A Chinese-foreign contractual joint venture (hereinafter referred to as a contractual joint venture) refers to an enterprise jointly established by China and foreign partners in China according to the laws of People's Republic of China (PRC), which distributes profits or products and shares risks and losses according to the contractual joint venture contract. Chinese partners include China enterprises or other economic organizations, and foreign partners include foreign enterprises and other economic organizations or individuals. On 1986, China promulgated the Law of People's Republic of China (PRC) on Chinese-foreign Cooperative Enterprises.

Chinese-foreign cooperative enterprises are cooperative enterprises. The investment or cooperation conditions provided by Chinese and foreign parties shall not be converted into shares. Therefore, there is no need to distribute income or products according to the shareholding ratio and share risks and losses. The Chinese and foreign parties shall stipulate in the contractual joint venture contract the investment or cooperation conditions, the distribution of income or products, the sharing of risks and losses, the mode of operation and management, and the ownership of property when the contractual joint venture terminates.

Compared with Chinese-foreign joint ventures, Chinese-foreign cooperative enterprises are more flexible and can give full play to the investment enthusiasm of Chinese and foreign partners. The difference between a cooperative enterprise and a joint venture lies in:

First, the parties to the joint venture can provide cooperation conditions, and the parties to the joint venture must contribute.

Second, a contractual joint venture can share the profits according to the proportion agreed in the contract, and it can also distribute the income by product sharing, and the joint venture must share the profits according to the proportion of capital contribution.

Third, the foreign partner of a joint venture can recover the investment before the expiration of the cooperation period, but the foreign joint venture cannot recover the investment first.

Fourthly, the joint venture should set up a board of directors, a joint management organization or entrust others to manage it, and the management of the joint venture must adopt the general manager responsibility system under the leadership of the board of directors.

Fifth, contractual joint ventures can obtain legal person status, and some can be established as joint ventures without legal person status. Moreover, all joint ventures have legal personality.

Two. Establishment of Chinese-foreign cooperative enterprises

According to the Law on Chinese-foreign Cooperative Enterprises, the state encourages the establishment of production-oriented cooperative enterprises with export products or advanced technology. Product export enterprises refer to production enterprises whose products are mainly used for export, and the total annual foreign exchange income is deducted from the annual foreign exchange expenditure for production and operation and the foreign exchange needed for foreign investors to remit and share profits. Advanced technology enterprises refer to production enterprises in which foreign investors provide advanced technology and engage in new product development and product upgrading in order to increase export earnings or replace imports.

To apply for the establishment of a contractual joint venture, the agreements, contracts, articles of association and other documents signed by the Chinese and foreign parties shall be submitted to the foreign economic relations and trade department of the State Council or the department and local government authorized by the State Council (hereinafter referred to as the examination and approval authority) for examination and approval. The examination and approval authority shall decide whether to approve or not within 45 days from the date of receiving the application.

After the application for the establishment of a contractual joint venture is approved, it shall apply to the administrative department for industry and commerce for registration and obtain a business license within 30 days from the date of receiving the approval certificate. The date of issuance of the business license of the contractual joint venture is the date of establishment of the contractual joint venture.

Three. Investment and investment recovery methods and profit distribution methods of Chinese-foreign cooperative enterprises.

The capital of Chinese-foreign cooperative enterprises comes from two aspects: first, the investment of shareholders; The second is the loan applied in the name of the cooperative enterprise. Generally speaking, shareholders' investment is the main source. Enterprise loans are applied to banks according to the business needs of enterprises. A contractual joint venture may borrow money from financial institutions inside or outside China. Loans and guarantees made by Chinese and foreign parties as conditions for investment or cooperation shall be settled by the parties themselves.

(A) the mode of investment

According to the Law on Sino-foreign Joint Ventures, the conditions for investment or cooperation provided by Chinese and foreign parties can be cash, in kind, land use rights, industrial property rights, non-patented technologies and other property rights. This provision is very flexible, that is, all parties to a contractual joint venture can contribute capital according to the needs of the project and their own conditions. The capital contribution of each party does not need to be calculated by shares, and it is not limited by the proportion of shares.

Non-cash investments or cooperation conditions provided by the parties to a contractual joint venture shall not be converted into currency, and the investment proportion shall not be calculated. In practice, China partners generally use the right to use factories, facilities and sites as investment or cooperation conditions. If the partners invest in implementation and industrial property rights, they must set a price and convert it into specific equity. Other property rights here refer to the company's shares (stocks), bonds or other income, including the right to claim money. As well as commercial franchising and labor services permitted by law.

(2) Investment recovery

According to the provisions of the Law on Chinese-foreign Joint Ventures, it can be agreed in the joint venture that the foreign party will recover the investment in advance within the cooperation period. This is a kind of preferential treatment for China and foreign co-authors.

The ways of early recovery of foreign investment in cooperative operation are flexible and diverse, which mainly include: ① repayment of principal and interest from operating income to the lending bank, that is, repayment of the principal of shareholders' own loans or investments with a certain amount of money from turnover. (2) Allocate the relocation expenses among shareholders by accelerating the depreciation of equipment, so that the foreign investment of the cooperative enterprise can be recovered first; After the expiration of the cooperation, all assets shall be owned by the Chinese partner. ③ By-product recovery. After the enterprise produces products, they are distributed among shareholders according to the proportion agreed in the contract, and the products shared by shareholders include principal and profit.

