Partner Lior Aviram – Head of Hi-Tech and Venture Capital Partner Michal Tzhori – Head of China Practice

A Joint Venture In China Is There Anything Worse?

01 Joint Ventures – the

History

02 03

04

Round Trip – JV to

WFOE

JV – What Can be

Worse?

Common Business

Structure recently

05 Successful Joint

Ventures

Joint Venture – The History

July,1979

• Sino-foreign Joint Venture Law published

1983

• Implementation rules of Sino-foreign joint venture law introduced

1983-2001

• 1986-WFOE allowed

• Coastal and riverside areas and cities gradually open

2001-2016

• China’s accession to the WTO

Round trip: JV to WFOE

JVs Domination

• Permitted since 1979

• No-other-choice basis

WOFE’s birth

• 1986 China has published Foreign-invested enterprise law

• Nonetheless, only after China’s accession to WTO has WOFE become popular in China

Why WOFE?

• Independency and sense of control

• Business cultural gaps

• Profits are all yours

• Better control over IPR

Why JV?

• China Market

• We–understand-the-value basis

• Infrastructure and knowledge of the Chinese market

• Lack of experience in the Chinese market

ISRAEL

CHINA

Marketing/ Commercialization/Assembly

Land, basic facilities, human resources, channels, go to market

Check this Business Structure

Injection of IP, know-how, skills and methods

Investment in R&D in Israel against equity

ISRAEL

CHINA

Marketing/ Commercialization/Assembly

Land, basic facilities, human resources, channels, go to market

Check this Business Structure

Injection of IP, know-how, skills and methods

ISRAEL

CHINA

When you rule out this structure

When you DIY

ISRAEL

CHINA

Operation costs

Management of local staff; cultural differences

Regulation, relations, channels

Successful Ventures

Guangzhou Honda

Shanghai Volkswagen

GMCC Meizhi

Guangzhou Procter & Gamble

China HP Priortech

Partner Selection

Carful Structuring

Modular Technology Sharing

Mutual Trust

Nominate your Executive

Active Involvement & Supervision

Exit Strategy

Preconditions to a Successful JV

JV

Foreign Partner China Partner

JV - Advantages and Disadvantages

- Sometimes it is Mandatory

- Prerequisite for an investment in IL

- Lower entry barriers

- Cost sharing

- Chinese partner (knowledge of the local market, relations, ability to manage local talents)

- Streamline regulatory processes

- Stronger protection of the JV’s IP

- Must plan in advance; align interest and goals; reach common targets

- If not enough managerial attention you might lose control

- Loyalty of talents

- Easy to rely on partner and loosen supervision

- Challenging decisions making process

Profit sharing

- Might compromise your IP

Shibolet China Practice

Michelle has over 20 years of legal experience in Israel and China and has established the China

practice of Shibolet & Co. in 2005;

Michelle specialized in guiding foreign clients through all legal stages of doing business in China,

as well as assisting Chinese clients in their investments in Israel.

Industry Experience: General Manager of FOX-WIZEL CHINA WFOE 2007-2011,

Chief Representative (Rep Office) and Legal Representative (WFOE)

of a leading US Importer in the fashion industry 2011-2013

Lior Aviram

Head of High-Tech

& VC Practice

Lior has vast experience leading high-end, complex, cross-border transactions. He is recognized as a leading expert in venture capital and strategic investments, and in the structuring and establishment of venture capital funds. He also specializes in complex, cross-border M&A and capital markets transactions, having been a lead counsel in some of the most innovative transactions in the Israeli market. Lead counsel in some of the most innovative transactions in the Israeli market. Guiding Israeli and foreign clients through all legal stages of doing business in China, and in assisting Chinese clients in their investments in Israel. One of only five Israeli lawyers listed, as a ‘leading individual’ in high-tech, start-ups and venture capital – Legal 500

Michelle Tzhori

Head of China Practice