Translated by John Jiang & Henry Liu
DISCLAIMER:
Neither the author nor Babelcom makes any
express or implied warranty to the accuracy or completeness
of the information contained herein. Neither the author nor
Babelcom shall be liable for any direct, indirect, incidental,
consequential or special damages resulting from use of materials
contained herein.
COPYRIGHT NOTICE:
All Rights Reserved, Babelcom, 2000. No part
of this work may be reproduced or transmitted in any form
or by any means, including photocopying, recording, or by
any information storage and retrieval system, without written
permission from Babelcom.
THE COMPANY LAW
OF THE PEOPLE'S REPUBLIC OF CHINA
(Adopted at the 5th Session of the Standing
Committee of the 8th National People's Congress on December
29, 1993, and Promulgated by Presidential Order of the People's
Republic of China ( No. 16) on December 29, 1993, and Amended
on December 25, 1999)
TABLE OF CONTENTS
Chapter One: General Provisions
Chapter Two: Establishment and Organs
of Limited Liability Company
Section One. Establishment
Section Two. Organs
Section Three. Wholly State-owned Company
Chapter Three: Establishment and Organs
of Joint Stock Limited Company
Section One. Establishment
Section Two. Shareholders' general committee
Section Three. Board Of Directors And
General Manager
Section Four. Board Of Supervisors
Chapter Four: Issue and Transfer of Shares
of Joint Stock Limited Company
Section One. Issue Of Shares
Section Two. Transfer Of Shares
Section Three. Listed Company
Chapter Five: Company Bonds
Chapter Six: Financial and Accounting
Affairs of Company
Chapter Seven: Merger and Division of
Company
Chapter Eight: Bankruptcy, Dissolution
and Liquidation of Company
Chapter Nine: Branch of Foreign Company
Chapter Ten: Legal Liabilities
Chapter Eleven: Supplementary Provisions
Chapter One: General Provisions
Article 1 This Law is enacted in accordance
with the Constitution, in order to meet the needs of establishing
a modern enterprise system, to regulate the organization and
conduct of companies, to protect the lawful rights and interests
of companies as well as the shareholders and creditors thereof,
to maintain social and economic order, and to promote the
development of the socialist market economy.
Article 2 A company referred to herein means
a limited liability company or a joint stock limited company
established within China in accordance herewith.
Article 3 Limited liability companies and
joint stock limited companies are enterprise legal persons.
In the case of a limited liability company,
the shareholders are liable thereto to the extent of their
capital contribution, and the company is liable for its debts
to the extent of all of its assets.
In the case of a joint stock limited company,
its total capital is divided into stocks of equal value, and
the shareholders are liable thereto to the extent of their
share holdings, and the Company is liable for its debts to
the extent of all of its assets.
Article 4 As contributors of capital, the
shareholders of a company enjoy the rights of proprietors
in proportion to their respective share of capital contributions
to the company, such as deriving benefits from its assets,
making major decisions, and selecting its management.
The company enjoys the full property rights
of a legal person in respect of assets resulting from the
investment by its shareholders, and enjoys civil rights and
bears civil liabilities in accordance with the law.
Title to the state-owned assets in the company
shall vest in the State.
Article 5 A company, with all of its assets
owned by it as a legal person, shall operate autonomously
and be responsible for its own profit and loss in accordance
with the law.
The company shall, under the state's macro-regulation,
organize its production and operation autonomously in light
of market demand, with a view to improving economic return
and productivity, and accomplishing the preservation and increase
of the value of its assets.
Article 6 A company shall adopt an internal
management system which clearly sets out the rights and responsibilities
of the relevant parties, is conducive to scientific management,
and combines incentive with check and balance.
Article 7 If a state-owned enterprise is
to be reorganized into a company, it must, in accordance with
the conditions and requirements prescribed by national statutes
and administrative regulations, change its operating mechanism,
and orderly identify and verify its assets, determine the
respective owners of the property rights therein, settle its
creditor's rights and liabilities, conduct assets appraisal,
and set up standard internal management organs.
Article 8 The establishment of a limited
liability company or a joint stock limited company is subject
to the requirements prescribed herein. An entity meeting the
requirements prescribed herein may be registered as a limited
liability company, or a joint stock limited company, as the
case may be; an entity failing to meet the requirements prescribed
herein may not be registered as a limited liability company,
or a joint stock limited company, as the case may be.
Where the establishment of a company is subject
to examination and approval as required by the relevant national
statutes or administrative regulations, examination and approval
procedure must be carried out in accordance with the law prior
to its registration.
Article 9 The name of a limited liability
company established in accordance herewith must contain the
words "limited liability company".
The name of a joint stock limited company
established in accordance herewith must contain the words
"joint stock limited company".
Article 10 The Company shall be domiciled
at the place where its principal executive office is located.
Article 11 In order to establish a company,
its articles of association must be prepared in accordance
herewith. The articles of association of the company are binding
upon the company and its shareholders, directors, supervisors
and general manager.
The company's business scope shall be prescribed
by its articles of association and be registered in accordance
with the law. If an item in the Company's business scope is
subject to any restriction prescribed by any national statute
or administrative regulation, approval for such item shall
be obtained in accordance with the law.
The company shall conduct its business within
its registered business scope. The Company may change its
business scope by amending its articles of association in
accordance with legally prescribed procedure and registering
such amendment with the company registration authority.
Article 12 A Company may invest in another
limited liability company or joint stock limited company,
and is liable to such company to the extent of its capital
contribution.
Except for an investment company or a holding
company stipulated by the State Council, where a company is
to invest in other limited liability companies or joint stock
limited companies, its cumulative investment may not exceed
50 percent of its net assets, provided that if after the investment,
the capital is increased using profit distribution received
from the company in which it invested, the increased amount
shall not be included.
Article 13 A company may establish branch
companies, which do not have the status of enterprise legal
persons, and the civil liabilities thereof shall be borne
by the company.
The company may establish subsidiary companies,
which have the status of enterprise legal persons and bear
civil liabilities independently in accordance with the law.
Article 14 In conducting its business, a
company must abide by the law, observe industry ethics, strengthen
the development of socialist spiritual civilization, and subject
itself to supervision by the government and the public.
The company's lawful rights and interests
are protected by law and shall not be infringed upon.
Article 15 A company must protect the lawful
rights and interests of its workers, strengthen labor protection,
and achieve workplace safety.
The company shall strengthen the professional
education and on the job training of its workers in various
forms, so as to improve their quality.
