Company Law of the People's Republic of China
CONTENTS
Chapter I General Provisions
Chapter II Incorporation and Organizational Structure of Limited Liability Companies
Section 1 Incorporation
Section 2 Organizational Structure
Section 3 Special Regulations of One Person Limited Liability Company
Section 4 Special Regulations of Wholly State-Owned Companies
Chapter III Equity Transfer of Limited Liability Companies
Chapter IV Incorporation and Organizational Structure of Joint Stock Limited Companies
Section 1 Incorporation
Section 2 Shareholders' General Meetings
Section 3 Board of Directors, and Manager
Section 4 Supervisory Board
Section 5 Special Regulations of Organizational Structure of Listed Companies
Chapter V Issue and Transfer of Shares of Joint Stock Limited Companies
Section 1 Issue of Shares
Section 2 Transfer of Shares
Chapter VI Qualifications and Obligations of Directors, Supervisors, Senior Managerial Staff
Chapter VII Company Bonds
Chapter VIII Financial Affairs and Accounting of Companies
Chapter IX Merger, Division, Increase and Reduction of Capital of Companies
Chapter X Dissolution and Liquidation of Companies
Chapter Xl Branches of Foreign Companies
Chapter XII Legal liability
Chapter XIII Supplementary Provisions
CHAPTER I GENERAL PROVISIONS
Article 1 This Law is formulated in order to standardize the organization and activities of companies, to protect the legitimate rights and interests of companies, shareholders and creditors, to maintain social and economic order and promote the development of the socialist market economy.
Article 2 The term "company" mentioned in this Law refers to a limited liability company or a joint stock limited company incorporated within the territory of the People’s Republic of China in accordance with this Law.
Article 3 A company is an enterprise legal person who owns independent legal person assets and enjoys the right to the property of the legal person. A Company is liable for its debts to the extent of all its property.
Shareholders of a limited liability company shall assume liability towards the company to the extent of their respective capital subscriptions. Shareholders of a joint stock limited company shall assume liability towards the company to the extent of their respective shares subscribed by them.
Article 4 The shareholders of a company shall enjoy the rights as benefiting from assets of the company, making major decisions and selecting managerial personnel in accordance with the law.
Article 5 A company must, when engaging in business activities, abide by the law, administrative regulations, observe social morality, business ethics, be honest and keep faith, and accept supervision of the government and the public, assume social responsibilities.
The legitimate rights and interests of companies shall be protected by the law and shall be inviolable.
Article 6 Incorporation of companies shall apply to the Company Registration Authority to register the incorporation of companies in accordance with the law. Companies meeting the incorporation conditions set by this Law shall be registered by the Company Registration Authority as limited liability companies or joint stock limited companies; while companies failing to meet the establishment conditions set by this Law shall not be registered as limited liability companies or joint stock limited companies.
Where laws or administrative rules and regulations provide that incorporation of companies must be subject to approval, the procedure of approval shall be completed according to law prior to the registration of such companies.
The public may apply to the Company Registration Authority for inquiries on company’s register proceedings, and the Company Registration Authority shall provide such inquiry services.
Article 7 The Company Registration Authority shall issue a business license to a company that is incorporated in accordance with the law . The date of the issuance of the company business license shall be the date of the incorporation of the company.
A business license of a company shall set out the company’s name, domicile, registered capital, paid-up capital, business scope, name of legal representative and other matters.
If there is a change in any term recorded in its business license, the company shall carry out a change of registration with the Company Registration Authority . The business license shall be renewed by the Company Registration Authority.
Article 8 A limited liability company established according to this Law must clearly indicate the words “limited liability company” or “limited company” in its name.
A joint stock limited company established according to this Law must clearly indicate the words “ joint stock limited companies” or “joint stock companies” in its name.
Article 9 If a limited liability company is to be converted into a joint stock limited company, it shall satisfy the requirements for a joint stock limited company stipulated by this Law.
If a joint stock limited company is to be converted into a limited liability company, it shall satisfy the requirements for a limited liability company stipulated by this Law.
Where a limited liability company is converted into a joint stock limited company or a joint stock limited company is converted into a limited liability company, the creditor’s rights and indebtedness of the original company shall be succeeded to by the company into which it is converted.
Article 10 A company’s domicile shall be the place where its main administrative organization is located.
Article 11 Articles of association must be formulated in accordance with the law when a company is incorporated. A company’s articles of association shall have binding force on the company, its shareholders, directors, supervisors and senior managerial staff.
Article 12 A company’s scope of business shall be defined in its articles of association and registered in accordance with the law. A Company may amend its articles of association , change its scope of business, but it shall make such amendments and changes registered with the Company Registration Authority.
Items within the company’s “scope of business” that are subject to approval under laws ,administrative rules and regulations shall be approved in accordance with the law.
Article 13 The chairman of the board of directors, executive director or manager of a company shall be the company’s legal representative in accordance with the company’s articles of association and shall be registered in accordance with the law.
Where the legal representative of a company changes, it shall change its registration with the Company Registration Authority.
Article 14 A company may establish branches. Establishment of a branch shall apply to the Company Registration Authority to obtain the business license.
Branches of a company shall not possess the status of legal persons and its civil liabilities shall be borne by the company.
A Company may establish subsidiaries, which shall possess the status of legal persons, and shall independently bear civil liabilities according to law.
Article 15 A company may invest in other enterprises, but it should not be the jointly liable contributor for the debts of the enterprises that it has invested in except as otherwise provided in the law.
Article 16 In case a company invests in other enterprises or provides a guarantee for other individuals, the resolution of such investments or guarantee shall be decided by the board of directors or a shareholders’ meeting, a general meeting of shareholders in accordance with the company’s articles of association. Where the provisions on the total amount of investing or guarantee and single amount of investing or guarantee are provided for in the company’s articles of association, the amount of the above provisions should not be exceeded.
Where a company provides a guarantee for the its shareholders or the actual controller, the resolution of such guarantee shall be adopted by a shareholders’ meeting or a general meeting of shareholders.
Shareholders stipulated in the above clause or shareholders controlled by the actual controller stipulated in the above clause shall not vote on the matters stipulated in the above clause. Such resolution requires the approval of other shareholders with more than half of the voting rights present at the meeting.
Article 17 Companies must protect the lawful rights and interests of their staff and workers, sign labor contracts with their staff and workers in accordance with the law, participate the social insurance, and strengthen labor protection so as to achieve safety in production.
Companies shall apply various forms to strengthen professional education and on-the-job training of their staff and workers so as to improve their quality.
Article 18 Company’s staff and workers shall, in accordance with organize a trade union to carry out the trade union activities and protect the lawful rights and interests of the staff and workers. The company shall provide its trade union with conditions necessary for carrying out its activities. The trade union of the company shall sign collective contracts with the company on behalf of the staff and workers with regards to labor rewards, working time, welfare, insurance and labor security, health, etc. in accordance with the law.
A company shall practice democratic management in accordance with the provisions of the Constitution and of relevant laws through staff and workers’ congresses or other forms.
When a company considers deciding the major issues of restructuring and management, formulating major rules and regulations, it shall listen to the opinions of the trade union and the opinions and suggestions of the staff and workers through staff and workers’ congresses or other forms.
Article 19 The organizations of the Communist Party of China in companies shall be established and carry out their activities in accordance with the provisions of the Constitution of the Communist Party of China. Companies shall provide necessary conditions for the activities of the organizations of the Communist Party of China.
Article 20 Shareholders of a company shall abide by the law, administrative regulations and the articles of association, exercise shareholders’ rights in accordance with the law. Shareholders of a company shall not abuse shareholders’ rights to damage the interests of the company or other shareholders and shall not abuse the independent status of corporate legal person and the limited liabilities of the shareholders to damage the interests of the creditors of the company.
Shareholders of a company which abuse shareholders’ rights by causing losses to the company or other shareholders shall be responsible for providing compensation.
Shareholders of a company which abuse the independent status of corporate legal person and the limited liabilities of the shareholders by evading the debts, damaging interests of the creditors of the company seriously shall be jointly liable for the debts of the company.
Article 21 The controlling shareholders, actual controllers, directors, supervisors and senior managerial staff of a company shall not use a interrelated connection to damage the interests of the company.
The controlling shareholders, actual controllers, directors, supervisors and senior managerial staff who violate the above provisions and result in harm to the company shall be liable for damages.
Article 22 Where the content of the resolution of a shareholders’ meeting or a general meeting of shareholders, board of directors violates the law, administrative regulations, such content is ineffective.
Where the convening procedure, voting formula of a shareholders’ meeting or a general meeting of shareholders, a meeting of the board of directors violate the law, administrative regulations or the company’s articles of association, or the content of the resolution violates the company’s articles of association, the shareholders may request people’s court to revoke the resolution within sixty days of the date of the resolution being made.
When the shareholders initiate legal proceedings in accordance with the provisions of the previous clause, the people’s court may request the shareholders to provide a corresponding guarantee upon the request of the company.
Where a company has already changed its registration in accordance with the resolution of a shareholders’ meeting or a general meeting of shareholders, the board of directors, the company shall revoke its changes in its registration with the Company Registration Authority after the people’s court’s declaring the resolution invalid or revoking the resolution.
CHAPTER II Incorporation and Organizational Structure of Limited Liability Companies
Section 1 Incorporation
Article 23 The following conditions must be fulfilled for the incorporation of a limited liability company:
(1) the number of shareholders conforms to the statutory number;
(2) the capital contributions of the shareholders reach the statutory minimum amount of capital
(3) the shareholders have jointly formulated the articles of association of the company;
(4) the company has name and an organizational structure established in compliance with the requirements for a limited liability company;
(5) there is a company’s domicile
Article 24 A limited liability company shall be jointly invested in and incorporated by not more than fifty shareholders.
Article 25The articles of association of limited liability companies shall specify the following particulars:
(1) the name and domicile of the company
(2) the scope of business of the company
(3) the registered capital of the company
(4) the names or titles of the shareholders
(5) the method and amount and time of capital contributed by the shareholders
(6) the organization of the company, its method of creation, functions and powers and the rules of procedure;
(7) the legal representative of the company
(8) other items which the shareholders’ meeting deem necessary to be specified.
The shareholders shall sign and affix their seals to the company's articles of association.
Article 26 The registered capital of a limited liability company shall be the amount of the capital subscriptions paid by all its shareholders as registered with the Company Registration Authority. The first amount of the capital contribution of all it shareholders of a company shall be not less than twenty percent of the registered capital of a company, and shall not be less than the minimum levels of the registered capital set by law, and the remaining part of the capital shall be paid in full by shareholders within two years of the incorporation of the company. The remaining part of capital of an investment company may be paid in full within five years of its incorporation.
The minimum amount of the registered capital of a limited liability company is RMB 30,000. Requirements for the minimum amount of the registered capital of a limited liability company to be higher than the above amount are provided for in separate laws or administrative regulations.
