What is the difference between a Company and an enterprise?
Legally there are several differences between the two. An enterprise means foreign investment enterprises (FIE) in China. There are state owned enterprises in China but we do not include them into the comparison here.
A PRC company is incorporated under the PRC company law, or the "Tentative Provision for the Establishment of the Foreign Investment Joint Stock Limited Liability Company". There are two types of companies: one is limited liability company;the other is joint stock limited liability company; An enterprise is incorporated under one of the following laws:-
1. The PRC Law for Sino-foreign Equity Joint Venture Enterprises;
2. The PRC Law for Sino-foreign Cooperative Joint Venture Enterprises;
3. The PRC Law for Wholly Foreign Owned Enterprises.
The three types of enterprises are called foreign investment enterprises.
A company may have perpetual continuity while an enterprise must have a definite period of operating life in years, as stated in the Articles of Association.
A PRC company must have at least 2 shareholders (5 in the case of a joint stock limited liability company) with the exception of a wholly state owned company. A wholly foreign owned enterprise can have one shareholder.
A company has a status of a legal person while a Sino-foreign cooperative joint venture may not possess the status of a legal person if the joint venture parties agree to have such arrangement. Each party assumes its own legal responsibility independently.
A company is not required to have a shareholder agreement while the law requires that an equity joint venture or a cooperative joint venture must have a shareholder (or JV) agreement, as a pre-requisite for incorporation.
Except in certain cities, the FIE laws do not allow Chinese citizens to become the shareholder of an FIE in the capacity of natural persons. Chinese citizens are allowed to be shareholders of a company. In contrast, foreign nationals can act as the shareholders in an FIE.
The highest authority is the board of director for a foreign investment enterprise. For a company the highest authority is the general meeting of the shareholders, who make the decision on the appointment of directors.
What is something in common between a company and an enterprise?
1. Both of them must have a legal representative.
2. The PRC Company law shall apply to a foreign investment enterprise in the absence of any provision in the applicable FIE laws.
3. Both the company and an FIE have share capital, except that for Sino-foreign cooperative joint venture enterprises in certain cases.
4. Both a foreign investment enterprise and a company can be converted into a joint stock company under the PRC Company Law.