ARTICLES OF ASSOCIATION OF JI’AN CITY FOREST INDUSTRY CORPORATION LIMITED
ARTICLES
OF ASSOCIATION
OF
JI’AN
CITY FOREST INDUSTRY CORPORATION LIMITED
CHAPTER
1 GENERAL
PROVISIONS
Article
1 These
Articles of Association are hereby made in accordance with the “Law of the
People’s Republic of China on Chinese-Foreign Equity Joint Ventures“ and the
joint venture agreement entered into between CHINA JI’AN CITY XX XX INDUSTRIAL
COMPANY LIMITED (hereinafter referred to as “Party A”) and HONG KONG EASE DRAGON
HOLDINGS LIMITED (hereinafter referred to as “Party B”).
Article
2 The
Chinese name of the joint venture company: 吉安市森簏实业有榰公司
The
English name of the joint venture company: JI’AN CITY FOREST INDUSTRY
CORPORATION LIMITED
The
legal
address of the joint venture company: New industrial zone, Xxxx Xxxx District,
Ji’An City
Article
3 The
names
and the legal addresses of Party A and Party B are as follows:-
Party
A:
CHINA JI’AN CITY XX XX INDUSTRIAL COMPANY LIMITED, and its legal address is New
industrial zone, Xxxx Xxxx District, Ji’An City
Party
B:
HONG KONG EASE DRAGON HOLDINGS LIMITED, and its legal address is Xxxx 0000-0X,
00xx
xxxxx,
Champion Building, 287-000, Xxx Xxxxx Xxxx Xxxxxxx,
Xxxxxx
Xxx, Xxxx Xxxx
Article
4 The
organization form of the joint venture company is “limited liability company”.
The liabilities of Party A and Party B to the joint venture company shall be
limited to the amount of their respective capital contributions prescribed
by
the current Articles of Association or by the subsequent revised Articles of
Association. Based on the foregoing, the parties shall share the profits, risks
and losses of the joint venture company in proportion to their respective
capital contributions to the registered capital.
Article
5 The
joint
venture company is a body corporate in China, which shall be governed and
protected by the Chinese laws. All the activities of the joint venture company
shall comply with laws, decrees and relevant regulations of China.
1
CHAPTER
2 PURPOSES
AND BUSINESS SCOPE
Article
6 The
purposes of Party A and Party B to set up the joint venture company are: in
light of the wishes of strengthening the economic cooperation and the technology
exchange, to adopt advanced and appropriate technology and scientific
operational and managerial method, to improve the quality of the products,
to
invent new products, to have competitive abilities in the international market
in the areas of quality, price and other aspects, to improve economic benefits,
and to obtain satisfactory economic benefits for the parties.
Article
7 The
business scope of the joint venture company: production and sales of Christmas
trees and Christmas gift sets.
Article
8 The
production scale of the joint venture company: the annual total production
value
is estimated to be U.S. dollars 40 million.
Article
9 The
joint
venture company shall sell its products in the domestic market and overseas
market by its own, and also provide other relevant services. In order to ensure
the success and development of the joint venture company, the joint venture
company shall give its priority to export sales and earning foreign exchange
revenue.
CHAPTER
3 TOTAL
INVESTMENT AMOUNT AND REGISTERED CAPITAL
Article
10 The
total
investment amount of the joint venture company is U.S. dollars 12 million.
The
registered capital
of the
joint venture company is U.S. dollars 6 million.
Party
A:
the amount of the capital contributions shall be U.S. dollars 600,000, which
shall account for 10% of the registered capital, and such capital contributions
shall be made in cash; and
Party
B:
the amount of the capital contributions shall be U.S. dollars 5.4 million,
which
shall account for 90% of the registered capital, and such capital contributions
shall be made by foreign currency notes.
Article
12 The
parties of the joint venture company shall make full payment of 15% of their
respective subscribed amount of the capital contributions within three (3)
months from the date of issue of the business license of the joint venture
company, and the balance shall be paid off within two (2) years from the date
of
issue of the business license of the joint venture company.