Article 16 The workers of a company shall
organize a labor union, which shall conduct union activities
and safeguard the lawful rights and interests of the workers
in accordance with the law. The Company shall provide the
necessary conditions for its labor union to conduct its activities.
In accordance with the Constitution and other
relevant national statutes, democratic management in the form
of workers' assembly and other forms shall be adopted in a
wholly state-owned company or a limited liability company
established through investment by two or more state-owned
enterprises or by two or more state-owned investment entities
of other kinds.
Article 17 Activities of the elementary-level
cell of the Chinese Communist Party in a company shall be
conducted in accordance with the Charter of the Chinese Communist
Party.
Article 18 Limited liability companies with
foreign investment are subject to this Law, provided that
where the provisions of national statutes governing Sino-foreign
equity joint venture enterprises, Sino-foreign cooperative
joint venture enterprises, and wholly foreign owned enterprises
stipulate otherwise, the stipulations therein shall prevail.
Chapter Two: Establishment And Organs Of
A Limited Liability Company
Section One Establishment
Article 19 The establishment of a limited
liability company is subject to the following conditions:
(i) The number of shareholders meets legal
requirement;
(ii) The amount of shareholders' capital
contribution reaches the minimum level prescribed by law;
(iii) The shareholders jointly prepare the
articles of association;
(iv) There is a company name, and the organs
meeting the requirements for a limited liability company are
established;
(v) There is a permanent place of business
and there are necessary conditions for production and operation.
Article 20 A limited liability company shall
be established through joint investment by not fewer than
2 but not more than 50 shareholders.
A state authorized investment entity or state
authorized department may establish wholly state-owned limited
liability companies as the sole investor.
Article 21 In the case of a state-owned enterprise
established before this Law becomes operative, if it meets
the conditions prescribed herein for the establishment of
a limited liability company, it may be reorganized into a
wholly state-owned limited liability company in accordance
herewith if it was established by a single investment entity,
or it may be reorganized into a limited liability company
pursuant to Paragraph 1 of the previous Article if it was
established by more than one investment entities.
The implementing procedures and detailed
measures for reorganizing state-owned enterprises into companies
shall be separately prescribed by the State Council.
Article 22 The articles of association of
a limited liability company shall set forth the following:
(i) its name and domicile;
(ii) its business scope;
(iii) its registered capital;
(iv) the names of its shareholders;
(v) the rights and obligations of its shareholders;
(vi) the forms and amounts of capital contribution
made by shareholders;
(vii) the conditions under which the shareholders'
shares of capital contribution may be assigned;
(viii) its organs, the manners in which they
are established and their respective powers, and the rules
governing their conduct of business;
(ix) its legal representative;
(x) the causes for its dissolution and the
method for its liquidation;
(xi) other matters which shareholders deem
necessary to provide for.
Shareholders shall sign or impress their
chops on the articles of association.
Article 23 The registered capital of a limited
liability company is the amount of capital contribution actually
paid up by all shareholders and registered with the company
registration authority.
The registered capital of a limited liability
company shall not be less than:
(i) Renminbi 500,000 Yuan if it primarily
engages in production;
(ii) Renminbi 500,000 Yuan if it primarily
engages in commodity wholesale;
(iii) Renminbi 300,000 Yuan if it primarily
engages in commodity retail;
(iv) Renminbi 100,000 Yuan if it engages
in scientific and technical development, consulting or service.
If for a specific industry, the required
minimum registered capital exceeds any of the minimum levels
prescribed above, such minimum requirement shall be separately
prescribed by the relevant national statute or administrative
regulations.
Article 24 Shareholders may contribute their
capital in the form of cash, as well as in the forms of tangible
goods, industrial property, non-patented technology and land
use rights at certain value. If any tangible goods, industrial
property, non-patented technology or land use rights are contributed
as capital, they must be appraised and the property rights
therein must be verified, and the contributed items may not
be over-valued or under-valued. Appraisal on land use rights
shall be carried out in accordance with the provisions of
the relevant national statute and administrative regulations.
Where industrial property or non-patented
technology is contributed as capital at certain value, its
valuation shall not exceed 20 percent of the total registered
capital, except where the state makes special provisions for
companies utilizing high and new technologies.
Article 25 Each shareholder shall invest
in full the capital contribution which he has subscribed for
in accordance with the articles of association. If a shareholder
makes his capital contribution in cash, he shall deposit in
full the amount of such cash capital contribution into a temporary
bank account opened for the contemplated limited liability
company; If capital contribution is made in the form of tangible
goods, industrial property, non-patented technology or land
use rights, the appropriate transfer procedure for the property
rights therein shall be carried out in accordance with the
law.
A shareholder who fails to invest the capital
contribution which he has subscribed for in accordance with
the previous Paragraph is liable for breach of contract to
those shareholders who have invested in full the capital contribution
they have subscribed for.
Article 26 Upon investment in full of their
respective capital contribution by the shareholders, a legally-prescribed
capital verification institution must carry out capital verification
procedure and issue a certificate.
Article 27 After a legally-prescribed capital
verification institution has verified the shareholders' full
capital contribution, a representative designated by all shareholders
or the agent appointed jointly thereby shall apply to the
company registration authority for establishment registration
and submit thereto documents such as the company registration
application form, the articles of association, and the capital
verification certificate, etc.
Where approval by the relevant authority
is required by the relevant national statute or administrative
regulations, the approval document shall be submitted at the
time of applying for establishment registration.
The company registration authority shall
grant registration to an applicant who meets the requirements
prescribed herein and shall issue a company business license,
and shall not grant registration to an applicant who fails
to meet the requirements prescribed herein.
The date of issuance of a company business
license shall be the establishment date for a limited liability
company.
Article 28 If after the establishment of
a limited liability company, it is discovered that the actual
value of the tangible goods, industrial property, non-patented
technology, or land use rights contributed as capital is significantly
below their value fixed in the articles of association, the
shareholder who contributed such item as capital shall contribute
the difference in value, and the other shareholders of the
company at the time it was established shall be jointly and
severally liable.
Article 29 Where a branch company is to be
established contemporaneous with the establishment of a limited
liability company, an application for registration of such
branch company shall be submitted to the company registration
authority, and it shall be issued a business license.
Where a branch company is to be established
after the establishment of the limited liability company,
the company's legal representative shall apply to the company
registration authority for registration of such branch company,
and it shall be issued a business license.
Article 30 Upon the establishment of a limited
liability company, each shareholder shall be issued a capital
contribution certificate, which shall set forth the following:
(i) the name of the company;
(ii) the date of registration of the company;
(iii) the company's registered capital;
(iv) the name of the shareholder, the amount
of his capital contribution, and the date of capital contribution;
(v) the serial number and date of issuance
of the capital contribution certificate.
