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Company Law of the People's Republic China (1999)

Contents
Chapter IGeneral Provisions
Chapter IIIncorporation and Organizational Structure
Chapter IIIIncorporation and Organizational Structure
Section 3Board of Directors, and Manager
Chapter IVIssue and Transfer of Shares of Joint Stock Limited Companies
Chapter VCompany Bonds
Chapter VIFinancial Affairs and Accounting of Companies
Chapter VIIMerger and Division of Companies
Chapter VIIIBankruptcy, Dissolution and Liquidation of Companies
Chapter IXBranches of Foreign Companies
Chpater XLegal Liability
Chapter XISupplementary Provisions



(Adopted at the Fifth Meeting of the Standing Committee of the
Eighth National People's Congress of China on December 29, 1993,
promulgated by Order No.16 of the President of the People's
Republic of China on December 29, 1993, and effective as of July 1,
1994) (Editor's Note: For the revised text, see the Amendment to the
Decision of the Standing Committee of the National People's Congress
Regarding the Revision of Company Law of the People's Republic of China
adopted by the 13th Session of the Standing Committee of the Ninth National
People's Congress and promulgated by the Order No. 29 of the President of
the People's Republic of China on December 25,1999)
Contents


Chapter IGeneral Provisions
Chapter IIIncorporation and Organizational Structure of
Limited Liability Companies
Section 1Incorporation
Section 2Organizational Structure
Section 3Wholly State-owned Companies
Chapter III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
Chapter IVIssue and Transfer of Shares of Joint Stock Limited Companies
Section 1Issue of Shares
Section 2Transfer of Shares
Section 3Listed Companies
Chapter VCompany Bonds
Chapter VIFinancial Affairs and Accounting of Companies
Chapter VIIMerger and Division of Companies
Chapter VIIIBankruptcy, Dissolution and Liquidation of Companies
Chapter IXBranches of Foreign Companies
Chapter XLegal Liability
Chapter XISupplementary Provisions
Chapter IGeneral Provisions
Article 1This Law is formulated in accordance with the
Constitution of the People's Republic of China in order to meet the
needs of establishing a modern enterprise system, 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 to 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 "limited liability company" or "joint stock
limited company" is an enterprise legal person.
In the case of a limited liability company, shareholders shall
assume liability towards the company to the extent of their
respective capital contributions, and the company shall be liable
for its debts to the extent of all its assets.
In the case of a joint stock limited company, its total
capital shall be divided into equal shares, shareholders shall
assume liability towards the company to the extent of their
respective shareholdings, and the company shall be liable for its
debts to the extent of all its assets.
Article 4The shareholders of a company shall, in their
capacity of contributors of capital, enjoy such rights of owners as
benefitting from assets of the company, making major decisions and
selecting managerial personnel in accordance with the amount of
their respective capital investment in the company.
A company shall enjoy the right to the entire property of the
legal person formed by the investments of the shareholders and
shall possess civil rights and bear the civil liabilities in
accordance with the law.
The ownership of State-owned assets in a company shall vest in
the State.
Article 5A company shall, with all its legal person assets,
operate independently and be responsible for its own profits and
losses according to law.
A company shall, under the macro-adjustment and control of the
State, organize its production and operation independently in
accordance with market demand for the purpose of raising economic
benefits and labour productivity and maintaining and increasing the
value of its assets.
Article 6An internal management mechanism shall be
implemented within companies, which is characterized by clear
definition of powers and responsibilities, scientific management
and combination of encouragement and restraint.
Article 7State-owned enterprises restructured to form
companies must transform their operating mechanism, gradually
produce an inventory of their assets and verify their funds,
delimit their property rights, clear off their claims and debts,
evaluate their assets and establish a standard internal management
mechanism in accordance with the conditions and requirements set by
laws, administrative rules and regulations.
Article 8Incorporation of limited liability companies or
joint stock limited companies must meet the conditions stipulated
by the present Law. Companies meeting the conditions set by this
Law shall be registered as limited liability companies or joint
stock limited companies; while companies failing to meet the
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 examination and
approval, the procedures of examination and approval shall be
completed according to law prior to the registration of such
companies.
Article 9A limited liability company established according to
this Law must clearly indicate the words "limited liability
company" in its name.
A joint stock limited company established according to this
Law must clearly indicate the words "joint stock limited company"
in its name.
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 this Law when a company is incorporated. A
company's articles of association shall have binding force on the
company, its shareholders, directors, supervisors and managers.
A company's scope of business shall be defined in its articles
of association and registered in accordance with the law. Items
within the company's "scope of business" that are subject to
restrictions under laws, administrative rules and regulations shall
be approved in accordance with the law.
Companies shall engage in business activities within their
registered scope of business. A company may change its scope of
business by amending its articles of association in accordance with
statutory procedures and making such amendments registered with the
Company Registration Authority.
Article 12A company may invest in other limited liability
companies or joint stock limited companies and shall assume
liability towards the company so invested in to the extent of such
capital contributions.
In case a company, other than an investment company or a
holding company as specified by the State Council, invests in other
limited liability companies or joint stock limited companies, the
aggregated amount of such investments shall not exceed fifty
percent of its net assets; after the initial investment, the
increase therein resulting from capitalization of the profit
derived from the company invested in shall not be included.
Article 13A company may establish branches, which shall not
possess the status of enterprise legal persons and whose civil
liabilities shall be borne by the company.
A company may establish subsidiaries, which shall possess the
status of enterprise legal perons, and shall independently bear
civil liabilities according to law.
Article 14A company must, when engaging in business
activities, abide by the law, observe professional ethics,
strengthen the construction of socialist culture and ideology and
accept supervision of the government and the public.
The legitimate rights and interests of companies shall be
protected by the law and shall be inviolable.
Article 15Companies must protect the lawful rights and
interests of their staff and workers, and strengthen labour
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 16Company's staff and workers shall, in accordance
with the law, 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.
Wholly State-owned companies and limited liability companies
invested in and established by two or more State-owned enterprises
or by two or more other State-owned investment entities shall,
through staff and workers' congresses or other forms, practise
democratic management in accordance with the provisions of the
Constitution and relevant laws.
Article 17The grass-root organizations of the Communist Party
of China in companies shall carry out their activities in
accordance with the Constitution of the Communist Party of China.
Article 18The present Law shall apply to limited liability
companies with foreign investment. Where laws concerning
Chinese-foreign equity joint ventures, Chinese-foreign contractual
joint ventures and foreign-funded enterprises provides otherwise,
such provision shall prevail.
Chapter IIIncorporation and Organizational Structure
of Limited Liability Companies
Section 1Incorporation
Article 19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; and
(5) there are fixed premises and necessary conditions for
production and operation.
Article 20A limited liability company shall be jointly
invested in and incorporated by not less than two and not more than
fifty shareholders.
State-authorized investment institutions or departments
authorized by the State may independently invest in and establish
wholly State-owned limited liability companies.
Article 21If State-owned enterprises established prior to the
implementation of this Law comply with the conditions stipulated in
this Law for the incorporation of limited liability companies, they
may, in the case of enterprises with a single investing entity, be
restructured as wholly State-owned limited liability companies in
accordance with this Law, or in the case of enterprises with
multiple investing entities, be restructured as limited liability
companies as specified in the first paragraph of the preceding
Article.
 The implementation procedures and specific measures for
restructuring State-owned enterprises as companies shall be
formulated separately by the State Council.
Article 22The 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 rights and obligations of the shareholders;
(6) the method and amount of capital contributions by the
shareholders;
(7) the conditions for transfer of capital contributions by
shareholders;
(8) the organization of the company, its method of creation,
functions and powers and the rules of procedure;
(9) the legal representative of the company;
(10) the reasons for dissolution of the company and method of
liquidation; and
(11) other items which the shareholders deem necessary to be
specified.
The shareholders shall sign and affix their seals to the
company's articles of association.
Article 23The registered capital of a limited liability
company shall be the amount of the paid-up capital contributions of
all its shareholders as registered with the Company Registration
Authority.
The registered capital of a limited liability company shall be
no less than the following minima:
(1) RMB 500,000 yuan for a company engaged mainly in production
and operation;
(2) RMB 500,000 yuan for a company engaged mainly in commodity
wholesale;
(3) RMB 300,000 yuan for a company engaged mainly in
commercial retailing; and
(4) RMB 100,000 yuan for a company engaged in science and
technology development, consultancy or services.
Where the minimum registered capital of a limited liability
company in specified trades needs to be higher than those
stipulated in the preceding paragraph, it shall be stipulated by
the laws and administrative rules and regulations separately.
Article 24A shareholder may make its capital contributions to
a company in currency or by contributing material objects,
industrial property rights, non-patented technology and land use
rights at their appraised value. The material objects, industrial
property rights, non-patented technology or land use rights to be
contributed as capital must undergo an asset valuation and
verification, and shall not be overvalued or undervalued. The
appraisal and valuation of land use rights shall be handled in
accordance with the laws and administrative rules and regulations.
The investment in the form of industrial property rights and
non-patented technology at their appraised value shall not exceed
twenty percent of the registered capital of a limited liability
company, except where special State regulations inrespect of the
application of high and new technological achievement provide
otherwise.
