Joint Venture

Articles of Association for
Joint Ventures Using Chinese and Foreign Investment

Chapter I General provisions

Article 1 In accordance with the "Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment" and the contract signed by ____company (hereinafter referred to Party B), the articles of association hereby is formulated.

Article 2 The name of the joint venture company shall be ____Limited Liability Company. Its name in foreign language is ____. The legal address of the joint venture company is ____.

Article 3 The names and legal addresses of the parties to the joint venture are as follows:
Party A:___________________Company at _____________________.
Party B: __________________Company at _____________________.

Article 4 The joint venture company is a limited liability company.

Article 5 The joint venture company has the status of a legal person and is subject to the jurisdiction and protection of China's laws concerned. All its activities shall be governed by Chinese laws, decrees and other pertinent rules and regulations.

Chapter II Purpose and Scope of Business.

Article 6 The purpose of the joint venture company is to produce and sell ____products and to reach ____level for obtaining satisfactory economic benefits for the parties to the joint venture company. (Note: Each joint venture company may write them out according to its own conditions).

Article 7 The business scope of the joint venture company is to design, manufacture and sell products and provide after-sale maintenance services.

Article 8 The scale of production of the joint venture company is as follows:
____year_______________(unit of quantity);
____year_______________
____year_______________

Article 9 The joint venture company may sell its products on the Chinese domestic market and on the international market, its selling proportion is as follows:
____(year): _________% for export;
____% for the domestic market.
____(year): _________% for export;
____% for the domestic market.

Chapter III The Total Amount of Investment and The Registered Capital

Article 10 The total amount of investment of the joint venture company is RMB____.

Article 11 The investment contributed by each party is as follows:
Party A: Investment subscribed is RMB____, accounts for ____% of the registered capital, among which.
Cash____________________ ;
Machinery and equipment ____________________ ;
Premises ____________________ ;
Land use right ____________________ ;
Industrial property ____________________ ;
Others ____________________ .
Party: Investment subscribed is RMB____, account for ____% of the registered capital, among which,
Cash ____________________ ;
Machinery and equipment ____________________ ;
Industrial property ____________________ ;
Others ____________________ .

Article 12 The parties to the joint venture shall pay in all the investment subscribed according to the time limit stipulated in the contract.

Article 13 After the investment is paid by the parties to the joint venture, a Chinese registered accountant invited by the joint venture company shall verify it and provide a certificate of verification. According to this certificate, the joint venture shall issue an investment certificate which includes the following main items: name of the joint venture; date of the establishment of the joint venture; names of the parties and the investment contributed; date of the contribution of the investment, and the date of issuance of the investment certificate.

Article 14 Within the term of the joint venture, the joint venture company shall not reduce its registered capital.

Article 15 Should one party assign all or part of its investment subscribed, consent shall be obtained from the other party of the joint venture. When one party assigns its investment, the other party has preemptive right.

Article 16 Any increase, assignment of the registered capital of the joint venture company shall be approved by the board of directors and submitted to the original examination and approval authority for approval. The registration procedures for changes shall be dealt with at the original registration and administration office.

Chapter IV The Board of Directors

Article 17 The joint venture shall establish the board of directors which is the highest authority of the joint venture company.

Article 18 The board of directors shall decide all major issues concerning the joint venture company. Its functions and powers are as follows:
-deciding and approving the important reports submitted by the general manager (for instance: production plan, annual business report, funds, loans, etc.);
-approving annual financial reports, budget of receipts and expenditures, distribution plan of annual profits;
-adopting major rules and regulations of the company;
-deciding to set up branches;
-amending the articles of association of the company;
-discussing and deciding the termination of production, termination of the company or merging with another economic organization;
-deciding the engagement of high-rank officials such as the general manager, chief engineer, treasurer, auditor etc;
-being in charge of the liquidation matters upon termination and expiration of the joint venture company;
-other major issues which shall be decided by the board of directors.

Article 19 The board of directors shall consist of ____by Party B. The term of office for the directors is four years and may be renewed.

Article 20 The chairman of the board shall be appointed by A and the vice chairman of the board by Party B.

