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let me first explain my situation before asking my question. I use to work in research at university overseas on a project that has been spun off in a startup in China by my former supervisor who is Chinese (I am not Chinese). I actually left before the company started but was responsible for part of the idea and building the prototype. As such, my former supervisor (with who I am in very good terms BTW) has agreed that I should get some form of participation in the company.

The problem is that according to him, foreigners are not allowed to hold shares in a Chinese company without complicated business structure workarounds that would be too much to undertake at such an early stage. So his recommendation is basically that I should trust him and wait till a later stage to then get my share in the company.

I do trust him but I would also like to have some kind of legally binding document that says something like: "Mr. X is granted X amount of shares at X price", does such a thing exist?

I'm really not familiar with all this, and the fact that the company is based in China makes it even more complicated so I'm ready to hear any kind of advice on people in similar situations.

Thanks!

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    Foreigners can own shares listed in Hong Kong. So you can get some thing done to force him(her) to list in Hong Kong and not in mainland stock exchanges. – DumbCoder Feb 4 '15 at 13:28
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    In return for his "promise" are you going to contribute more to this venture? Or is the promise of shares simply based on your original contribution? – EkoostikMartin Feb 4 '15 at 15:09
  • @DumbCoder he isn't going to list on any exchanges. It is a private company – CQM Jun 25 '15 at 8:17
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Setting up an entity that is partially foreign owned is not that difficult. It takes an additional 1-1.5 months in total, and in this particular case, you guys would be formed as a Joint Venture. It will cost a bit more (about 3-5000). If you're serious about owning a part of a business in China, you should carefully examine what he means by 'more complicated'. From my point of view, I have set up my own WOFE in China, and examined the possibilities of a JV and even considered using a friend to set up the company under their personal name as a domestic company (which is what your supervisor is doing), any difference between the three are not really a big deal anymore, and comes down to the competency of the agencies you are using and the business partner themselves.

It cost me 11,000 for a WOFE including the agency and government registration fees (only Chinese speaking).

You should also consider the other shareholders who may be part of this venture as well. If there are other shareholders, and you are not providing further tangible contribution, you will end up replaced and penniless (unless of course you trust them too...), because they are actually paying money to be part of the business and you are not. They will not part with equity for you.

I'm not a lawyer, but think you should not rely on any promises other than what it says on a company registration paper. Good luck!

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