No matter what kind of investment recovery method the contractual joint venture adopts, as long as the contract stipulates that the foreign partner will recover the investment before paying the income tax, it must apply to the financial and tax authorities, which will review and approve it in accordance with the relevant tax regulations of the state.

(3) Profit distribution

The Law on Chinese-foreign Joint Ventures stipulates the principle of profit distribution for all parties to a joint venture, that is, all parties to a joint venture shall distribute profits or products and bear risks and losses in accordance with the provisions of the joint venture contract. This shows that its profit distribution has its own flexibility, that is, it is agreed and stipulated by the parties to the contract.

At present, the profit distribution methods of cooperative enterprises mainly include: ① Chinese and foreign partners determine a payback period or investment recovery amount of foreign investment, and agree on a fixed profit distribution ratio during this period or before investment recovery (the foreign party can score more points). If the time limit is exceeded or the investment recovery amount is reached, the Chinese partner will score more points according to another proportion. (2) Determine the first few years of the cooperation period as the payback period of foreign investment. During this period, the Chinese side will not distribute profits, and all the profits will be returned to the foreign side to repay its investment, and the profits in subsequent years will be distributed by both parties according to a certain proportion. ③ Repay the foreign investment according to the fixed percentage of monthly turnover or sales of each batch of products. When the accumulated principal amount reaches the planned principal amount, it will not be withdrawn, and the remaining profits will be distributed by both parties according to a certain proportion. (4) A fixed amount of profits realized by the cooperative enterprise will be used to repay the principal of foreign investment, and the rest will be distributed by both parties according to a certain proportion. (5) On the premise of not affecting the normal production of the contractual joint venture, with the approval of the financial and tax authorities, part of the depreciation expenses may be withdrawn to compensate the investment of the foreign partner. The insufficient part is repaid from the profit. The remaining profits shall be distributed by both Chinese and foreign parties in accordance with the determined reasonable proportion.

In short, all the above distribution methods have one thing in common, that is, they can make the investment of foreign partners recover quickly and relatively stably. This is the key factor to attract foreign businessmen to establish cooperative enterprises in China. Of course. In any case, it must be a fair, reasonable, equal and mutually beneficial distribution mode permitted by our laws.

The way for all parties to share the risks and losses of the cooperative enterprise must also be stipulated in the contract. The parties to the cooperation may share the risks and losses of the enterprise according to the profit sharing ratio and capital contribution ratio, or may separately agree on the sharing ratio of losses and risks.

Four. Organizational structure and management of Chinese-foreign cooperative enterprises

According to the Law on Sino-foreign Joint Ventures, a contractual joint venture shall set up a board of directors or a joint management body to decide on major issues of the enterprise in accordance with the provisions of the contractual joint venture contract and articles of association. A cooperative enterprise with legal person qualification and enterprise legal person qualification in China shall generally set up a board of directors as the highest authority of the enterprise; However, a contractual joint venture that does not have the legal person status and has not obtained the legal person status of an enterprise in China usually establishes a joint management institution. If one of the Chinese and foreign parties serves as the chairman or director of the joint management institution, the other party serves as the vice chairman and deputy director.

According to the contract, the operation and management of a contractual joint venture can take the following different ways: ① If a board of directors is established, the board of directors decides to appoint or hire a general manager to be responsible for the daily operation and management of the contractual joint venture and be responsible to the board of directors. ② Where a joint management organization is established, it shall be decided by the joint organization or the general manager shall be hired to be responsible for the daily operation and management. The joint management organization is composed of representatives of the cooperative parties and is the highest authority of the cooperative enterprise. (III) If the chronicle meeting or the joint management organization decides to entrust a third party to operate and manage, the board of directors or the joint management organization shall sign an entrusted management contract with the third party on behalf of the cooperative enterprise, and submit it to the examination and approval authority for approval together with the credit certificate of the third party, and go through the formalities of change registration with the administrative department for industry and commerce.

V termination of Chinese-foreign contractual joint ventures

A contractual joint venture may be terminated due to the expiration of the term of cooperation between the Chinese and foreign parties, or it may be terminated in advance according to law. The term of cooperation of a contractual joint venture shall be negotiated by the Chinese and foreign parties and stipulated in the contractual joint venture contract. If the Chinese and foreign parties agree to extend the cooperation period, they shall apply to the examination and approval authority 180 days before the expiration of the cooperation period, and the examination and approval authority shall decide whether to approve or not within 30 days from the date of receiving the application.

Upon expiration or early termination of a contractual joint venture, the assets, creditor's rights and debts shall be liquidated in accordance with legal procedures; The Chinese and foreign parties shall determine the ownership of the enterprise property in accordance with the contractual joint venture contract.

If the foreign party recovers its investment in advance within the term of cooperation, the Chinese and foreign parties shall be liable for the debts of the contractual joint venture in accordance with relevant laws and contractual joint venture contracts.

When a contractual joint venture expires or terminates ahead of schedule, it shall go through the formalities of cancellation of registration with the administrative department for industry and commerce and the tax authorities after the property is disposed of.