The Chinese Commercial Legal System - Assignment Example

1. a. The long term benefits and short term pains to China for the accession to the world trade organization is linked to the various changes that are occurring from the change in the region. The main change is the need to alter some of the government trade policies that are linked to the concept of trade. Because there have been past restrictions on trading rights, China has to alter what the economy and industrial services can and can't do. This includes tariffs, quotas and licenses that are linked to China's Ministry of Foreign and Economic Co-Operation. Changing these obligations over a certain period will also alter the ability for the WTO to be successful in the area1. The long term benefits that override the difficulties with changing the change value is directly linked to economical factors that are a part of the country. The four areas of trade that China is basing the WTO on includes telecommunications, finances, distribution and selling of goods. It is expected that, with these four areas, there will be a continuous increase in the economy, seen through several agreements being made in the region. For example, the government of China has made provisions to help community members, such as farmers, who need more substantial income, by the increases that will be seen in the WTO. This allows for an overall increase to take place in the region and within the Chinese and world economy2 1. b. The first example of an amendment that has strengthened minority shareholders from the Company Law of the People's Republic of China is the ability for shareholders to not be limited in the investments made. This was based on the concept of foreign relations and trade that has opened China's economy into new focus. Under the old Company Law, China's stockholders were not able to invest in more than 50% of a company, especially with external investments. This also included the inability to be restricted in having a share in more than one company. Under the new Company Law, this is no longer valid, and the restriction for investment has been lifted, as well as the restriction on investing in a limited number of company's. This is beneficial to stockholders because it allows for global investments to be made, as well as more return with the capital that can be accumulated from a specific share. The interest from this pertains to the FIIC, or foreign invested investment company. The second amendment that is in favor of minority shareholders is based on the concept of managerial duties within different organizations. This was amended to strengthen the organizations, as well as the different methods used to help the corporations function differently. This was amended with the expectation that, by changing the roles, duties and powers within the internal environment, it would increase the capital and market coming into the different organizations. For shareholders, this provides more substantial income from the investments, so there is the ability to expand as well as to increase revenue and capabilities within an organization. This is combined with management from the state owned areas, such as the Administration Commission and State Council, both which are designed to overlook the management of an organization and to provide insight into the complete functioning within the different workforces3. 2. a. Establishing a joint venture with a Chinese partner for a company in Hangzou has several advantages. These are linked to capabilities with being both in Australia and in China, and is also related to having resources available under the company law of China. With resources, this includes economic capabilities of establishing and selling the product because of the Chinese partner. This also includes access to more technology, markets and management opportunities. In relation to finances and law, this also allows for more possibilities with building revenue. When working with a Chinese partner, there is instant access to the financial resources within the country, which would not be available only through Australia because of company law that has been established. Even though more resources are available, there are still disadvantages towards forming a partnership with a Chinese partner. This begins with the application and approval process that will have to go through the common practice and through the government because of the socialist market economy. Even though the registration of the company can be completed through the Chinese partner and the initial company, there will still be registration processes that can be difficult. For instance, the registered capital, under a joint venture, has to be paid with at least 20% during the first period, which can be costly since the process in this area is just being established. At the same time, if any expansion begins, the company needs to re-apply and has to be approved by the company law for the modification and growth of the company. The individuals within the company that are outside of the Chinese partner, would also have to move outside of personal investments, and instead would only be able to invest with money coming in from the sales of the product. In comparison, establishing a wholly owned subsidiary could cause different outcomes, as well as difficulties. This particular option is more specific to international company's who want to own the company at 100%, leaving some of the advantages as being more practical. This begins with the ability to conduct business in China, as well as outside of China through both import and export, related to the provision that the company can be completely international. The liability is also recognized as capital that is being moved into the business. This allows for certain incentives, such as tax breaks and financial rebates to be more readily available. The disadvantages of this, of course, are linked to the lack of resources and availability in the area by not being a localized business. The ability to work with the Representative Offices within China, for instance, are weakened because of the foreign trade. This stops some of the advantages from the company law from being available, and furthers risk by not being under this protection. It is advised that the 100% owned subsidiary be used as the best route, because of it's relation to foreign relations and company law in China. In relation to this, finding valuable resources through expanding the business can also be beneficial to compensate for not having a joint venture partner4. 2. b. Based on legalities of China, the best route to consider is with the coffee beans and coffee farming, rather than the genetically engineered soy beans. This is because, beginning in 2001, regulations began to be made on genetically modified foods, with the desire to regulate the modified crops, and instead focus only on research with the agricultural biotechnology. At the same time, more implementation is being given to agriculture, based on the ability to produce substantial amounts of organic based food that is health conscious and that is not based on the cautions that biotechnology carries. Any biotechnology used has to be regulated and modified through the policies of the area5. 2. c. The minimum required capital for any 100% owned subsidiary company is based on the ratio of the total investment to be made. For instance, if it is a smaller investment, than 70% capital should be made. A higher amount should be at 50% of the investment. It is also recommended that the business uses a minimum of RMB 500,000 for the beginning capital. This is specific for agricultural needs as well as for production operations that will be carried by the company6. 