Article 21 When appointing and replacing directors, a written notice shall be submitted to the board.

Article 22 The board of directors shall convene ____meeting(s) every year. An interim meeting of the board of directors may be held based on a proposal made by more than one third of the total number of directors.

Article 23 The board meeting will be held in principle at the location of the company.

Article 24 The board meeting shall be called and presided over by the chairman. Should the chairman be absent, the vice-chairman shall call and preside over the board meeting.

Article 25 The chairman shall give each director a written notice 30 days before the date of the board meeting. The notice shall cover the agenda, time and place of the meeting.

Article 26 Should a director be unable to attend the board meeting, he may present a proxy in written form to the board. In case the director neither attends nor entrusts others to attend the meeting, he will be regarded as abstention.

Article 27 The board meeting requires a quorum of over two thirds of the total number of directors. When the quorum is less than two thirds, the decisions adopted by the board meeting are invalid.

Article 28 Detailed written records shall be made for each board meeting and signed by all the attended directors or by the attended proxy. The record shall be made in Chinese and ____, and shall be filed with the company.

Article 29 The following issues shall be unanimously agreed upon by the board of directors: (Note: It should be stipulated according to each company's concrete situations.)

Article 30 The following issues shall be passed by over two thirds of the total number of directors or by over half of the total number. (Note: It should be stipulated according to each company's concrete situations.)

Chapter V Business Management Organization

Article 31 The joint venture company shall establish a management organization. It consists of production, technology, marketing, finance and administration offices etc. (Note: It should be stipulated according to each company's concrete situations.)
Article 32 The joint venture company shall have one general manager and ____deputy general manager(s) who are engaged by the board of directors. The first general manager shall be recommended by party ____, deputy general manager(s) by party ____.

Article 33 The general manager is directly responsible to the board of directors. He shall carry out the decisions of the board of directors, organize and conduct the daily production, technology and operation and management of the joint venture company. The deputy general managers shall assist the general manager in his work and act as the agent of the general manager during his absence and exercise the functions of the general manager.

Article 34 Decision on major issues concerning the daily work of the joint venture company shall be signed jointly by the general manager and deputy general managers, then the decisions shall come into effect. Issues which need co signatures shall be specifically stipulated by the board of directors.

Article 35 The term of office for the general manager and deputy general manager(s) shall be ____years, and may be renewed at the invitation of the board of directors.
Article 36 At the invitation of the board of directors, the chairman, vice-chairman or directors of the board may concurrently be the general manager, deputy general managers or other high-ranking personnel of the joint venture company.

Article 37 The general manager or deputy general managers shall not hold posts concurrently as general manager or deputy general managers of other economic organizations in commercial competition with their own joint venture company.

Article 38 The joint venture company shall have one chief engineer, one treasurer and one auditor engaged by the board of directors.

Article 39 The general engineer, treasurer and auditor shall be under the leadership of the general manager.
The treasurer shall exercise leadership in financial and accounting affairs of the joint venture company, organize the joint venture company to carry out overall business accounting and implement the economic responsibility system.
The auditor shall be in charge of the auditing work of the joint venture company, examine and check the financial receipts and expenditure and the accounts, and submit written reports to the general manager and the board of directors.

Article 40 The general manager, deputy general managers, chief engineer, treasurer, auditor and other high-ranking personnel who ask for resignation shall submit their written reports to the board of directors in advance.
In case any one of the above-mentioned persons conduct graft or serious dereliction of duty, they may be dismissed at any time upon the decision of the board. Those who violate the criminal law shall be under criminal sanction.

Chapte VI Finance and Accounting

Article 41 The finance and accounting of the joint venture company shall be handled in accordance with the "Stipulations of the Finance and Accounting System of the Joint Venture Using Chinese and Foreign Investment" formulated by the Ministry of Finance of the People's Republic of China.

Article 42 The fiscal year of the joint venture company shall coincide with the calendar year, i.e. from January to December 31 on the Gregorian calendar.

Article 43 All vouches, account book, statistic statements and reports of the joint venture company shall be written in Chinese.

