893.5034 Registration/10–645: Telegram
The Chargé in China (Robertson) to the Secretary of State
[Received October 6—3:46 p.m.]
1746. In recent conversations both with Dr. Sun Fo, President Legislative Yuan, and Dr. Chang Chao-yuan, drafter, revised company law, the Assistant Commercial Attaché has inquired concerning the present legal status of joint enterprises (ReDeptel 1435 September 11 and Dept. of Commerce inquiry telegram 1460 September 1456).
These sources state that term “joint enterprise” does not refer to a type of entity or form of organization unmentioned in the revised company law and/or on which new or special legislation is required. The term loosely refers to any company whether organized in China or abroad in which Chinese and foreign shareholders or investors are associated. It can of course also refer to any company in which the Chinese Government and a foreign govt, or foreign private interest share in ownership.
The revised company law as approved by Legislative Yuan Sept. 29 (ReEmbs telegram 1738, October 6, 10 a.m.) and after promulgation scheduled for enforcement January 1, 1946 does definitely purport to cover entire field of general company law. The term “joint enterprise” [Page 1243] is not restricted to the “limited company” as provided for in chapter V of this law. It is expected that joint enterprises in which the Chinese Govt, participates will chiefly consist of such “limited companies” but there is nothing to prevent the association of Chinese and foreign capital in any of the other types of organization provided for in the company law.
There is no stipulation as to percentage of capital or shareholders which must be of Chinese nationality in any of these types of companies. It is only provided (article 193 in draft as approved) that the chairman of the Board of Directors of a “limited liability share company” must be Chinese. Also in such companies half of the incorporations and directors are required to reside in China as is at least one examiner (chien ch’a jen). In the case of “unlimited liability companies” and “limited companies”, half of the shareholders (of whatever nationality) must reside in China.
Dr. Chang further stated that upon enforcement of the revised company law January 1, 1946, such measures as the law covering special limited corporations promulgated March 21, 1940, would be repealed. The banking, mining, insurance and maritime laws are now in process of revision. These laws may be expected to contain provisions concerning foreign participation in these particular fields; reference qualifying phrase article 297 revised company law which states that “unless otherwise provided for by law the legal rights and duties of a foreign company which has been granted authorization as well as the jurisdiction of appropriate governmental authority over it shall be the same as in the case of Chinese companies. Reference also article 25 of same law which states that “should the business of a company require special permission by the government such business shall not be undertaken unless such special permission has been obtained”.
The Embassy will report as promptly as possible on revisions which are made on these laws affecting particular fields of economic activity, especially as they may affect foreign participation, and upon specific measures which are to be repealed upon enforcement of company law.
- Latter not printed.↩