The company's chop shall be impressed on
each capital contribution certificate.
Article 31 A limited liability company shall
maintain a record of shareholders, which shall set forth the
following:
(i) the name of each shareholder and the
domicile thereof;
(ii) the amount of capital contribution invested
by each shareholder;
(iii) the serial number of each capital contribution
certificate.
Article 32 Shareholders are entitled to inspect
the minutes of meetings of shareholder committee as well as
the financial and accounting reports of the company.
Article 33 Shareholders shall share in the
distribution of profits in proportion to their respective
shares of capital contribution. Where the company is to increase
its capital, its shareholders have the preemptive right to
subscribe for the increased amount.
Article 34 A shareholder may not withdraw
its capital contribution after registration of the company.
Article 35 Shareholders may assign in whole
or part their respective shares of capital contribution amongst
themselves.
Transfer of his share of capital contribution
by a shareholder to anyone other than another shareholder
is subject to consent by a majority of all the shareholders;
shareholders who do not consent to the transfer shall purchase
the share of capital contribution to be assigned, and failure
by those shareholders to make such purchase is deemed to be
their consent to the assignment.
Where the shareholders consent to the assignment
of share of capital contribution, other shareholders have
the preemptive right of purchase under the same conditions.
Article 36 Upon a shareholder's lawful assignment
of his share of capital contribution, the company shall record
on the record of shareholders the name of the assignee, the
domicile thereof and the amount of capital assigned thereto.
Section Two Organs
Article 37 The shareholders' committee of
a limited liability company consists of all the shareholders,
and the shareholders' committee is the company's organ of
authority, and shall exercise its powers in accordance herewith.
Article 38 The shareholders' committee shall
exercise the following powers:
(i) determining the company's operational
guidelines and investment plans;
(ii) electing and replacing directors, and
deciding upon matters relating to their remuneration;
(iii) electing and replacing supervisors
who represent the shareholders, and deciding upon matters
relating to the remuneration of supervisors;
(iv) considering and approving reports by
the board of directors;
(v) considering and approving reports by
the board of supervisors or the supervisor, as the case may
be;
(vi) considering and approving annual financial
budget plans and final accounting plans of the company;
(vii) considering and approving company profit
distribution plans and plans to cover company losses;
(viii) adopting resolutions relating to increase
or reduction of the company's registered capital;
(ix) adopting resolutions relating to issuance
of company bonds;
(x) adopting resolutions relating to assignment
of share of capital contribution by a shareholder to anyone
other than a shareholder of the company;
(xi) adopting resolutions relating to merger,
division, change of corporate form, dissolution and liquidation
of the company;
(xii) amending the articles of association.
Article 39 Unless otherwise provided herein,
the method for conducting business and voting procedure at
a meeting of shareholders' committee shall be prescribed by
the articles of association.
Any resolution adopted by the shareholders'
committee relating to the company's increase or reduction
of registered capital, division, merger, dissolution or change
of corporate form requires affirmative votes by shareholders
representing two-thirds of the votes.
Article 40 A company may amend its articles
of association. Adoption of a resolution to amend the articles
of association requires affirmative votes by shareholders
representing two-thirds of the votes.
Article 41 Shareholders shall exercise their
voting rights at the meeting of shareholders' committee in
proportion to their respective shares of capital contribution.
Article 42 The first meeting of shareholders
committee shall be called and presided over by the shareholder
with the largest share of capital contribution, and shall
exercise its powers in accordance herewith.
Article 43 Meetings of shareholders committee
are classified as either regular meetings or interim meetings.
Regular meetings shall be timely held as
prescribed in the articles of association. Shareholders representing
one-fourth or more of the votes, or one-third of the directors
or supervisors, may propose for an interim meeting.
Where a limited liability company has a board
of directors, a meeting of shareholders committee shall be
called by the board, and presided over by the chairman of
the board; where the chairman is unable to perform his duties
due to any special reason, the meeting shall be presided over
by the vice-chairman or another director appointed by the
chairman.
Article 44 In order to hold a meeting of
shareholders committee, notice shall be given to all shareholders
15 days in advance.
The shareholders' committee shall prepare
minutes regarding the decisions on matters considered at the
meeting of shareholders committee, which shall be signed by
the shareholders attending the meeting.
Article 45 A limited liability company shall
have a board of directors, which shall be composed of not
fewer than 3 but not more than 13 directors.
Where a limited liability company has been
established through investment by two or more state-owned
enterprises, or by two or more state-owned investment entities
of other kinds, there shall be representative(s) of the workers
of the company on the board of directors. The representative(s)
of the workers on the board shall be democratically elected
by the workers of the company.
The board shall have one chairman, and may
have one to two vice-chairmen. The manner in which the chairman
and vice-chairman are selected shall be prescribed by the
articles of association.
The chairman is the legal representative
of the company.
Article 46 The board of directors is accountable
to the shareholders' committee, and shall exercise the following
powers:
(i) being responsible for calling meetings
of shareholders committee and presenting reports thereto;
(ii) implementing resolutions adopted by
the shareholders' committee;
(iii) determining the company's operational
plans and investment programs;
(iv) preparing annual financial budget plans
and final accounting plans of the company;
(v) preparing profit distribution plans and
plans to cover company losses;
(vi) preparing plans for increasing or reducing
registered capital of the company;
(vii) drafting plans for merger, division,
change of corporate form or dissolution of the company;
(viii) determining the structure of the company's
internal management;
(ix) appointing or removing the manager (general
manager) (Hereinafter referred to as the "general manager")
of the company, appointing or removing, upon the general manager's
recommendation, deputy managers of the company and the officer
in charge of finance, and determining the remuneration for
those officers;
(x) formulating the basic management scheme
of the company.
Article 47 The term of the directors shall
be prescribed by the articles of association, provided that
each term may not exceed 3 years. A director may continue
to serve his post if he is re-elected upon the expiration
of his term.
Prior to expiration of a director's term,
the shareholders' committee may not remove him without cause.
Article 48 A meeting of the board of directors
shall be called and presided over by the chairman; in the
event that the chairman is unable to perform his duties due
to any special reason, the chairman shall appoint the vice-chairman
or another director to call and preside over the meeting.
One-third or more of the directors may propose for a meeting
of the board.
Article 49 Unless otherwise provided herein,
the method for conducting business and voting procedure at
the meeting of board of directors shall be prescribed by the
articles of association.
In order to hold a board meeting, notice
shall be given to all directors 10 days in advance.
