Ever since China's opening to foreign investment in the late 1970s, foreign invested enterprises (FIEs) have enjoyed a fair amount of flexibility regarding their internal organization. This was especially true for wholly foreign-owned enterprises (WFOEs), the most popular foreign investment vehicle in China, but also, to a lesser extent, for equity joint ventures (EJVs) and cooperative joint ventures (CJVs). Only the scarcely used foreign invested company limited by shares (FICLS) has been required to abide by most of the company law rules applicable to standard Chinese companies.
So much for the good old times. The revised version of the company law, which took effect on January 1 2006, has proven to be a considerable obstacle for investment in China. After the enactment of the revised company law, many foreign investors were unsure about whether they had to follow any of the newly drafted stipulations. Recently published regulations have done away...