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Nanchang Joint Venture (JV)

Nanchang Joint Venture Service
Hotline: 86-755-82143348, Email:tannet-solution@hotmail.com

 

Nanchang Joint Venture is a business arrangement in which the participants create a new business entity or official contractual relationship and share investment and operation expenses, management responsibilities, and profits and losses. There are 2 types of joint venture: Equity Joint Venture (EJV) and Cooperative Joint Venture (CJV).

             

 

Nanchang Joint Venture (JV) - Equity Joint Venture (EJV)
Equity joint ventures are the second most common manner in which foreign companies enter the China market and the preferred manner for cooperation where the Chinese government and Chinese businesses are concerned. Nanchang 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 know-how, 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 some cases an unlimited period of operation can be approved, especially when the transfer of advanced technology is involved. Profit and risk sharing in a joint venture are proportionate to the equity of each partner in the joint venture, except in cases of a breach of the joint venture contract.

Share holdings in Nanchang joint venture are usually non-negotiable and cannot be transferred without approval from the Chinese government. Investors are restricted from withdrawing registered capital during the live of the joint venture contract. Regulations surrounding the transfer of shares with only the approval of the board of directors and without approval from government authorities will probably evolve over time as the size and number of international joint ventures grow.

Nanchang Joint Venture (JV) - Cooperative Joint Venture (CJV)
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.

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.

Nanchang Joint Venture (JV) - Principal Differences between an EJV and a CJV
- For an EJV:
Each party must make cash or permitted contributions in proportion to its subscribed percentage of the EJV's registered capital.

Profit must be distributed strictly in accordance with the parties' respective percentage shareholding of the registered capital of the EJV.

Upon dissolution of the EJV at the expiry of the term of operation, the EJV's net assets are to be distributed to each party in accordance with its respective shareholding of the EJV's registered capital.

- For a CJV:
A party (typically, but not always, the Chinese party) may contribute non-cash intangibles in the form of "cooperative conditions". Such "cooperative conditions" may consist of market access rights, rights to use buildings or office space owned or leased by the party that are not subject to clear valuation. In exchange for such "cooperative conditions", the party is entitled to participate in the distributable earnings of the CJV.

Profit sharing in a CJV need not be made strictly in accordance with the parties' respective percentage shareholding of the registered capital of the CJV but can be made in accordance with the agreement of the parties (e.g. the Chinese party may be entitled to a fixed profit share with the balance to be distributed to the foreign party, or the parties may agree on a multi-tiered profit-sharing arrangement that permits the foreign party to recover an amount equal to its capital investment on a priority basis, following which the profit split will be changed, etc.).

Upon dissolution of the CJV at the expiry of the term of operation, the CJV's net assets may be transferred to the Chinese party without compensation (thus operating in many respects as a BOT project) so long as the foreign party has been able to recoup its capital contribution during the term of the CJV. Such recoupment typically is funded by excess cash flow generated by accelerated depreciation of the CJV's assets. Such arrangement requires approval of relevant finance and tax authorities in China. Note that this capital recoupment is separate and distinct from possible priority rights to receive after-tax net profit distributions as outlined in the bullet point above.

Contact Us
If you have further queries in Nanchang Joint Venture (JV), don’t hesitate to contact Tannet anytime, anywhere by simply visiting Tannet’s website www.tannet-group.net or www.companies-registry.net or emailing to tannet-solution@hotmail.com, Hong Kong TEL: 852-27826888   China TEL: 86-755-82143422   NANCHANG TEL: 86-791-88188098




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