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Www Flexiblemorgage Flexible Mortgage Flexible Mortgage Flexible Mortgage Szh 2007 01 05 Spontaneous Human Combustion Flexible Mortgage COOPERATIVE OR CONTRACTUAL JOINT VENTURES

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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;

5. profit distribution, and sharing of risks and losses;

6. details about members of the board of directors and dismissal and recruitment of managers of the joint venture;

7. the major production equipment and technology and its source;

8. sale arrangements for the joint venture's products in China and overseas;

9. arrangements for the income and expenses in foreign exchange;

10. accounting and auditing standards or principles to be used;

11. methods for resolving disputes among the partners, and other obligations and responsibilities of each partner in case of breach of contract;

12. financial, accounting and auditing guidelines for the joint venture;

13. the procedures for revising the articles of association of the joint venture; and

14. duration, dissolution and liquidation of the cooperative joint venture.

Capital

The Cooperative Joint-Venture Law makes no mention of total investment and registered capital. The provisions of the Equity Joint-Venture Law and Regulations are usually applied by analogy.

Capital contributions

Capital contributions by the parties in a cooperative joint venture may take any of the forms applicable to equity joint ventures under Arts. 8 and 9 of the Cooperative Joint-Venture Law. These include industrial property rights and know-how, buildings, plant and equipment, land-use rights and cash. (See 6.4.3.)

In addition, the parties to a cooperative joint venture may also contribute natural resource rights, labour and utilities, none of which is permitted under the Equity Joint-Venture Law.

There is no minimum requirement of foreign contribution to a cooperative joint venture without legal person status.

The treatment of capital contributions in a cooperative joint venture which is a contractual joint venture, and a joint-venture company with the status of a legal person, may differ considerably:

- In a true contractual joint venture such contributions are not treated as part of the "equity" or "registered capital", as they would be in an equity joint venture. Rather, they are viewed as separate contributions made by the parties to the project or undertaking. As a result, the parties to such ventures are able to avoid the problem involved in valuation of the contributions in kind.

- By contrast, capital contributions to a cooperative venture in the form of a legal person are treated in very much the same way as capital contributions to equity joint ventures.

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