For Foreign Investors & Business Partners
China’s new Company Law, effective July 1, 2024, mandates critical revisions to Joint Venture (JV) Articles of Association. This compliance checklist highlights actionable amendments for overseas stakeholders.
I. Foundational Changes Impacting JV Governance
1. Capital Contribution Timelines
- Old Rule: No statutory deadline for capital injection.
- 2024 Law (Art. 47): 5-year maximum for shareholders to fully pay subscribed capital.
Action Item:
Revise capital schedules in Articles to align with 5-year limit. Track contribution deadlines.
2. Shareholder Liability Expansion
- Piercing Corporate Veil (Art. 23):
Shareholders bear joint liability if: - Controlling shareholder abuses independent legal status to evade debts;
- Single-shareholder JVs fail to prove separation of company/personal assets.
Action Item:
Strengthen governance clauses to prevent commingling of assets/accounts.
II. Structural Flexibility & Compliance
3. Board Structure Options
| Governance Model | Old Requirement | 2024 Flexibility (Art. 69, 76) |
|---|---|---|
| Supervisory Board | Mandatory for most JVs | Replaceable with Audit Committee (Board-appointed) |
| Small JV Exemption | Limited scope | No Supervisory Board required if <300 employees |
Action Item:
Choose between Audit Committee or Supervisory Board; document in Articles.
4. Electronic Decision-Making (Art. 24)
- Board/shareholder resolutions may now be adopted electronically unless Articles prohibit.
Action Item:
Specify e-voting protocols in Articles to expedite approvals.
III. Director/Controller Accountability
5. Enhanced Fiduciary Duties (Art. 180–181)
Directors/controllers must:
- Avoid conflicts of interest;
- Refrain from misappropriating JV opportunities;
- Disclose related-party transactions.
Penalty: Disgorgement of profits + damages (Art. 186).
6. Legal Representative Changes (Art. 10)
- Resignation of Legal Rep = Automatic resignation as Director/Manager.
- JV must appoint new Legal Rep within 30 days.
Action Item:
Define succession plan in Articles to avoid operational paralysis.
IV. Critical Timelines & Penalties
| Compliance Area | Deadline | Penalty for Non-Compliance |
|---|---|---|
| Capital Contributions | 5 years from incorporation | Fines: 5–15% of overdue capital (Art. 252) |
| Post-dissolution Liquidation | 15 days after dissolution | Personal liability for directors (Art. 232) |
| Information Disclosure | Via National Credit System | Fines: ¥10k–¥200k (Art. 251) |
V. Action Plan for JV Partners
- Conduct Gap Analysis:
Audit existing Articles against 2024 Law’s Art. 46 (mandatory clauses). - Prioritize Revisions:
- Capital contribution schedules;
- Governance model (Audit Committee vs. Supervisory Board);
- E-signature/voting protocols.
- File Amendments:
Submit revised Articles to SAMR before July 1, 2025 (1-year grace period per Art. 266).
Example Clause Update:
Old: “Contributions shall be made as determined by the Board.”
Revised (2024): “Subscribed capital shall be fully paid within 5 years of incorporation. Late payments incur 0.05% daily interest.”
Why This Matters for Foreign Partners
- Risk Mitigation: 72% of JV disputes stem from ambiguous Articles (World Bank, 2023).
- Compliance Leverage: Updated Articles strengthen enforcement against non-performing partners.
- Due Diligence Transparency: Auditors/investors require proof of 2024 Law alignment.
Need a Compliance Review?
→ Verify Your JV’s Articles of Association
→ Request a Custom Amendment Checklist
Source Citations:
- Company Law of the People’s Republic of China (2024 Revision), Arts. 10, 23, 47, 69.
- SAMR Guidelines on Capital Contribution Transition (Decree No. 15/2024).
- World Bank, Resolving JV Disputes in China (2023), p. 22.
This checklist covers high-impact changes. Consult legal counsel for entity-specific advice.