LLC or LLP are the two main forms that are most popular among businessmen looking to open a joint venture in China.
If you are interested in registering a Joint Venture in China, and you want to successfully bypass the hidden pitfalls of this process, we recommend that you carefully read this material, as well as get advice on the regulation of a joint venture in China from the IQ Decision UK legal advisors.
JVs in the PRC are of 2 forms - with foreign investment and without it.
The set up of a foreign investment JV in China is regulated by the new Foreign Investment Law starting from January. For previously registered enterprises, a 5-year transition period is envisaged.
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A JV set up in the area of car production, has to be carried out with Chinese partners only and foreign IP must be technologically advanced or energy efficient.
Currently, 70 percent of cars in China are produced in JVs, including almost all of the middle and upper class passenger cars, which provide the highest profitability. In these JVs, car models, technologies, and brands are foreign owned. The overwhelming majority of these enterprises do not have their own potential for mastering and developing new types of products, so they can actually be called workshops for the production of foreign brand cars or factories for their assembly.
Crucially, JV participants often license their technologies instead of transferring them to the company, by making the main contribution when registering such a business.
Chinese JV Dispute Resolution
To resolve the conflict through arbitration in PRC entrepreneurs are free to involve a local or foreign arbitration institution. However, it is not allowed to choose a foreign court for litigation. Such disputes are exclusively handled by the local courts.
Entrepreneurs wishing to resolve a JV dispute through arbitration in China, should keep in mind that there is no explicit limitation on the remedies that the tribunal can provide.
Legal assistance
If you are interested in registering a joint venture in China, then in general there is no particular reason for concern - the country has a favourable legal regime regarding FI. Overseas investors are motivated to use this form of business. By doing so, the country obtains exposure to advanced technologies and best management practices.
If you have any questions on this topic, we recommend ordering an individual consultation on the registration of a JV in PRC.
IQ Decision UK professionals are ready to offer you legal assistance in drafting an agreement on the set up of a JV in China. We also offer assistance in the process of registering a JV in this jurisdiction which is associated with collecting and executing a huge package of documents that are submitted to the relevant bodies. Do not hesitate to contact us by filling out a feedback form below.
