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What are the conditions required of a Joint Venture Enterprise Undergoing Contract Management?

"Contract management of joint venture enterprise " refers to circumstances whereby, after the signing of a contractual management contract between a joint venture enterprise and a contractor, all or part of the operational and administrative rights of the enterprise are transferred to the contractor for a specified period within which the said contractor is responsible for the operations and administration of the enterprise.

A joint venture enterprise may only be subject to contract management if it complies with all of the following conditions:

1. The joint venture enterprise must be involved in an industrial project encouraged or approved by the State. Key state projects, especially resource and communications projects shall, however, be prohibited from undergoing contract management.

2. The Chinese and foreign investment partners must have already made their investment contributions pursuant to the schedule and amounts stipulated in the joint venture contract and these funds must have already been examined and verified. The enterprise is difficult to survive due to unsound management practices.

Qualifications of a Contractor

A contractor shall have the following qualifications:

1. be a Chinese or foreign company or enterprise with legal person status and shall have at least three years experience in management activities;

2. be engaged in the same industry as the joint venture enterprise which it is contracting to manage and have the ability to put forward detailed plans to realistically resolve the said enterprise's serious debts and enable normal development to be carried out;

3. be able to provide the joint venture enterprise with a sufficient amount of risk collateral or risk security and the related letter of guarantee.

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