Article 27 A shareholders may make its capital contribution in currency or by contributing material objects, intellectual property or land use rights and other non-cash property which could be appraised by cash and be transferred in accordance with the law at their appraised value; however, except those property that shall not be contributed specified in the law and administrative regulations.
The non-cash property to be contributed as capital shall undergo an asset valuation and verification, and shall not be overvalued or undervalued. Where the laws, administrative regulations on valuation otherwise provide, the provisions of such laws apply.
The amount of currency contributed as capital shall not be less than thirty percent of the registered capital of a limited liability company.
Article 28 Each shareholder shall make in full the amount of the capital contribution subscribed for under the articles of association of the company. Where a shareholder makes its capital contribution in currency, it shall deposit the full amount of such capital contribution in currency in the bank account opened by the limited liability company. Where a shareholder makes its capital contribution in the form of non-cash property, the transfer procedures fro the property shall be handled in accordance with the law.
Shareholders failing to make the capital contributions they subscribed for in accordance with the preceding paragraph shall make in full their capital contributions to the company and be liable for breach of contract towards the shareholders who have made in full their capital contributions.
Article 29 After the shareholders have made their capital contributions, such contributions must be verified by a capital verification institution established in accordance with the law which shall issue capital verification certificates.
Article 30 Upon verification by a capital verification institution established in accordance with the law of the first capital contributions of shareholders, a designated representative or jointly entrusted agent of all the shareholders applies to the Company Registration Authority to submit the company registration application, the company’s article of association, capital verification certificate and other documents to register the incorporation of the company.
Article 31 Where, after the incorporation of a limited liability company, it is discovered that the actual value of the non-cash property contributed as capital is notably less than the value stated in the article of association, the shareholders that made such contributions shall make up the discrepancy. Those are shareholders at the time of the incorporation of the company shall bear joint and several liability therefore.
Article 32 After a limited liability company has been incorporated, it shall issue capital contribution certificates to its shareholders.
A capital contribution certificate shall specify the following items:
(1) the name of the company
(2) the registration date of the company
(3) the registered capital of the company
(4) the name or title of the shareholder, the amount and date of its capital contribution;
(5) the serial number of the capital contribution certificate and the date of its verification and issuance.
A capital contribution certificate shall bear the seal of the company on it.
Article 33 A limited liability company shall prepare a roster of its shareholders with the following items therein:
(1) the names or titles and domiciles of the shareholders;
(2) the amounts of capital contributions of the shareholders;
(3) the serial numbers of the capital contribution certificates
Shareholders recorded in the roster of shareholders may claim to exercise shareholders’ rights in accordance with the roster of shareholders.
The company shall register shareholders’ names and the shareholders’ amounts of capital contributions with the Company Registration Authority; when there is a change in any term in its registration, the company shall change its registration with the Company Registration Authority. Those shall not claim against the third party without registration or changing registration.
Article 34 A shareholder shall have the right to look up, copy the company’s articles of association, the minutes of a shareholders’ meeting, the resolutions of the meetings of the board of directors and the meetings of the supervisory board and the financial and accounting reports of the company.
A shareholder may demand to look up the company’s accounting book. Demanding to look up the company’s accounting book, a shareholder shall file a written application with the company and provide an explanation of the purposes. If the company considers with the legitimate basis that the shareholder’s consultation has illegitimate purposes and may damage the legitimate interests of the company, it may refuse to provide consultation, and shall provide a written answer and explain the reasons to shareholders within fifteen days of filing the written application. Where the company refuses to provide consultation, the shareholder may request the people’s court to demand the company to provide consultation.
Article 35 Shareholders shall draw dividends in proportion to their actual capital contributions; shareholders have a preemptive right to subscribe capital in accordance with the proportions of their actual capital contributions when a company increases its capital; however, except all shareholders covenant to receive dividends not in accordance with the proportions of their actual capital contributions or to subscribe capital not in accordance with the proportions of their actual capital contributions.
Article 36 A shareholders shall not surreptitiously withdraw his capital after the incorporation of the company.
Section 2 Organizational Structure
Article 37 The shareholder's meetings of a limited liability company shall be composed of all the shareholders. The shareholders’ meeting shall be the organ of power of the company and shall exercise functions and powers in accordance with this Law.
Article 38 The shareholders' meeting shall exercise the following powers:
(1) to decide on the company's business policies and investment plans
(2) to elect and recall directors, supervisors who are not representatives of the staff and workers and decide on matters relating to the remuneration of directors, supervisors
(3) to examine and approve reports of the board of directors
(4) to examine and approve reports of the board of the supervisory board or supervisors
(5) to examine and approve the company's annual financial budget and final accounts plan
(6) to examine and approve the company's plans for profit distribution and recovery of losses
(7) to adopt resolutions on the increase or reduction of the company's registered capital
(8) to adopt resolutions on the issuance of company bonds
(9) to adopt resolutions on matters such as the merger, division, transformation, dissolution, liquidation of the company
(10) to amend the company's articles of association
(11) other powers provided for in the company’s articles of association
If the shareholders express their approvals unanimously on any of the matters set out above in written form, they may make a decision without convening a shareholders’ meeting and all shareholders shall sign and seal the decision documents.
Article 39 The first meeting of the shareholders of the company shall be convened and presided over by the shareholder who has made the biggest capital contribution to the company and shall exercise its functions and powers in accordance with this Law.
Article 40 Shareholders' meetings shall be divided into regular meetings and interim meetings.
Regular meeting shall be convened on time as stipulated by the articles of association the company. Interim shareholders’ meetings shall be convened upon proposal made by shareholders representing one-tenth or more of the voting rights, or by one-third or more of directors or supervisor or the supervisor of the company with no supervisory board.
Article 41 Where a limited liability company has set up a board of directors, its shareholders' meetings shall be convened by the board of directors and presided over by the chairman of the board. Where the chairman of the board of directors is unable to perform his duties or not performing his duties, the vice-chairman shall preside over the meeting; where the vice-chairman is unable to perform his duties or not performing his duties, a director who shall be elected jointly by more than half directors shall preside over the meeting.
Where a limited liability company has no board of directors, the executive director convenes and presides over the shareholders’ meeting.
Where the board of directors or executive director is unable to perform his duties or not performing his duties to convene the shareholders’ meeting, the supervisory board or the supervisor of the company with no supervisory board shall convene and preside over the meeting; where the supervisory board or the supervisor does not convene and preside over, the shareholders representing one-tenth or more of the voting rights may convene and preside over the meeting by themselves.
Article 42 All shareholders shall be notified fifteen days prior to the convening of a shareholders’ meeting, however, except as otherwise specified in the company’s articles of association or agreements by all shareholders.
The shareholders’ meeting shall keep minutes of their decisions on matters discussed at it; the shareholders present at the meeting shall sign the minutes.
Article 43 Shareholders shall exercise voting rights at shareholders’ meetings in accordance with the proportions of their capital contribution; however, except as otherwise specified in the company’s articles of association.
Article 44 Except as otherwise provided for in this Law, methods of discussion and voting procedures for shareholders’ meetings are specified in the company’s articles of association.
A resolution on amending the company’s articles of association, an increase in or reduction of registered capital, and merger, division, dissolution or transformation of the company shall be passed by shareholders representing two-third or more of the voting rights.
Article 45 A limited liability company shall have a board of directors, which shall be composed of three to thirteen members; however, except as otherwise specified in the Article 51 in this Law.
For a limited liability company established with the investment of two or more state-owned enterprises or two or more state-owned investment entities, members of its board of directors shall include representatives of the staff and workers of the company. For other limited liability companies, members of their board of directors may include representatives of the staff and workers of the company. Representatives of staff and workers on the board of directors are elected by the company’s staff and workers by democratic election through the representative conferences of the staff and workers, the meetings of the staff and workers and otherwise.
A board of directors shall have one chairman and may have a vice-chairman. The method for the creation of the chairman and vice-chairman shall be stipulated in the articles of association of the company.
Article 46 The term of office of directors shall be stipulated by the company’s articles of association but may not exceed three years. A director may, if reelected upon expiration of his term of office, serve consecutive terms.
Where a director’s term of office expires and is not reelected in time, or a director resigns before the expiration of his term of office and such resignation results in the number of members of the board of directors being less than a quorum, the original directors shall still perform directors’ duties in accordance with the law, administrative regulations and the articles of association before the reelected director fills the office.
Article 47 The board of directors shall be responsible to the shareholders’ meetings and exercise the following functions and powers:
(1) to convene shareholders’ meetings and be accountable to the shareholders’ meeting
(2) to implement the resolutions of the shareholders’ meetings
(3) to decide on the business plans and investment plans of the company
(4) to formulate the annual financial budget plan and final accounts plan of the company
(5) to formulate plans for profit distribution and plans for making up losses of the company
(6) to formulate plans for the increase or reduction of the company's registered capital and the issuance of company bonds
(7) to formulate plans for the merger, division, transformation and dissolution of the company
(8) to decide on the establishment of the company's internal management organs
(9) to decide on the appointment or dismissal of the company's manager and the manager’s remuneration, and upon recommendation of the manager, to decide on the appointment or dismissal of the deputy managers and persons in charge of the financial affairs of the company and their remuneration
(10) to formulate the company's basic management system
(11) other powers provided for in the company’s articles of association
Article 48 Meetings of the board of directors shall be convened and presided over by the chairman of the board. Where the chairman is unable to perform or not performing his duties, the vice-chairman shall convene and preside over the meetings. Where the vice-chairman is unable to perform his duties or not performing his duties, meetings shall be convened and presided over by a director who shall be elected jointly by more than half directors.
Article 49 The rules of deliberation and voting procedures of the board of directors shall, except where provided for by this Law, be stipulated by the articles of association of the company.
The board meeting shall keep minutes of the decisions made on matters discussed at it; directors present at the meeting shall sign the minutes.
For the voting of the resolution of the board of directors, shareholders shall have one vote for each person.
Article 50 A limited liability company may have a manager, who shall be appointed or dismissed by the board of directors. The manager shall be responsible to the board of directors and shall excise the following functions and powers:
(1) to be in charge of the company’s production, operation and management, and to organize the implementation of the resolutions of the board of directors.
(2) to organize the implementation of the company’s annual business plans and investment plans
(3) to draw up plans on the establishment of the company’s internal management organs
(4) to draw up the company’s basic management system
(5) to formulate specific rules and regulations of the company
(6) to recommend the appointment or dismissal of the company’s deputy manager(s) and of persons in charge of the financial affairs of the company
(7) to decide on the appointment or dismissal of management personnel other than those required to be appointed or dismissed by the board of directors
(8) other functions and powers granted by the board of directors
Where the company’s articles of association on the manager’s powers otherwise provide for, the provisions of the company’s articles of association apply.
The manager shall be present at the meetings of the board of directors.
Article 51 Where a limited liability company has a small number of shareholders and is comparatively small in scale, it may have an executive director instead of a board of directors. The executive director may concurrently serve as the manager of the company.
The functions and powers of the executive director shall be stipulated in the company’s articles of association.
