How to protect foreign investors in Sino-foreign equity joint ventures

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Over time, foreign investors have come more and more inclined to “go alone”, i.e. setting up a WOFE (wholly foreign owned enterprise), when making green field investment in China. The reason behind is that Chinese partners may proved to be unreliable and may and can mess up things altogether. Look at the battle between Wahaha and Donone. Wherever it is possible to set a WFOE for investments in China, WFOE will always triumph over joint ventures with Chinese investors.

Now when having to partner with (a) Chinese investor(s), foreign investors shall have to think over and over strategies and tactics that may be utilized to safeguard its interests in the joint venture company (the “JV Company”). We hereby introduce the following often-used tactics in protecting rights and interests of the foreign party. Such tactics shall be fully considered before entering into the partnership with Chinese parties and shall be clearly manifested in the joint venture contract, articles of association of the JV Company and other related documents.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jason Tian | Attorney Advertising

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