The board shall prepare minutes relating
to the decisions on matters considered at the meeting, which
shall be signed by the directors attending the meeting.
Article 50 A limited liability company shall
have a general manager, to be appointed or removed by the
board of directors. The general manager is accountable to
the board and shall exercise the following powers:
(i) being in charge of the management of
the company's production and operation, and organizing the
implementation of board resolutions;
(ii) organizing the implementation of annual
operating plans and investment programs of the company;
(iii) preparing the plan for the structure
of the company's internal management;
(iv) preparing the basic management scheme
of the company;
(v) formulating detailed company rules;
(vi) recommending the appointment or removal
of a deputy general manager and the officer in charge of finance;
(vii) appointing and removing officers of
the company other than those to be appointed or removed by
the board;
(viii) other powers prescribed by the articles
of association or delegated by the board.
The general manager shall be present at board
meetings.
Article 51 A small-scaled limited liability
company with only a few shareholders may have an executive
director without establishing a board of directors. The executive
director may serve concurrently as the general manager of
the company.
The powers of the executive director shall
be prescribed in the articles of association by reference
to the provisions of Article 46 hereof.
Absent a board of directors, the executive
director of a limited liability company shall be the legal
representative thereof.
Article 52 A large-scaled limited liability
company shall have a board of supervisors, which shall be
composed of not fewer than 3 members. The board of supervisors
shall elect one of its members as the person responsible for
calling meetings.
The board of supervisors shall be composed
of shareholders' representative(s) and representative(s) of
the workers' of the company at an appropriate ratio to be
specifically prescribed in the articles of association. The
workers' representative(s) on the board of supervisors shall
be democratically elected by the workers of the company.
A small-scaled limited liability company
with only a few shareholders may have one or two supervisors.
A director, the general manager and the officer
in charge of finance may not serve concurrently as a supervisor.
Article 53 Each term of a supervisor shall
be 3 years, and a supervisor may continue to serve his post
upon expiration of his term if he is re-elected.
Article 54 The board of supervisors or the
supervisor, as the case may be, shall exercise the following
authorities:
(i) reviewing the financial affairs of the
company;
(ii) monitoring the acts of the directors
or the general manager to guard against violation of national
statutes, administrative regulations or the articles of association
in the course of performance of their duties;
(iii) requiring the directors or the general
manager to make rectification when any act thereof causes
harm to company interests;
(iv) proposing for interim meetings of shareholders'
committee;
(v) other authorities prescribed by the articles
of association.
The supervisors shall be present at board
meetings.
Article 55 When a company considers and decides
upon matters which affect the personal interests of its workers,
such as their wages, benefits, production safety and labor
protection, or labor insurance, it shall first hear the opinions
of the labor union and the workers of the company, and invite
representatives of the labor union or the workers to be present
at related meetings.
Article 56 When a company considers and decides
upon major matters relating to its production and operation,
or formulates important rules and standards, it shall hear
the opinions and suggestions of the labor union and the workers.
Article 57 A person in any of the following
categories may not serve as a director, supervisor, or the
general manager of a company:
(i) without civil capacity or with limited
civil capacity;
(ii) having been sentenced to prison for
the following crimes, and completion of the sentence being
less than 5 years ago: embezzlement, bribery, conversion of
property, misappropriation of property, sabotage of social
economic order; or having been deprived of political rights
as a result of a criminal conviction, and completion of such
sanction being less than 5 years ago;
(3) having served as a director, the factory
chief, or the general manager of a company or enterprise which
underwent bankruptcy liquidation as a result of mismanagement,
and being personally responsible for such bankruptcy, and
completion of the bankruptcy liquidation being less than 3
years ago;
(4) having served as the legal representative
of a company or enterprise whose business license was revoked
due to its violation of law, and being personally responsible
for such revocation, and such revocation occurring less than
3 years ago;
(5) in default of personal debt of a significant
amount.
If the company elects or appoints a director
or supervisor or employs the general manager in violation
of the above Paragraph, such election, appointment or employment
is invalid.
Article 58 No public servant may concurrently
serve as a director, supervisor or the general manager of
a company.
Article 59 A directors, supervisor, or the
general manager shall abide by the articles of association,
faithfully perform their duties, and safeguard the interests
of the company, and may not abuse their positions and authorities
at the company for private gain.
A directors, supervisor, or the general manager
may not abuse their authorities by accepting bribes or generating
other illegal income, and may not convert company property.
Article 60 A director or the general manager
may not misappropriate company funds or loan company funds
to other people.
A director or the general manager may not
deposit company assets into an account in his own name or
in any other individual's name.
A director or the general manager may not
give company assets as security for the debt of a shareholder
or any other individual.
Article 61 A director or the general manager
may not engage in the same business as the company in which
he serves as a director or the general manager either for
his own account or for any other person's account, or engage
in any activity detrimental to company interests. If a director
or the general manager engages in any of the above mentioned
business or activity, any income so derived shall be turned
over to the company.
Unless otherwise provided in the articles
of association or otherwise agreed by the shareholders' committee,
a director or the general manager may not execute any contract
or engage in any transaction with the company.
Article 62 Unless required by law or consented
to by the shareholders' committee, a director, supervisor,
or the general manager may not disclose the company's confidential
information.
Article 63 If a director, supervisor or the
general manager causes detriment to the company while performing
his duties in violation of any national statute, administrative
regulation or the articles of association, he shall be liable
for the loss so caused.
Section Three Wholly State-owned Companies
Article 64 A wholly state-owned company referred
to herein means a limited liability company established through
sole investment by a state authorized investment entity or
state authorized department.
Companies designated by the State Council
to produce special products or in special industries shall
adopt the form of a wholly state-owned company.
Article 65 The articles of association of
a wholly state-owned company may be formulated by the state
authorized investment entity or state authorized department
in accordance with the provisions hereof, or may be prepared
by its board of directors and submitted to the state authorized
investment entity or state authorized department for approval.
Article 66 A wholly state-owned company shall
not have a shareholders' committee, and the state authorized
investment entity or state authorized department shall authorize
the board of directors to exercise part of the authorities
of the shareholders' committee, and to decide on major matters
of the company, provided that matters such as merger, division
or dissolution of the company, capital increase or reduction
by the company, and issue of company bonds must be decided
by the state authorized investment entity or state authorized
department.
Article 67 (Amended) The Supervisory Committee
of a wholly State-owed Company shall comprise personnel appointed
by the State Council or agencies or departments, and staff
representative(s). There shall be no fewer than three supervisors.
