Law of The People's Republic of China on Sino-foreign Cooperative Enterprises(2000)

Article 1 This Law is formulated to expand economiccooperation and technological exchanges with other countries,help foreign enterprises and other economic organizations orindividuals (hereinafter referred to as foreign cooperators)to establish Sino-foreign cooperative enterprises (hereinafterreferred to as cooperative enterprises) in the People'sRepublic of China with enterprises or other economicorganizations of the People's Republic of China (hereinafterreferred to as the Chinese cooperators) in accordance with theprinciple of equality and mutual benefit. 

Article 2 When establishing cooperative enterprises, theChinese and foreign cooperators shall, in accordance with theregulations of this Law, set the investment or cooperationconditions, the distribution of the profits or products, theshare of risks and losses, the method of management, theownership of the properties of the enterprises when thecooperation ceases and other issues covered in the cooperativeenterprise contracts. Cooperative enterprises that conform to the regulations ofChinese laws on the 2 qualification of legal persons may acquirethe status of Chinese legal persons. 

Article 3 The state protects, in accordance with law, thelawful rights and interests of cooperative enterprises andSino-foreign cooperators. The cooperative enterprises shall obey the provisions of lawsand regulations of China, and shall not harm the social orpublic interests of China. The relevant organs of the state will implement supervisionover the cooperative enterprises in accordance with law.

Article 4 The state encourages the establishment of productexport and high-tech production cooperative enterprises. 

Article 5 When establishing a cooperative enterprise, thecooperators shall submit the agreement, contract, articles ofassociation and other documents signed by the two parties tothe department in charge of foreign economic relations andtrade of the State Council or other organs or localgovernments authorized by the State Council (hereinafterreferred to as the examination and approval organs). Theexamination and approval organs shall, within 45 days afterreceiving the application, decide whether to approve or rejectit.

Article 6 After an application for establishing a cooperativeenterprise is approved, the enterprises shall apply forregistration at the relevant industrial and commercialadministrative organ, and receive a business license within 30days after receiving the approval certificate. The date whenthe business license of a cooperative enterprise is issued isthe date the enterprise is established. The cooperative enterprises shall conduct tax registrationwith the taxation organs within 30 days after theirestablishment. 

Article 7 Any important changes in the cooperative contracts,discussed and agreed by all the Chinese and foreign partiesinvolved, shall be reported to the examination and approvalorgans for approval; if the changes concern legal industrialand commercial registration items or tax items, theenterprises shall register such changes with the industrialand commercial administrative and taxation organs. 

Article 8 The investment or cooperative conditions supplied bythe Sino-foreign cooperators can be cash, material objects,land-use rights, industrial property rights, non-patenttechnology or other property rights. 

Article 9 The Chinese and foreign cooperators shall carry outtheir obligations, providing investment in full andcooperation conditions in time, in accordance with theprovisions of laws and regulations, and the agreements in thecooperative enterprise contracts. If the obligations are notcarried out in time, the industrial and commercialadministrative organs shall set a time limit for them to carryout the obligations. 

If the cooperators still do not carry outthe obligations within the time limit, the examination andapproval organs and the industrial and commercialadministrative organs shall deal with the case in accordancewith relevant state regulations. 

The investment or cooperation conditions provided by theSino-foreign cooperators shall be testified by Chinesecertified public accountants or other relevant organs, whichshall issue testimonials to this effect. 4 

Article 10 If one side of the Sino-foreign cooperators wishesto transfer whole or part of its rights and obligations in thecooperative enterprise contract, it shall obtain the agreementof the other side and the approval of the examination andapproval organs.

Article 11 The cooperative enterprises shall manage thebusiness in accordance with the approved cooperativeenterprise contracts and articles of association. The right ofthe cooperative enterprises to manage the business bythemselves shall not be interfered with. 

Article 12 A cooperative enterprise shall have a board ofdirectors or a joint management organ, which will makedecisions on important issues of the cooperative enterprise inaccordance with the regulations of the contracts and articlesof association of the cooperative enterprise. One side of theSino-foreign cooperators shall hold the post of chairman ofthe board of directors or director of the joint managementorgan. The other side shall be the vice-chairman of the boardof directors or deputy director of the joint management organ.The board of directors or the joint management organ shallmake decisions to appoint or employ the chief manager, whoshall be responsible for the daily operations and management.The chief manager shall be responsible to the board ofdirectors or the joint management organ. 

If the Sino-foreign cooperators wish to entrust another partybesides themselves to manage their cooperative enterprise, aunanimous agreement must be made by the board of directors orthe joint management organ. And then the cooperativeenterprise shall 5 report this decision to the examination andapproval organs for approval, and register the change with theindustrial and commercial administrative organ. 

Article 13 A labor contract, made in accordance with law,shall set the employment, dismissal, remuneration, welfare,labor protection, labor insurance and other items for thestaff of the cooperative enterprise.