2
Article
13 After
Party A and Party B have paid their amount of the capital contributions, the
joint venture company shall appoint certified public accountants in China to
conduct the capital verification. After the capital verification report is
issued, the joint venture company shall issue the capital contributions
certificate to Party A and Party B respectively, certifying the date and amount
of the capital contributions made by the respective party.
Article
14 Within
the term of the joint venture, the joint venture company shall not reduce its
registered capital amount. Neither party shall be allowed to pledge any part
of
its capital contributions to the registered capital of the joint venture company
to any third party.
Article
15 Any
increase or transfer of the registered capital of the joint venture company
is
subject to the unanimous consent of the board of directors and then the approval
by the original approving authorities, after which the joint venture company
shall carry out the relevant registration alternation procedures with the
original registration authority.
CHAPTER
4 BOARD
OF DIRECTORS
Article
16 The
joint
venture company shall establish the board of directors. The board of directors
is the highest authority of the joint venture company.
Article
17 The
board
of directors shall decide on all the major issues concerning the joint venture
company. The board of directors shall make decisions on the following issues
only with the unanimous approval by the board:-
| 1. |
forming
and amending
the Articles of Association of the joint venture company
;
|
| 2. |
the
termination and dissolution of the joint venture
company;
|
| 3. |
the
merger, affiliation and consolidation of the joint venture company
with
another economic organization;
|
| 4. |
any
increase or transfer of the registered capital of the joint venture
company;
|
| 5. |
deciding
on setting up branches of the joint venture
company;
|
| 6. |
approving
the medium-term and long-term development plans of the joint venture
company;
|
| 7. |
approving
the annual operational strategies and plans of the joint venture
company;
|
| 8. |
approving
the annual financial budgets, financial reports and accounting
statements;
|
3
| 9. |
deciding
on the annual profit appropriation
plans of the joint venture company;
|
| 10. |
appointing
and dismissing the general manager and the deputy general manager;
and
|
| 11. |
matters
involving conflict of interests of any joint venture
party.
|
As
for
the following mattersôapproval
by at least two (2) directors present at the board meetings shall be required:
-
| 1. |
the
maximum loan amount for working capital of the joint venture company,
and
issues concerning the purchasing, leasing, sales or mortgages of assets
of
the joint venture company and other issues concerning the assets of
the
joint venture company;
|
| 2. |
the
labor contracts and other important rules and regulations of the joint
venture company;
|
| 3. |
examining
and approving the annual business report submitted by the general
manager;
|
| 4. |
appointing
and dismissing the senior managerial personnel who is nominated by
the
general manager and submitted to the board of directors in connection
with
the appointment, and deciding on his/her salaries and
welfares;
|
| 5. |
deciding
on the system of salaries and welfares for the employees of the joint
venture company in accordance with the relevant regulations promulgated
by
the government of China;
|
| 6. |
deciding
on and adjusting the organizational structure of the joint venture
company;
|
| 7. |
deciding
on the proportion of appropriation to the reserve funds, the enterprise
development funds, and the employees’ reward and welfare funds from the
after-tax profits of the joint venture
company;
|
| 8. |
deciding
on the types and scope of insurances for the joint venture
company;
|
| 9. |
matters
concerning the scope of authority of the general
manager;
|
| 10. |
deciding
on the joint venture company’s employees’ housing and various welfare
matters; and
|
| 11. |
other
matters which shall be decided by the board of directors.
|
Article
18 The
board
of directors shall be composed of three (3) directors, among which, one (1)
director shall be appointed by Party A and two (2) directors shall be appointed
by Part B. The term of a director shall be three (3) years and he/she may serve
consecutive terms. In the event that Party A or Party B replaces the
director(s), such party shall give advanced written notice to the board of
directors and the other party.
Article
19 The
meeting of the board of directors shall be held at least once a year. With
the
proposals made by more than two (2) directors (including two (2) directors),
the
chairman of the board of directors may convene an interim board meeting.
4
Article
20 The
chairman shall give thirty (30) days advance written notice to each director
prior to the board meeting, and the time and venue of the meeting shall be
set
out in such notice. In the event that any director is unable to attend the
board
meeting, he/she may present a power of attorney in writing to entrust other
personnel to attend the board meeting and vote on his/her behalf. In the event
that the director neither attends the meeting nor entrusts other personnel
to
attend the meeting, it shall be deemed an abstention.