The Supervisory Committee shall exercise the authorities enumerated
in Items (i) and (ii) of Paragraph 1 of Article 54 hereof,
as well as other authorities granted by the State Council.
The supervisors shall be present at the meetings of board
of directors. A director, the manager and the person in charge
of finance shall not serve as a supervisor concurrently.
Article 68 A wholly state-owned company shall
have a board of directors, which shall perform its duties
in accordance with the provisions of Article 46 and Article
66 hereof. Each term of the board of directors shall be 3
years.
There shall be not fewer than 3 but not more
than 9 members on the board, to be appointed or replaced by
the state authorized investment entity or state authorized
department according to the terms of the board. There shall
be representative(s) of the workers on the board. The workers'
representative(s) on the board shall be democratically elected
by the workers.
The board of directors shall have a chairman,
and if needed, a vice-chairman. The chairman and vice-chairman
shall be appointed by the state authorized investment entity
or state authorized department from the board members.
The chairman of the board is the legal representative
of the company.
Article 69 A wholly state-owned company shall
have a general manager, to be appointed or removed by the
board of directors. The general manager shall perform his
duties in accordance with the provisions of Article 50 hereof.
If approved by the state authorized investment
entity or state authorized department, a board member may
serve concurrently as the general manager.
Article 70 Absent approval by the state authorized
investment entity or state authorized department, the chairman,
vice-chairman, a director, or the general manager may not
serve concurrently as the person in charge of any other limited
liability company, joint stock limited company or any other
business organization.
Article 71 In the case of assignment of the
assets of a wholly state-owned company, the state authorized
investment entity or state authorized department shall carry
out examination and approval, and the formalities for transfer
of property rights shall be carried out in accordance with
the relevant national statutes and administrative regulations.
Article 72 A large-scaled wholly state-owned
company with sound operating and management system and good
operating condition may be authorized by the State Council
to exercise the proprietor's rights in respect of its assets.
Chapter Three: Establishment And Organs
Of A Joint Stock Limited Company
Section One Establishment
Article 73 The establishment of a joint stock
limited company is subject to the following conditions:
(i) The number of sponsors meets legal requirement;
(ii) The amount of capital stocks subscribed
for by the sponsors and publicly placed reaches the legally-prescribed
minimum capital level;
(iii) The issue of its shares and the preparation
for its establishment comply with the law;
(iv) The sponsors prepare the articles of
association, and such articles of association are adopted
by the establishment meeting;
(v) There is a company name, and the organs
complying with the requirements for a joint stock limited
company are established;
(vi) There is a permanent place of business
and there are necessary conditions for production and operation.
Article 74 A joint stock limited company
may be established either by sponsorship or public share offer.
Establishment by sponsorship means establishment
of the company through subscription by the sponsors for all
the shares to be issued by the company.
Establishment by public share offer means
establishment of the company through subscription by sponsors
for part of the shares to be issued by the company, and public
placement of the remaining shares.
Article 75 In order to establish a joint
stock limited company, there shall be not fewer than 5 sponsors,
half of whom shall be domiciled in China.
In the case of reorganization of a state-owned
enterprise into a joint stock limited company, there may be
fewer than 5 sponsors, provided that such joint stock limited
company shall be established by public share offer.
Article 76 Sponsors of a joint stock limited
company must subscribe for the shares as required and conduct
preparations for the establishment of the company in accordance
herewith.
Article 77 Establishment of a joint stock
limited company is subject to approval by the department authorized
by the State Council, or the People's Government at the provincial
level.
Article 78 The registered capital of a joint
stock limited company shall be the total amount of share capital
which is paid in and registered with the company registration
authority.
The minimum registered capital of a joint
stock limited company may not be less than Renminbi 10,000,000
Yuan. Where the minimum level of registered capital required
for a joint stock limited company exceeds the minimum level
prescribed above, such minimum level shall be separately prescribed
by the relevant national statutes and administrative regulations.
Article 79 The articles of association of
a joint stock limited company shall set forth the following:
(i) its name and domicile;
(ii) its business scope;
(iii) the method for its establishment;
(iv) the total number of shares of the company,
the value of each share, and the registered capital of the
company;
(v) the names of the sponsors and the number
of shares they have subscribed for;
(vi) the rights and obligations of shareholders;
(vii) the composition of the board of directors,
its authorities, term, and rules of conducting business;
(viii) its legal representative;
(ix) the composition of the board of supervisors,
its authorities, term, and rules of conducting business;
(x) the method for company profit distribution;
(xi) the causes for its dissolution and the
method for its liquidation;
(xii) the method for giving notice and making
public announcement;
(xiii) other matters which the shareholders'
general committee deems necessary to provide for.
Article 80 A sponsor may contribute his share
capital in the form of cash, or in the form of tangible goods,
industrial property, non-patented technology or land use rights
at certain value. If share capital is contributed in the form
of tangible goods, industrial property, non-patented technology
or land use rights, they must be appraised and the property
rights therein must be verified, whereupon the value thereof
shall be converted into shares. The contributed items may
not be overvalued or undervalued. The appraisal of land use
rights shall be carried out in accordance with the provisions
of the relevant national statutes and administrative regulations.
The value of the industrial property and
non-patented technology contributed as share capital by the
sponsors shall not exceed 20 percent of the total registered
capital.
Article 81 In the case of reorganizing a
state-owned enterprise into a joint stock limited company,
conversion of state assets into shares through under-valuation,
sale of state assets at low price, or distribution of state
assets to individuals without compensation are strictly prohibited.
Article 82 In the case of establishing a
joint stock limited company by sponsorship, upon the sponsors'
full subscription in writing for the shares to be issued as
prescribed in the articles of association, the sponsors shall
promptly pay the share proceeds in full; where tangible goods,
industrial property, non-patented technology or land use rights
are contributed in lieu of money, the property rights therein
shall be transferred in accordance with legally prescribed
procedures.
Upon full contribution of the share capital
which the sponsors have subscribed for, they shall elect members
to the board of directors and the board of supervisors, and
the board of directors shall apply for establishment registration
by submitting the document approving the establishment of
the company, the articles of association, and the capital
verification certificate, etc. to the company registration
authority.
Article 83 In the case of establishing a
joint stock limited company by public share offer, the shares
subscribed for by the sponsors shall be not less than 35 percent
of the total number of shares of the company, and the remaining
shares shall be openly offered to the public.