Article 25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 crurrency in the interim bank account
opened by the limited liability company to be established. Where a
shareholder makes its capital contribution in the form of material
objects, industrial property rights, non-patented technology or
land use rights, the transfer procedures for the property rights
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 be
liable for breach of contract towards the shareholders who have
made in full their capital contributions.
Article 26After all shareholders have made their capital
contributions in full, such contributions must be verified by a
statutory capital verification institution which shall issue
capital verification certificates.
Article 27After the total capital contributions of the
shareholders have been verified by a statutory capital verification
institution, application shall be made to the Company Registration
Authority for registration of the incorporation of the company by
a representative designated by all the shareholders or by an agent
jointly entrusted by them, who shall submit such documents as an
application for registration, the articles of association and the
capital verification certificate.
Where the examination and approval of the relevant authorities
is required by the laws or administrative rules and regulations,
the approval documents shall be submitted on application for
registration of incorporation.
The Company Registration Authority shall grant registration
and issue a business licence to a company that meets the
requirements stipulated in this Law; the Company Registration
Authority shall not register a company failing to meet the
requirements stipulated in this Law.
The date of the issuance of the company business license shall
be the date of the incorporation of a limited liability company.
Article 28Where, after the incorporation of a limited
liability company, it is discovered that the actual value of the
material objects, industrial property rights, non-patented
technology or land use rights contributed as capital is notably
less than the value stated in the articles of association, the
shareholders that made such contributions shall make up the
discrepancy. Those who are shareholders at the time of the
incorporation of the company shall bear joint and several liability
therefor.
Article 29Where branches are established simultaneously with
the incorporation of a limited liability company, application for
registration of the branches established shall be made to, and
business licences obtained from the Company Registration Authority.
Where a limited liability company establishes branches after
its incorporation, the company's legal representatiive shall apply
for the registration to, and obtain business licences from the
Company Registration Authority.
Article 30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 comany;
(3) the registered capital of the company;
(4) the name or title of the shareholder, the amount and date
of its capital contribution; and
(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 31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;
and
(3) the serial numbers of the capital contribution
certificates.
Article 32A shareholder shall have the right to look up the
minutes of shareholders' meetings and the financial and accounting
reports of the company.
Article 33Shareholders shall draw dividends in proportion to
their capital contributions. Where a company increases capital, the
existing shareholders shall have priority in subscription for new
shares.
Article 34Once a company is registered, its shareholders may
not withdraw their capital contributions.
Article 35The shareholders of a company may assign among
themselves all or part of their capital contributions.
Where a shareholder intends to assign its capital contribution
to persons who are not shareholders, the consent of over half of
all the shareholders must be secured. Those shareholders
disapproving the assignment shall purchase the capital contribution
to be assigned. If such shareholders do not make the purchase, they
shall be deemed to have consented to the assignment.
Other shareholders shall, under identical terms, have priority
in purchasing the capital contribution to be assigned with the
consent of the shareholders.
Article 36After a shareholder has assigned its capital
contribution according to law, the company shall record the name or
title and domicile of the consignee and the amount of the capital
contribution assigned in the roster of the shareholders.
Section 2Organizational Structure
Article 37The shareholders' meeting 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 its functions and powers in accordance with this
Law.
Article 38The shareholders' meeting shall exercise the
following functions and powers:
(1) to decide on the business policy and investment plan of
the company;
(2) to elect and recall members of the board of directors and
to decide on matters concerning the remuneration of directors;
(3) to elect and recall supervisors appointed from among the
shareholders' representatives, and to decide on matters concerning
the remuneration of supervisors;
(4) to examine and approve reports of the board of directors;
(5) to examine and approve reports of the supervisory board or
supervisors;
(6) to examine and approve the annual financial budget plan
and final accounts plan of the company;
(7) to examine and approve plans for profit distribution of
the company and plans for making up losses;
(8) to adopt resolutions on the increase or reduction of the
registered capital of the company;
(9) to adopt resolutions on the issuance of company bonds;
(10) to adopt resolutions on the assignment of capital
contribution by a shareholder to a person other than the
shareholders;
(11) to adopt resolutions on matters such as the merger,
division, transformation, dissolution and liquidation of the
company; and
(12) to amend the articles of association of the company.
Article 39The rules of deliberation and voting procedures of
the shareholders' meeting shall, except where provided for by this
Law, be stipulated by the articles of association of the company.
Resolutions of the shareholders' meeting on the increase or
reduction of the registered capital, the division, merger,
dissolution, or transformation of the company must be adopted by
shareholders of the company representing two-thirds or more of the
voting rights.
Article 40A company may amend its articles of association. A
resolution on the amendment of the articles of association must be
adopted by shareholders of the company representing two-thirds or
more of the voting rights.
Article 41Shareholders shall exercise their voting rights at
the shareholders' meeting in proportion to their capital
contributions.
Article 42The first meeting of the shareholders of a 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 43Shareholders' meetings shall be divided into
regular meetings and interim meetings.
Regular shareholders' meetings shall be convened on time as
stipulated by the articles of association of the company. Interim
shareholders' meetings may be convened upon proposal made by
shareholders representing one-fourth or more of the voting rights,
or, by one-third or more of directors or supervisors.
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 special circumstances preclude the chairman of the board from
performing his function, the meeting shall be presided over by a
vice-chairman or a director of the board designated by the
chairman.
Article 44All shareholders shall be notified fifteen days
prior to the convening of a shareholders' meeting.
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 45A limited liability company shall have a board of
directors, which shall be composed of three to thirteen members.
The members of the board of directors of a limited liability
company invested in and established by two or more State-owned
enterprises, or by two or more other State-owned investment
entities shall include representatives of the staff and workers of
the company. Such representatives of the staff and workers shall be
democratically elected by the staff and workers of the company.
A board of directors shall have a chairman and one or two
vice-chairmen. The method for the creation of the chairman and
vice-chairmen shall be stipulated in the articles of association of
the company.
The chairman of the board of directors shall be the company's
legal representative.
Article 46The board of directors shall be responsible to the
shareholders' meeting, and exercise the following functions and
powers:
(1) to be responsible for convening shareholders' meetings and
to report on its work to the shareholders' meetings;
(2) to implement the resolutions of the shareholders'
meetings;
(3) to decide on the businesss 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
registered capital of the company;
 (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 appoint or dismiss the company's manager (general
manager) (hereinafter referred to as "manager"), and, upon
recommendation of the manager, to appoint and dismiss the company's
deputy manager(s) and persons in charge of the financial affairs of
the company, and to decide on matters concerning their
remuneration; and
 (10) to formulate the basic management system of the company.
Article 47The term of office of directors shall be stipulated
by the articles of association of the company but may not exceed
three years. A director may, if reelected upon expiration of his
term of office, serve consecutive terms.
 The shareholders' meeting of a company may not unwarrantedly
dismiss a director of the board prior to the expiration of his term
of office.
Article 48Meetings of the board of directors shall be
convened and presided over by the chairman of the board. Where
special circumstances preclude the chairman from performing his
function, the meeting shall be convened and presided over by a
vice-chairman or a director of the board designated by the
chairman. One-third or more of the members of the board of
directors may propose the convening of a meeting of the board of
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.
 All directors shall be notified ten days prior to the
convening of a board meeting.
 The board meeting shall keep minutes of decisions on matters
discussed at it; directors present at the meeting shall sign the
minutes.
Article 50A limited liability company shall 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
exercise the following functions and powers:
 (1) to be in charge of the production, operation and
management of the company, and to organize the implementation of
the resolutions of the board of directors;
 (2) to organize the implementation of the annual business
plans and investment plans of the company;
 (3) to draw up plans on the establishment of the internal
management organs of the company;
(4) to draw up the basic management system of the company;
(5) to formulate specific rules and regulations of the
company;
(6) to recommend the appointment or dismissal of the deputy
manager(s) and of persons in charge of the financial affairs of the
company;
(7) to appoint or dismiss management personnel otherthan
those to be appointed or dismissed by the board of directors; and
(8) other functions and powers granted by the articles of
association of the company and the board of directors.
 The manager shall attend meetings of the board of directors as
a non-voting attendant.
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 powers and functions of the executive director shall be
stipulated by the articles of association of the company with
reference to Article 46 of this Law.
Where a limited liability company does not have a board of directors,
the executive director shall be the legal representative of the company.
Article 52A limited liability company with a relatively
large-scale business shall have a supervisory board composed of no
less than three members. The supervisory board shall elect a
convener from among its members.
The supervisory board shall be composed of representatives of
the shareholders and an appropriate proportion of the staff and
workers of the company. The exact proportion shall be stipulated in
the articles of association. The representatives of the staff and
workers in the supervisory board shall be democratically elected by
the staff and workers of the company.
Where a limited liability company has a small number of
shareholders and is comparatively small in scale, it may have one
or two supervisors.
Directors, the manager or personnel in charge of financial
affairs 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.
