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Structuring Your Business Venture in China

Four Understandings. Industrial PolicyApproval ProcessScope of BusinessForeign Exchange Control. Three Basic Investment Forms. Equity Joint Venture (

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Structuring Your Business Venture in China

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    1. Structuring Your Business Venture in China Z. Y. James Fang, Partner/Attorney ??? ?????

    2. Four Understandings Industrial Policy Approval Process Scope of Business Foreign Exchange Control

    3. Three Basic Investment Forms Equity Joint Venture (“EJV”) EJV Law of 1979, as Amended 2002 Resemble Closely-held “C” Corporation in US. Equity holding - basis for profit/risk/voting distribution Right of First Refusal

    4. Three Basic Investment Forms/EJV (Cont’d) Pros Only Choice for Restricted Industry Less Capital Commitment Quick Capture of Chinese Party’s Market Share Cons Dealing with Chinese Partner, a Challenge Lack of Capital for Growth Chinese Party’s Leverage Diminishing Conditions for Establishing WFOE Removed

    5. Three Basic Investment Forms (Cont’d) Cooperative (Contractual) Joint Venture (“CJV”) An Unexpected By-product EJV vs. CJV, a Comparison Contract the Basis Fixed Revenue Strict Scrutiny over “Fixed Revenue” Arrangement

    6. Three Basic Investment Forms (Cont’d) Wholly Foreign-Owned Enterprise (“WFOE”) Source of Fund Advantages Offered Absolute Control Streamlined Decision - making

    7. Two Ways to Enter Greenfield Investment vs. M&A Legal Framework for M&A Company Law of 1994, as Amended 2005 Interim Provisions on Restructuring and Reorganization of State Owned Enterprises with Foreign Investment of 2002 Regulations on merger and Acquisition by Foreign Investment Anti-monopoly Law of 2007

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