Verifying Secondary Chop Authority in PRC Master Supply Agreements
Verify secondary contract chops against Public Security Bureau 13-digit codes and secure a primary-chopped Power of Attorney to prevent non-authorization defenses.
Exit Plan Drafting
Meaning
Strategic preparation for joint venture termination defines the process of creating enforceable terms for winding down a corporate presence in China. Foreign investors engage in exit plan drafting during the initial negotiation phase to avoid becoming trapped in a deadlocked partnership. This document outlines the trigger events and the valuation methods for equity transfer upon dissolution.
Contractual Structure
Detailing the specific triggers for termination in the joint venture agreement prevents protracted court battles over deadlocks. The exit plan drafting must include clear clauses defining material breach or persistent deadlock that make business operations impossible. These terms must specify the purchase price formula, using established earnings multiples or book value calculations.
An ambiguous valuation clause leads directly to disputes that prevent the local Administration for Market Regulation from processing the equity transfer.
Administrative Procedure
Processing the official closure of a foreign-invested enterprise requires approval from the local commerce bureau and the tax authority. The exit plan drafting must assign specific responsibilities for executing these administrative steps, including the appointment of a liquidation committee. If the local partner refuses to cooperate, the foreign shareholder needs a clear mechanism to act unilaterally.
This includes holding power of attorney and having custody of the necessary registration certificates to complete the deregistration.
Financial Settlement
Securing the repatriation of the remaining capital after liquidation requires compliance with the State Administration of Foreign Exchange rules. The agreement must dictate the bank account structure for distributing the proceeds. This ensures that the foreign investor can convert local currency and transfer the funds out of China.