Article 54The supervisory board or the supervisors shall
exercise the following functions and powers:
(1) to examine the financial affairs of the company;
(2) to supervise the acts of the directors and the manager
violating the laws, administrative rules and regulations or the
articles of association of the company during the performance of
their functions;
(3) to demand directors and the manager to make corrections if
any of their acts is found to have damaged the interests of the
company;
(4) to propose the convening of interim shareholders'
meetings; and
(5) other functions and powers as stipulated in the articles
of association of the company.
The supervisors shall attend meetings of the board of
directors as non-voting participants.
Article 55A company shall, in studying and deciding on issues
involving the personal interests of its staff and workers such as
their salaries, welfare, safety in production, labour protection
and labour insurance, solicit in advance the opinions of the trade
union and the staff and workers of the company. And representatives
of the trade union or of the staff and workers shall be invited to
attend relevant meetings as non-voting participants.
Article 56A company shall solicit the opinions and
suggestions of the trade union and the staff and workers of the
company when studying and deciding on major issues concerning
production and operation, and formulating important rules and
regulations.
Article 57None of the following persons may hold the position
of director, supervisor or manager of a company:
(1) a person without capacity or with restricted capacity for
civil acts;
(2) a person who was sentenced to cirminal
punishment for the crime of embezzlement, bribery, seizure of
property or misappropriation of property or for undermining the
social economic order, where not more than five years have elapsed
since the expiration of the enforcement period; or a person who,
was deprived of his political rights for committing a crime, where
not more than five years have elapsed since the expiration of the
enforcement period;
(3) a director, or factory head or manager who was personally
responsible for the bankruptcy liquidation of the company or
enterprise due to mismanagement, where not more than three years
have elapsed since the date of completion of the bankruptcy
liquidation;
(4) a legal representative of the company or enterprise that
had the business license revoked for violating the law, where such
representative bear individual liability therefor and not more than
three years have elapsed since the date of revocation of the
business license; and
(5) a person with relatively large amount of personal debts
that have fallen due but haven't been settled.
Where a company elects or appoints a director or supervisor or
engages the manager in violation of the preceding paragraph, such
election, appointment or engagement shall be invalid.
Article 58Government functionaries may not concurrently serve
as directors, supervisors or managers of companies.
Article 59Directors, supervisors and the manager of a company
shall comply with the articles of association of the company,
faithfully perform their duties and maintain the interests of the
company and shall not take advantage of their position, functions
and powers in the company to seek personal gains.
Directors, supervisors and the manager of a company shall not,
by taking advantage of their functions and powers, accept bribes or
other unlawful incomes, nor may they misappropriate the property of
the company.
Article 60Directors and the manager of a company shall not
misappropriate company funds or lend company funds to others.
Directors and the manager shall not deposit company assets in
their own personal accounts or in personal accounts of other
individuals.
Directors and the manager shall not use company assets as
security for the personal debts of shareholders of the company or
of other individuals.
Article 61Directors and the manager shall not operate their
own in or operate for others the same category of business as the
company they are serving or, engage in activities which damage the
interests of the company. If a director or the manager engages in
such business or activities, the incomes derived therefrom shall
belong to the company.
Directors and the manager shall not enter into contracts or
conduct transactions with the company except as provided for in the
articles of association or approved by the shareholders' meeting.
Article 62Directors, supervisors and the manager shall not
disclose any company secrets except as provided for by the law or
approved by the shareholders' meeting.
Article 63Directors, supervisors and the manager shall be
liable for compensation, if they violate the laws, administrative
rules and regulations or the articles of association in performance
of their duties and thus cause damage to the company.
Section 3Wholly State-owned Companies
Article 64A wholly State-owned company mentioned in this Law
means a limited liability company invested in and established
solely by the State-authorized investment institution or a
department authorized by the State.
Companies which manufacture special products as determined by
the State Council or companies that belong to the category of
specialized trades shall adopt the form of wholly State-owned
companies.
Article 65The articles of association of a wholly State-owned
company shall be formulated by the State-authorized investment
institution or a department authorized by the State in accordance
with this Law, or be formulated by the board of directors of the
company and submitted for the approval of the relevant
State-authorized investment institution or the department
authorized by the State.
Article 66A wholly State-owned company shall not have a
shareholders' meeting. The State-authorized investment institution
or the department authorized by the State shall authorize the board
of directors of the company to exercise part of the functions and
powers of the shareholders meeting and to make decisions on
important matters of the company. However, the merger, division,
dissolution, increase and reduction of capital, and issuance of
company bonds must be decided by the State-authorized investment
institution or by the department authorized by the State.
Article 67The State-authorized investment institution or the
department authorized by the State shall exercise supervision and
administration over the State-owned assets of the wholly
State-owned company in accordance with the provisions of the laws
and administrative rules and regulations.
Article 68A wholly State-owned company shall have a board of
directors, which shall exercise its functions and powers in
accordance with the provisions of Article 46 and Article 66 of this
Law. Each term of office of the board of directors shall be three
years.
The board of directors shall be composed of three to nine
members, who shall be appointed and replaced by the
State-authorized investment institution or by the department
authorized by the State in accordance with the term of office of
the board of directors. The board of directors shall include
representatives of the staff and workers of the company. The
representatives of the staff and workers on the board of directors
shall be democratically elected by the staff and workers of the
company.
The board of directors shall have a chairman and may have a
vice-chairman, if necessary. The chairman and vice-chairman shall
be designated by the State-authorized investment institution or the
department authorized by the State from among members of the board
of directors.
The chairman of the board of directors shall be the legal
representative of the company.
Article 69A wholly State-owned company shall have a manager,
who shall be engaged and dismissed by the board of directors. The
manager shall exercise his functions and powers in accordance with
the provisions of Article 50 of this Law.
A member of the board of directors may, subject to the consent
of the State-authorized investment institution or the department
authorized by the State, serve concurrently as manager.
Article 70The chairman, vice-chairman and directors of the
board, or the manager of a wholly State-owned company may not,
without the consent of the State-authorized investment institution
or the department authorized by the State, serve concurrently as
responsible persons in other limited liability companies,
joint-stock limited companies or other business organizations.
Article 71Where a wholly State-owned company transfers its
assets, the procedures for examination and approval, and the
transfer of property rights shall be handled by the
State-authorized investment institution or the department
authorized by the State in accordance with the laws and
administrative rules and regulations.
Article 72Large-sized wholly Stated-owned companies with a
sound business management system and relatively successful
operations may be authorized by the State Council to exercise the
rights of asset owners.
Chapter IIIIncorporation and Organizational Structure
of Joint Stock Limited Companies
Section 1Incorporation
Article 73To incorporate a joint stock limited company, the
following conditions must be satisfied:
(1) the number of sponsors shall conform to the statutory
number;
(2) the share capital subscribed for by the sponsors and
raised from the general public 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 sponsors and adopted at the inaugural meeting;
(5) the company shall have a name and an organizational
structure required for the incorporation of a joint stock limited
company; and
(6) the company shall have a fixed site and the necessary
conditions for production and operation.
Article 74Joint stock limited companies may be incorporated
by means of sponsorship or by means of share offer.
"Incorporation by means of sponsorship" means incorporation of
a company by means of subscription by the sponsors 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 sponsors for a portion of
the shares to be issued by the company and offer of the rest to the
general public.
Article 75To incorporate a joint stock limited company, there
shall be five or more sponsors, of which more than half must have
their domicile within the territory of the People's Republic of
China.
Where a State-owned enterprise is restructured as a joint
stock limited company, there may be less than five sponsors,
however, such a company shall be incorporated by means of share
offer.
Article 76The sponsors of a joint stock limited company must
subscribe in accordance with this Law for the shares to be
subscribed for by them, and shall undertake the matters concerning
the preparation for the incorporation of the company.
Article 77The incorporation of a joint stock limited company
must be subject to the approval of a department authorized by the
State Council or of a people's government at the provincial level.
Article 78The registered capital of a joint stock limited
company shall be the total amount of paid-up share capital as
registered with the Company Registration Authority.
The minimum registered capital of a joint stock limited
company shall be RMB 10,000,000 yuan. If the minimum registered
capital of a joint stock limited company needs to be higher than
the aforesaid amount, it shall be stipulated separately by the
laws, or administrative rules and regulations.
Article 79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 number of shares, the amount of each share and
the registered capital of the company;
(5) the names or titles of the sponsors and the numbers of
shares subscribed for by the sponsors;
(6) the rights and obligations of the shareholders;
(7) the compositition, functions and powers, the term of
office and the deliberation rules of the board of directors;
(8) the legal representative of the company;
(9) the composition, functions and powers, the term of office
and the deliberation rules of the supervisory board;
(10) methods for the distribution of the company's profit;
(11) the reasons for dissolution of the company and
liquidation method;
(12) methods for notices and announcements of the company; and
(13) other matters that the shareholders' general meeting
deems necessary to be specified.
Article 80The sponsors may make their capital contributions
in cash, or with material objects, industrial property rights,
non-patented technology or land use rights at their appraised
value. Material objects, industrial property rights, non-patented
technology or land use rights contributed as capital must be
appraised and valued, and such property must be verified and
converted into shares. Such contributions may not be over-valued or
under-valued. The appraisal and valuation of land use rights shall
be conducted in accordance with the provisions of the laws,
administrative rules and regulations.
