The conflict between the Amended Company Law and Chinese-Foreign Cooperative Joint Venture Law has been long-debated. Considering Article 218 of the newly amended Company Law and the chronological development of the two Laws, it appears that the following principles shall be applied in the application of the foregoing two laws: (1) the Chinese-Foreign Cooperative Joint Venture Law shall prevail when there are no conflicts between the two laws, and/or if the Amended Company Law is silent; (2) the Amended Company Law shall prevail in matters related to general characteristics of a companyprovided that the Chinese-Foreign Cooperative Joint Venture Law is silent on such matters; and (3) the Chinese-Foreign Cooperative Joint Venture Law shall prevail in conflicts related to particular CJV issues (e.g. the cooperation conditions, organizational structure and distribution of income). Finally, if any doubt remains as to the application of each law, the Detailed Rules on Implementation of Chinese-Foreign Cooperative Joint Venture Law ("Detailed Rules") shall provide clarification and follow the preceding principles when interpreting the Amended Company Law.
Can CJVs be dissolved through the judicial process as provided in Article 183 of the Amended Company Law? Some scholars believe that judicial dissolution shall not be applied to CJVs, because Article 48 of the Detailed Rules provides that:
[if] the CJV cannot operate due to one or more foreign and Chinese parties’ failure to fulfil the obligations as stated in the CJV contract and organization charter… [then] the parties who have fulfilled their obligations have the right to apply for dissolution of the CJV with the authorities in charge of examination of the CJV.
Therefore, any party who has fulfilled his/her obligations may apply for administrative dissolution of the company. Filing an application with the authorities for approval is a prerequisite for shareholders’ right to exercise the right to dissolve the CJV company dissolution in CJVs. As provided by the Detailed Rules, shareholders are only entitled to apply for the dissolution of CJVs and have no right to file legal actions to dissolve the CJVs. Also, Article 48 of the Detailed Rules is an administrative dissolution procedure, specially designed for the supervision of CJVs. It shall be considered an “other alternative mechanism” in addition to the judicial dissolution. The Detailed Rules were promulgated before the Amended Company Law and do not consider the situation regarding judicial dissolution. Article 48 of the Detailed Rules shall not be considered as the exception to judicial dissolution within the legislative intent. The judicial dissolution system was first provided in the Amended Company Law and shall be applicable to all corporate entities. Therefore, judicial dissolution shall be applicable to CJVs unless the Chinese-Foreign Cooperative Joint Venture Law and its Detailed Rules provide otherwise.
