How to set up a cooperative joint venture in China?
Updated: 2006-04-17 09:29
A: In a cooperative 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.
There is no minimum foreign contribution required to initiate a cooperative
venture, allowing a foreign company to take part in an enterprise where they
preferred to remain a minor shareholder. The contributions made by the investors
are not required to be expressed in a monetary value and can include excluded in
the equity joint venture process can be contributed such as labor, resources,
and services. Profits in a cooperative venture are divided according to the
terms of the cooperative venture contract rather than by investment share,
allowing a more flexible schedule for return on investment in cases where one
investor provides cash while the other party's investment is primarily in
kind.
Greater flexibility in the structuring of a cooperative venture is also
permissible including the structure of the organization, management, and assets.
There is no term 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.
Because of the unique privileges and added features offered to the foreign
party in a cooperative venture, trade unions must be allowed to represent the
employees in employment matters to protect the interests of the employees.
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