The amount of capital contributions made by sponsors in the
form of industrial property rights and non-patented technology
shall not exceed twenty percent of the registered capital of a
joint stock limited company.
Article 81Where a State-owned enterprise is restructured as
a joint stock limited company, it shall be strictly prohibited to
convert the State-owned assets into shares at a depressed price or
to sell off them at a depressed price, or to distribute them to
individuals without charge.
Article 82Where a joint stock limited company is incorporated
by means of sponsorship, the sponsors shall pay in full for their
shares immediately after confirming in writing their subscription
of the shares to be issued according to the articles of association
of the company. If material objects, industrial property rights,
non-patented technology or land use rights are invested as payment
for shares,the sponsors shall undertake the transfer procedures
for property rights therein in accordance with the law.
After the sponsors make their capital contributions in full,
they shall elect the board of directors and supervisory board. The
board of directors shall submit to the Company Registration
Authority the documents such as approval document for the company's
incorporation, articles of association and capital verification
certificate of the company, and shall apply for registration of
incorporation.
Article 83Where a joint stock limited company is incorporated
by means of share offer, the sponsors shall not subscribe for less
than thirty five percent of the total shares issued by the company,
and the remaining shares shall be offered to the general public.
Article 84When offering shares to the general public for
subscription, the sponsors must submit to the department of
security administration under the State Council an application for
share offer along with the following main documents:
(1) the approval documents for the incorporation of the
company;
(2) the articles of association of the company;
(3) a business forecast;
(4) the names or titles of the sponsors, the number of shares
subscribed for by the sponsors, the forms of capital contributions
and the capital verification certificate;
(5) the prospectus on share offer;
(6) the name and address of the bank accepting subscription
money on behalf of the company; and
(7) the name of the selling agencies and related agreements.
The sponsors shall not offer shares to the general public
without the approval of the securities administrative department
under the State Council.
Article 85A joint stock limited company may, with the
approval of the department of security administration under the
State Council, offer its shares to the general public outside the
territory of the People's Republic of China. The specific measures
therefor shall be specially stipulated by the State Council.
Article 86The department of security administration under the
State Council shall approve the applications for share offer which
conform to the stipulations of this Law, and disapprove the
applications which fail to conform to the stipulations of this Law.
If an approval is found to be inconsistent with the
stipulations of this Law after it has been granted, such approval
shall be revoked. If the share offer has not yet been made, the
offer shall be halted; if the share offer has already been made,
the subscribers may claim a refund from the sponsors according to
their paid-up subscriptions plus bank deposit interest calculated
for the same period.
Article 87A prospectus on share offer shall have the articles
of association of the company formulated by the sponsors attached,
and shall specify the following:
(1) the number of sharessubscribed for by the sponsors;
(2) the face value and the issue price of each share;
(3) the total number of bearer shares issued;
(4) the rights and obligations of the subscribers; and
(5) 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Where shares are to be offered to the general
public, the sponsors must publish the company's prospectus on share
offer and prepare subscription forms. The subscription forms shall
contain the items listed in the preceding Article, 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 89When sponsors offer shares to the public, the
shares shall be distributed by a securities agency established
according to law, with which a distribution agreement shall be
concluded.
Article 90Where shares are to be offered to the public, the
sponsors 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 91After payment in full of the subscription money for
all shares is made, a statutory capital verification institution
shall be commissioned to conduct a verification of the funds and
produce a verification certificate. The sponsors 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 sponsors fail to hold an inaugural meeting
within thirty days thereafter, the subscribers may claim a refund
from the sponsors according to the paid-up share subscription money
plus bank deposit interest calculated for the same period.
Article 92The sponsors 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 sponsors' 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 sponsors 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 93Sponsors 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 sponsors fail to convene the inaugural meeting
according to the schedule, or the inaugural meeting resolves not to
incorporate the company.
Article 94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 approval documents issued by the relevant department
in charge;
(2) the minutes of the inaugural meeting;
(3) the articles of association of the company;
(4) the financial audit report on the preparation of the
incorporation of the company;
(5) the capital verification
certificate;
(6) the names and domiciles of the members of the board of
directors and the supervisory board; and
(7) the name and domicile of the legal representative.
Article 95The Company Registration Authority shall, within
thirty days after receipt of an application for the incorporation
of a joint stock limited company, make a decision whether or not to
register the company. A company complying with the provisions of
this Law shall be registered and a company business licence shall
be issued thereto. A company failing to comply with the provisions
of this Law shall not be registered.
The date of issuance of a company business licence shall be
the date of the incorporation of the company. Once a company is
incorporated, an announcement shall be made.
A joint stock limited company incorporated by means of share
offer shall, after its registration for incorporation, report its
share subscription to the department of security administration
under the State Council for the record.
Article 96Where branches are established simultaneously with
the incorporation of a joint stock limited company, the company
shall submit applications for registration of the establishment of
the branches to, and obtain business licenses of the branches from,
the Company Registration Authority.
Where branches are established after the incorporation of a
joint stock limited company, the legal representative of the
company shall submit applications for registration of the branches
to, and obtain business licences of the branches from, the Company
Registration Authority.
Article 97The sponsors 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; and
(3) in the event of the interests of the company being damaged
during the course of its incorporation due to faultof the
sponsors, liability for compensation to the company.
Article 98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 and the conversion shall be handled in accordance with the
procedures stipulated in this Law for the incorporation of a joint
stock limited company.
Article 99Where a limited liability company is, after
approval, converted into a joint stock limited company in
accordance with the law, the total amount of its shares converted
shall be equal to the amount of its net assets. Where a limited
liability company that is, after approval, converted into a joint
stock limited company in accordance with the law offers shares to
the general public for the purpose of increasing its capital, it
shall be handled in accordance with the provisions of this Law in
respect of the share offers to the public.
Article 100Where a limited liability company is converted into a
joint stock limited company in accordance with the law, the claims and
debts of the original limited liability company shall be succeeded to by
the joint stock limited company into which it is converted.
Article 101A joint stock limited company shall keep its
articles of association, roster of the shareholders, minutes of the
shareholders' general meetings and financial and accounting
statements at the company.
Section 2Shareholders' General Meetings
Article 102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 exercies its functions and powers in
accordance with this Law.
Article 103The shareholders' general meeting shall exercise
the following functions and powers:
(1) to decide upon policies on business operation and
investment plans of the company;
(2) to elect and replace members of the board of directors and
to decide upon matters concerning the remuneration of the
directors;
(3) to elect and replace the supervisors who are
representatives of the shareholders and to decide upon matters
concerning the remuneration of the supervisors;
(4) to examine and approve reports of the board of directors;
(5) to examine and approve reports of the supervisory board;
(6) to examine and approve plans of the company's fiscal
financial budget and final accounts;
(7) to examine and approve plans for company's profit
distribution and making up losses;
(8) to make resolutions on the increase or reduction of the
registered capital of the company;
(9) to adopt resolutions on the issuance of company bonds;
(10) to adopt resolutions on matters such as the merger,
division, dissolution and liquidation of the company; and
(11) to amend the articles of association of the company.
Article 104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 situations 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 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.
Article 105A shareholders' general meeting shall be convened
by the board of directors in accordance with the provisions of this
Law and presided over by the Chairman of the board. Where the
Chairman is unable to perform his duties due to special reasons,
the vice-chairman or other director designated by the Chairman may
preside over such meetings. Shareholders shall be notified of the
matters to be considered at a shareholders general meeting thirty
days prior to the holding of such a meeting. At interim
shareholders' general meetings, no resolutions may be adopted in
respect of matters not included in the notice.
Where bearer shares are to be issued, a public announcement
shall be made in respect of the matters mentioned in the preceding
paragraph forty-five days prior to the holding of such a meeting.
Holders of bearer shares attending the shareholders' general
meeting shall deposit their share certificates with the company for
the period from five days prior to the holding of the meeting until
the end of the meeting.
Article 106Shareholders attending a shareholders' general
meeting shall have the right to one vote for each share held.
A resolution of the shareholders general meeting must be
passed by more than one half of the voting rights held by the
shareholders present at the meeting. Resolutions on the merger,
division or dissolution of the company adopted by the shareholders'
general meeting must require more than two-thirds of the voting
rights held by the shareholders present at the meeting.
Article 107Amendments to the articles of association of the
company must be adopted by more than two-thirds of the voting
rights held by the shareholders present at the shareholders'
general meeting.
Article 108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 109Resolutions on matters discussed at a
shareholders' general meeting shall be minuted down. The 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.
Article 110Shareholders shall have the right to examine the
articles of association of the company, the minutes of the
shareholders' general meetings and the financial and accounting
statements, and to make suggestions or inquiries about the business
operation of the company.
Article 111Where a resolution of the shareholders' general
meeting or of the board of directors violates the law or
administrative rules and regulations or infringes the lawful rights
and interests of the shareholders, the shareholders concerned shall
have the right to bring a lawsuit in a people's court demanding
that such illegal or imfringing action be stipped.
Section 3Board of Directors, and Manager
Article 112A joint stock limited company shall have a board
of directors composed of five to nineteen members.
