- The holders of 5 percent of the paid-up capital of the company which carries the right to vote at general meetings may requisition the directors to call a meeting.
- in the event of a successful take-over offer, the minority who did not accept the offer have the right to be bought out
- in the event of a successful general offer to buy back shares, the minority who did not accept the offer have the right to be bought out
- A member may petition for the company to be wound up by the court.
China Company Law:-
Now, let us look at three typical foreign investments in China.
Equity joint venture
-It received capital contributions from both the Chinese party and the foreign party, thus joint venture partners share profits and bear risks and losses in proportion to their contribution to the registered capital of the joint venture;
-been established within China’s territory in accordance with relevant Chinese law and is subject to the jurisdiction and protection of Chinese law.
-been registered as a Chinese legal person and must take the form of a limited liability company; and
-foreign investors who have contributed at least 25 percent of the registered capital of the equity joint venture.
Cooperative joint venture
-It is a type of joint venture; therefore, cooperative parties share profits and risks.
-Foreign investors and Chinese partners put every aspect of their arrangements into a written contract, such as the terms for cooperation, distribution of earnings or products, sharing of risks and losses, method of business management and the ownership of property on the expiration of the joint venture.
-A cooperative enterprise can also obtain the status of a ‘Chinese legal person’ if it compiles with the provisions of Chinese law for a legal person. On the other hand, a cooperative joint venture can choose not to have the status of a Chinese legal person.
-the main characteristic of a cooperative joint venture is that the parties can stipulate all their investment intentions and conditions in a written contract. Within the scope of relevant law and upon prior agreement by all parties, any arrangements can be put into contract and will be binding on all the joint venturers. In this regard, a cooperative joint venture is more flexible than an equity joint venture.
Wholly foreign owned enterprise
It is an enterprise established within Chinese territory, in accordance with the relevant Chinese laws, with capital provided totally by the foreign investor. A wholly Foreign Owned Enterprise should be distinguished from a branch of a foreign company or a representative of a foreign economic organization.
Generally, once a Wholly Foreign Owned Enterprise is registered in China, it becomes a Chinese legal person. That means, if a Wholly Foreign Owned Enterprise enters into a contract with another Chinese legal person, then the contract will be subject to the domestic contract law. As with an equity joint venture, a Wholly Foreign Owned Enterprise is also treated as a limited company. Thus, it has the status of a Chinese legal person with limited liability where its shareholders are liable to the company only up to the subscription price of shares and the company itself is liable for its debts to the existent of its total assets.
In China, there are two common methods for resolving disputes. They are arbitration and litigation.
‘Arbitration’ is generally a process whereby an independent third party makes an award after having heard submissions and reviewing evidence from disputants and deciding which of those disputants is more in the right or wrong. Arbitration is the most formal of the non-litigious forms of dispute resolution. Depending on the jurisdiction and circumstances, there can be many variations in the form of arbitration that it can be either (1) a voluntary or compulsory process, (2) annexed to a court or be held within a tribunal or commission, (3) legislative or non-legislative based, (4) binding or an advisory decision or award, (5) a judicial or non-judicial process and (6) conducted on an inquisitorial or adversarial basis.
In the PRC, arbitration is usually conducted by a governmental or quasi-governmental arbitration body and these organizations are the China International Economic and Trade Arbitration Commission (CIETAC) and the China Maritime Arbitration Commission (CMAC), plus some domestic arbitration bodies. While the conflicting parties can appoint almost anyone to act as the conciliator, they can only choose an arbitrator from the panel of officially approved arbitrators.
If the parties to a dispute resort to arbitration, they will go through a more formal proceeding compared with that of conciliation. An arbitration commission normally has its own arbitration rules to be followed during the arbitration procedure. As mentioned previously, both the CIETAC and the CMAC have issued their own arbitration rules to govern the arbitration proceeding.
The preference for arbitration over litigation is reflected not only in some of China’s commercial legislation but also the entreprises’ interest.
Disputants may still maintain business relation if arbitrary is used. If we lose in the arbitrary, all the expense involved will not be too high. Moreover, the compensation or penalty can be negotiable.
On the other hand, if we lose in the litigation, high cost will be involved. Moreover, litigation always attracts publicity deteriorating our goodwill.
In addition, the Arbitrary Committee may have more influence than the litigation.
Actually, having litigation in different areas in China is very difficult. For example, companies win in a province but lose in the other province. It is very difficult for them to carry out the winning decision in the province where the court case is lost.
Law in China cannot be carried out in different locations causing frustration to many foreign companies. Thus, the most important thing is to reinforce the law to be carried out in any provinces.
Due to the ambiguity of the law, the foreign investors were always put into difficult positions. Sometimes, Quanxi can contribute to resolve the problems. However, this contradicts to the spirit of the law.
The protectionism of different provinces causes a lot of injustice. In order to solve this problem, the law system should be reformed to unify all the laws’ interpretation in different provinces and align with the international law system.
