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Under the CJV rules and the CJV Law, a cooperative joint venture (CJV) can take the form of a company with limited liability (or a legal person) or a venture without the status of a legal person, which is akin to a partnership.

Where a CJV is without the status of a legal person, the following conditions must be met:

- the investment in the venture can be separately owned by each cooperative partner; accumulated profits or property of the joint venture belong to the parties;

- the responsibility of administering the joint venture lies with a joint administration and control committee whose members are elected by the parties; and

- the joint venture must keep unified books of account in addition to the independent accounting records kept by each partner.

The flexibility inherent in the contractual joint venture makes it particularly suited to certain types of investment. It tends to be utilized for the smaller businesses, where a corporate structure is inappropriate, and especially for joint ventures in which the chief contribution of the Chinese partner takes the form of the right to use land or resources.

Most joint ventures involving mining and quarrying or agriculture are contractual, as are those for the construction of apartments or hotels. Typically, for example, a hotel project will involve the Chinese party supplying the land, construction materials and labour, while the foreign party supplies capital, architectural designs and management expertise: profits will be shared for a number of years, frequently 10, at the end of which the hotel will pass to the Chinese party. This type of arrangement would be inappropriate for an equity joint venture, where each party contributes capital which belongs to the joint venture, and where profits are shared in proportion to capital contribution.

Offshore oil drilling also requires a special form of cooperative operation, specified in a standard contract formulated by the China National Offshore Oil Corporation, under which the foreign investor assumes exclusive responsibility for all risks relating to the exploration and, once oil is discovered, joint exploitation will be financed by the Chinese and foreign parties and the product shared according to the contract.

Formation

To establish a CJV, the following documents are required to be submitted by the Chinese partner to the Examination and Approval Department:

1. project proposal of the joint venture together with the documents for approval by the department in charge;

2. the feasibility study report prepared by all the parties involved;

3. authorized legal documents of the joint venture such as contract, agreement and articles of association;

4. business licence or registration certificate, capital guarantee certificate and all related valid documents of the parties;

5. a list of proposed personnel, such as chairman, deputy chairman, and members of the management committee of the joint venture;

6. any other documents requested.

In principle, the documents listed above shall be written in Chinese, except the documents in item 4. to be presented by the foreign party. Each of the documents required under items 2., 3. and 5. may be accompanied by a version of a foreign language agreed upon by all parties to the CJV.

The Examination and Approval Authority must make a decision on the application within 45 days after the submission of the documents. Where the Examination and Approval Authority is MOFTEC or another agency authorized by the State Council, all the approval certificates must be issued by the MOFTEC. If the Examination and Approval Authority is a local government, the approval certificates are issued by the local government, and are submitted to MOFTEC for information purposes within 30 days after the approval is obtained.

The CJV rules specify that approval of a CJV will not be granted if the proposed joint venture:

- would cause harm to China's national sovereignty or social welfare;

- would be a threat to China's national safety;

- would cause pollution to the environment;

- would be against the public interest, or violate Chinese laws or the state industrial policy.

The joint-venture contract must include the following items:

1. the names, place of registration, residence and personal data of the legal representative of the partners (if the person is a foreign national, the contract must also include his or her nationality and place of residence);

2. the name, site and scope of business of the joint venture;

3. the joint venture's total capital investment, registered capital, investment of each partner or term of operation, and conditions of cooperation;

4. investment of each partner and the conditions for transfer of the investment;