The board of directors shall be responsible to the
shareholders' general meeting and exercise the following functions
and powers:
(1) to convene the shareholders' general meeting and to report
on its work to the shareholders' general meeting;
(2) to implement resolutions passed at the shareholders'
general meetings;
(3) to decide on the business operation plans and the
investment plans of the company;
(4) to formulate the fiscal financial budgets and the final
accounts of the company;
(5) to formulate plans for the profit distribution and making
up losses of the company;
(6) to formulate plans for increasing or reducing the
registered capital of the company and plans for the issue of
company bonds;
(7) to formulate plans for the merger, division and
dissolution of the company;
(8) to decide on the establishment of the internal management
organs of the company;
(9) to engage or dismiss the manager and, upon recommendation
of the manager, to engage or dismiss the deputy manager(s) and
responsible persons in charge of the financial affairs of the
company, and to decide on matters concerning their remuneration;
and
(10) to formulate the basic managment system of the company.
Article 113The board of directors shall have one chairman and
may have one or two vice-chairmen. The chairman and vice-chairmen
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 shall be the legal representative of
the company.
Article 114The chairman of the board shall exercise the
following functions and powers:
(1) to preside over shareholders' general meetings, and to
convene and preside over meetings of the board of directors;
(2) to examine the implementation of resolutions of the board
of directors; and
(3) to sign the shares and the bonds of the company.
The vice-chairmen of the board shall assist the chairman of
the board in his work and shall, upon designation by the chairman,
exercise the chairman's powers and functions on behalf of the
chairman of the board in case the chairman is unable to perform his
powers and functions.
Article 115The term of office of the directors shall be
stipulated in the articles of association of the company, but each
term shall not exceed three years. A director may serve consecutive
terms if reelected upon expiration of his term of office.
The shareholders' general meeting may not without reason
remove a director from office before the expiration of his term of
office.
Article 116Meetings of the board of directors shall be held
at least twice a year. All the members of the board shall be
notified of the meeting ten days prior to the holding of the
meeting.
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 117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 the directors.
Article 118Meetings of the boad of directors shall be
attended by the directors in person. If a director is unable to
attend a meeting of the boad for certain reasons, he may entrust
another director in writing with attending the meeting on his
behalf. The power 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 and clerks present.
Directors shall be responsible for resolutions passed by the
board of directors. If a resolution of the board violates the law,
administrative rules and regulations or the articles of association
of the company 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 119A joint stock limited company shall have a
manager, who shall be engaged or dismissed by the board of
directors. The manager shall be responsible to the board of
directors and shall exercise the following functions and powers:
(1) to be in charge of the production, operation and
management of the company and to organize the implementation of
resolutions of the board of directors;
(2) to organize the implementation of the annual business
plans and investment plans ofthe company;
(3) to draft plans for the establishment of internal
management organs of the company;
(4) to draft the basic management system of the company;
(5) to formulate specific rules and regulations of the
company;
(6) to propose the appointment or dismissal of deputy
manager(s) and responsible persons in charge of the financial
affairs of the company;
(7) to appoint or dismiss management personnel, except those
who shall be appointed or dismissed by the board of directors; and
(8) to exercise other functions and powers authorized by the
articles of association of the company and by the board of
directors.
The manager shall attend meetings of the boared of directors
as a non-voting participant.
Article 120If necessary, the board of directors may authorize
its chairman to perform part of its functions and powers when the
meeting of the board is not in session.
The board of directors may decide that one of its members
shall concurrently serve as the manager of the company.
Article 121A company shall solicit in advance the opinions of
the trade union and its staff and workers in studying and deciding
on issues involving the personal interests of its staff and workers
such as the salary, welfare, safety in production, labour
protection and labour insurance, and shall invite representatives
from the trade union or from its staff and workers to attend
relevant meetings as non-voting participants.
Article 122A company shall solicit the opinions and
suggestions of the trade union and its staff and workers when
studying and deciding major issues in respect of the company's
production and operations or the formulation of important rules and
regulations of the company.
Article 123Directors and managers shall abide by the articles
of association of the company, faithfully perform their duties and
protect the interests of the company, and shall not use their
positions, functions and powers in the company to seek personal
gains.
Provisions of Articles 57 to 63 of this Law regarding persons
disqualified to serve as directors and managers, and the
obligations and responsibilities of the directors and managers
shall apply to directors and managers of jointstock limited
companies.
Section 4Supervisory Board
Article 124A joint stock limited company shall have a
supervisory board composed of no less than three members. The
supervisory board shall elect a convener from among its members.
The supervisory board shall be composed of shareholders'
representatives and an appropriate proportion of representatives of
the staff and workers of the company, and the specific proportion
of such representatives shall be provided for by the articles of
association of the company. The representatives of the staff and
workers serving on the supervisory board shall be democratically
elected by the staff and workers of the company.
Directors, managers and responsible persons in charge of the
financial affairs of the company may not serve concurrently as
supervisors.
Article 125The term of office of the supervisors shall be
three years. A supervisor may serve consecutive terms if re-elected
upon expiration of his term of office.
Article 126A supervisory board shall exercise the following
functions and powers:
(1) to examine the financial affairs of the company;
(2) to supervise the acts of the directors and the manager violating
the laws, the administrative rules and regulations or the articles
of association of the company during the performance of their
functions;
(3) to demand directors or the manager to make corrections if
any of their acts is found to have damaged the interests of the
company;
(4) to propose the convening of interim shareholders' general
meetings; and
(5) other functions and powers provided for in the articles of
association of the company.
Supervisors shall attend meetings of the board of directors as
non-voting participants.
Article 127The articles of association of the company shall
stipulate the method of deliberation and voting procedures of the
supervisory board.
Article 128A supervisor shall faithfully perform his duties
of supervision in accordance with the law, the administrative rules
and regulations and the articles of association of the company.
Provisions of Articles 57 to 59 and Articles 62 to 63 of this
Law regarding persons disqualified to serve as supervisors and the
obligations and responsibilities of supervisors shall apply to the
supervisors of joint stock limited companies.
Chapter IVIssue and Transfer of Shares of Joint Stock Limited Companies
Section 1Issue of Shares
Article 129The capital of a joint stock limited company shall
be divided into shares of equal value.
The shares of the company shall take the form of share
certificates, which are vouchers issued by the company to certify
the shares held by their shareholders.
Article 130The issue of shares shall be in compliance with
the principles of publicity, fairness and justice. The same shares
must carry the same rights and the same benefits.
Shares of the same issue 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 131Shares may be issued at or above par but not below
par.
Shares to be issued above par shall be subjected to the
approval of the department of security administration under the
State Council.
The premiums generated from issuing shares above par shall be
entered under the capital common reserve fund of the company.
Specific measures for the administration of issue of shares
above par shall be separately stipulated by the State Council.
Article 132Share certificates may be in paper form or in such
other forms as stipulated by the department of security
administration 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 registration of the company's incorporation;
(3) the class of the shares, the par value and the number of
shares represented by the certificate; and
(4) the serial number of the share certificate.
A share certificate shall be signed by the chairman of the
board of directors and sealed with the seal of the company.
In the case of share certificates owned by sponsors, the words
"sponsor's share certificate" shall be clearly stated on the share
certificates.
Article 133Shares issued by a company to sponsors, a
State-authorized investment institution or legal persons shall be
registered shares which shall state the names of the sponsors,
State-authorized investment institution or legal persons. Such
shares may not be registered in other names, or names of their
representatives.
Shares issued to the general public may be either registered
shares or bearer shares.
Article 134Where registered shares are issued, the company
shall prepare a roster of the shareholders, in which the following
items shall be recorded:
(1) the names 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; and
(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
share certificates.
Article 135The State Council may formulate separate
regulations on the issue of other classes of shares which are not
provided for in this Law.
Article 136A joint stock limited company shall formally
deliver share certificates to its shareholders immediately after
the registration of its incorporation. No company may deliver share
certificates to its shareholders prior to the registration of its
incorporation.
Article 137To issue new shares, a company must satisfy the
following conditions:
(1)shares of the previous issue must have fully been
subscribed for and at least one year has elapsed since the previous
issue of shares;
(2) the company has been continuously profitable for the last
three years and is able to pay dividends to its shareholders;
(3) the company is not found to have false records in the
financial accounting documents in the last three years; and
(4) the forecast profit rate of the company can reach the
interest rate of bank deposit for the same period of time.
A company's distribution of new shares from the current year's
profits shall not be restricted by item (2) of the preceding
paragraph.
Article 138Where a company issues new shares, resolutions on
the following matters shall be adopted by a shareholders' general
meeting:
(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; and
(4) the class and number of new shares issued to existing
shareholders.
Article 139After the shareholders' general meeting adopts a
resolution to issue new shares, the board of directors must apply
to the department authorized by the State Council or to the local
provincial people's government for approval. If the new shares are
to be issued to the general public, the approval of the department
of security administration under the State Council must be
obtained.
Article 140When a company obtains the approval to issue new
shares to the general public, it must publicly announce its
prospectus on new share offer and its financial accounting
statements with annexed detailed schedules, and shall prepare
subscription application forms.