Article 84 In offering shares to the public,
the sponsors shall deliver an application for public share
offer to the securities regulatory authority under the State
Council, and submit thereto the following main documents:
(i) the document approving the establishment
of the company;
(ii) the articles of association;
(iii) the operating forecast report;
(iv) the names of the sponsors, the number
of shares they have subscribed for, the nature of their share
capital contribution, and the capital verification certificate;
(v) the prospectus;
(vi) the name and address of the depository
bank for the share proceeds;
(vii) the name of the underwriter and related
agreements.
Without approval by the securities regulatory
authority under the State Council, the sponsors my not offer
shares to the public.
Article 85 Upon approval by the securities
regulatory authority under the State Council, a joint stock
limited company may offer shares to the public overseas, and
the detailed procedure shall be specially prescribed by the
State Council.
Article 86 The securities regulatory authority
under the State Council shall approve an application for public
share offer which meets the requirements prescribed herein;
and shall not approve any application for public share offer
which fails to meet the requirements prescribed herein.
If it is discovered that an approval given
is not in compliance with the requirements prescribed herein,
it shall be revoked. Where no share has been placed, such
share offer shall be terminated; where shares have been placed,
the subscribers may demand that the sponsors return the share
proceeds paid, together with the interest thereon as if they
have been deposited in a bank for a like period.
Article 87 The prospectus shall be accompanied
with the articles of association prepared by the sponsors,
and shall set forth the following:
(i) the number of shares subscribed for by
the sponsors;
(ii) the par value and issuing price of each
share;
(iii) the total number of bearer share certificates
issued;
(iv) the rights and obligations of the subscribers;
(v) the commencing time and expiration time
of the share offer, and a statement that in the event the
shares have not be placed in full upon the expiration time,
the subscribers may revoke their share subscriptions.
Article 88 In a public share offer, the sponsors
shall make the prospectus available to the public and prepare
the share subscription form. The share subscription form shall
contain the items listed in the previous Article, and a subscriber
shall fill in the following: the number of shares subscribed
for, the amount of share proceeds, and his or her domicile,
and shall sign or impress his chop on the form. A subscriber
shall pay the share proceeds according to the number of shares
he has subscribed for.
Article 89 The sponsors' share offer to the
public shall be underwritten by a securities underwriter established
in accordance with the law, and an underwriting agreement
shall be executed.
Article 90 When conducting public share offer,
the sponsors shall execute an agreement with a bank for deposit
of share proceeds.
The depository bank shall collect and hold
the share proceeds in accordance with the agreement, and issue
receipts to subscribers who have paid their share proceeds,
and is obligated to provide to the relevant authority a certificate
for receipt of share proceeds.
Article 91 After the proceeds from issue
of the shares are paid in full, the share capital must be
verified by a legally-prescribed capital verification institution
and a certificate shall be issued thereby. Within 30 days,
the sponsors shall hold and preside over the establishment
meeting, which is composed of the subscribers.
If the issued shares are not fully placed
upon expiration of the time limit prescribed in the prospectus,
or the sponsors fail to hold the establishment meeting within
30 days of full payment of the proceeds from issue of the
shares, the subscribers may demand that the sponsors return
the share proceeds paid, together with the interest thereon
as if they have been deposited in a bank for a like period.
Article 92 The sponsors shall notify each
subscriber of the date of the establishment meeting or make
a public announcement for such meeting 15 days in advance.
The establishment meeting may not be held unless attended
by subscribers representing at least half of the shares.
The establishment meeting shall exercise
the following authorities:
(1) considering the report on pre-establishment
activities prepared by the sponsors;
(2) adopting the articles of association;
(3) electing members of the board of directors;
(4) electing members of the board of supervisors;
(5) verifying expenses incurred for the establishment
of the company;
(6) verifying the value of the assets contributed
by the sponsors in lieu of share proceeds;
(7) where an event of force majeure or any
material change in operating condition affecting the company's
establishment has occurred, a resolution not to establish
the company may be adopted.
A resolution adopted at the establishment
meeting on any of the matters mentioned in the previous Paragraph
requires affirmative votes by subscribers representing at
least half of the votes attending the meeting.
Article 93 Upon payment of the share proceeds
or delivery of the items as contribution of share capital
in lieu of share proceeds, the sponsors and subscribers may
not withdraw their share capital, except where the shares
issued are not fully placed in time, the sponsors fail to
hold the establishment meeting in time, or the establishment
meeting adopts a resolution not to establish the company.
Article 94 Within 30 days of the completion
of the establishment meeting, the board of directors shall
apply for establishment registration by submitting to the
company registration authority the following:
(i) the approval document issued by the relevant
authority;
(ii) the minutes of the establishment meeting;
(iii) the articles of association;
(iv) the financial auditing report on pre-establishment
activities;
(v) the capital verification certificate;
(vi) the names and domiciles of members of
the board of directors and the board of supervisors;
(vii) the name and domicile of the legal
representative.
Article 95 The company registration authority
shall decide whether to grant registration to the joint stock
limited company within 30 days of receipt of the application
for establishment registration. Where the application meets
the requirements prescribed herein, registration shall be
granted and the company shall be issued a business license;
where the application fails to meet the requirements prescribed
herein, registration shall not be granted.
The date on which the business license is
issued shall be the date of the company's establishment. Upon
establishment, the company shall make a public announcement.
If established through public share offer,
upon establishment and registration, the joint stock limited
company shall submit to the securities regulatory authority
under the State Council a report on the share offer activities
for filing.
Article 96 Where a branch company is to be
established contemporaneous with the establishment of a joint
stock limited company, an application for registration of
such branch company shall be submitted to the company registration
authority, and it shall be issued a business license.
Where a branch company is to be established
after the joint stock limited company's establishment, the
company's legal representative shall apply to the company
registration authority for registration of such branch company,
and it shall be issued a business license.
Article 97 The sponsors of a joint stock
limited company shall bear liabilities as follows:
(i) in the event of failure to establish
the company, being jointly and severally liable for the debts
and expenses incurred as a result of the pre-establishment
activities;
(ii) in the event of failure to establish
the company, being jointly and severally liable for the return
of share proceeds paid by the subscribers, together with the
interest thereon as if they have been deposited in a bank
for a like period.
(iii) if the company's interest is harmed
in the course of its establishment due to the negligence of
the sponsors, being liable to the company for damages.
Article 98 Where a limited liability company
is to be converted into a joint stock limited company, the
requirements for establishing a joint stock limited company
prescribed herein shall be met, and the conversion shall be
carried out in accordance with the procedure for the establishment
of a joint stock limited company prescribed herein.
Article 99 Where conversion of a limited
liability company to a joint stock limited company is approved
in accordance with the law, the total value of the converted
shares shall be equivalent to the company's net assets value.
