Must the government approve the equity transfer of Sino-foreign joint ventures?

According to the contract, the registered capital of the joint venture company is100000 yuan, with each party contributing 50%. After the establishment of the joint venture company, both parties shall pay their capital contributions on schedule. During the operation of the joint venture, the general manager appointed by Company A is responsible for all the business activities of the joint venture, and Company B has actually been completely excluded from the management of the joint venture. In view of this situation, Company B has repeatedly proposed to terminate the joint venture contract in advance, dissolve the joint venture company and conduct liquidation, but all failed because Company A did not agree. Company B proposes to withdraw from the joint venture by transferring its equity in the joint venture. After many consultations, the board of directors of the joint venture company made a resolution to agree to the foreign party's transfer of equity, and both parties to the joint venture reached an agreement on the transfer of equity, agreeing to transfer all the equity of Company B in the joint venture company to Company A. Later, because Company A refused to pay the equity transfer fee, Company B filed an arbitration, demanding that Company A pay the equity transfer fee in full and compensate Company B for its losses. After investigation, the arbitration tribunal found that the equity transfer between Company B and Company A was not reported to the original examination and approval authority of the joint venture company for approval, and the transfer was invalid because it violated the mandatory provisions of the law. Therefore, the arbitral tribunal made a ruling and rejected the arbitration request of Company B. [Analysis] The main legal issue involved in this case is what conditions should be met for the equity transfer of Sino-foreign joint ventures. The Sino-foreign joint venture was established in China with the approval of the China Municipal Government. Foreign individual companies, enterprises or other economic organizations jointly invest, operate and manage with individuals, companies, enterprises or other economic organizations in China, and enjoy the benefits and bear the risks. A joint venture is a limited liability company and legal person in China. Each party to a joint venture may transfer all or part of its equity in the joint venture according to its own needs, and these equity can be transferred to other parties to the joint venture or to a third party other than the joint venture. The transfer of its equity by a joint venture must comply with the mandatory provisions of the law, otherwise the act will be invalid. Article 20 of the Regulations for the Implementation of the Law of the People's Republic of China on Chinese-foreign Joint Ventures stipulates: "If a joint venture transfers all or part of its equity to a third party, it must obtain the consent of the other party to the joint venture, report it to the examination and approval authority for approval, and go through the formalities of change registration with the registration authority. When one party of the joint venture transfers all or part of its equity, the other party of the joint venture has the preemptive right. The conditions for a joint venture to transfer its equity to a third party shall not be superior to those of the other party to the joint venture. " In violation of the above provisions, its transfer is invalid. As can be seen from the above provisions, the joint venturers in a Sino-foreign joint venture shall meet the following conditions if they want to transfer their equity in the joint venture: (1) The transfer shall be subject to the consent of other joint venturers. (2) Its transfer shall be reported to the original examination and approval authority that approved the establishment of the joint venture for approval, and the registration formalities for change shall be handled with the joint venture registration authority. (3) The conditions for a joint venture to transfer its equity to a third party other than the joint venture shall not be superior to those for transferring its equity to other parties to the joint venture. The lack of any of the above conditions will lead to the invalidation of equity transfer. In this case, although Company B transferred its equity in the joint venture with the consent of the other party of the joint venture, namely Company A, the transfer was invalid because it did not go through the formalities of approval and change registration, which frustrated the expected purpose of Company B. In addition, after Company B transferred all its shares in the joint venture to Company A, the enterprise not only lost its status as a foreign-invested enterprise, but also lost its status as a limited liability company. Because our company law stipulates that a limited liability company must have more than two shareholders, unless it is a wholly state-owned company.