Article 52 A limited liability company shall have a supervisory board composed of no less than three members. Where a limited liability company has a small number of shareholders and is comparatively small in scale, it may have one to two supervisors and no supervisory board.
The supervisory board shall include representatives of shareholders and a reasonable proportion of representatives from the company’s staff and workers, and the proportion of representatives from the company’s staff and workers shall not be less than one third, the specific proportion to be provided in the company’s articles of association. Representatives of the staff and workers in the supervisory board shall be elected by the company's staff and workers by democratic election through the representative conferences of the staff and workers, the meetings of the staff and workers and otherwise.
The supervisory board shall have one chairman who is elected by more than half of all supervisors. The chairman of the supervisory board convenes and presides over the meetings of the board of directors; if the chairman of the supervisory board is unable to perform his duties or not performing his duties, meetings shall be convened and presided over by a supervisor who shall be elected jointly by more than half supervisors.
Directors and senior managerial staff of the company may not concurrently serve as supervisors.
Article 53 The term of office of a supervisor shall be three years. A supervisor may, if reelected upon expiration of his term of office serve consecutive terms.
If a supervisor’s term of office expires and is not reelected in time, or a supervisor resigns before the expiration of his term of office and such resignation results in the number of members of the supervisory board being less than a quorum, the original supervisors shall still perform supervisors’ duties in accordance with the law, administrative regulations and the articles of association before the reelected supervisor’s filling office.
Article 54 The supervisory board and the supervisors of the company with no supervisory board exercise the following functions and powers:
(1) to examine the financial affairs of the company;
(2) to exercise supervision over the acts of the directors and senior managerial staff carried out while performing their corporate functions, and propose the dismissal of the directors and senior managerial staff who violate laws, administrative rules and regulations, the company's articles of association or the resolutions of a shareholders’ meeting.
(3) to demand directors or senior managerial staff to make corrections if any of their acts if found to have damaged the interests of the company;
(4) to propose the convening of interim shareholders' meetings, and convene and preside over the shareholders’ meeting when the board of directors is not performing the duties of convening and presiding over the shareholders’ meeting in accordance with this Law.
(5) to present proposals to the shareholders’ meeting
(6) to initiate legal proceedings against the directors, senior managerial staff in accordance with the provisions of the Article 152 in this Law
(7) other functions and powers stipulated in the company's articles of association
Article 55 The supervisors may attend meetings of the board of directors and make inquiries or proposals in respect of matters of the board of directors’ resolutions.
The supervisory board, supervisors of the company with no supervisory board may conduct an investigation when discovering the company’s operational conditions abnormal. The supervisory board, supervisors of the company with no supervisory board may engage an accounting firm etc. to provide assistance when necessary and the expenses is assumed by the company.
Article 56 Meetings of the supervisory board shall be convened at least once a year and the supervisors may request that an interim meeting of the supervisory board be convened.
Except as otherwise provided in this Law, methods of discussion and voting procedures for the meetings of the supervisory board are stipulated in the company's articles of association.
Resolutions of the meetings of the supervisory board shall be adopted with half or more supervisors.
Meetings of the supervisory board shall keep minutes of the decisions made on matters discussed. The minutes shall be signed by the supervisors present at the meeting.
Article 57 The necessary expenses for exercising their functions and powers of the supervisory board, the supervisors of the company with no supervisory board is assumed by the company.
Section 3 Special Regulations of One Person Limited Liability Company
Article 58 Incorporation and organizational structure of a one person limited liability company shall be in accordance with the provisions of this Section; if it is not specified in this Section, the provisions of Section One, Section Two in this Chapter apply.
In this Law, the term "one person limited liability company" refers to a limited liability company with only one natural person shareholder or one legal person shareholder.
Article 59 The minimum amount of registered capital for a one person limited liability company is RMB 100,000. The shareholder shall pay in full the capital contribution stipulated in the company’s articles of association once.
A natural person only can establish a one person limited liability with his investment; and such one person limited liability company shall be unable to establish a new one person limited liability company with its investment.
Article 60 A one person limited liability company shall give clear indication of wholly natural person company or wholly legal person company when registering and the above indication shall be set out in the company’s business license.
Article 61 The articles of association of a one person limited liability company is formulated by the shareholder.
Article 62 A one person limited liability company shall not have a shareholders’ meeting. When the shareholder makes a decision stated in clause (1) of the Article 38 in this Law, the decision shall be in written form, be signed by the shareholder and be deposited in the company.
Article 63 At the end of each fiscal year, a one person limited liability company shall formulate its financial and accounting report which shall audited by an accounting firm.
Article 64 The shareholder of a one person limited liability company shall be jointly liable for the company’s debts if the shareholder is unable to prove the company’s property is independent from the shareholder’s own property.
Section 4 Special Regulations of Wholly State-Owned Companies
Article 65 Incorporation and organizational structure of a wholly state-owned company shall be in accordance with the provisions of this Section; if it is not stipulated in this Section, the provisions of Section One, Section Two in this Chapter apply.
"A wholly state-owned company" in this Law refers to a limited liability company in which the State is the sole contributor and the State-owned assets supervision and administration institution of a people’s government at the same level authorized by the State Council or the local people’s government is exercising the capital contributor’s duties.
Article 66 The articles of association of a wholly state-owned company are formulated by the State-owned assets supervision and administration institution, or formulated by the board of directors, and reported to the State-owned assets supervision and administration institution for approval.
Article 67 Where a wholly state-owned company does not have a shareholders' meeting, the State-owned assets supervision and administration institution shall exercise the shareholder’s functions and powers. The State-owned assets supervision and administration institution may authorize the company’s board of directors to exercise part of the powers of a shareholders’ meeting, decide on the major issue of the company, however, provided that decisions on merger, division, dissolution of the company, increase or reduction in registered capital and issuance of company bonds shall be decided by the State-owned assets supervision and administration institution. Those major wholly state-owned companies’ merger, division, dissolution, application for bankruptcy, shall be examined and verified by the State-owned assets supervision and administration institution, and be reported to a people’s government at the same level for approval.
The major wholly state-owned companies stated above are determined in accordance with the provisions of the State Council.
Article 68 A wholly state-owned company shall have a board of directors that carries out its functions and powers in accordance with the provisions of Article 47 and Article 67 in this Law. The term of office of the board of directors shall not be longer than three years. Members of the board of directors shall include representatives of the staff and workers of the company.
Members of the board of directors are appointed by the State-owned assets supervision and administration institution; however, representatives of the staff and workers on the board of directors are elected by though the representative conferences of the staff and workers.
The board of directors shall have one chairman and may have a vice-chairman. The chairman and the vice-chairman are designated from among the members of the board of directors by the State-owned assets supervision and administration institution.
Article 69 A wholly state-owned company shall have a manager who is appointed or dismissed by the board of directors. The manager shall exercise his functions and powers in accordance with the provisions of Article 50 in this Law.
With the consent of the State-owned assets supervision and administration institution, members of the board of directors may act concurrently as manager.
Article 70 The chairman and vice-chairman of the board of directors, directors, and the senior managerial staff of a wholly state-owned company shall not act concurrently as officers of other limited liability companies, joint stock limited companies or other economic organizations without the consent of the State-owned assets supervision and administration institution.
Article 71 A wholly state-owned company shall have a supervisory board with not less than five members, and the proportion of representatives from the company’s staff and workers shall not be less than one third, the specific proportion to be provided for in the company’s articles of association.
Members of the supervisory board are appointed by the State-owned assets supervision and administration institution; however, representatives of the staff and workers on the supervisory board are elected through the representative conferences of the staff and workers. The chairman of the supervisory board is designated by the State-owned assets supervision and administration institution from among the members of the supervisory board.
The supervisory board exercises the functions and powers stipulated in clause(1) to clause(3) of Article 54 in this Law and other powers specified by the State Council.
Chapter III Equity Transfer of Limited Liability Companies
Article 72 Shareholders of a limited liability company may transfer among themselves all or part of their equity.
Where a shareholder transfers its equity to a person other than a shareholder, the consent of more than half of all shareholders shall be required. The shareholder shall give a written notice to other shareholders with regards to the equity transfer matters for approval, and other shareholders are deemed to have agreed to the transfer if no reply within thirty days of receiving the written notice. If more than half of other shareholders object to such transfer, those shareholders objecting to such transfer shall purchase the equity to be transferred and those shareholders are deemed to have agreed to the transfer if without purchasing.
For a transfer of equity that is transferred with the consent of the shareholders, other shareholders have a pre-emptive right to purchase it on the same conditions. When more than two shareholders claim to exercise the pre-emptive right, those shareholders shall determine their respective purchase proportion through negotiation; if the negotiations can not be reached, those shareholders shall exercise the pre-emptive right in accordance with the proportions of their respective capital contributions during the transfer.
Where the company’s articles of association on the equity transfer otherwise provide for, the provisions of the company’s articles of association shall apply.
Article 73 The people’s court shall give a notice to the company and all shareholders when transferring shareholders’ equity through the enforcing procedure in accordance with the law, and other shareholders have a pre-emptive right to purchase the equity on the same conditions. Other shareholders are deemed to disclaim the right to purchase the equity if not exercising the pre-emptive right to purchase the equity within twenty days of notice given by people’s court.
Article 74 After transferring the equity in accordance with Article 72, Article 73, the company shall cancel the original shareholders’ capital contribution certificates and shall issue an capital contribution certificate to new shareholders, and shall amend the records set out in the articles of association and the roster of shareholders accordingly with regards to the shareholders and the shareholders’ capital contributions. Such amendment of the articles of association shall not require the voting of a shareholders’ meeting.
Article 75 A shareholder objecting to such resolution of a shareholders’ meeting may request the company to purchase his equity in accordance with the reasonable price under any of the following circumstances:
(1) the company has not distributed the profits to the shareholders in each of the last five years, but the company has been continuously profitable for the last five years, and the conditions on the profit distribution is met in accordance with this Law.
(2) the company merges, divides and transfers its major property.
(3) pursuant to the provisions of the company's articles of association, the term of the company has expired or one of the other events which are grounds for dissolution has occurred and the shareholders’ meetings amend the articles of association to keep the company existence.
Within the sixty days of the resolutions passed by a shareholders’ meeting, the shareholders may apply to the people’s court to initiate legal proceedings within ninety days of the resolutions passed by a shareholders’ meeting if the shareholders and the company can not enter into an agreement with regards to the equity purchase.
Article 76 After the death of a natural person shareholder, his legitimate heir may carry on the shareholder’s qualification; however, except as otherwise specified in the articles of association.
Chapter IV Incorporation and Organizational Structure of Joint Stock Limited Companies
Section 1 Incorporation
Article 77 To incorporate a joint stock limited company, the following conditions must be satisfied:
(1) the number of promoters shall conform to the statutory number
(2) the share capital subscribed for by the promoters and raised shall reach the statutory minimum amount of capital;
(3) the issuance of shares and preparations for incorporation shall be in conformity with the provisions of the law;
(4) the articles of association of the company shall be formulated by the promoters and the articles of association of the company established by offer method shall be adopted by the founding meeting
(5) the company shall have a name and an organizational structure required for the incorporation of a joint stock limited company;
(6) there is a company’s domicile
Article 78 Joint stock limited companies may be incorporated by means of promotion or by means of share offer.