2. d. Under specific provisions of Chinese law, it is illegal for another company to use the logo and name, as well as the recipe of the Kangaroo company. This begins with basic copyright, trademark and patent laws. If Kangaroo Coffee has these laws established by showing proof that they own the specific brand. This begins with registering their coffee recipe and logo with the State Intellectual Property Office in China. This gives Wombat exclusive rights to the property. This specific ideal also links back to the treaties established for company law through the Law Against Unfair Competition of the PRC, which was established in 1993. This was set by the Fair trade Bureau and is based out of the State Administration for Industry and Commerce to offer protection to businesses that are both local and international. In this specific set of regulations, it is illegal to let others know of recipes, trademarks, secrets or other establishments that are a part of the business. This leads into business factors, such as advertising means. This means that, as long as the Wombat coffee company can prove that their brand of coffee was established first, and has registered the company within China, than they are protected with their brand. Because the logo and coffee that is made by Kangaroo was stolen, Wombat can begin to take action by notifying the correct agencies of the problem. This begins with moving into the IP, which can file a complaint against those that have copied the information and are selling it as a business. It is also possible to file a complaint that can move into the judicial system of the country, which includes contacting the court system through a civil suit. It should be noted that there are differences in where this should be filed, beginning with contacting the State Administration on Industry and Commerce, which has the information and files of the original company, recipes, trademarks and patents within the company. In relation to this, a protection agreement can be made with all employees to stop the trademark and breaks of the trade secrets from occurring. The only way this can be done is through a general agreement and contract that is signed. If the employees break this, than they can be held partly liable for the breaking of the trademark agreement through the Unfair Competition Act. This can work as a preventative way to stop employees from violating the trademark and patent agreements7. 2. e. There is not a contract between Kangaroo and Unicorn. Even though there was an agreement to the offer that was made, the contract was never completed after this offer for an official contract. According to Articles 13 and 14, this holds true. The first part is that a contract only concludes after there is an offer and acceptance. While this was done with Unicorn, it did not complete the second part. This is that the terms are specific and definite and that the acceptor and the accept tee have completely agreed. Since Kangaroo did not make specific and definite terms with Unicorn, it becomes a withdrawal of the offer, according to Article 17 – 19. The only thing that remains valid with this is the acceptance of the transmission, even though it was delayed when being received. There is; however, a contract between Panda and Kangaroo. This is because the acceptance, terms and specifics with the coffee machine were made. Panda had accepted this offer and Kangaroo had negotiated the specific terms with them. According to the Articles 17 – 19, the delay in mail, and not receiving the notification does not cause the agreement to be invalid. The only way that Kangaroo can argue that this is not under a contract is through Article 37 which states that there has to be a signed contract in order to fulfill the agreements on both sides. Because there was no validity of the contract, as shown in Chapter 3, Kangaroo does not have to be liable for the agreement that was not completed. If Kangaroo wanted to be assured of this, than an amendment or cancellation of the contract could be made through a discharge of the agreement to Panda. By notifying Panda of the change, it would stop Kangaroo from furthering the obligation to the company. This can occur with a delay in obligations for fulfilling the necessary requirements8. 2. f. According to the China Employment Laws, it is acceptable to terminate both Amy and Mary's employment. In Mary's instance, she has not held to the acceptable needs within the company, including the ability to fulfill duties. However, Mary may be able to avoid this because she is in a pregnancy. In this instance, an employee can not terminate an employee. In Amy's instance, the illness is leaving her unable to work according to the contract signed. This is combined with Kangaroo letting 15 of the members go. This alone is acceptable, if it is done with a 30 day notice to all employees with specific reasoning of why this has to happen. For Kangaroo to let both Mary and Amy go, they first have to contact the labor union of the termination, with an explanation of why this decision has been made. The union then has to agree or disagree with this decision, with giving reasoning of why this is being done. After this, Kangaroo has the right to terminate the contracts that have been made by Mary and Amy in relation to their duties. If one of the terminations is not accepted by the labor union, than Kangaroo can wait until the contract is completed, then can terminate their time as an employee. At the end of this, Kangaroo has to issue a proof of termination from the company has to transfer the files and social insurance from the company, all which has to be completed within 30 days. Both Amy and Mary are entitled to compensation pay from Kangaroo. The severance pay that they receive is divided by the number of years that each has worked. For each year, the employees will receive one month's worth of compensation. This is only done with the minimum compensation being for one year of work. 2. g. Both David and Jason can take the National Judicial Examination. Because David works as the legal department staff within Kangaroo, this would be in relation to his job duties, and is required to be supported by Kangaroo. For David, being the general manager also means understanding basic judicial relations, especially pertaining to employees and their rights, meaning this would also be compensation for job related duties.9 Bibliography 1. Dongtai China. (2008: HKDTC). Retrieved from: http://my.hktdc.com/webdir/directory_detail.asp?catid=7&subcatid=54&type=2&cty=Shanghai. 2. Labor Contract Law In The People's Republic of China. (2007, Government Documents). 3. Lardy, Nicholas, “Integrating China Into the Global Economy.” (2002, Brookings Institution Press: Brookings). 4. People's Republic of China Company Laws. (2003: Government Documents). 5. Protecting Your Intellectual Property Rights in China. (2003, Government Documents: International Trade Administration). 6. Sino-Tone. “Foreign Owned Enterprise.” (2008: Retrieved from: http://www.sinotone-invest.com/sw1.htm) 7. The Company Law of the People's Republic of China. (2005: Government Documents). 8. “What Is China's Attitude Towards Agricultural Biotechnology?” Lehman, Lee and Xu. (2008). 9. “World Trade Organization: First Year U.S. Efforts to Monitor China's Compliance.” (2003: U.S. Government Accountability Office). Read More