Article
21 The
quorum of a board meeting shall be two-thirds (2/3) of all the directors. In
the
event that the number of the directors attending the meeting fail to achieve
two-thirds (2/3) of all the directors, the resolutions passed by such meeting
shall be invalid. The meeting minutes shall be filed for record purposes. The
meeting minutes shall be written in both Chinese and English languages, and
each
of the directors attending the meeting shall sign his/her name on the meeting
minutes.
CHAPTER
5 OPERATION
AND MANAGEMENT ORGANIZATION
Article
22 The
joint
venture company shall set up the operation and management organization to be
in
charge of the daily operation and management of the joint venture company.
The
joint venture company shall have one (1) general manager and one (1) deputy
general manager. The general manager and the deputy general manager shall be
appointed by the board of directors with a term of three (3) years, and the
general manager and the deputy general manager may serve consecutive terms
upon
the decisions of the board of directors.
Article
23 The
joint
venture company shall adopt the system of “general manager in charge” under the
leadership of the board of directors. The general manager shall be directly
accountable to the board of directors, execute the various decisions made in
the
board meetings, organize and be in charge of the daily production, technology,
operational and managerial work of the joint venture company.
Article
24 The
chairman of the board of directors, and the director appointed by the board
of
directors, may concurrently serve as the general manager, the deputy general
manager or the assistant to manager.
Article
25 Except
with the approval by the board of directors, the general manager and the deputy
general manager shall not be engaged in other economic organizations which
commercially compete with the joint venture company.
Article
26 In
the
event that the general manager, the deputy general manager or other senior
managerial personnel request for resignations, such person shall submit a
written report to the board of directors in advance. In
the
event that any of the aforementioned personnel practices graft and embezzlement
or gross neglect of duty and is unable to cope with work, he/she may be
dismissed and replaced at any time upon the decision of the board of directors.
5
CHAPTER
6 FINANCE
AND ACCOUNTING
Article
27 The
finance and accounting of the joint venture company shall be handled in
accordance with the "Stipulations of the Finance and Accounting System of the
Foreign Investment Enterprise of the People’s Republic of China" formulated by
the Ministry of Finance of the People's Republic of China.
Article
28 The
joint
venture company shall adopt the calendar year system to set the accounting
year,
and the accounting year shall commence
on 1 January and end on 31 December each year. All the accounting vouchers,
documentary evidence, statements, and accounting books shall be written in
Chinese language.
Article
29 The
joint
venture company shall adopt Renminbi (RMB) as the currency unit for book-keeping
purposes. The conversion of RMB into other currency shall be conducted in
accordance with the exchange rate of the actual converting day published by
the
State Administration of Foreign Exchange of the People’s Republic of China.
Article
30 The
joint
venture company shall open RMB accounts and foreign currency accounts with
the
banks in China.
Article
31 The
joint
venture company shall adopt the internationally used accrual basis and
debit-credit method for book-keeping purposes.
Article
32 The
following contents shall be recorded in the financial and accounting books
of
the joint venture company:-
| 1. |
amount
of all of the cash income and expenditure in cash of the joint venture
company;
|
| 2. |
status
concerning
sales and procurement of the materials of the joint venture
company;
|
| 3. |
status
concerning the registered capital and liabilities of the joint venture
company; and
|
| 4. |
status
concerning the payment schedule of the registered capital, and the
increase and transfer of the registered capital of the joint venture
company.
|
Article
33 The
finance department of the joint venture company shall prepare the balance sheet
and profit and loss statement for the previous accounting year within the first
three (3) months of each accounting year, which shall be submitted to the board
of directors after they are verified and signed by auditors.
6
Article
34 Either
party of the joint venture shall have the right to appoint auditors to review
the accounting books of the joint venture company at its own cost. The joint
venture company shall provide convenience during such review.
Article
35 The
depreciation period of the fixed assets of the joint venture company shall
be
decided by the board of directors in accordance with the "Detailed
Implementation Rules on the Income Tax Law of the People's Republic of China
on
Foreign Investment Enterprises and Foreign Enterprises".