"Incorporation by means of promotion" means incorporation of a company by means of subscription by the promoters for all the shares to be issued by the company.
"Incorporation by means of share offer" means incorporation of a company by means of subscription by the promoters for a portion of the shares to be issued by the company and offer of the rest to the general public or specific objects.
Article 79 To incorporate a joint stock limited company, there shall be at least two and no more than two hundred promoters, of which more than half must have their domicile within the territory of the People’s Republic of China.
Article 80 The promoters of a joint stock limited company shall undertake the matters concerning the preparation for the incorporation of the company.
The promoters shall enter into the promoters’ agreement and specify the rights and obligations during the process of the incorporation of the company.
Article 81 Where a joint stock limited company is to be incorporated by the promoter method, its registered capital is the total share capital which has been registered with the Company Registration Authority and which has been subscribed by all promoters. The first amount of the capital contribution of all promoters of a company shall not be less than twenty percent of the registered capital of the company, and the remaining part of the capital shall be paid in full by promoters within two years of the incorporation of the company. The remaining part of capital of an investment company may be paid in full within five years of its incorporation. The promoters shall not offer shares to others without paying in full.
Where a joint stock limited company is to be incorporated by the offer method, the registered capital of the company is the total share capital which has been registered with the Company Registration Authority and which has been actually received.
The minimum amount of the registered capital of a joint stock limited company is RMB 5,000,000. Requirements for the minimum amount of the registered capital of a joint stock limited company to be higher than the above amount are provided for in separate laws or administrative regulations.
Article 82 The articles of association of a joint stock limited company shall specify the following items:
(1) the name and domicile of the company
(2) the scope of business of the company
(3) the method of incorporation of the company
(4) the total amount of shares, the amount of each share and registered capital of the company
(5) the names or titles of the promoters and the number of shares subscribed by the promoters, the form and the time of the capital contributions,
(6) the composition, functions and powers, the term of office and the deliberation rules of the board of directors.
(7) the legal representative of the company
(8) the composition, functions and powers, the term of office and the deliberation rules of the supervisory board
(9) methods for the distribution of the company’s profit
(10) the reasons for dissolution of the company and liquidation method
(11) methods for notices and announcements of the company
(12) other matters that the shareholders' general meeting deems necessary to be specified
Article 83 The method of the capital contributions of the promoters shall be in accordance with the provisions of Article 27 in this Law.
Article 84 Where a joint stock limited company is incorporated by the promoter method, the promoters shall subscribe in writing for all shares that the articles of association provide for to be subscribed. The promoters shall pay in full for their capital contributions immediately if being required to pay in full once; the promoters shall pay the first capital contributions immediately if being required to pay in full for their capital contributions by installments. Where non-cash property is used as payment for the shares, procedures for the transfer of the property rights shall be dealt with in accordance with the law.
A promoter shall be liable for default in accordance with the promoters’ agreement if the promoter does not pay the capital contributions pursuant to the provisions of the above clause.
After the promoters make their first capital contributions, they shall elect the board of directors and supervisory board. The board of directors shall submit to the Company Registration Authority the company's articles of association, the capital verification certificate issued by a capital verification institution established in accordance with the law and other documents in accordance with the law, administrative rules and regulations, and shall apply for registration of incorporation.
Article 85 Where a joint stock limited company is incorporated by the offer method, the promoters shall not subscribe for less than thirty five percent of the total shares issued by the company, however, except as otherwise specified in the law, administrative regulations.
Article 86 Where shares are to be offered to the general public, the promoters must publish the company's prospectus on share offer and prepare subscription forms. The subscription forms shall contain the items listed in Article 87 in this Law, and the subscribers shall fill in the number of shares subscribed for, the amount of money contributed to, and their respective domiciles on the forms, and shall sign and seal such forms. The subscribers shall pay their subscription money in accordance with the number of shares subscribed for.
Article 87 A prospectus on share offer shall have the articles of association of the company formulated by the promoters attached, and shall specify the following:
(1) the number of shares subscribed for by the promoters;
(2) the face value and the issue price of each share;
(3) the total number of bearer shares issued;
(4) the purpose of the raising funds
(5) the rights and obligations of the subscribers; and
(6) the term of the share offer and a statement to the effect that subscribers may withdraw their share subscriptions if all the shares are not taken up within the time limit.
Article 88 When promoters offer shares to the public, the shares shall be distributed by a securities company established according to law, with which a distribution agreement shall be concluded.
Article 89 Where shares are to be offered to the public, the promoters shall enter into an agreement with a bank on the collection of subscription money on behalf of the company.
The bank entrusted with collecting the subscription money shall, in accordance with its agreement, collect and keep the subscription money, issue receipts to the subscribers for their payments, and bear an obligation to issue certification of receipt of subscription money to the relevant departments.
Article 90 After payment in full of the subscription money for all shares is made, a capital verification institution established in accordance with the law shall be commissioned to conduct a verification of the funds and produce a verification certificate. The promoters shall, within thirty days thereafter, convene and preside over an inaugural meeting composed of all the subscribers.
If the number of shares has not been fully subscribed for within the time limit specified in the prospectus on share offer or, after payment in full of the subscription money for the total share is made, or if promoters fail to hold an inaugural meeting within thirty days thereafter, the subscribers may claim a refund from the promoters according to the paid-up share subscription money plus bank deposit interest calculated for the same period.
Article 91 The promoters shall notify each subscriber of the date of the inaugural meeting or make a public announcement 15 days prior to the convening of the meeting. The inaugural meeting may be convened only if subscribers representing fifty percent or more of the total shares issued are present.
The following functions and powers shall be exercised at an inaugural meeting:
(1) to examine the promoters' report on the preparation for the incorporation of the company;
(2) to adopt the articles of association of the company;
(3) to elect members of the board of directors;
(4) to elect members of the supervisory board;
(5) to examine and verify the expenses incurred in the incorporation of the company;
(6) to examine and verify the valuation of the property used by the promoters to pay for subscription money; and
(7) to resolve not to incorporate the company in the event that a force majeure or major changes in business operation conditions may directly affect the incorporation of the company.
The resolution made at the inaugural meeting on the issues listed in the preceding paragraph must be approved by subscribers attending the meeting who represent more than half of the voting rights.
Article 92 Promoters and subscribers may not withdraw their share capital after paying their subscription money or making their capital contributions as substitutes for subscription money, except where the total share issue is not fully subscribed for within the time limit or the promoters fail to convene the inaugural meeting according to the schedule, or the inaugural meeting resolves not to incorporate the company.
Article 93 The board of directors shall, within thirty days after the inaugural meeting, submit the following documents to the Company Registration Authority and apply for registration of the incorporation of the company:
(1) the company’s application of registration
(2) the minutes of the inaugural meeting
(3) the articles of association of the company
(4) the capital verification certificate
(5) the documents of office and identity certifications of the legal representative, the board of directors, the supervisory board.
(6) the certifications of the promoters’ legal status or the certifications of the natural persons’ identification.
(7) the certificates of the company’s domicile
Where a joint stock limited company incorporated by the offer method makes a public offer, the company shall submit the documents examined and approved by the securities supervision and administration authority under the State Council to the Company Registration Authority.
Article 94 After the incorporation of a joint stock limited company, a promoter shall pay the capital contributions in arrear if not paying in full the capital contributions in accordance with the articles of association; and other promoters shall be jointly liable.
After the incorporation of a limited liability company, if the actual values of the non-cash property are obviously lower than the values set in the articles of association, the difference shall be made up by the promoter(s) who contributed such investment; and other promoters shall be jointly liable.
Article 95 The promoters of a joint stock limited company shall bear the following responsibilities:
(1) in the event of the company failing to be incorporated, joint and several liabilities for all debts and expenses incurred in the act of the incorporation;
(2) in the event of the company failing to be incorporated, joint and several liabilities for refunding to the subscribers the paid-up subscription money plus bank deposit interest calculated for the same period of time
(3) in the event of the interests of the company being damaged during the course of its incorporation due to fault of the promoter, liability for compensation to the company.
Article 96 Where a limited liability company is converted into a joint stock limited company, the total amount of the actual share capital into which conversion is made shall be not more than the amount of the company's net assets. Where a limited liability company that is converted into a joint stock limited company issues shares to the general public for the purpose of increasing its capital, it shall be handled in accordance with the law。
Article 97 A joint stock limited company shall keep its articles of association, roster of shareholders, company bonds counterfoil, minutes of shareholders' general meetings ,minutes of the meetings of the board of directors, minutes of the meetings of the supervisory board and financial and accounting statements at the company.
Article 98 Shareholders have the right to look up the company's articles of association, roster of shareholders, company bonds counterfoil, minutes of shareholders' general meetings ,minutes of the meetings of the board of directors, minutes of the meetings of the supervisory board and financial and accounting statements, and to make proposals or inquiries in respect of the company's operations.
Section 2 Shareholders' General Meetings
Article 99 A joint stock limited company shall form a shareholders' general meeting which shall be composed of all the shareholders. The shareholders' general meeting is the organ of power of the company and shall exercise its functions and powers in accordance with this Law
Article 100 The provisions of Clause (1) of Article 38 in this Law on the functions and powers of the shareholders’ meetings of a limited liability company are applicable to the shareholders’ general meetings of a joint stock limited company.
Article 101 The annual meeting of the shareholders' general meeting shall be convened once a year. An interim shareholders' general meeting shall be convened within two months if any of the following circumstances occurs:
(1) if the number of directors is less than the number as stipulated by this Law, or less than two-thirds of the number required by the articles of association of the company;
(2) if the amount of the company's losses that have not been made up reaches one-third of its total share capital;
(3) if shareholders solo or totally holding ten percent or more of the company's shares request to convene a shareholders' meeting;
(4) if the board of directors deems it necessary; and
(5) if the supervisory board proposes that such a meeting be convened
(6) other circumstances specified in the articles of association.
Article 102 A shareholders’ general meeting shall be convened by the board of directors and presided over by the chairman of the board of directors. Where the chairman of the board of directors is unable to perform his duties or not performing his duties, the vice-chairman shall preside over the meeting; where the vice-chairman is unable to perform his duties or not performing his duties, a director who shall be elected jointly by more than half directors shall preside over the meeting.
Where the board of directors is unable to perform the duties or not performing the duties of convening the shareholders’ general meeting, the supervisory board shall convene and preside over the shareholders’ general meeting in time; where the supervisory board does not convene and preside over the shareholders’ general meeting, the shareholders solo or totally holding ten per cent or more of the shares of the company continuously for ninety days may convene and preside over the shareholders’ general meeting by themselves.
