SPV located in a tax-efficient jurisdiction.
When establishing an EJV in "special industries" with foreign investor qualification requirements, is whether the industry regulator would accept the use of an SPV backed up by a parent company guarantee of the SPV's obligations in relation to the EJV or similar arrangement, based on an agreement negotiated with the regulator. There are no hard and fast rules as to what may or may not be possible as it depends on the position taken by the regulator. You should make inquiries to confirm.
Tax structure with a foreign party's investment in an FIE does not, however, stop at the OHC level, as you also need to consider (where applicable) the tax implications of repatriating of funds from the OHC to the foreign party's home jurisdiction, and the DTTs (if any) between OHC jurisdiction and the foreign investor's home jurisdiction.

(a) Under PRC law, joint venture companies have a fixed term of operation. Currently, the most common term of operation approval of is fifty (50) years. Furthermore, you can extend this term with the approval of all parties and relevant government authorities. For example, particularly like CJVs, the term of operation agreed by the Chinese party and approved by the relevant government authorities will be much shorter.
(b) According to the nature of the operations of the proposed joint venture company, certain additional government approvals, permits or licenses may be required, e.g., production approvals, sanitation certificates, export licenses, environmental permits, value-added telecom services operating licenses, etc. Certain other legal and practical considerations relating to the establishment of a Sino-foreign joint venture company are set out in the notes at the end of the template of Joint Venture Contract.

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

If you have any questions about your China business, please feel free to contact us for free.
Contact us in Shanghai, Beijing, Shenzhen or HK for more details:

Jilian Consultants


+(86)21- 6071 0208(Shanghai)

+(86)0755-2394 1595(Shenzhen)

+91 124 436 1515(India)

Rm2008, O.T.C Building, No.912,Rd Gonghexin, Shanghai, China.

Rm6519,block A,Jingjibinhe Times Building,Futian District,Shenzhen.
Centrum Plaza First Floor,Office No.111,Golf Course Road,Gurgaon.

Rm104, Tower 1, Shakti Towers, 766 Anna Salai, Chennai, Tamil Nadu.


Our consulting specialist: 
Ms. Vivia Fan(English & Mandarin)
Wechat/Mobile: +(86)135 2424 9506
Email: vivia@ijilian.cn  
Ms. Claire Qin(English & Mandarin)
Wechat/Mobile: + (86)189 2372 4682
Email: claire.qin@ijilian.com

Mr. Tony Chen(English & Spanish)
Wechat/Mobile: + (86)185 2105 5967
Email: tony.chen@ijilian.com

Complaints and Suggestions
Wechat/Mobile:+ (86)187 2157 9300
WhatsApp:+86187 2157 9300


Office Time: Monday to Friday 0900AM-1700PM (GMT+8)

Follow Us: