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Apr19

China Trade Union Law and Regulation and Foreign Owned Companies

China trade union regulations is always a mysterious area of law in China employment law legal system. Some of my clients always consult me on this topic. However, even myself will sometimes be confused on the trade union laws and regulations, as well as the reality of the trade union law practice. The following text will feed those who are interested in this area.

Basic Introduction to China Trade Union

Cheap labor. Minimal regulations. Bribable officials. Foreign corporations attracted to China because of its low cost of business have avoided the unionization desired by the Chinese Communist Party (“CCP”) despite China’s history of weak trade union laws and inconsistent enforcement of union mandates. However, recent concerns of social unrest have forced the CCP to consider reforming the political tools used to control Chinese society. The CCP wants to create social stability, avoid independent unionization, and prevent the westernization of China. Foreign Investment Enterprises (“FIEs”) present new challenges for labor market regulation in China with their large number of non-unionized workers revolting at poor working conditions, as well as FIEs' importation of western values. The Trade Union Law amendment of 2001 affords the All-China Federation of Trade Unions (“ACFTU”) more avenues of enforcement through which to force FIEs to unionize and obliges the ACFTU to become a greater presence in private enterprises—especially FIEs.

 
Apr17

It's Essential To Retain A China Lawyer To Draft A Non-disclosure Agreement In English

A Non-Disclosure Agreement (also known as a "Confidentiality Agreement") is used when someone with an unpatented idea shows it to another party, and wants that party to maintain as confidential any information he learns about the product as a result of the meeting.

As experienced attoreny practising in China, we have drafted numerous Non-disclosure Agreement in English for our foreign clients. It's essential to enter into such non-disclosure agreement in China, since it will be treated as valid evidence on which your rights when dispute arise during executing the agreement. A non disclosure agreement is an agreement between two individuals or organizations restricting one individual from disclosing company business, proprietary processes or paperwork, or trade secrets, of the business.

The agreement, often called a confidentiality agreement, includes several types of closely held information:

l          Information on the nature of and formulas for patents, copyrights, trademarks and service marks

l          Information on company processes ("the way we do things here")

l          Information on trade secrets- a formula, device, or mechanism, for example - that provides a competitive advantage to a company and which is severely compromised if disclosed.

l          Non-disclosure agreements are used in employment situations to restrict an employee from stealing company secrets, inventions, or proprietary processes.

 
Apr17

China Contract Attorney: Essentials on the Making of a Business Contract: The Legal Ties that Bind

The main goal of this law blog is to assist foreigners to do business and solve other issues in China. More than 90 per cent foreigners come to china for business, so it's essential for foreigners to know how to conclude a contract in China. Especially for those owners of a small business, you will probably need to create business contracts as your company grows.

What is a Business Contract?

A business contract is a legally binding agreement between two parties for an exchange of services that are of value. For a contract to be valid, an offer must be made and accepted. Using a contract in business dealings helps ensure an agreement is acted on, insofar as a broken contract could result in a lawsuit or out-of-court settlement and the payment of damages caused by the breach. The best way to avoid a dispute or potential litigation, however, is to craft a solid agreement in which you’re confident you’ve negotiated the best terms for your business.

 
Apr16

How to Find and Choose the Best English Speaking Lawyer in China

We are China English speaking lawyers. Most of our clients are foreign nationals and foreign companies. We have lawyers in Beijing, Shanghai, Tianjin, Guangzhou, Shenzhen, Suzhou, Nanjing, Qingdao, Fuzhou, Hainan, Hefei, Wuhan, Xian, Changsha, Xiamen and other cities. As China is now a "factory of the world", so many foreign businesses buy products in China. Thus it's essential to find an English speaking lawyer as your legal counsel in China. Unfortunately, sometimes foreign companies or individuals have to face these problems during the transactions: late delivery, quality defects, IP and business secret infringement etc. When damage is incurred, it's proved that a PO in simple form cannot protect their benefits sufficiently and effectively. Thus, we provide views and suggestions to guide you how to cope with damages because of the counter party's breach of contract, such as: what kind of purchase contract you actually need? Is a signed contract in original necessary? How to choose jurisdiction and governing law for disputes arising from the purchase? And, under which circumstances should there be a penalty for breach of contract stipulation in your purchase contract. China law blog can serve as your legal counsel in South China Areas, including Shenzhen, Dongguan, Guangzhou, Huizhou, Nanhai, Panyu, Shekou, Jiangmen, Foushan, Zhoushan and other cities.

Choosing the right law firm can be one of the most important decisions you will ever make. You hire a law firm because you have a legal problem, which will entail either money / property, or possible jail time. With so much at stake, you want the best legal representation. That's why finding the right lawyers for you is so important.

