Business in China Flashcards
Two main forms of business:
companies and partnerships
Company Law of People’s Republic of China recognizes two types of companies:
Limited Liability Company (LL); most common, especially with foreign investments. Assets including intellectual properties are protected by Chinese law.
Joint Stock Limited Company (JSLC); companies limited by shares, difficult to set up, more regulations
LLC structure is
generally for smaller, less restricted companies. Chinese LLC may not have more than 50 shareholders. Ownership is determined by the amount of subscribed capital of each shareholder.
JSLC
generally used by larger companies, including publicly traded companies (which must be companies limited by shares)
Primary difference between LLC and JSLC
Shareholder’s ownership is determined by the number of shares of the company that they hold. Each share has an equal value
Partnership Enterprise Law (1 June 2007)
includes general partnership and limited partnership
General Partnerships:
comprise of general partners whose liability is not limited in any way
Limited Partnerships:
comprise of both general partners and limited partners. General partners’’ liability is unlimited and they are responsible for the day-to-day operation of the business. Limited partners’ liability is limited and they do not have direct say over the operation of the business.
Other corporate structures in China are:
branch company, representative office, chinese-foreign joint venture, coorperative
Branch Companies:
are not considered distinct legal entities in China, but rather a part of a legal entity that is registered in a jurisdiction other than the jurisdiction where the parent company is registered
Under Chinese law, branch companies
must be named using the format ‘name of parent entity, location of branch, branch company’. It is always possible to determine the parent entity of a Chinese branch company by the name alone
Representative offices:
are not considered legal entities in china, but rather local office of a foreign legal entity. They must use the same format as branch companies
Chinese-foreign joint ventures:
will be listed in the same field on Chinese corporate records as the company’s corporate structure
Cooperatives:
are legal entities that can be incorporated by rural residents. They are governed by the Rural Specialized Cooperative Law
Management structures:
company as a family, hierarchy, party/state influence
