Equity Joint Venture (“EJV”)

An EJV, organized as a limited liability company, is a separate legal entity established by one or more foreign investors with one or more Chinese investors. Ownership and the investor’s share of profits and losses are determined based on the relevant contributions to the registered capital of the EJV.

There is no upper limit on foreign participation for general projects. The capital contribution requirements are almost the same as those for a WFOE.

Partners must pay their contribution within the timetable fixed in the contract. Failure to make timely capital contributions may result in contractual liability as stipulated in the contract.

The governance of an EJV is different from that of a corporation in western countries. Investors hold equity interests, but no stock. Voting authority is vested in the board of directors rather than in the shareholders. The directors are appointed by the investors and, in general, the power to appoint directors reflects the ratio of the capital contributions of the partners.

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