 
Apr16

China Lawyer Tips: How to Set Up Joint Venture in China

When the value of goods purchased is large enough, setting up a dedicated factory in China may be a consideration. It is the preferred option when issues of quality, design security and brand control are paramount. However, the effort required to build and manage a factory from the ground up can be intimidating, especially for those businesses which are new to China. For companies that want greater control over the production process, but prefer to avoid the headaches associated with “going it alone” in China, PassageMaker offers two forms of cooperation:

Virtual Joint Venture in China:  Existing PassageMaker floor space, staff and equipment are dedicated solely to the production of the client’s given product. In this fashion, the client can leverage the existing PassageMaker business umbrella (space, staff, management, logistics, accounting). Compensation to PassageMaker depends on the scope of the factory formation project, but can take the form of a fixed monthly retainer and/or percentage of production value.
Joint Venture in China: In cases where the production space and staffing requirements are substantial, the client and PassageMaker may form a Joint Venture at a new facility. In simple terms, under a pre-agreed compensation structure.

 
Apr13

What is a no-default divorce and do you need a divorce law in China

What is a "no fault" divorce?

"No fault" divorce describes any divorce where the spouse asking for a divorce does not have to prove that the other spouse did something wrong. All states allow no fault divorces.

To get a no fault divorce, one spouse must simply state a reason for the divorce that is recognized by the state. In most states, it's enough to declare that the couple cannot get along (this reason goes by such names as "incompatibility," "irreconcilable differences," or "irremediable breakdown of the marriage").

In some states, however, the couple must live apart for a period of months or years before they can obtain a no fault divorce.

 
Apr13

China Law Blog Tips: Wrongful Termination: Was Your Firing Illegal?

If you've been fired from your job, do you have grounds to challenge the termination?

 

Your Rights in the Workplace

If you've been fired from your job, how do you know if the termination was legal or illegal (called "wrongful termination")? Most employment is "at will," which means an employee may be fired at any time and for any reason or for no reason at all (as long as the reason is not illegal). But there are some important exceptions to the at-will rule -- and legal remedies -- that may help you keep your job or sue your former employer for wrongful termination.

 
Apr12

China Company Formation/Corporation Registration/Setting up company

China Law Blog provides a full range of professional services for foreign investors targeting to enter or operate in China. Our services include, among others, offshore incorporation (Hong Kong, BVI, Seychelles, Marshall Islands etc.), China company formation (WFOEs, representative offices, Joint Ventures) and investment consulting services (China investment project management, due diligence, M&A, corporate restructuring, auditing, accounting services etc.) Different Company Types in China

We have a clear focus on small and medium size businesses, including family-owned businesses and entrepreneurs, and strive to provide them the full range of services as they enter the Chinese market. No other advisory firm truly understands the needs of this market segment better than us. Furthermore, our qualified and multi-cultural staff, with years of experience in company formation, China market entry advisory, tax, accounting and audits, investment project management and more, are well prepared to guide entrepreneurs and SMEs in entering and succeeding in China.

 

Equity Joint Venture (EJY)

l The foreign investors will have a holding of at least 25% in the Chinese company.

l The registered share capital must cover a specific percentage of the total investment in the company. This percentage varies between 33% (an investment of over $ 36 million) and 70% (an investment of under $ 3 million).

 

A Joint Cooperative Venture (CJV)

l A Joint Cooperative Venture is usually set up for a specific project or partnership for a period of time that is defined in advance.

 

Wholly Foreign Owned Venture (WFO)

l There are no minimum or maximum limits regarding the amount of the foreign investment.

l In recent years over 65% of foreign investments in China have been in the form of a WFO, mainly because of the absence of a minimum investment requirement.

 

Chinese Holding Company (CHC)

l This is intended for a company that is interested in consolidating a number of investments in China to one body.

l There are legal requirements in China regarding the credit rating of a foreign investment in a CHC. The total value of the investor's assets and his investments in a company in China must be in excess of the legally defined minimum.

 

Joint Stock Company

l The minimum registered share capital is CNY 30 million. The minimum for a company traded on the Stock Exchange is CNY 50 million.

l The foreign investors' share must be at least 25% of the registered capital.

 

Branch

l At present, only foreign companies in the financial and services sector, subject to the restrictions specified in Chinese law, may set up a branch in China.

 

Representative Office (RO)

l A representative office is a type of operation with low financial expenses.

l The aim of the RO is the creation of a presence in China and promotion of contacts/supervision/management investigations in China.

l The RO may not issue accounts to the Chinese market for sales and services in China.

Advantages and disadvantages of setting up company in China

 

China company formation assists global entrepreneurs legitimately conduct business in one of the world’s fastest-growing economies. The following information will help you determine whether China company formation is the optimum corporate structure to fulfill international business objectives:

Advantages of China Company Formation 

1. China company formation is popular with foreign investors looking for a foothold in the world's third-largest economy (after the EU and the USA), based on nominal GDP data from the IMF. China is the recipient of more foreign direct investment (FDI) than other nations in Asia. Furthermore, China offers a vast labour pool that, in the major cities, increasingly comprises sophisticated graduates. 

2. A China Representative Office is an ideal way for entrepreneurs choosing China company formation to market a foreign parent company’s services in China.