Article 103 When convening a shareholders' general meeting, notice, place and the matters to be considered at the meeting shall be given to all shareholders twenty days before the meeting. The notice of an interim shareholders’ general meeting shall be given to all shareholders fifteen days before the meeting. Where bearer shares are to be issued, a public announcement shall be made about the time, place and the matters to be considered at the meeting thirty days before the meeting.
The shareholders solo or totally holding 3 per cent or more of the shares of the company may present interim proposals and submit to the board of directors in the written form ten days before the shareholders’ general meeting. The board of directors shall give notice to other shareholders within two days of receiving the proposals and submit such interim proposals to the shareholders’ general meeting for examination and approval. The content of the interim proposals shall be within the scope of the shareholders’ general meeting’s functions and powers, and shall have definite subject under discussion and specific matters to be decided.
The shareholders’ general meeting shall not adopt resolutions on matters not stated in the notice of the above two clauses.
Where shareholders of bearer shares are present at a shareholders’ general meeting, their shares shall be deposited at the company from five days prior to the opening of the meeting until the adjournment of the meeting.
Article 104 Shareholders attending a shareholders’ general meeting shall have the right to one vote for each share they held. However, the company does not have voting right for its own shares it hold.
A resolution of the shareholders' general meeting must be passed by more than one half of the voting rights held by shareholders present at the meeting. However, resolutions of the shareholders' general meeting on amendment of the articles of association, increase or reduction of the registered capital, and merge, division, dissolution or transformation of the company shall be adopted by shareholders with two-thirds or more of the voting rights present at the meeting.
Article 105 Where matters on transferring, assigning its major assets of a company or providing a guarantee for outsiders, etc. shall be decided by a shareholders’ general meeting in accordance with this Law and the articles of association, the board of directors shall convene a shareholders’ general meeting in time, and the above matters shall be voted on by the shareholders’ general meeting.
Article 106 Elections of directors, supervisors at a shareholder’ general meeting shall be in accordance with the provisions of the articles of association or the resolutions of a shareholders’ general meeting, and shall apply cumulative voting.
The ‘ cumulative voting’ in this Law refers to the number of voting rights allocated to each share is equal to the number of directors or supervisors to be elected when electing directors or supervisors at a shareholders’ general meeting, and the voting rights held by shareholders may be used in congregation.
Article 107 A shareholder may entrust a proxy to attend the shareholders' general meeting on his behalf. The proxy shall present the shareholders' power of attorney to the company and exercise voting rights within the scope of authorization.
Article 108 Resolutions on matters discussed at a shareholders' general meeting shall be minuted down and the chairperson, directors attending the meeting shall sign the minutes. The minutes of the meeting shall be kept together with the roster of the signatures of the shareholders attending the meeting and the powers of attorney of attending proxies.
Section 3 The Board of Directors, Managers
Article 109 A joint stock limited company shall have a board of directors composed of five to nineteen members.
Members of its board of directors may include representatives of the staff and workers of the company. Representatives of staff and workers on the board of directors are elected by the company’s staff and workers by democratic election through the representative conferences of the staff and workers, the meetings of the staff and workers and otherwise.
The provisions of Article 46 in this Law on the term of the office of the directors of a limited liability company are applicable to the directors of a joint stock limited company.
The provisions of Article 47 in this Law on the functions and powers of the board of directors of a limited liability company are applicable to the board of directors of a joint stock limited company.
Article 110 The board of directors shall have one chairman and may have a vice-chairman. The chairman and vice-chairman of the board of directors shall be elected by the affirmative votes of more than half of all the directors.
The chairman of the board of directors shall convene and preside over the meetings of the board of directors, and examine the implementation of resolutions of the board of directors. The vice-chairman of the board of directors shall assist the chairman of the board of directors in his work. Where the chairman is unable to perform his duties or not performing his duties, the vice-chairman shall perform the duties; where the vice-chairman is unable to perform his duties or not performing his duties, a director who shall be elected jointly by more than half directors shall perform the duties.
Article 111 Meetings of the board of directors shall be held at least twice a year. All members of the board of directors and the supervisory board shall be notified of the meeting ten days prior to the holding of the meeting.
Shareholders representing one-tenth or more of the voting rights or one-third or more of the directors or the supervisory board may request that an interim meeting be convened. The chairman of the board of directors shall convene and preside over the meetings of the board of directors within ten days of receiving the request.
The notification method and time limit for giving notice of the convening of the interim meetings of the board of directors may be separately decided.
Article 112 A meeting of the board of directors shall be convened only if more than one half of all the directors are present. Any resolution of the board must be adopted by the affirmative votes of more than one half of all directors.
Voting of a resolution of the board of directors applies one vote for each person.
Article 113 Meetings of the board of directors shall be attended by the directors in person. If a director is unable to attend a meeting of the board for certain reasons, he may entrust another director in writing with attending the meeting on his behalf. The powers of attorney shall define the scope of authorization.
Decisions on matters discussed at a meeting of the board of directors shall be minuted. Such minutes of the meeting shall be signed by the directors present at the meeting..
Directors shall be responsible for the resolutions passed by the board of directors. If a resolution of the board violates the law, administrative rules and regulations or the company's articles of association, resolutions of the shareholders’ general meetings and thus causes serious losses to the company, the directors who participated in the adoption of such a resolution shall be liable for compensation to the company. However, if a director is proved to have expressed his objection to such a resolution when it was put to the vote and his objection was recorded in the minutes of the meeting, he may be exempted from such liability.
Article 114 A joint stock limited company shall have a manager, who shall be engaged or dismissed by the board of directors.
The provisions of Article 50 in this Law on the functions and powers of the manager of a limited liability company are applicable to the manager of a joint stock limited company.
Article 115 The board of directors of the company may decide that one of its members shall concurrently serve as the manager of the company.
Article 116 The company shall not provide a loan to its directors, supervisors, senior managerial staff directly or through the subsidiaries.
Article 117 The company shall disclose the remuneration of the directors, supervisors and senior managerial staff obtained from the company on a regular basis.
Section 4 the Supervisory Board
Article 118 A joint stock limited company shall have a supervisory board composed of no less than three members.
The supervisory board shall include representatives of shareholders and a reasonable proportion of representatives from the company’s staff and workers, and the proportion of representatives from the company’s staff and workers shall not be less than one third, the specific proportion to be provided for in the company’s articles of association. Representatives of the staff and workers on the supervisory board are elected by the company's staff and workers by democratic election through a representative conference of the staff and workers, a meeting of the staff and workers and otherwise.
The supervisory board shall have one chairman and may have a vice-chairman. The chairman and vice-chairman of the supervisory board shall be elected by more than half of all supervisors. The chairman of the supervisory board convenes and presides over the meetings of the board of directors; if the chairman of the supervisory board is unable to perform his duties or not performing his duties, meetings shall be convened and presided over by the vice-chairman of the supervisory board; if the vice-chairman of the supervisory board is unable to perform his duties or not performing his duties, meetings shall be convened and presided over by a supervisor who shall be elected jointly by more than half supervisors.
The directors, senior managerial staff shall not act concurrently as supervisor.
The provisions of Article 53 of this Law on the term of office of the supervisors of a limited liability company are applicable to the supervisors of a joint stock limited company.
Article 119 The provisions of Article 54 and Article 55 in this Law on the functions and powers of the supervisory board of a limited liability company are applicable to the supervisory board of a joint stock limited company.
The necessary expenses for exercising its functions and powers of the supervisory board is assumed by the company.
Article 120 Meetings of the supervisory board shall be convened at least once half a year. The supervisory board may request that an interim meeting of the supervisory board be convened.
Except as otherwise provided for in this Law, methods of deliberation and voting procedures for the meetings of the supervisory board shall be stipulated in the company’s articles of association.
Resolutions of the meetings of the supervisory board shall be adopted with half or more supervisors.
Decisions on matters discussed at a meeting of the supervisory board shall be minuted. Such minutes of the meeting shall be signed by the supervisors present at the meeting..
Section 5 Special Regulations of Organizational Structure of Listed Companies
Article 121 A listed company mentioned in this Law referred to a joint stock limited company which has its issued shares listed and traded at stock exchanges.
Article 122 Where the amount of purchasing, selling its major assets of a listed company or the amount of a guarantee provided by the listed company exceeds thirty per cent of the total amount of its assets within one year, the above shall be decided by a shareholders’ general meeting with two-thirds or more of the voting rights present at the meeting.
Article 123 A listed company shall have an independent director and specific means shall be stipulated by the State Council.
Article 124 A listed company shall have a secretary of the board of directors who is responsible for the preparations of a shareholders’ general meeting and a meeting of the board of directors, storing the documents and shareholders’ data management, disclosing information, etc.
Article 125 Where a director of a listed company has an interrelated connection with the enterprises involved in the matters of a resolution of a meeting of the board of directors, such director shall not vote on the resolution, and shall not vote on behalf of other directors. Such meeting of the board of directors shall be held only if more than half of the non-related directors are present, and the resolution of such meeting of the board of directors shall be adopted with more than half of the non-related directors. The matters shall be submitted to a shareholders’ general meeting of the listed company for discussion and examination if the number of the non-related directors present at the meeting of the board of directors is less than three.
Chapter V Issue and Transfer of Shares of Joint Stock Limited Companies
Section 1 Issue of Shares
Article 126 The capital of a joint stock limited company shall be divided into shares of equal value.
The shares of the company take the form of share certificates, which are vouchers issued by the company to certify the shares held by their shareholders.
Article 127 The issue of shares shall be in compliance with the principles of fairness and justice. The shares of the same class must carry the same rights and the same benefits.
Shares of the same issue and the same class shall be issued on the same conditions and at the same price. A unit or an individual subscribing to shares shall pay the same price for each share.
Article 128 Share may be issued at or above par but not below par.
Article 129 Share certificates may be in paper form or in such other forms as specified by the securities supervision and administration institutions under the State Council.
The following main particulars shall be clearly stated on a share certificate:
(1) the name of the company;
(2) the date of the registration of the company’s incorporation;
(3) the class of the shares, the par value and the number of shares represented by the certificate;
(4) the serial number of the share certificate.
A share certificate shall be signed by the legal representative and sealed with the seal of the company.
In the case of share certificates owned by promoters, the words "promoter's share certificate" shall be clearly stated on the share certificates.
Article 130 Shares issued by a company may be either registered shares or bearer shares.
Shares issued by a company to promoters, legal persons shall be registered shares which shall state the names of the promoters, legal persons. Such shares may not be registered in other names, or names of their representatives.
Article 131 Where registered shares are issued, the company shall prepare a roster of the shareholders, in which the following items shall be recorded:
(1) the name or titles, and domiciles of the shareholders;
(2) the number of shares held by each shareholder
(3) the serial numbers of the share certificates held by each shareholder;
(4) the date on which each shareholder obtained his shares
Where bearer shares are issued, the company shall keep a record of the number, the serial numbers and the issue date of the shares certificates.
Article 132 The State Council may formulate separate regulations on the issue of other classes of shares not provided for in this Law.