When a company issues new shares openly to the public, the new
shares shall be distributed by a securities agency established in
accordance with the law, with which a distribution agreement shall
be concluded.
Article 141Where a company issues new shares, it may
determine the pricing proposal for new shares based upon the
circumstances of its consecutive profit gains and property value
appreciations.
Article 142Where the new share 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 143Shares held by shareholders may be transferred in
accordance with the law.
Article 144Transfer of shares by shareholders shall be
conducted through stock exchanges established in accordance with
the law.
Article 145Registered shares shall be transferred by means of
endorsement by the shareholders or by such other means as provided
for by the law and administrative rules and regulations.
When 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
thirty 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 146Transfer of bearer shares shall become effective
immediately after the shareholder delivers the share certificates
to the transferee at a stock exchange established in accordance
with the law.
Article 147Shares held by the sponsors of a company shall not
be transferred within three years after the date of incorporation
of the company.
Directors, supervisors and the manager shall declare their
numbers of shares held by them to the company, and shall not
transfer such shares during their term of office.
Article 148The State-authorized investment institution may
transfer its shares held by it in accordance with the law and may
purchase shares held by other shareholders. The authority to
examine and approve, and measures for administration of such
transfers or purchases shall be separately provided for by the law
and administrative rules and regulations.
Article 149A company may not purchase its own shares except
where, for the purpose of reducing its capital, shares need to be
cancelled, or where the company merges with another company which
holds its shares.
A company must cancel the shares purchased by the company
itself in accordance with the preceding paragraph within ten days,
and register the change of its capital in accordance with laws and
administrative rules and regulations and make a public announcement
thereafter.
A company may not accept its own shares as the subject matter
of a mortgage.
Article 150Where registered share certificates are stolen,
lost or destroyed, the shareholder may, in accordance with the
procedure for publicizing public notice for assertion of claims
provided for in the Civil Procedure Law, request a people's court
to declare such share certificates as void.
After the voidness has been declared by a people's court in
accordance with the aforesaid procedure, the shareholder may apply
to the company for a replacement of the share certificates.
Section 3Listed Companies
Article 151A listed company mentioned in this Law refers to
a joint stock limited company which has its issued shares listed
and traded at stock exchanges with the approval of the State
Council or the department of security administration authorized by
the State Council.
Article 152Where a joint stock limited company applies to
have its shares listed and traded, the following conditions shall
be satisfied:
(1) the shares have already been issued to the general public
with approval of the securities administrative department under the
State Council;
(2) the total amount of the company's share capital reaches
not less than RMB 50,000,000 yuan;
(3) the company must have been in operation for three years
or more and have made profits for the past three consecutive years;
the business operation of a company which is converted from a
State-owned enterprise according to law or which is newly
incorporated after the implementation of this Law with medium
and large-size State-owned enterprises as the main sponsors may be
traced back without interruption to the original enterprise or the
main sponsors;
(4) the number of shareholders holding shares at the face
value of RMB 1,000 yuan or more is not less than one thousand and
the shares issued to the general public amount to twenty five
percent or more of the total share issue; where the company has a
registered capital of more than RMB 400,000,000 yuan, the ratio of
shares issued to the general public must amount to fifteen percent
or more of the total share issue;
(5) the company must have no records of involvement in serious
illegal activities in the recent three years, and its financial
accounting statements must contain no false information in the same
period; and
(6) other conditions as stipulated by the State Council.
Article 153Where a joint stock limited company applies to
have its shares listed and traded in a stock exchange, it shall
apply to the State Council or the department of security
administration authorized by the State Council for approval and
submit the relevant documents as required by the law and
administrative rules and regulations.
The State Council or the department of security administration
authorized by the State Council shall approve applications for
approval of the listing and trading of shares that comply with the
conditions specified in this Law and shall not approve those that
fail to comply with the provisions of this Law.
Where an application for the listing and trading of shares has
been approved, the approved listed company must publicly announce
its report on the listing of its shares and put its application
documents at a designated place for public review.
Article 154Shares of an approved listed company shall be
listed and traded in accordance with the relevant laws and
administrative rules and regulations.
Article 155Upon approval of the department of security
administration under the State Council, shares of a joint stock
limited company may be listed and traded in stock exchanges outside
the territory of the People's Republic of China and the measures
therefore shall be specially formulated by the State Council.
Article 156A listed company must, in compliance with the
provisions of the laws and administrative rules and regulations,
regularly disclose its financial and business situations. A
financial accounting report shall be publicized every half year of
each fiscal year.
Article 157The department of security administration under
the State Council may decide to suspend the listing of the shares
of a listed company if any of the following circumstances occurs:
(1) the total share capital and the distribution of share
ownership have been altered to make the company no longer satisfy
the requirements necessary for listing;
(2) the company has failed to make public its financial
situation in compliance with the legal provisions or has falsified
its financial accounting statements;
(3) the company is involved in major illegal acts; or
(4) the company has incurred losses for the past three
consecutive years.
Article 158Where any of the circumstances stipulated in item
(2) or (3) of the preceding Article applies to a listed company and
the consequences are verified to be serious, or where any of the
circumstances stipulated in item (1) or (4) of the preceding
Article is unable to be eliminated within the time limit and the
company has become disqualified as a listed company, the department
of security administration under the Satate Council shall decide to
terminate the listing of the shares of the company.
Where a company decides to dissolve itself, is ordered by a
competent administrative department in accordance with the law to
close down or is declared bankrupt, the department of security
administration under the State Council shall decide to terminate
the listing of the company's shares.
Chapter VCompany Bonds
Article 159A joint stock limited company, a wholly
State-owned company, and a limited liability company incorporated
by two or more State-owned enterprises or by two or more other
State-owned investment entities may, for the purpose of raising
funds for its production and operation, issue company bonds in
accordance with this Law.
Article 160Company bonds mentioned in this Law mean
negotiable instrument issued by a company in accordnace with the
legal procedures with repayment of the principal and payment of the
interest within a definite time limit.
Article 161To issue company bonds, the following conditions
must be met:
(1) for a joint stock limited company, the value of its net
asset may not be lower than RMB 30,000,000 yuan; for a limited
liability company, the value of its net asset may not be lower than
RMB 60,000,000 yuan;
(2) the accumulated value of the bonds issued may not exceed
forty percent of the value of the net assets of the company;
(3) the average distributable profits for the past three years
shall be sufficient to pay the interest on the company bonds for
one year;
(4) the funds to be raised must be invested in accordance with
the industrial policies of the State;
(5) the interest rate for the bonds shall not exceed the
ceiling fixed by the State Council; and
 (6) other conditions as stipulated by the State Council.
 Funds raised through the issue of company bonds must be used
for the purpose approved by the examination and approval
authorities and shall not be used to make up the losses of the
company or for non-production expenditure.
Article 162In any of the following circumstances, a company
may not make another issue of bonds:
(1) if the company bonds of the previous issue have not been
fully subscribed for; or
(2) if it is a fact that the company has defaulted on, or
deferred repayment of the principal and the payment of interest of
its previously issued company bonds or its debts, and such default
or deferment still persists.
Article 163For a joint stock limited company and a limited
liability company to issue company bonds, its board of directors
shall formulate a plan therefor, and a pertinent resolution shall
be adopted by the shareholders' meeting.
For a wholly State-owned company to issue company bonds, a
decision on the approval shall be made by the State-authorized
investment institution or the department authorized by the State.
Where a resolution or decision is made in accordance with the
preceding two paragraphs of this Article, the company shall submit
the matter to the department of security administration under the
State Council for approval.
Article 164The scale of the company bond issues shall be
determined by the State Council. Issues of company bonds examined
and approved by the department of security administration under the
State Council shall not exceed the scale determined by the State
Council.
The department of security administration under the State
Council shall approve the application for issuing company bonds if
it conforms with the provisions of this Law and shall disapprove
the application if it does not conform with the provisions of this
Law.
If an approval that has been granted is found not to be in
compliance with the stipulations of this Law, such an approval
shall be withdrawn. In the event that company bonds have not yet
been issued, the company shall stop issuing the bonds; if the
company bond issue has already commenced, the issuing company shall
refund the subscribers the money already paid for their
subscriptions plus bank deposit interest calculated for the same
period of time.
Article 165Where a company applies to the department of
security administration under the State Council for issuing company
bonds, the following documents shall be submitted:
(1) the registration certificate of the company;
(2) the articles of association of the company;
(3) the method of offer of the company bonds; and
(4) an asset valuation report and an asset verification
report.
Article 166After an application for the issue of company
bonds is approved, 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 total amount of the bonds and their par value;
(3) the interest rate of the bonds;
(4) the time limit for and the method of the repayment
of the principal and the payment of interest;
(5) the beginning and ending dates of the bond issue;
(6) the amount of the net assets of the company;
(7) the total amount of the undue bonds issued by the company;
and
(8) the selling agency of the company bonds.
Article 167Company bonds issued by a company must cleary
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 chairman of the board of directors and
sealed by the company.
Article 168Company bonds may be divided into registered bonds
and bearer bonds.