3.  A foreign-owned company can obtain tax exemptions if based in a Free Trade Zone or Export Processing Zone. Furthermore, to encourage foreign investment some provinces offer preferential corporate tax rates. Although the most popular locations for foreign investors are Beijing, Guangzhou, Shanghai and Shenzhen, Healy Consultants will compare regional options and provide a professional recommendation based on our client's requirements. Other notable options include Suzhou, Qingdao, Ningbo and Dailan.

4. A Chinese company accesses double taxation treaties with 95 countries including Australia, France, Germany, India, Singapore, the UK and the US to support China company formation. There are more tax agreements in the process.

5.  100% foreign ownership is permitted for a Chinese company. For more information, visit Healy Consultants' Wholly-Owned Foreign Enterprise (WOFE) page. 

6. In its 2010 World Competitiveness Yearbook, the Switzerland-based IMD positively ranks China as the world’s 18th most competitive economy. The ranking takes into account factors including economic performance, government efficiency, business efficiency and infrastructure. Furthermore, in the World Economic Forum's Global Competitiveness Report 2009-2010, China is ranked at a positive 29th place. 

7. Following China company formation, Healy Consultants can open a corporate bank account with one of the world's leading retail banks, including HSBC, Standard Chartered and Citibank. For more information, visit our China corporate bank account page. For a wider overview of our services visit our Other services to support China incorporation page. 

Disadvantages of China Company Formation

1. All Chinese companies suffer a fixed 25% tax on global profits. However, tax deductions are available for foreign-owned companies (see point 3 above). 

2.  Although 100% foreign ownership is permitted, the company activities allowed and minimum start up capital required varies depending on geographical region. The activities of a foreign-owned entity are restricted to those on its business license, issued by the provincial government. Because of this, it is critical for a foreign investor to carefully prepare incorporation documents. Healy Consultants handles all pre-incorporation documentation for clients to ensure the scope of business license matches the planned activities of the company. Examples of the restrictions placed on Chinese companies include the inability of a Representative Office to make sales and invoice clients in China.

3.  Both a foreign-owned entity and a Representative Office must be located in a prime office premises pre-approved by local government and municipal authorities. Consequently, office premises eligible for foreign-invested companies are expensive to rent. 

4.  China company formation takes up to 6 months due to inefficient bureaucracy and complex licensing procedures involving local and provincial authorities. To highlight this, China ranks poorly as the world’s 79th easiest place to do business in the 2011 Doing Business Survey by the World Bank, which takes into account China company set up procedures, time, cost and minimum capital required to start a business. China also negatively ranks as the world's 140th freest economy in the Heritage Organisation’s 2010 Index of Economic Freedom, a measure of freedom enjoyed in business, trade, monetary, financial, investment and labour markets.

5. Forbes Tax Misery Index 2009 rated China as having the 2nd highest tax misery in the world. The index takes into account corporate income, employer social security, personal income, employee social security, wealth tax and VAT/sales. Forbes suggests the index can be used as a proxy to evaluate whether a country抯 policy attracts or repels capital and talent. 

6. China's legal system has a poor international reputation, for example the enforcement of intellectual property rights. As evidence of this, China ranks as the world's 78th-least corrupt country in the 2010 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians. Moreover, China is poorly ranked as the world's 27th most competitive economy in the World Economic Forum's Global Competitiveness Report 2010-2011. 

7. After China company formation, all entities are required to submit financial statements and tax returns to federal and provincial authorities. Healy Consultants will assist our clients efficiently and effectively to complete this annual statutory obligation. 

Why Choose US to Accomplish Your China Company Formation and Business Registration:

  • Introduction to trusted Business Registration agent and guidance on document preparation
  • A prestigious city office location
  • Office facilities to base your new business form
  • A local business telephone number at your chosen city location
  • Dedicated receptionist to answer your calls in your company name and transfer to you
  • Access to corporate meeting rooms and boardrooms for as little as 10 mins or the whole day
  • Professional reception area where your guests will be warmly welcomed prior to meetings
  • Flexible lease terms
  • Experienced multi-lingual personal assistants available to support you when you need them
  • Some complimentary access to the executive business lounge in any local or international location
  • Complimentary use of a day suite office in any other city for up to 3 days per month
  • 24 hour per day voicemail with delivery to your email and direct diversions such as press 1 for mobile, press 2 for home or perhaps 3 for a colleague
 
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I am a licensed China lawyer. Most clients are foreign nationals and companies. China Lawyer Blog have associates in Beijing, Shanghai, Tianjin, Guangzhou, Suzhou, Nanjing, Qingdao, Fuzhou, Hainan, Hefei, Wuhan, Xian, Changsha, Xiamen and Hangzhou. Learn More

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This China Lawyer Blog is aiming at providing better knowledge and understanding of Chinese law for foreigners. Should you have any legal issue in China, do not hesitate to contact China Lawyer Blog for consultation. Preliminary consultation is free. Further legal service, however, will be charged in due rate and in due course.

You are welcomed to ask for a quotation pursuant to your specific circumstance.

About author

China Lawyer BLog AuthorPeter Zhu, an experienced China attorney licensed to practice law for more than ten years, the author of this China Lawyer blog, welcomes any enquiry or consultation related to Chinese law.