Article 133 A joint stock limited company shall formally deliver share certificates to its shareholders immediately after its incorporation. No company may deliver share certificates to its shareholders prior to its incorporation.
Article 134 Where a company issues new shares, resolutions on the following matters shall be adopted by a shareholders’ general meeting or the board of directors in accordance with provisions of the articles of association of the company:
(1) the class and number of the new shares;
(2) the issue price of the new shares
(3) the opening and closing dates of the new share issue;
(4) the class and number of new shares issued to existing shareholders.
Article 135 When a company obtains the examination and approval from the securities supervision and administration institution under the State Council to issue new shares, it must publicly announce its prospectus on new share offer and its financial accounting statements, and shall prepare subscription application forms.
The provisions of Article 88, Article 89 in this Law are applicable to the issue of new shares of the company..
Article 136 Where a company issues new shares, it may determine its pricing proposals for new shares based upon the circumstances of its operational conditions and financial conditions.
Article 137 Where the new shares issue of a company is fully subscribed for ,the company shall apply to the Company Registration Authority for registration of the modification in its capital and make a public announcement thereafter.
Section 2 Transfer of Shares
Article 138 Shares held by shareholders may be transferred in accordance with the law.
Article 139 Transfer of shares by shareholders shall be conducted through stock exchanges established in accordance with the law or by other means in accordance with the provisions of the State Council.
Article 140 Registered shares shall be transferred by means of endorsement by shareholders or by such other means as provided for by the law and administrative rules and regulations; after registered shares are transferred, the company shall register the transferee’s name or title and domicile in its roster of shareholders.
No registration of modification to the roster of shareholders as stipulated in the preceding paragraph shall be made within twenty days prior to the convening of a shareholders’ general meeting or within five days prior to the date decided by the company for the distribution of dividends.
Article 141 Transfer of bearer shares shall become effective immediately after the shareholder delivers the shares certificates to the transferee.
Article 142 Shares held by the promoters of a company shall not be transferred within one year after the date of incorporation of the company. Shares issued prior to the company’s public offering shall not be transferred within one year after the date on which the company has its shares listed and traded at stock exchanges.
Directors, supervisors and the senior managerial staff of a company shall report to that company all the shares of the company that they hold and any changes of their shares, and the shares of the company that they may transfer annually shall not exceed twenty five per cent of the total shares of the company they hold during their term of office; the shares of the company they hold shall not be transferred within one year after the date of the shares’ listing and trading at stock exchanges. The above personnel shall not transfer the shares of the company they hold within half year after the date of their resignation. Other restrictive provisions on the transfer of the company shares held by directors, supervisors, senior managerial staff of the company may be stipulated in the company’s articles of association.
Article 143 A company may not purchase its own shares. However, except any of the followings:
(1) to reduce its registered capital
(2) to merge with another company that holds its shares
(3) to reward staff and workers of the company with shares
(4) the shareholders request the company to purchase their shares for objecting to the resolutions of a shareholders’ general meeting on the company’s merger, division.
Purchase of its own shares of a company for reasons of item(1) to item (3) above shall be decided by a shareholders’ general meeting. Within ten days following the purchase of its own shares pursuant to the terms of the preceding paragraph, under the circumstances described in item (1), the company shall cancel that portion of its shares; within six months following the purchase of the company’s own shares pursuant to the terms of the preceding paragraph, under the circumstances described in item (2), item (4), the company shall transfer or cancel that portion of its share.
The amount of a company’s purchase of its own shares in accordance with the provisions of item (3) above shall not exceed five per cent of the total shares issued by the company; the funds used for purchase shall be paid from the company’s after-tax profits. The shares being purchased shall be transferred to staff and workers of the company.
A company shall not accept its own share certificates as collateral.
Article 144 Where registered share certificates are stolen, lost or destroyed, the shareholder may, in accordance with the procedures for publicizing public notice for assertion of claims provided for in , request a people's court to declare such share certificates as void. After the voidance has been declared by a people’s court, the shareholder may apply to the company for a replacement of the share certificates.
Article 145 Shares of a listed company shall be listed and traded at stock exchanges in accordance with applicable laws, administrative rules and regulations and trading rules of stock exchanges.
Article 146 Pursuant to laws and administrative rules and regulations, a listed company shall make public its financial situations and operational conditions and major litigations. A listed company shall publish its financial and accounting statements once every six months in each fiscal year.
Chapter VI Qualifications and Obligations of Directors, Supervisors, Senior Managerial Staff
Article 147 Any of the following persons shall not serve as a director, supervisor or senior managerial staff of a company.
(1) persons without civil capacity or with restricted civil capacity
(2) persons who have been sentenced to criminal penalties for corruption, bribery, infringement of property, misappropriation of property or for sabotaging the socioeconomic order, where less than five years have elapsed since the date of completion of the sentence, or persons who have been deprived of their political rights due to criminal offences, where less than five years have elapsed since the date of the completion of implementation of this deprivation
(3) persons who are former directors, factory directors or managers of a company or enterprise which has become bankrupt and been liquidated and are personally liable for the bankruptcy of such company or enterprise, where less than three years have elapsed since the date of the completion of the bankruptcy and liquidation of the company or enterprise
(4) persons who were legal representatives of a company or enterprise which had its business license revoked due to a violation of the law, had been legally ordered to close down and who are personally liable, where less than three years have elapsed since the date of the revocation of the business license
(5) persons who have a relatively large amount of debts due and outstanding
Where a company elects, nominates or appoints any director or supervisor or employs a manager contrary to the provisions of the preceding clause, such election, appointment or employment is ineffective.
Directors, supervisors, senior managerial staff shall be removed from their office during their term of office if the circumstances described in clause (1) of this Article occurs.
Article 148 The directors, supervisors or managers shall abide by the law, administrative regulations and the company's articles of association, have the obligation to be faithful and diligent. They shall not exploit their position and power in the company to advance their own private interests.
The directors, supervisors and senior managerial staff of a company shall not exploit their position to accept bribes or other illegal income or wrongfully take over company property.
Article 149 Directors, supervisors, senior managerial staff shall not have the following behavior:
(1) to misappropriate company funds
(2) to open accounts in their own names or in the names of other individuals for the deposit of the company's funds.
(3) to loan company’s funds to others or provide a guarantee for others with the company's property, in violation of the provisions of the articles of association, without the approval of the shareholders’ meetings, the shareholders’ general meetings or the board of directors
(4) to enter into contracts or transactions with the company, in violation of the provisions of the articles of association, or without approval of shareholders’ meetings, shareholders’ general meetings
(5) to seek business opportunities belonging to the company for their own or others by taking advantages of their position and to engage on their own behalf or on behalf of others in any business similar to the business of the company in which they hold office without approval of the shareholders’ meetings or the shareholders’ general meetings.
(6) to gain the commissions for accepting others into the transactions with the company.
(7) to disclose the secrets of the company without authorization.
(8) other behavior violates the obligation to be faithful to the company
The incomes of the directors, senior managerial staff derived from violating the provisions above shall belong to the company.
Article 150 Where a director, supervisor or senior managerial staff of a company violates the law, administrative regulations or the company’s articles of association while performing his official corporate duties resulting in harm to the company, such director, supervisor or manager shall be liable for damages.
Article 151 Where the shareholders’ meetings or the shareholders’ general meetings require the directors, supervisors, senior managerial staff to be present at the meetings, the directors, supervisors, senior managerial staff shall be present at the meetings and accept shareholders’ inquiries.
The directors, senior managerial staff shall truthfully provide relevant information and materials to the supervisory board or the supervisor(s) of a limited liability company without the supervisory board, and shall not hinder the board of supervisor or supervisor(s) from exercising powers.
Article 152 Where any of the circumstances stipulated in Article 150 in this Law applies to directors, senior managerial staff, the shareholders of a limited liability company, and the shareholders solo or totally holding one per cent or more of the shares of a joint stock limited company continuously for ninety days may request the supervisory board or supervisors of a limited liability company without the supervisory board in written form to initiate legal proceedings in the people’s court; where any of the circumstances stipulated in Article 150 in this Law applies to supervisors, the above shareholders may request the board of directors or the executive director of a limited liability company without the board of directors in written form to initiate legal proceedings in the people’s court.
Where the supervisory board, supervisors of a limited liability company, or the board of directors, the executive director refuse to initiate legal proceedings after receiving the above shareholders’ written requests, or do not initiate legal proceedings within thirty days of receiving the requests, or the situation is urgent and the interests of the company will be damaged and unable to recover without initiating legal proceedings immediately, the shareholders described in the preceding paragraph have the right to initiate legal proceedings in the people’s court directly in their own names for the interests of the company.
Where others infringe upon the lawful rights and interests of a company, the shareholders described in clause (1) may initiate legal proceedings in the people’s court in accordance with the provisions of the above two clause.
Article 153 Where the directors, senior managerial staff violate the provisions of the law, administrative regulations or the articles of association, damage the interests of the shareholders, the shareholders may initiate legal proceedings in the people’s court.
Chapter VII Company bonds
Article 154 "Company bonds" mentioned in this Law mean negotiable instrument issued by a company in accordance with legally procedures with repayment of the principal and payment of the interests within a definite time limit.
Issuance of company bonds shall meet the requirements for issuance in accordance with .
Article 155 After an application for the issue of company bonds is examined and approved by the departments authorized by the State Council, the company shall make a public announcement of the method of offer of the company bonds.
The method of offer of company bonds shall specify the following main particulars:
(1) the name of the company;
(2) the purpose of the raising funds of company bonds
(3) the total amount of the bonds and their par value;
(4) the determining method of interest rate of the bonds;
(5) the time limit for and the method of the repayment of the principal and the payment of interest;
(6) the information of guaranty of the bonds
(7) the price, the beginning and ending dates of the issue;
(8) the amount of the net assets of the company;
(9) the total amount of the undue bonds issued by the company;
(10) the selling agency of the company bonds.
Article 156 When a company issues company bonds by the bearer bonds method, the bonds must clearly carry thereon items such as the name of the company, the par value, the interest rate, and the time limit for repayment, and the bonds shall be signed by the legal representative of the company and sealed by the company.
Article 157 Company bonds may be divided into registered bonds and bearer bonds.
Article 158 A Company issuing company bonds shall prepare the counterfoils of bonds issued.
When registered company bonds are issued, the counterfoils of bonds shall specify the following:
(1) the name or title and domicile of the bondholder
(2) the date on which the holder acquired the bonds and their serial numbers
(3) the total amount of the bonds, the par value, the interest rate of the bonds and the method of and time limit for repayment of the principal and payment of interest
(4) the issuing date of the bonds
Where bearer company bonds are issued, the counterfoils of the company bonds shall specify the total amount of the bonds, the interest rate, the time limit for and method of repayment of the principal and payment of interest, the issuing date of bonds and the serial numbers.
Article 159 Registration and settlement agencies of the registered bonds shall establish bonds registration, storage and management, interest payment, cashing and paying and other related systems.