Article 169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; and
(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 the bonds
and the serial numbers.
Article 170Company bonds may be transferred. The transfer
shall be carried out at the securities exchanges established in
accordance with the law.
The price for the transfer of the company bonds shall be
agreed upon by the transferor and transferee.
Article 171Registered 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.
Where 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 at a securities exchange established in accordance
with the law.
Article 172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
subjected to the approval of the department security administration
under the State Council. Company bonds convertible into shares
shall, in addition to satisfying the conditions for the issue of
company bonds, satisfy the conditions for the issue of shares.
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 173A company that issues company bonds convertible
into shares shall let the bondholders convert their bonds into
shares in accordance with the convertion measures. However,
bondholders shall have an option whether or not to convert their
bonds into shares.
Chapter VIFinancial Affairs and Accounting of Companies
Article 174A company shall establish its financial and
accounting system in accordance with the law, administrative rules
and regulations, and the stipulations of the department in charge
of financial affairs under the State Council.
Article 175At the end of each fiscal year, a company shall
prepare its financial and accounting report, which shall be
examined and verified in accordance with the law.
The financial and accounting report shall include the
following financial and accounting statements and annexed detailed
schedules:
(1) a balance sheet;
(2) a profit and loss statement;
(3) a statement on changes in the financial position of the
company;
(4) a statement explaining the financial situation of the
company; and
(5) a statement regarding the distribution of profits.
Article 176A limited liability company shall send the
fiancial 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 incorporated by means of share
offer must announce its financial and accounting report.
Article 177When a company distributes the annual after-tax
profits, it shall allocate ten percent of its profits to its
statutory common reserve fund and another five to ten percent to
its statutory common welfare 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 and statutory common welfare 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, make allocations to the discretionary
common reserve fund.
After a company makes up its losses and makes allocations to
the statutory common reserve fund and the statutory common welfare
fund, a limited liability company shall distribute the remaining
profits to its shareholders according to the proportion of capital
subscribed for by each shareholder, 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.
Where the shareholders' 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 and the
statutory common welfare fund, the profits distributed in violation
of the legal provisions must be returned to the company.
Article 178The premium income derived from issuing shares
above par by a joint stock limited company in accordance with the
provisions of this Law, and other income which according to the
rules set by the departments in charge of financial affairs under
the State Council should be entered into the capital common reserve
fund, shall be entered into the capital common reserve fund of the
company.
Article 179A company's common reserve fund shall be used to
make up the company's losses, to expand the production and
operation of the company or to increase the capital of the company
by means of conversion.
If a joint stock limited company converts its common reserve
fund into capital upon a resolution made by the shareholders'
general meeting, it shall issue new shares in proportion to the
original shares held by the shareholders or increase the original
par value of each share. However, when the statutory common reserve
fund is converted into its capital, the remaining amount of the
statutory common reserve fund shall not be less than twenty five
percent of the registered capital.
Article 180The statutory common welfare fund retained by a
company shall be used for the collective welfare of the company's
staff and workers.
Article 181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 VIIMerger and Division of Companies
Article 182The merger or division of a company shall require
the adoption of a resolution by its shareholders' meeting of the
company.
Article 183The merger or division of a joint stock limited
company must be approved by the department authorized by the State
Council or by the people's government at the provincial level.
Article 184The merger of a company may take the form of
merger by absorption or merger by new establishment.
When 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.
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 at least three announcements
in newspaper within thirty days. The creditors shall have the right
to claim full repayment of their debts or provision of a
orresponding guarantee from the company within thirty days from the
date of receipt of the notice or,within ninety days from the date
of the first public announcement for those who have not received
the notice. The company that fails to repay itsdebts in full or
to provide a corresponding guarantee shall not be merged.
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 185Where 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 at
least three announcements 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 ninety days from the date of the first public announcement
for those who have not received the notice. The company that fails
to pay its debts in full or to provide a corresponding guarantee
shall not be divided.
The debts prior to the division of a company shall be assumed
by the companies following the division in accordance with the
agreement reached between them.
Article 186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 ninety days from the date of the
first 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 187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 188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 VIIIBankruptcy, Dissolution and Liquidation of Companies
Article 189Where a company is declared bankrupt according to
law because it is unable to pay off its due debts, a people's court
shall, in accordance with relevant laws, organize the shareholders,
the relevant departments and relevant professionals to form a
liquidation committee which shall conduct bankruptcy liquidation of
the company.
Article 190Where one of the following circumstances occurs,
a compay may be dissolved:
(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 shareholdrs' meeting resolves to dissolve the company;
or
(3) dissolution is necessary as a result of the merger or
division of the company.
Article 191Where a company is dissolved in accordance with
the provisions of item (1) or (2) of the preceding Article, a
liquidation committee shall be formed within fifteen days
thereafter. A liquidation committee of a limited liability company
shall be composed of its shareholders. Membership of a liquidation
committee of a joint stock limited company shall be decided upon by
its shareholders' general meeting. Where a company fails to form a
liquidation committee to conduct liquidation within the time limit,
its creditors may request a people's court to designate relevant
personnel to form a liquidation committee and conduct liquidation.
The people's court shall accept such request and without delay
designate the members of the liquidation committee to conduct
liquidation.
Article 192Where a company is ordered to be closed down in
accordance with the law due to its violation of the law or
administrative rules and regulations, it shall be dissolved. In
such a case, the department in charge shall organize the
shareholders, relevant departments and relevant professionals to
form a liquidation committee to conduct liquidation.
Article 193During liquidation, a liquidation committee shall
exercise the following functions and powers:
(1) to check up on 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 owed by the company;
(5) to clear up claims and debts;
(6) to dispose of, after paying off the debts of the company,
its remaining property; and
(7) to participate in civil lawsuits on behalf of the company.
Article 194A liquidation committee shall inform the creditors
of the company of its establishment within ten days following the
date of its establishment, and make at least three 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 ninety days from the date of the first 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.
Article 195After the liquidation committee has checked up on
the company's assets, formulated the balance sheet and a detailed
inventory of assets, it shall formulate a liquidation plan and
shall submit such plan to the shareholders' meeting or the
department in charge for confirmation.
Where the assets of the company are sufficient to pay off the
company's debts, such assets shall be applied to payment of the
liquidation fee, the wages and labour insurance premiums of the
staff and workers of the company, due taxes and the company's
debts.
The remaining assets of a company after paying off all the
debts and expenses as prescribed by the preceding paragraph shall
be distributed, in the case of a limited liability company, in
proportion to the shareholders' capital contributions and, in the
case of a joint stock limited company, in proportion to the
shareholders' shareholdings.
During liquidation, a company may not engage in new business
activities. No assets of the company shall be distributed to the
shareholders prior to full payments prescribed by the second
paragraph of this Article.
Article 196If a company is liquidated due to tis dissolution
and the liquidation committee, having checked up on the company's
assets and formulated the balance sheet and a detailed inventory of
assets, discovers that there are insufficient assets in the company
to pay off its debts, the committee shall apply to the people's
court for a declaration of bankruptcy of the company.
After the people's court has ruled to declare the company
bankrupt, the liquidation committee shall turn the liquidation
matters over to the court.
Article 197After the completion of liquidation, the
liquidation committee shall formulate a liquidation report and
submit the report to the shareholders' meeting or to the department
in charge for confirmation and submit it to the Company
Registration Authority in order to cancel the registration of the
company and publicly announce the company's termination. If no
application is made for cancellation of the company's registration,
the Company Registration Authority shall revoke the business
licence of the company and publicly announce the revocation.
Article 198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 power.
Members of a liquidation committee who cause losses to the
company or to its creditors, either willfully or through gross
negligence, shall be liable for compensation.
Chapter IXBranches of Foreign Companies
Article 199A foreign company may, in accordance with this
Law, establish a branch within the territory of the People's
Republic of China to engage in production and business activities.
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 laws.
Article 200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 licence 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 201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 202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 203A foreign company is a foreign legal person, so
its 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 204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 205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.
Chpater XLegal Liability
Article 206Where a company obtains its registration by making
a false report on its registered capital, submitting falsified
certificates, or resorting to other fraudulent means to conceal
important facts in violation of this Law when carrying out company
registration, it shall be ordered to make a rectification; where a
company makes a false report on its registered capital, it shall be
fined an amount of not less than five percent but not more than ten
percent of the registered capital falsely reported; where a company
submits falsified certificates or resorts to other fraudulent means
to conceal important facts, it shall be punished with a fine of not
less than RMB 10,000 yuan but not more than RMB 100,000 yuan. If
circumstances are serious, the registration of the company shall be
revoked. If a crime is constituted, criminal liabilities shall be
investigated in accordance with the law.
Article 207Where a company issues shares or company bonds by
making false prospectus on share offer, false subscription forms or
false methods of offer of company bonds, it shall be ordered to
stop the issuance and to refund the funds it has raised and the
interest therefrom to the subscribers, and shall be punished with
a fine of not less than one percent but not more than five percent
of the funds illegally raised. If a crime is constituted, criminal
liabilities shall be investigated in accordance with the law.