Article 44 The joint venture company adopts RMB as its accounts keeping unit. The conversion of RMB into other currency shall be in accordance with the exchange rate of the converting day published by the State Administration of Exchange Control of the People's Republic of China.

Article 45 The joint venture company shall open accounts in RMB and foreign currency with the Bank of China or other banks agreed by the Bank of China.

Article 46 The accounting of the joint venture company shall adopt the internationally used accrual basis and debit and credit accounting system in their work.

Article 47 Following items shall be covered in the financial accounts books:
1. The amount of overall cash receipts and expense of the joint venture company;
2. All material purchasing and selling of the joint venture company;
3. The registered capital and debts situation of the joint venture company;
4. The time of payment, increase and assignment of the registered capital of the joint venture company.

Article 48 The joint venture company shall work out the statement of assets and liabilities and losses and gains accounts of the past year in the first three months of each fiscal year, and submit to the board meeting for approval after examined and signed by the auditor.

Article 49 Parties to the joint venture have the right to invite an auditor to undertake annual financial check and examination at his own expense. The joint venture company shall provide convenience for the checking and examination.

Article 50 The depreciation period for the fixed assets of the joint venture company shall be decided by the board of directors in accordance with the "Rules for the Implementation of the Income Tax Law of the People's Republic of China Concerning Joint Ventures with Chinese and Foreign Investment".

Article 51 All matters concerning foreign exchange shall be handled in accordance with the "Provisional Regulations for Exchange Control of the People's Republic of China", and other pertaining regulations as well as the stipulations of the joint venture contract.

Chapter VII Distribution of Profits Sharing

Article 52 The joint venture company shall draw reserve funds, expansion funds and bonuses welfare funds for staff and workers after payment of income taxes. The proportion of allocation is decided by the board of directors.

Article 53 After paying income taxes in accordance with law and drawing the various funds, the remaining profits will be distributed according to the proportion of each party's investment in the registered capital.

Article 54 The joint venture company shall distribute its profits once a year. The profit distribution plan and the amount of profit distributed to each party shall be published within the first three months following each fiscal year.

Article 55 The joint venture company shall not distribute profits unless the losses of previous fiscal year have been made up. Remaining profit from previous year can be distributed together with that of the current year.

Chapter VIII Staff and Workers

Article 56 The employment, recruitment, dismissal and resignation of the staff and workers of the joint venture company and their salary. Welfare benefits, labor insurance, labor protection, labor discipline and other matters shall be handled according to the "Regulations of the People's Republic of China on Labor Management in Joint Ventures Using Chinese and Foreign Investment" and its implementation rules.

Article 57 The required staff and workers to be recruited by the joint venture company will be recommended by the local labor department or the joint venture will do so throught public examinations and employ those who are qualified with the consent of the labor department.

Article 58 The joint venture company has the right to give warning, record a demerit and reduce salary against those staff and workers who violate the rules and regulations and labor disciplines of the joint venture company. Those with serious cases may be dismissed. Discharging of workers shall be filed with the labor and personnel department in the locality.

Article 59 The salary treatment of the staff and workers shall be set by the board of directors according to the specific situation of the joint venture, with reference to pertaining stipulations of China, and shall be specified in detail in the labor contract.
The salary of the staff and workers shall be increased correspondingly with the development of production and the raising of the ability and technology of the staff and workers.

Article 60 Matters concerning the welfare funds, bonuses, labor protection and labor insurance, etc. shall be stipulated respectively in various rules by the joint venture company, to ensure that the staff and workers go in for production and work under normal conditions.

Chapter IX Trade Union Organization

Article 61 The staff and workers of the joint venture company have the right to establish trade union organization and carry out activities in accordance with the stipulations of the "Trade Union Law of the People's Republic of China.

Article 62 The trade union in the joint venture company is representative of the interests of the staff and workers. The tasks of the trade union are: to protect the democratic rights and material interests of the staff and workers pursuant to the law; to assist the joint venture companhy to arrange and make rational use of welfare funds and bonuses; to organize political, professional, scientific and technical studies, carry out literary, art and sports activities; and to educate staff and workers to observe labor discipline and strive to fulfill various economic tasks of the joint venture company.