Article 160 Company bonds may be transferred and the transfer price is negotiated and agreed upon by the transferor and transferee.
Where the company bonds are listed and traded at securities exchanges, the transfers of the company bonds shall be carried out in accordance with the trading rules of stock exchanges.
Article 161 Registered company bonds shall be transferred by means of endorsement by the bondholder or by other means provided for by the law or administrative rules and regulations; after registered bonds are transferred, the name and domicile of the transferee shall be recorded in the counterfoils of the company bonds.
Where bearer bonds are transferred, the transfer becomes effective immediately after the bondholder delivers his bonds to the transferee.
Article 162 Upon adoption of a resolution by the shareholders’ general meeting, a listed company may issue company bonds which can be converted into shares. The specific measures for the conversion shall be stipulated in the method of offer of the company bonds. The issue of company bonds convertible into shares shall be subject to the securities supervision and administration institutions under the State Council for examination and approval.
In issuing company bonds convertible into shares, the words “ convertible company bonds” shall be clearly indicated on the bonds and the amount of convertible company bonds shall be recorded in the counterfoils of company bonds.
Article 163 A Company that issues company bonds convertible into shares shall let the bondholders convert their bonds into shares in accordance with the conversion measures. However, bondholders shall have an option whether or not to convert their bonds into shares.
Chapter VIII Financial Affairs and Accounting of Companies
Article 164 A Company shall establish its financial and accounting system in accordance with the law, administrative rules and regulations, and the stipulations of the department of financial affairs under the State Council.
Article 165 At the end of each fiscal year, a company shall prepare its financial and accounting report that shall be audited by an accounting firm in accordance with the law.
A financial and accounting report shall be prepared in accordance with the law, administrative rules and regulations and the stipulations of the department of financial affairs under the State Council.
Article 166 A limited liability company shall send its financial and accounting report to each of its shareholders within the time limit stipulated in its articles of association.
A joint stock limited company shall make the financial and accounting report available at the company for examination by its shareholders twenty days prior to the convening of the shareholders’ annual general meeting. A joint stock limited company that has issued new shares openly must announce its financial and accounting report.
Article 167 When a company distributes the annual after-tax profits, it shall allocate ten percent of its profits to its statutory common reserve fund. Where the accumulated amount of the statutory common reserve fund has exceeded fifty percent of the registered capital of the company ,no further allocation may be made.
Where the statutory common reserve fund is insufficient to make up the company’s losses of the previous fiscal year, the company shall apply its annual after-tax profits to making up its losses before allocating such profits, in accordance with provisions of the preceding paragraph, to the statutory common reserve fund.
After making its allocation to the statutory common reserve fund from the company’s after-tax profits, the company may, upon resolution made by the shareholders’ meeting or the shareholders’ general meeting, make allocations to the discretionary common reserve fund.
After a company makes up its losses and makes allocations to the statutory common reserve fund, a limited liability company shall distribute the remaining profits to its shareholders according to the provisions of Article 35 in this Law; and a joint stock limited company shall distribute the remaining profits to its shareholders according to the proportion of the shareholdings held by each shareholder, except those stipulated in the articles of association of a joint stock limited company that distribution of the remaining profits shall not be in accordance with the proportion of the shareholdings held by each shareholder.
Where the shareholders’ meeting, the shareholders’ general meeting or the board of directors violates the provisions of the preceding paragraphs by distributing profits to the shareholders before making up the company’s losses and making allocations to the statutory common reserve fund, the profits distributed in violation of the legal provisions must be returned to the company.
A company shall not be distributed the profits for its own shares it hold.
Article 168 The premium income derived from issuing shares above par by a joint stock limited company, and other income which according to the rules set by the department of financial affairs under the State Council should be entered into the capital common reserve fund of the company.
Article 169 The company’s common reserve fund shall be used to make the company’s losses, to expend the production and operation of the company or to increase the capital of the company by means of conversion. However, the capital common reserve fund of a company shall not be used to make up its losses.
When the statutory common reserve fund is converted to its capital, the remaining amount of the statutory common reserve fund shall not be less than twenty five percent of the registered capital of the company before the conversion.
Article 170 Appointment, dismissal of an accounting firm to undertake the company’s auditing shall be decided by a shareholders’ meeting, a shareholders’ general meeting or the board of directors in accordance with the provisions of the articles of association.
Where the voting is in process with regards to dismissing an accounting firm at a shareholder’ meeting, a shareholders’ general meeting or the board of directors, the accounting firm shall be allowed to state opinions.
Article 171 A company shall provide truthful, complete accounting certificates, account books, financial and accounting reports and other accounting materials to its appointed accounting firm, and shall not refuse, conceal, lie.
Article 172 A company shall not have any other account books in addition to its statutory account books.
No account may be opened in the name of any individual for deposit of a company's assets.
Chapter IX Merger, Division, Increase and Reduction of Capital of Companies
Article 173 The merger of a company may take the form of merger by absorption or merger by new establishment.
Where a company absorbs another, it is an absorption merger, and the company being absorbed shall be dissolved. When two or more companies merge to establish a new company, it is merger for new establishment, and all parties being merged shall be dissolved.
Article 174 When companies merge, the parties to a merger shall sign a merger agreement and formulate a balance sheet and a detailed inventory of assets. The company shall inform its creditors of the intended merger within ten days following the date on which the merger resolution is adopted, and make an announcement in newspaper within thirty days.
The creditors shall have the right to claim full repayment of their debts or provision of a corresponding guarantee from the company within thirty days from the date of receipt of the notice, or within forty five days from the date of the receipt of the public announcement for those who have not received the notice.
Article 175 The claims and debts of the parties to a merger shall be succeeded to by the absorbing company or the newly established company when companies are merged.
Article 176 When a company proceeds into a division, its assets shall be divided correspondingly.
Where a company decides to divide itself, it shall formulate a balance sheet and a detailed inventory of assets and shall inform its creditors of the intended division within ten days following the date on which the division resolution is adopted, and make an announcement in newspaper within thirty days.
Article 177 Debts of the company prior to division are assumed by the post-division companies; however, except as otherwise specified in the written agreement entered by the company and the creditors with regards to the debts repayment prior to the company’s division.
Article 178 Where a company intends to reduce its registered capital, it must formulate a balance sheet and a detailed inventory of assets.
The company shall inform its creditors of the planned reduction of its registered capital within ten days following the date on which the resolution to reduce its capital is adopted, and make at least three announcements in newspaper within thirty days following the aforesaid date. The creditors shall have the right to claim full repayment of their debts or provision of a corresponding guarantee from the company within thirty days from the date of the receipt of the notice or, within forty five days from the date of the receipt of the public announcement for those who have not received the notice.
After the reduction of capital, the amount of a company's registered capital shall not be lower than the statutory minimum
Article 179 Where a limited liability company increases its registered capital, the capital contributions to the newly increased shares subscribed for by the shareholders shall be governed by the relevant provisions of this Law regarding the subscription for capital contributions in connection with the incorporation of a limited liability company.
Where a joint stock limited company issues new shares to increase its registered capital, shareholders shall subscribe for the new shares in accordance with the relevant provisions of this Law regarding the payment of subscription money in connection with the incorporation of a joint stock limited company.
Article 180 Where the merger or division of a company involves changes in registered items, such changes shall be registered according to law with the Company Registration Authority. Where a company is dissolved, it shall apply for cancellation of its registration in accordance with the law. Where a new company is incorporated, the registration of the incorporation of the company shall be carried out according to law.
Where a company increases or reduces its registered capital, it shall apply to the Company Registration Authority for registration of the changes in accordance with the law.
Chapter X Dissolution and Liquidation of Companies
Article 181 ACompany dissolves for any of the following reasons:
(1) the term of operation as stipulated by the articles of association of the company expires or other reasons for dissolution as stipulated by the articles of association occur;
(2) the shareholders’ meeting or the shareholders’ general meeting resolves to dissolve the company;
(3) dissolution is necessary as a result of the merger or division of the company
(4) the company is ordered to close down or withdrawn and its business license is revoked in accordance with the law
(5) the people’s court dissolves the company in accordance with the provisions of Article 183 in this Law
Article 182 A company may keep itself existence through amending the company’s articles of association with circumstances stipulated in clause (1) of Article 181 in this Law.
Resolutions for amending the company’s articles of association in accordance with the above clause, shall be passed by shareholders holding two-third or more of the voting rights if the company is a limited liability company, and shall be passed by shareholders holding two-third or more of the voting rights present at the shareholders’ general meeting if the company is a joint stock limited company.
Article 183 Where a company has serious difficulties in its business management and its continuous existence will damage interests of shareholders and cause major losses, a shareholder holding more than ten per cent of the voting rights of all shareholders may request the people’s court to dissolve the company.
Article 184 A liquidation committee shall be set up within fifteen days of the occurrence of the grounds for the dissolution pursuant to provisions of item (1), (2), (4), (5) of Article 181 and begin to carry out liquidation. The liquidation committee of a limited liability company is made up of its shareholders. The composition of the liquidation committee of a joint stock limited company is determined by the directors or a general meeting of the shareholders. If a liquidation committee to carry out liquidation procedures is not set up within the specified time limit, the creditors may apply to the people's court to have it designate relevant persons to form a liquidation committee in order to carry out liquidation procedures. The people's court shall accept and hear such applications and timely designate the members of the liquidation committee in order to carry out liquidation procedures.
Article 185 During the liquidation period, the liquidation committee shall exercise the following functions and powers:
(1) to check up the company’s assets and separately formulate a balance sheet and a detailed inventory of assets;
(2) to notify creditors by notice or announcement
(3) to dispose of and liquidate the company’s unfinished business;
(4) to pay off taxes owned by the company and taxes generated during the liquidation period
(5) to clear up creditors' rights and indebtedness
(6) to dispose of, after paying off the debts of the company, its remaining property;
(7) to participate in civil lawsuits on behalf of the company
Article 186 A liquidation committee shall inform the creditors of the company of its establishment within ten days following the date of its establishment, and make an announcements in newspaper within sixty days following the aforesaid date. The creditors shall declare their claims to the liquidation committee within thirty days from the date of receipt of the notice or, within forty five days from the date of receipt of the public announcement for those who have not received the notice
When declaring his claims, a creditor shall specify the relevant items of the claim and provide supporting material. The liquidation committee shall register the claims.
The liquidation committee shall not pay off the debts to a creditor during the period of reporting creditors’ rights.
Article 187 After checking up the company's assets and formulating a balance sheet and a detailed inventory of assets, the liquidation committee shall formulate a liquidation plan and submit it to the shareholders’ meeting, a shareholders’ general meeting or to the people’s court for confirmation.
After the company’s respectively paying all liquidation expenses, wages of staff and workers, labor insurance fees and legal compensation, and taxes owing, repaying its debts, the assets of the company remaining are distributed in proportion to the shareholders capital contributions if the company is a limited liability company and in proportion to the number of shares held by the shareholders if the company is a joint stock limited company.