Where conversion of a limited liability company to a joint
stock limited company is approved in accordance with the law,
and its shares are offered to the public for the purpose of
increasing capital, such share offer shall be carried out
in accordance with the provisions herein governing public
share offer.
Article 100 Where conversion of a limited
liability company to a joint stock limited company is approved
in accordance with the law, the creditor's rights and liabilities
of the original company shall be assumed by the joint stock
limited company resulting from the conversion.
Article 101 A joint stock limited company
shall maintain its articles of association, the record of
shareholders, the minutes of meetings of shareholders' general
committee, and its financial and accounting reports on the
company's premises.
Section Two Shareholders' General Committee
Article 102 The shareholders' General Committee
of a joint stock limited company is composed of all shareholders.
The shareholders' general committee is the company's organ
of authority, and shall exercise its authorities in accordance
herewith.
Article 103 The shareholder's general committee
shall exercise the following authorities:
(i) determining the company's operational
guidelines and investment plans;
(ii) electing and replacing members of the
board of directors, and deciding upon matters relating to
their remuneration;
(iii) electing and replacing members of the
board of supervisors who are the shareholders' representatives,
and deciding upon matters relating to the remuneration of
the supervisors;
(iv) considering and approving reports by
the board of directors;
(v) considering and approving reports by
the board of supervisors;
(vi) considering and approving annual financial
budget plans and final accounting plans of the company;
(vii) considering and approving profit distribution
plans and plans to cover company losses;
(viii) adopting resolutions regarding increase
or reduction of registered capital by the company;
(ix) adopting resolutions on the issue of
bonds by the company;
(x) adopting resolutions on merger, division,
change of corporate form, dissolution and liquidation of the
company;
(xi) amending the articles of association.
Article 104 The shareholders' general committee
shall hold an annual meeting each year. An interim meeting
of the shareholders' general committee shall be held within
2 months upon the occurrence of any of the following circumstances:
(i) The number of directors falls below the
number prescribed herein or below two-thirds of the number
prescribed in the articles of association;
(ii) The company's losses which are not covered
have reached one-third of the total amount of the share capital;
(iii) Shareholders holding at least 10 percent
of the company's stocks make a request;
(iv) The board of directors deems necessary;
(v) The board of supervisors proposes for
such a meeting.
Article 105 A meeting of shareholders general
committee shall be called by the board of directors in accordance
with herewith, and shall be presided over by the chairman
of the board. Where the chairman is unable to perform his
duties due to any special reason, the meeting shall be presided
over by the vice-chairman appointed by the chairman or another
director appointed by the chairman. In order to hold a meeting
of shareholders' general committee, notice concerning the
matters to be considered at the meeting shall be given to
each shareholder 30 days in advance. An interim meeting of
shareholders' general committee may not adopt any resolution
on matters not stated in the notice.
Where the company has issued bearer share
certificates, a public notice concerning matters set forth
in the previous Paragraph shall be made 45 days prior to the
meeting.
When attending a meeting of shareholders'
general committee, holders of bearer share certificates shall
deposit such certificates at the company from the 5th day
prior to the meeting until the closing of the meeting.
Article 106 When a shareholder attends the
meeting of shareholders' general committee, each share he
holds is entitled to one vote.
A resolution adopted by the shareholders'
general committee requires affirmative votes by a majority
of the votes held by shareholders attending the meeting. The
shareholders' general committee's adoption of a resolution
for merger, division or dissolution of the company requires
affirmative votes by at least two-thirds of the votes held
by shareholders attending the meeting.
Article 107 An amendment to the articles
of association requires affirmative votes by at least two-thirds
of the votes held by shareholders attending the meeting of
shareholders' general committee.
Article 108 A shareholder may attend a meeting
of shareholders' general committee by proxy, the proxy holder
shall present the proxy statement issued by the shareholder
to the company, and shall exercise his voting rights to the
extent authorized by the proxy.
Article 109 The shareholders' general committee
shall prepare minutes regarding the decisions on matters considered
at the meeting, which shall be signed by the directors attending
the meeting. The minutes shall be maintained together with
the record containing signatures of the shareholders attending
the meeting and the proxy statements.
Article 110 A shareholder is entitled to
inspect the articles of association, the minutes of meetings
of shareholders' general committee and the financial and accounting
reports of the company, and is entitled to make a proposal
or inquiry concerning the company's operation.
Article 111 Where a resolution adopted by
the shareholders' general committee or the board of directors
violates the relevant national statutes or administrative
regulations, or infringes on the rights and interests of the
shareholders, a shareholder is entitled to bring a suit to
the People's Court to enjoin such illegal act or infringing
act.
Section Three Board Of Directors And General
Manager
Article 112 A joint stock limited company
shall have a board of directors, which shall be composed of
not fewer than 5 but not more than 19 members.
The board of directors is accountable to
the shareholders' general committee, and shall exercise the
following authorities:
(i) being responsible for calling meetings
of shareholders' general committee, and presenting reports
thereto;
(ii) implementing resolutions adopted by
the shareholders' general committee;
(iii) determining the company's operating
plans and investment programs;
(iv) preparing annual financial budget plans
and final accounting plans of the company;
(v) preparing the company's profit distribution
plans and plans to cover company losses;
(vi) preparing plans for increasing or reducing
registered capital by the company, and plans to issue company
bonds;
(vii) drafting plans for merger, division
or dissolution of the company;
(viii) determining the structure of the company's
internal management;
(ix) appointing or removing the general manager
of the company; appointing or removing, upon the general manager's
recommendation, deputy general managers of the company and
the officer in charge of finance; and determining the remuneration
for those officers;
(x) formulating the company's basic management
scheme.
Article 113 The board of directors shall
have a chairman, and may have one or two vice-chairmen. The
chairman and vice-chairman shall be elected by the board of
directors through affirmative votes by a majority of the directors.
The chairman is the legal representative
of the company.
Article 114 The chairman shall exercise the
following authorities:
(i) presiding over meetings of shareholders'
general committee, and calling and presiding over meetings
of the board of directors;
(ii) supervising the implementation of resolutions
adopted by the board of directors;
(iii) signing the share certificates and
bond certificates of the company.
The vice-chairman shall assist the chairman
in his work. Where the chairman is unable to exercise his
authorities, the vice-chairman appointed by the chairman shall
exercise such authorities in his capacity.
Article 115 The term of directors shall be
prescribed by the articles of association, provided that each
term shall not exceed 3 years. A director may continue to
serve his post if he is re-elected upon the expiration of
his term.