Article 208Where a sponsor or a shareholder makes a false
capital contribution by failing to pay the promised cash or
tangible assets, or to transfer property rights, thereby deceiving
the creditors and the general public, he shall be ordered to make
a rectification and imposed a fine of not less than five percent
but not more than ten percent of the false capital contributions.
If a crime is constituted, criminal liabilities shall be
investigated in accordance with the law.
Article 209Where a sponsor or a shareholder of a company
surreptitiously withdraws his capital contribution after the
incorporation of the company, rectification shall be ordered and a
fine of not less than five percent but not more than ten percent of
the amount of capital contribution withdrawn surreptitiously shall
be imposed. If a crime is constituted, criminal liabilities shall
be investigated in accordance with the law.
Article 210Where a company issues shares or company bonds
without the approval of the relevant department in charge as
stipulated by this Law, it shall be ordered to stop the issuance
and to refund the funds it has raised with interest, and a fine of
not less than one percent but not more than five percent of the
funds illegally raised shall be imposed. If a crime is constituted,
criminal liabilities shall be investigated in accordance with the
law.
Article 211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 and
imposeda fine of not less than RMB 10,000 yuan but not more than
RMB 100,000 yuan. If a crime is constituted, criminal liabilities
shall be investigated in accordance with the law.
Whoever deposits the assets of a company in a personal account
shall be confiscated of the illegal gains and imposed upon a fine
from one to five times the amount of the illegal gains. If a crime
is constituted, criminal liabilities shall be investigated in
accordance with the law.
Article 212Where a company submits to the shareholders and
the general public false financial and accounting reports or
reports concealing important facts, the persons in charge who are
directly responsible and other persons directly held responsible
shall be imposed upon a fine of not less than RMB 10,000 yuan but
not more than RMB 100,000 yuan. If a crime is constituted, criminal
liabilities shall be investigated in accordance with the law.
Article 213Where this Law is violated by converting the
State-owned assets into shares at a depressed value, or selling
them at low prices, or distributing them gratuitously to
individuals, the persons in charge who are directly responsible and
other persons directly held responsible shall be given
administrative sanctions in accordance with the law. If a crime is
constituted, criminal liabilities shall be investigated in
accordance with the law.
Article 214Where a director, a supervisor or the manager of
a company takes advantage of his position and powers to accept
bribes, to take other illegal gains or to misappropriate company
property, he shall be confiscated of the illegal gains, ordered to
return such property to the company, and imposed upon a sanction.
If a crime is constituted, criminal liabilities shall be
investigated in accordance with the law.
Where a director or the manager misappropriates company funds
or lends company funds to another person, he shall be ordered to
return such funds to the company; the gains derived therefrom shall
belong to the company; the company shall impose a sanction upon
him. If a crime is constituted, criminal liabilities shall be
investigated in accordance with the law.
Where a director or the manager violates the provisions of
this Law by providing company assets as a guarantee for personal
debts of a shareholder of its company or of another person, he
shall be ordered to cancel the guarantee and shall be liable for
compensation in accordance with the law; the gains derived from the
illegal provision of guarantee shall belong to the company. If the
circumstances are serious, the company shall impose a sanction upon
him.
Article 215Where a director or the manager violates the
provisions of this Law by engaging for his own account or for
another person in the same kind of business as his company is
engaged in, the income derived therefrom shall belong to the
company. In addition, the company may impose a sanction upon him.
Article 216Where a company fails to make allocations to its
statutory common reserve fund or statutory common welfare fund in
accordance with this Law, the company shall be ordered to make up
the amount that it is required to allocate and shall be imposed
upon a fine of not less than RMB 10,000 yuan but not more than RMB
100,000 yuan.
Article 217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 yuan but not more
than RMB 100,000 yuan.
Where a company, in the process of its liquidation, conceals
property, records false information in its balance sheet or
inventory of assets or, distributes the company assets prior to the
full payment of its debts, it shall be ordered to make a
rectification and be imposed upon a fine of not less than one
percent but not more than five percent of the amount concealed or
of the amount distributed prior to the full payment of the debts of
the company. The persons in charge who are directly responsible and
others directly held responsible shall be imposed upon a fine of
not less than RMB 10,000 yuan but not mroe than RMB 100,000 yuan.
If a crime is constituted, criminal liabilities shall be
investigated in accordance with the law.
Article 218Where a liquidation committee fails to submit a
liquidation report to the Company Registration Authority in
accordance with the provisions of this Law, or where a report
submitted conceals major facts or contains major omissions, it
shall be ordered to make a rectification.
Where a member of the liquidation committee takes advantage of
his position and power to practise favouritism for personal gains,
seek illegal income or misappropriate the property of the company,
he shall be ordered to return the property to the company,
confiscated of his illegal gains and imposed upon a fine from one
to five times the amount of his illegal gains. If a crime is
constituted, criminal liabilities shall be investigated in
accordance with the law.
Article 219Where an institution in charge of asset valuation,
capital verification or certificate verification provides false
documents of certification, the illegal income derived therefrom
shall be confiscated and a fine from one to five times the amount
of the illegal income shall be imposed; 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. If a crime is constituted, criminal liabilities
shall be investigated in accordance with the law.
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; where the circumstances are serious, a fine from one
to three times the amount of the income derived therefrom 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 according to law.
Article 220Where a relevant department in charge authorized
by the State Council approves an application for the incorporation
of a company or an application for the issue of shares that does
not satisfy the conditions as stipulated in this Law, if the
circumstances are serious, the persons in charge who are directly
responsible and others directly held responsible shall be given
administrative sanctions according to law. If a crime is
constituted, criminal liabilities shall be investigated in
accordance with the law.
Article 221Where the department security administration under
the State Council approves an application for the offer of shares,
the listing of shares or the issue of bonds that does not satisfy
the conditions as stipulated in this Law, if circumstances are
serious, the persons in charge who are directly responsible and
others directly held responsible shall be given administrative
sanctions according to law. If a crime is constituted, criminal
liabilities shall be investigated in accordance with the law.
Article 222Where the Company Registration Authority approves
an application for registration which does not meet the
requirements as stipulated in this Law, if the circumstances are
serious, the persons in charge directly held responsible and others
directly held responsible shall be given administrative sanctions
according to law. If a crime is constituted, criminal liabilities
shall be investigated in accordance with the law.
Article 223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 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. If a crime is constituted,
criminal liabilities shall be investigated in accordance with the law.
Article 224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", it shall be ordered to make a
rectification or be banned, and a fine of not less than RMB 10,000
yuan but not more than RMB 100,000 yuan may be imposed. If a crime
is constituted, criminal liabilities shall be investigated in
accordance with the law.
Article 225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 shall revoke the company's
business licence.
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;
and if the company still fails to register within the specified
time limit, a fine of not less than RMB 10,000 yuan but not more
than RMB 100,000 yuan shall be imposed.
Article 226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, and a fine
of not less than RMB 10,000 yuan but not more than RMB 100,000 yuan
may be imposed.
Article 227Where a relevant department in charge performing
examination and approval duties according to this Law refuses to
approve an application which meets the statutory requirements or
the Company Registration Authority refuses an application for
registration which meets the statutory requirements, the party
concerned may apply for reconsideration or institute an
administrative lawsuit in accordance with the law.
Article 228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 peralties, the company shall assume
the civil liability for compensation first.
Chapter XISupplementary Provisions
Article 229Companies registered and incorporated in
accordance with the law, administrative rules and regulations,
local regulations or the Opinions on Standardization of Limited
Liability Companies and the Opinions on Standardization of Joint
Stock Limited Companies formulated by the relevant competent
departments under the State Council prior to the implementation of
this Law shall continue to be retained; companies which do not
fully meet the requirements as stipulated in this Law shall meet
all such requirements within a prescribed time limit. Specific
measures for the implementation thereof shall be formulated
separately by the State Council.
Article 230This Law shall enter into force as of July 1,
1994.
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    Заявление об авторских правах и отказе от ответственности сайта Министерства коммерции КНР:

    1. Авторские права на все статьи с указанием «Тип статьи: оригинальный», размещенные на сайте Министерства коммерции КНР и его дочерних сайтах, принадлежат сайту Министерства коммерции КНР и его дочерним сайтам. Другие СМИ, сайты или индивидуальные лица при их воспроизведении и использовании должны указать: «Источник: Министерство коммерции КНР».

    2. Все опубликованные на данном сайте и его дочерних сайтах статьи, помеченные «Тип статьи: воспроизведение», «Тип статьи: перевод», «Тип статьи: выборочное редактирование», являются работами, воспроизведенными, переведенными или выборочно отредактированными из других СМИ. Воспроизведение, перевод или выборочное редактирование имеют цель передать больше информации, а вовсе не означают, что сайт Министерства коммерции КНР и его дочерние сайты поддерживают мнения, высказанные в  этих статьях, и несут ответственность за их достоверность. При воспроизведении и использовании другие СМИ, сайты или индивидуальные лица должны сохранить источник статьи, указанный на сайте Министерства коммерции КНР или его дочерних сайтах,и должны сами нести юридическую ответственность.

    Пекинское время: 2020/08/10/11AM
    Здешнее время: 2020/08/10/2PM