Article
36 All
the
foreign exchange affairs of the joint venture company shall be dealt with in
accordance with the "Interim Provisions of Administration on Foreign Exchange
of
the People's Republic of China" and the relevant stipulations.
CHAPTER
7 PROFITS
APPROPRIATION
Article
37 The
joint
venture company shall make appropriations to the reserve fund, the enterprise
development fund and the employees’ welfare reward fund from its after-tax
profits. The percentage of such appropriations for each year shall be discussed
and decided by the board of directors based on the operational status of the
joint venture company.
Article
38 After
the
joint venture company has paid taxes in accordance with laws and has made
appropriations to the three types of fundsôthe
profits in net shall be appropriated to Party A and Party B respectively
according to the proportion of their capital contributions to the registered
capital.
Article
39 The
joint
venture company shall appropriate profits once a year. The
profit appropriation plan and the amount of profit appropriated to each party
for the previous year shall be announced within the first three (3) months
of
each accounting year.
Article
40 Profits
shall not be appropriated if the joint venture company has not covered the
losses made from the previous accounting year. The profits made from the
previous accounting year which have not been appropriated may be consolidated
into the profits of current accounting year for appropriation purposes.
7
CHAPTER
8 EMPLOYEES
Article
41 The
employmentô
recruitmentô
dismissal and resignation, salaries, welfares, rewards and penalties, labor
insurances, labor protection, labor disciplines and other matters shall be
handled in accordance with the "
Provisions on Labor Management in Chinese-Foreign Equity Joint Ventures of
the
People’s Republic of China "
and its
implementation rules, and the relevant regulations formulated by Xxxxx Xx
Province.
Article
42 The
joint
venture company has the right to take disciplinary actions against the employee
who violates the rules and regulations of the joint venture company and labor
disciplinesôand
such
actions include warningôdemerit
recording and salary reducing. Employee may be dismissed if he/she violates
the
foregoing to a serious extent. Discharging of employees shall be filed with
the
local labor authority for record purposes.
Article
43 The
salaries treatment of the employees from the Chinese party shall be ascertained
by the board of directors in accordance with the regulations issued by the
Bureau of Labor of Ji’An City and the specific situation of the joint venture
companyôand
shall
be specified in detail in the labor contracts. With the development of the
production of the joint venture company and the improvement of the employees’
abilities and technology, the joint venture company shall increase the
employees’ salaries accordingly. The pensions of the employees who retired from
the joint venture company shall be paid in accordance with the regulations
issued by the Bureau of Labor of Ji’An City.
Article
44 The
joint
venture company shall ensure that the employees will work in normal conditions
in accordance with the relevant regulations of the People’s Republic of China
and Jiang Xi Province concerning labor protection for employees.
CHAPTER
9 TRADE
UNION ORGANIZATION
Article
45 The
employees of the joint venture company shall have the right to organize a trade
union organization to conduct trade union activities in accordance with the
“Trade Union Law of the People’s Republic of China”.
Article
46 The
trade
union in the joint venture company is the representative of the interests of
the
employees. The tasks of the trade union are: to protect the democratic rights
and material interests of the employees pursuant to laws; to assist the joint
venture company to arrange and make rational use of welfare and rewards funds;
to organize the employees to study politics, business, science, technology
and
knowledge, to carry out literary and art activities and sports activities;
and
to educate the employees to observe labor disciplines and strive to fulfill
the
various economic tasks of the joint venture company.
8
Article
47 The
person in charge of the trade union of the joint venture company shall have
the
right to be present at the meetings discussing the joint venture company’s
development plans, production and operational activities and other issues,
and
to reflect the employees’ opinion and requests.
Article
48 The
trade
union shall take part in the mediation of disputes arising between the employees
and the joint venture company.
Article
49 Each
month, the joint venture company shall appropriate 2% of the total amount of
the
actual salaries of the employees to the trade union as its operating fee. This
operating fee shall be used by the trade union in accordance with “Trade Union
Fee Management Measures” formulated by the All-China Federation of Trade Unions.