Article 63 The trade union of the joint venture company will sign labor contracts with the joint venture company on behalf of the staff and workers, and supervise the implementation of the contract.

Article 64 Persons in charge of the trade union of the joint venture company has the right to attend as nonvoting members and to reflect the opinions and demands of staff and workers to meetings of the board of directors held to discuss issues such as development plans, production and operational activities of the joint venture.

Article 65 The trade union shall take part in the mediation of disputes arising between the staff and workers and the joint venture company.

Article 66 The joint venture company shall allot an amount of money totaling 2% of all the salaries of the staff and workers of the joint venture company as trade union's funds, which shall be used by the trade union in accordance with the "Managerial Rules for the Trade Union Funds" formulated by the All China Federation of Trade Unions.

Chaper X Duration, Termination and Liquidation

Article 67 The duration of the joint venture company shall be ____ years, calculating from the day when business license is issued.

Article 68 An application for the extension of duration shall, proposed by both parties and decided at the board meeting, be submitted to the orginal examination and approval authority six months prior to the expire date of the joint venture. Only upon the approval may the duration be extended, and the joint venture company shall go through registration formalities for the alteration at the original registration office.

Article 69 The joint venture may be terminated before its expiration in case the parties to the joint venture agree unanimously that the termination of the joint venture is for the best interests of the parties.
To terminate the joint venture before the term expires shall be decided by the board of directors through a plenary meeting, and it shall be submitted to the original examination and approval authority for approval.

Article 70 Either party shall have the right to terminate the joint venture in case one of the the following situations occurs. (Note: It shall be stipulated according to each joint venture company's concrete situation.)

Article 71 Upon the expiration or termination of the joint venture before its term ends, the board of directors shall work out procedures and principles for the liquidation, nominate candidates for the liquidation committee, and set up the liquidation committee for liquidating the joint venture company's assets.

Article 72 The tasks of the liquidation committee are: to conduct through check of the property of the joint venture company, its claim and indebtedness; to work out the statement of assets and liabilities and list of property: to formulate a liquidation plan. All these shall be carried out upon the approval of the board of directors.

Article 73 During the process of liquidation, the liquidation committee shall represent the company to sue and be sued.

Article 74 The liquidation expenses and remuneration to the members of the liquidation committee shall be paid in priority from the existing assets of the joint venture company.

Article 75 The remaining property after the clearance of debts of the joint venture company shall be distributed among the parties to the joint venture according to the proportion of each party's investment in the registered capital.

Article 76 On completion of the liquidation, the joint venture company shall submit a liquidation report to the original examination and approval authority, go through the formalities for nullifying its registration in the original registration office and hand in its business license, at the same time, make an announcement to the public.

Article 77 After winding up of the joint venture company, its account books shall be left in the care of the Chinese participant.

Chapter XI Rules and Regulations

Article 78 Following are the rules and regulations formulated by the board of directors of the joint venture company.
1. Management regulations, including the powers and functions of the managerial departments and their working rules and procedures;
2. Rules for the staff and workers;
3. System of labor and salary;
4. System of work attendance record, promotion and awards and penalty for the staff and workers;
5. System of staff and worker's welfare;
6. Financial system;
7. Liquidation procedures upon the dissolution of the joint venture company;
8. Other necessary rules and regulations.

Chapter XII Supplementary Articles

Article 79 The amendments to the Articles of Association shall be unanimously agreed and decided by the board of directors and submitted to the original examination and approval authority for approval.

Article 80 The Articles of Association is written in Chinese language and ____language. Both languages shall be equally authentic. In the event of any discrepancy between the two abovementioned versions, the Chinese version shall prevail.

Article 81 These Articles of Association shall come into effect upon the approval by the Ministry of Foreign Economic Relations and Trade of the People's Republic of China (or its entrusted examination and approval authority). The same applies in the event of amendments.

Article 82 The articles of Association is signed in ____of China by the authorized representatives of both parties on ____, 20____.

For Party A For Party B
(Signature) (Signature)

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