Sino-Foreign Co-operative Joint Venture is a general applicable mode of economic co-operation of investors for the exploitation of natural resources, which is distinctively subject to high risk, high input and high return.
The corporate capacity can be optional for the co-operative venture; for example, co-operative venture in corporate capacity is a limited liability company, where each participant shall bear its liability limited by its investment or the cooperative terms which provided by it; co-operative venture and each participant incompetent in terms of corporate capacity shall bear civil liability as per Chinese civil laws.
Sino-Foreign Co-operative Joint Venture allocates its profits not on the basis of investment amount or shareholding, but according to the rights and obligations determined by contract between all parties, where the foreign party can recover the investment in priority, and after the contract ends, fixed assets of the co-operative venture are generally vested in the Chinese party.
The investment or co-operative terms provided by the Chinese and foreign partner shall be in cash, in kind, in land use right, industrial property right, nonproprietary technology and other property rights.
Co-operative of Investments
As for the co-operative venture in corporate capacity, the foreign partner shall contribute not less than 25% of the registered capital generally; as for the co-operative incompetent in corporate capacity, each partner shall contribute in the proportion or on the co-operative terms as required by the competent Foreign Economic & Trade Authority of the State Council.
Advantages for Co-operative Venture
- Shared resources, complementation of advantages
- Flexible method of incorporation, as a legal entity or not
- Diversified management structure, in adoption of the system of the Board of directors, the system of joint management committee, or the system of administration by mandate (i.e. to entrust other party than the Chinese and foreign partner to operate and manage)
- The foreign investor is able to recover investment in priority
- Entitled to various preferences for the foreign investor