CHAPTER
10 TERM,
TERMINATION AND LIQUIDATION
Article
50 The
term
of the joint venture shall be twenty (20) years, which shall be calculated
from
the date of issue of the business license of the joint venture company.
With
the
consent of both parties and the unanimous consent of the board of directors, the
joint venture company may submit an application for the extension of its term
to
the original approving authorities six (6) months prior to the expiry of its
term.
Article
51 In
the
event both parties agree that termination of the joint venture is in line with
the best interests of the parties, the joint venture may be terminated prior
to
the expiry of its term. In this case, the decision of such termination shall
be
made by the board meeting ninety (90) days prior to the date of the termination
of the joint venture, and shall be submitted to the original approving
authorities for approvals.
Article
52 In
the
event that any of the following circumstances occurs, either Party A or Party
B
shall have the right to terminate the joint venture in accordance with
laws:-
| 1. |
the
term of the joint venture company has
expired;
|
| 2. |
the
joint venture company suffers from heavy losses and is unable to
continue
its operations;
|
| 3. |
the
joint venture company is unable to continue its operations due to
heavy
losses caused by the Force Majeure;
|
| 4. |
the
joint venture company is unable to continue its operations due to
the fact
that either party does not have the capacity or is unable to perform
its
obligations under this contract and the Articles of Association;
and
|
9
| 5. |
the
joint venture company fails to achieve its desired operational goals
and
it has no prospect for future
development.
|
Article
53 Upon
the
expiry of the term of the joint venture or in the event that the joint venture
is terminated prior to the expiry of its term, the board of directors shall
bring forward the liquidation procedures, liquidation principles and candidates
of the liquidation committee, and shall set up a liquidation committee to
conduct the liquidation of the joint venture company’s assets.
Article
54 The
tasks
of the liquidation committee are to conduct thorough check on the assets,
creditor's rights and liabilities of the joint venture company, to work out
the
balance sheet and the list of its assets, to formulate a liquidation plan,
and
to execute the liquidation plan after such plan is approved by the board of
directors.
Article
55 After
the
liquidation committee has paid off the debts of the joint venture company,
the
remaining assets of the joint venture company shall be appropriated to Party
A
and Party B respectively according to the proportion of their capital
contributions to the registered capital.
Article
56 Upon
the
completion of the liquidation, the joint venture company shall submit a report
to the approving authorities, and carry out the cancellation registration
procedures with the original registration authority, hand in its business
license and at the same time, make an announcement to the public.
Article
57 After
the
joint venture company terminates its operations, all of its accounting books
shall be kept by Party A.
CHAPTER
11 RULES
AND REGULATIONS
Article
58 The
rules
and regulations formulated by the board of directors of the joint venture
company include:-
| 1. |
operation
and management regulation (including the duties and working procedures
of
various management departments);
|
| 2. |
code
of conduct for employees;
|
| 3. |
labor
salaries regulation;
|
| 4. |
regulation
on employees’ attendance, promotion, reward and
penalties;
|
| 5. |
employees’
welfare regulation;
|
| 6. |
financial
regulation; and
|
| 7. |
other
necessary rules and regulations.
|
10
CHAPTER
12 GOVERNING
LAW
Article
59 The
formation, validityôinterpretationôand
performance of these Articles of Association shall be governed by the laws
of
the People's Republic of China.
CHAPTER
13 SUPPLEMENTARY
PROVISIONS
Article
60 Any
amendment to these Articles of Association must be subject to the unanimous
approval by the board of directors, and it shall also be submitted to the
original approving authorities for approval.
Article
61 These
Articles of Association shall become effective only upon approval by Ji’An City
Foreign Economic and Trade Bureau.
Article
62 These
Articles of Association were executed on 12 November 2007 by the authorized
representatives of Party A and Party B in the Xxxx Xxxx District of Ji’An City,
Xxxxx Xx Province.
|
CHINA
JI’AN CITY XX XX INDUSTRIAL COMPANY LIMITED
|
HONG
KONG EASE DRAGON HOLDINGS LIMITED
|
|
Signature
of the Representative:
|
Signature
of the Representative:
|
|
Designation:
|
Designation:
|
12
November 2007
11