Article 14 The workers of the cooperative enterprise shall setup union organizations in accordance with law, carry out unionactivities and protect the lawful rights and interests of theworkers. 

The cooperative enterprise shall provide the necessaryconditions for the activities of the workers' union of theenterprise. 

Article 15 The cooperative enterprise shall set up accountbooks in China, submit accounting statements in accordancewith regulations, and accept the supervision of the financialand taxation organs. 

If a cooperative enterprises is in violation of the aboveregulations by not setting up accounting books in China, thefinancial and taxation organs shall impose a fine, and theindustrial and commercial administrative organ can order it tocease operation or even evoke its business license. 

Article 16 The cooperative enterprises shall open foreignexchange accounts with the banks or other financial organsdesignated by the state foreign exchange control organs forhandling foreign exchange businesses. 

 Issues of cooperative enterprises concerning foreign exchangeshall be dealt with in accordance with state regulations onthe control of foreign exchange.

Article 17 The cooperative enterprises may seek loans fromfinancial organs in China as well as organs abroad. 

The loans and guarantees used by the Sino-foreign cooperatorsas investments or cooperation conditions shall be arranged bythemselves.

Article 18 The various kinds of insurance coverage forcooperative enterprises shall be furnished by insurance organsin China. 

Article 19 Cooperative enterprises may import the materialsthey need and export their products within the approvedbusiness range. The cooperative enterprises may purchase thenecessary raw materials, fuels and other materials within theapproved business range in the domestic or internationalmarket, in accordance with the principles of being fair andreasonable. 

Article 20 Cooperative enterprises must pay taxes and enjoypreferential treatment such as tax reduction or exemption inaccordance with relevant regulations of the state. 

Article 21 The Chinese and foreign cooperators shalldistribute the profits or products and share the risks andlosses in accordance with the cooperative enterprisecontracts. 

If all the fixed properties of a cooperative enterprise are tobelong to the Chinese  cooperator at the expiration of thecontract, according to the cooperation contract, theSino-foreign cooperators may arrange for the foreign cooperator to take back its investments before the expiration of the contract. If a cooperative enterprise contract stipulates that theforeign cooperator shall take back its investments beforepaying income tax, the cooperative enterprise must send anapplication to the financial and taxation organs, forexamination and approval in accordance with state taxationregulations.

 As in the above provisions, if the contract stipulates thatthe foreign cooperator take back the investment before theexpiration of the contracts, the Sino-foreign cooperatorsshall share the responsibility for the debts of thecooperative enterprise in accordance with the provisions oflaws and the cooperative enterprise contract. 

Article 22 The lawful profits of the enterprises, other lawfulincomes of the foreign cooperators after they have performedtheir legal obligations and the funds shared when thecooperation is terminated may be remitted abroad in accordancewith law. 

 The salary and other lawful incomes of the foreign employeesof cooperative enterprises may be remitted abroad after payingindividual income tax in accordance with law. 

 Article 23 Cooperative enterprises shall clear the assets,creditor's rights and debts when the cooperative enterprisecontracts expire or end before the expiration time. TheChinese and foreign cooperators shall confirm the ownership ofthe assets of the cooperative enterprises in accordance withthe cooperation contracts. 

When the cooperation comes to an end or ends before theexpiration time, the cooperative enterprise shall cancel itsregistration with the relevant industrial and 8 commercialadministrative and taxation organs.

Article 24 The cooperation time limit shall be decoded by theSino-foreign cooperators and stipulated in the cooperationcontract. If the Chinese and foreign cooperators wish toextend the cooperation time limit, they shall send anapplication to the relevant examination and approval organ 180days before the expiration date of the cooperation contract.The examination and approval organs shall, within 30 daysafter receiving the application, decide whether to approve orreject the application. 

Article 25 The Chinese and foreign cooperators shall solve alldisputes arising in the course of performance of thecooperative enterprise contract and the articles ofassociation by negotiation or mediation. In case the Chineseand foreign cooperators do not wish to solve the dispute bynegotiation or mediation, or negotiation or mediation hasproved unsuccessful, the two parties may take the dispute tothe Chinese arbitration organs or other arbitration organs inaccordance with the arbitration provisions in the cooperativeenterprise contracts or written arbitration agreements madeafter the dispute has arisen. 

 If the Chinese and foreign cooperators have not stipulatedarbitration provisions in the cooperative enterprise contractand failed to reach any agreement in writing after theemergence of a dispute, they can file a lawsuit with a Chinesecourt. 

Article 26 The department in charge of foreign economicrelations and trade of the State Council shall draw up rulesfor the implementation of this Law, which will come intoeffect after the State Council has given its approval. 

Article 27 This Law shall go into effect on the day it is promulgated.