Form of entity
China
Independent legal entity. In terms of companies set up by or with foreign investors, they need to follow the general company law (and partnership law as applicable) pursuant to the new Foreign Investment Law which took effect from January 1, 2020. Therefore, depending on the foreign shareholding ratio in a limited liability company (LLC) or a company limited by shares as discussed below, it would still work to make reference to a wholly foreign owned enterprise (WFOE) or a Sino-foreign joint venture enterprise in an economic sense. However, a WFOE or JV, including an equity joint venture (EJV) or contractual joint venture (CJV), would no longer exist as a legal form. All foreign invested enterprises (FIEs) in China will take the legal form of either a company (LLC or company listed by shares) or a partnership.
Limited liability company (LLC)
- Managed by board of directors or a single executive director (usually adopted by LLCs with a limited number of shareholders and relatively small size of operation), responsible for making major business decisions and overseeing general operations of an LLC.
- The highest authority of an LLC is the shareholders’ meeting.
- Director or the executive director is appointed/elected by the shareholder(s) of an LLC.
- Senior management officers run the day-to-day operations of an LLC, as led by a general manger who usually is appointed by the board of directors or executive director.
Company limited by shares
- Independent legal entity.
- Board of directors has overall management responsibility, making major business decisions and overseeing general operations of a company.
- The highest authority of a company listed by shares is the shareholders’ assembly.
- Director is appointed/elected by shareholders of a company.
- Senior management officers run the day-to-day operations of a company limited by shares, as led by a general manger who usually is appointed by the board of directors
Partnership enterprise
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NOT a separate legal person entity.
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Partnership agreement sets forth how the business is to be managed; one or several general partners can be designated to manage the business.