During the liquidation period, a company exists and shall not commence any operational activities which have no concern with the liquidation. The property of the company shall not be distributed to the shareholders until the settlement provided for in the previous paragraph of this article is complete.
Article 188 After putting the company's property in order and formulating a balance sheet and an inventory of property, the liquidation committee discovers that the company's assets are insufficient to repay the company's debts, the liquidation committee shall apply to the people's court for a bankruptcy declaration in accordance with the law.
After the people’s court has ruled to declared the company bankrupt, the liquidation committee shall turn the liquidation matters over to the court.
Article 189 After liquidation of the company is completed, the liquidation committee shall formulate a liquidation report and submit it for confirmation to a shareholders’ meeting, a shareholders’ general meeting or to the people’s court, apply to the Company Registration Authority for cancellation of the company's registration and publish by public notice of the termination of the Company.
Article 190 Members of a liquidation committee shall be devoted to their duties and perform their liquidation obligations in accordance with the law.
Members of a liquidation committee shall not accept bribes or other illegal income, or misappropriate the property of the company by taking advantage of their position and powers.
Members of liquidation committee who cause losses to the company or to its creditors, either willfully or through gross negligence shall be liable for compensation.
Article 191 Where a company is declared bankrupt in accordance with the law, the bankruptcy liquidation shall be implemented in accordance with the law related to enterprises bankruptcy.
Chapter Xl Branches of Foreign Companies
Article 192 A foreign company mentioned in this Law means a company registered and incorporated outside the territory of the People’s Republic of China in accordance with foreign law.
Article 193 A foreign company that intends to establish a branch within the territory of the People’s Republic of China must submit an application to the authorities in charge in China together with relevant documents such as its articles of association and the company registration certificate issued by its country. Upon approval, it shall apply to the Company Registration Authority for registration and for a business license for the branch according to law.
Measures for examining and approving the establishment of branches of foreign companies shall be formulated separately by the State Council.
Article 194 A foreign company that establishes a branch within the territory of the People's Republic of China must appoint its representative or agent within the territory of the People's Republic of China to take charge of the branch and shall allocate to the branch funds commensurate with the business which it is to engage in.
Where a minimum amount of operational funds is required for a branch of a foreign company, the State Council shall separately prescribe to that effect.
Article 195 A branch of a foreign company shall clearly indicate in its name the nationality and the form of liability of such foreign company.
The branch shall keep at its domicile a copy of the articles of association of such foreign company.
Article 196 A foreign company’s branch established within the territory of the People's Republic of China shall not have the status of a Chinese legal person in China.
A foreign company shall bear civil liability for the operational activities engaged by its branch within the territory of the People's Republic of China.
Article 197 The business activities engaged in within the territory of the People's Republic of China by branches of foreign companies established upon due approval must comply with the laws of China and shall not harm the social and public interest of China. The lawful rights and interests of such branches shall be protected by the laws of China.
Article 198 Where a foreign company dissolves its branch established within the territory of the People's Republic of China, it must pay off the branch's debts according to law and carry out liquidation in accordance with the relevant procedures concerning company liquidation provided for in this Law. The assets of the branch shall not be transferred out of the territory of the People's Republic of China prior to the full payment of its debts.
Chapter XII Legal liability
Article 199 A company which violates this Law by falsely reporting its registered capital, presenting false materials or employing other deceptions to conceal important facts in order to obtain registration of the company shall be ordered to make a rectification by the Company Registration Authority. A Company that falsely reports its registered capital shall be fined at least five per cent and no more than fifteen per cent of the amount of the registered capital falsely reported. A Company that presents false materials or employs other deceptions to conceal important facts shall be fined at least RMB 50,000 and no more than RMB 500,000. In serious cases, the company's registration or the company’s business license shall be revoked.
Article 200 A promoter or shareholder of a company who makes a false capital contribution by failing to pay or failing to pay within the period specified the cash or non-cash property which are capital contributions, shall be ordered to make a rectification by the Company Registration Authority and is fined at least five per cent and no more than fifteen per cent of the capital which he falsely contributed.
Article 201 A promoter or shareholder who surreptitiously withdraws his capital contributions after the incorporation of the company shall be ordered to correct his wrongs by the Company Registration Authority and is fined at least five per cent and no more than fifteen per cent of the capital contribution surreptitiously withdrawn.
Article 202 Where a company violates the provisions of this Law by setting up account books in addition to its statutory account books, it shall be ordered to make a rectification by the department of financial affairs of a government at county-level and above, and shall be fined at least RMB 50,000 and no more than RMB 500,000.
Article 203 If a company furnishes to the relevant responsible departments in accordance with the law the financial and accounting reports which are false or which conceal important facts, the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility shall be fined at least PMB 30,000 and no more than RMB 300,000 by the relevant responsible departments
Article 204 If a company does not make allocations to its statutory common reserve fund in accordance with this Law, the company shall be ordered to make up the exact amount which should have been allocated by the department of financial affairs of a government at county-level and above and shall be subject to a fine of no more than RMB 200,000.
Article 205 Where a company fails to issue a notice or make an announcement to its creditors according to this Law in case of merger, division, reduction of its registered capital or liquidation, it shall be ordered to make a rectification and be imposed upon a fine of not less than RMB 10,000 but not more than RMB 100,000.
If at the time of liquidation, a company conceals its property, makes false entries on its balance sheet or its inventory of property, or distributes the company's property before repaying its debts, the company shall be ordered to make a rectification by the Company Registration Authority and shall be subject to a fine of at least five per cent and no more than ten per cent of the assets concealed or the dents not repaid before distribution. The personnel in charge of the matter who have direct responsibility and the other personnel with direct responsibility shall be subject to a fine of at least RMB 10,000 and no more than RMB 100,000.
Article 206 Where a company commences any operational activities which have no concern with the liquidation during the liquidation period, the Company Registration Authority shall give warnings to the company and confiscate the company’s unlawful incomes.
Article 207 If a liquidation committee does not file a liquidation report with the Company Registration Authority in accordance with the provisions of this Law or the liquidation report conceals important facts or contains significant omissions, the wrongs shall be ordered to be remedied by the Company Registration Authority.
Where a member of the liquidation committee takes advantage of his position and power to practice favoritism for personal gains, seek illegal income or misappropriate the property of the company, he shall be ordered to return the property to the company by, confiscated of his illegal gains and imposed upon a fine from one to five times the amount of his illegal gains by the Company Registration Authority
Article 208 Where an institution in charge of asset valuation, capital verification or certificate verification provides false materials, the illegal income derived therefore shall be confiscated and a fine from one to five times the amount of the illegal income shall be imposed by the Company Registration Authority; the relevant department in charge may order the institution to suspend its business and revoke the qualification certificates of those directly held responsible according to law, and revoke the business license.
Where an institution in charge of asset valuation, capital verification or certificate verification provides by negligence reports with major omissions, it shall be ordered to make a rectification by the Company Registration Authority; where the circumstances are serious, a fine from one to five times the amount of the income derived therefore shall be imposed, and the relevant department in charge may order the institution to suspend its business and revoke the qualification certificates of those directly held responsible, and revoke the business license according to law.
Where an institution in charge of asset valuation, capital verification or certificated verification causes losses to the creditors for providing the false evaluation results, certificate of capital verification or certificated verification, the institution shall be liable for compensation within the scope of the amount provided in its false evaluation or certificate, except it could prove itself with no faults.
Article 209 Where the Company Registration Authority approves an application for registration which does not meet the requirements as stipulated in this Law, or the Company Registration Authority does not approve an application for registration which meets the requirements as stipulated in this Law, the persons in charge directly held responsible and others directly held responsible shall be given administrative sanctions according to law.
Article 210 Where departments at a level higher than the Company Registration Authority force the Company Registration Authority to approve an application for registration which does not meet the requirements as stipulated in this Law, force the Company Registration Authority not to approve an application for registration which meets the requirements as stipulated in this Law, or covers up an illegal registration, the persons in charge who are directly responsible and others directly held responsible shall be given administrative sanctions according to law.
Article 211 Where a company that has not registered according to law as a limited liability company or a joint stock limited company assumes the name of "limited liability company" or "joint stock limited company", or has not registered according to law as a branch of a limited liability company or a joint stock limited company assumes the name of “branch of a limited liability company” or “ branch of a joint stock limited company” , it shall be ordered to make a rectification or be banned, and a fine of not more than RMB 100,000 may be imposed by the Company Registration Authority.
Article 212 Where a company fails to commence its business without justification within the period of more than six months of its incorporation or, after commencing its business, suspends business at its own will for a period of six consecutive months or more, the Company Registration Authority may revoke the company's business license.
Where a company fails to apply for modification registration in accordance with the provisions of this Law whenever modification occurs in items of company registration, it shall be ordered to conduct modification registration within a specified time limit by the Company Registration Authority; and if the company still fails to register within the specified time limit, a fine of not less than RMB 10,000 but not more than RMB 100,000 shall be imposed.
Article 213 Where a foreign company, in violation of the provisions of this Law, establishes a branch within the territory of the People's Republic of China without authorization, it shall be ordered to make a rectification or to be closed down by the Company Registration Authority, and a fine of not less than RMB 50,000 but not more than RMB 200,000 may be imposed.
Article 214 Where a company engages in serious illegal activities which endanger national security or harm social public interests by using the name of the company, its business license shall be revoked.
Article 215 Where a company violating the provisions of this Law should assume civil liability for compensation and pay fines and penalties, and the company's property is insufficient to pay such compensation, fines and penalties, the company shall assume the civil liability for compensation first.
Article 216 If a crime is constituted, in violation of the provisions of this Law, criminal liabilities shall be investigated in accordance with the law.
Chapter XIII Supplementary Provisions
Article 217 Definitions of the following terms in this Law:
(1) a senior managerial staff refers to the manager, deputy manager, person in charge of the financial affairs of a company, the secretary of the board of directors of a listed company and other personnel stipulated in the articles of association of a company.
(2) a controlling shareholder refers to a shareholder whose capital contributions is more than fifty per cent of the company’s total capital if the company is a limited liability company, or whose shares held by him is more than fifty per cent of the company’s total shares if the company is a joint stock limited company; or the proportion of his capital contributions or the shares held by him is less than fifty percent, but the voting rights he possessed according to his capital contributions or the shares held by him are sufficient to have crucial impact on the resolutions of a shareholder’s meeting, a shareholders’ general meeting.
(3) an actual controller refers to a person who is able to dominate a company’s actions practically through an investment relation, agreement or other arrangements although he is not a shareholder of a company.
(4) a interrelated connection refers to a relationship between a controlling shareholder, actual controller, director, supervisor, senior managerial staff and an enterprise which is under his direct or indirect control and other relationships which probably result in the transfer of a company’s interests.
Article 218 The present Law shall apply to limited liability companies and joint stock limited companies with foreign investment. Where laws concerning foreign investment provides otherwise, such provision shall prevail.
Article 219 This Law shall enter into force as of January 1, 2006.
