DECISION CONCERNING THE AMENDMENT TO THE LAW ON SINO-FOREIGN EQUITY JOINT VENTURES

DECISION CONCERNING THE AMENDMENT TO THE LAW
ON SINO-FOREIGN EQUITY JOINT VENTURES

(Adopted by the Third Session of the Seventh National
People's Congress on April 4, 1990)

SUBJECT: EQUITY JOINT VENTURES

ISSUING-DEPT: NATIONAL PEOPLE'S CONGRESS

ISSUE-DATE: 04/04/1990

IMPLEMENT-DATE: 04/04/1990

LENGTH: 858 words

TEXT:

After examining the motion of the State Council for "the Amendment to the Law of the People's Republic of China on Sino-Foreign Equity Joint Ventures", the Third Session of the Seventh National People's Congress decided to make the following modifications to the Law of the People's Republic of China on Sino-Foreign Equity Joint Ventures:

1. The following paragraph shall be added as paragraph (3) of Article 2:

The State shall not nationalize and expropriate equity joint ventures. Under special circumstances, based on the need of the social public interest, equity joint ventures may be expropriated according to legal procedures and appropriate compensation shall be paid.

2. Article 3 shall be modified as follows:

The equity joint venture agreement, contract and articles of association signed by the parties to the venture shall be submitted to the State's competent department of foreign economic relations and trade (hereinafter referred to as the "examining and approving authority") for examination and approval. The examining and approving authority shall, within three months, decide whether or not approve them. After approval, the equity joint venture shall register with the State's competent department of industry and commerce administration, obtain a business licence and start operations.

3. Paragraph (1) of Article 6 shall be modified as follows:

An equity joint venture shall have a board of directors, the size of and composition of which shall be stipulated in the contract and articles of association after consultation between the parties to the venture; the directors shall be appointed and replaced by the parties to the venture. The chairman and the vice-chairman or vice-chairmen shall be chosen through consultation by the parties to the venture or elected by the board of directors. If the Chinese venturer or foreign venturer assumes the office of the chairman, the other venturer shall assume the office(s) of vice-chairman or vice-chairmen. The board of directors shall decide on important problems concerning the equity joint venture in accordance with the principle of equality and mutual benefit.

4. Paragraph (2) of Article 7 shall be modified as follows:

An equity joint venture may, in accordance with the provisions of the relevant laws and administrative regulations of the State on taxation, enjoy preferential treatment for reduction of, or exemption from, taxes.

5. Paragraph (1) of Article 8 shall be modified as follows:

An equity joint venture shall, on the strength of its business licence, open a foreign exchange account with a bank or other financial institution which is permitted by the State agency for foreign exchange control to handle foreign exchange transactions.

6. Paragraph (1) of Article 10 shall be modified as follows:

The net profit that a foreign venturer receives after fulfilling its obligations under the laws and the agreement and the contract, the funds it receives at the time of the equity joint venture's scheduled expiration and early termination, and its other funds may be remitted abroad in the currency stipulated in the equity joint venture contract and in accordance with the foreign exchange regulations.

7. Article 11 shall be modified as follows:

The wages, salaries and other legitimate income earned by the foreign staff and workers of an equity joint venture, after payment of the individual income tax under the tax laws of the People's Republic of China, may be remitted abroad in accordance with the foreign exchange regulations.

8. Article 12 shall be modified as follows:

The term of an equity joint venture shall be decided on the basis of various different lines of business and circumstances. The equity joint venture engaged in a certain line of business shall specify its term in the contrtact, while the equity joint venture engaged in another line of business may not specify its term. If the parties to the equity joint venture with its term specified wish to extend its term of operation, the application shall be made to the examining and approving authority six months before the expiration of the term. Within one month of the date of its receipt of the application, the examining and approving authority shall decide whether or not approve it.

9. Article 13 shall be modified as follows:

In case of heavy losses, failure of a party to perform its obligations prescribed by the contract and articles of association or force majeure, etc, the contract may be terminated through consultation and agreement by the parties to the venture, subject to the approval by the examining and approving authority and to registration with the State's competent department of industry and commerce administration. In cases of losses caused by a breach of contract, the financial responsibility shall be borne by the party that has breached the contract.

This Decision shall come into force from the day of its promulgation. The Law of the People's Republic of China on Sino-Foreign Equity Joint Ventures shall be modified correspondingly in accordance with this Decision and repromulgated.