Prior to the expiration of a director's term,
the shareholders' general committee may not remove him without
cause.
Article 116 The board of directors shall
hold meetings at least twice a year, and notice shall be given
to all directors 10 days in advance.
Where an interim meeting of the board of
directors is to be held, the method and time limit for notification
for calling the interim meeting may be prescribed separately.
Article 117 A meeting of the board of directors
may not be held unless attended by at least half of the directors.
A resolution adopted by the board of directors requires affirmative
votes by a majority of all the directors.
Article 118 A meeting of the board of directors
shall be attended by each director in person. Where a director
is unable to attend the meeting for cause, he may issue a
written proxy entrusting another director to attend in his
behalf, and the proxy shall set forth the scope of authorization.
The board of directors shall prepare minutes
regarding the decisions on matters considered at the meeting,
which shall be signed by the directors attending the meeting
and the person preparing the minutes.
The directors shall be responsible for resolutions
adopted by the board of directors. Where a resolution of the
board violates any national statutes, administrative regulations
or the articles of association, and causes the company to
incur serious loss, those directors participating in the adoption
of the resolution are liable to the company for damages. Provided,
however, if a director is proven to have dissented at the
vote adopting such resolution and such dissension was noted
in the minutes, then the director may be exempt from liability.
Article 119 A joint stock limited company
shall have a general manager, to be appointed or removed by
the board. The general manager is accountable to the board
and shall exercise the following authorities:
(i) being in charge of managing the company's
production and operation, and organizing the implementation
of resolutions adopted by the board;
(ii) organizing the implementation of annual
operating plans and investment programs of the company;
(iii) drafting the plan for the structure
of the company's internal management;
(iv) drafting the basic management scheme
of the company;
(v) formulating detailed rules of the company;
(vi) recommending for appointment or removal
of the deputy general managers and the officer in charge of
finance;
(vii) appointing and removing officers of
the company other than those to be appointed or removed by
the board;
(viii) other authorities prescribed by the
articles of association and delegated by the board.
The general manager shall be present at board
meetings.
Article 120 In light of the needs of the
company, the board of directors may authorize the chairman
to exercise part of the authorities of the board when it is
not in session.
The board of directors of the company may
decide that a board member is to serve concurrently as the
general manager.
Article 121 When a company considers and
decides upon matters which affect the personal interests of
its workers, such as workers' wages, benefits, production
safety and labor protection, or labor insurance, it shall
first hear the opinions of the labor union and the workers
of the company, and invite representatives of the labor union
or the workers to be present at related meetings.
Article 122 When a company considers and
decides upon major matters relating to its production and
operation, or formulates important rules and standards, it
shall hear the opinions and suggestions of the labor union
and the workers.
Article 123 The directors and the general
manager shall abide by the articles of association, faithfully
perform their duties, and safeguard the interests of the company,
and may not abuse their positions and authorities at the company
for private gain.
The provisions from Article 57 to Article
63 hereof setting forth the circumstances in which a person
may not serve as a director or the general manager, and the
obligations and responsibilities of the directors and the
general manager shall apply to the directors and general manager
of a joint stock limited company.
Section Four Board Of Supervisors
Article 124 A joint stock limited company
shall have a board of supervisors, which shall be composed
of not fewer than 3 members. The board of supervisors shall
elect one member to serve as the person responsible for calling
meetings.
The board of supervisors shall be composed
of the shareholders' representative(s) and representative(s)
of the workers of the company in an appropriate ratio to be
prescribed by the articles of association. The workers' representative(s)
on the board of supervisors shall be democratically elected
by the workers of the company.
A director, the general manager and the officer
in charge of finance may not serve concurrently as a supervisor.
Article 125 Each term of a supervisor shall
be three years, and a supervisor may continue to serve his
post at the expiration of his term if he is re-elected.
Article 126 The board of supervisors shall
exercise the following authorities:
(i) reviewing the financial affairs of the
company;
(ii) monitoring the acts of the directors
or the general manager to guard against violation of national
statutes, administrative regulations or the articles of association
in the course their performance of duties;
(iii) requiring the directors or the general
manager to make rectification when any act thereof harms company
interests;
(iv) proposing for interim meetings of shareholders'
general committee.
(v) other authorities prescribed by the articles
of association.
The supervisors shall be present at board
meetings.
Article 127 The method for conducting business
and voting procedure for the board of supervisors shall be
prescribed by the articles of association.
Article 128 A supervisor shall perform his
supervisory duties faithfully in accordance with the provisions
of national statutes, administrative regulations, and the
articles of association.
The provisions from Article 57 to Article
59 hereof and from Article 62 to Article 63 hereof setting
forth the circumstances in which a person may not serve as
a supervisor, and the obligations and responsibilities of
supervisors shall apply to the supervisors of a joint stock
limited company.
Chapter Four: Issue And Transfer Of Shares
Of A Joint Stock Limited Company
Section One Issue Of Shares
Article 129 The capital of a joint stock
limited company shall be divided into shares, and all the
shares shall be of equal value.
Shares of the company are represented by
share certificates. A share certificate is a certificate issued
by the company certifying the share held by a shareholder.
Article 130 When shares are issued, the principles
of openness, fairness, and equity shall be followed, and each
share in the same class must have the same rights and receive
the same interests.
For shares issued at the same time, each
share shall be issued on the same conditions and at the same
price. All entities or individuals subscribing for shares
shall pay the same price for each share.
Article 131 The issuing price per share may
be at par value, or above par value, but may not be below
par value.
The pricing of shares issued at above par
value is subject to approval by the securities regulatory
authority under the State Council.
The premium resulting from issuance of shares
at a price above par value shall be allocated to the company's
capital reserve fund.
The detailed regulatory measures concerning
issuance of shares at a premium shall be prescribed by the
State Council separately.
Article 132 A share certificate shall be
in paper form or in other forms prescribed by the securities
regulatory authority under the State Council.
A share certificate shall set forth the following
major items:
(i) the name of the company;
(ii) the company's date of registration and
establishment;
(iii) the class and par value of the shares
and the number of shares represented;
(iv) the serial number of the share certificate.
The share certificate shall be signed by
the chairman of the board, and the company's chop shall be
impressed thereon.
Share certificates held by the sponsors shall
be marked with the words Sponsors' Share.
Article 133 Share certificates issued by
the company to its sponsors, state authorized investment institutions,
or legal persons shall be registered share certificates bearing
the names of such sponsors, institutions, or legal persons,
and may not be registered under any other names or in the
names of their legal representatives.
Share certificates issued to the public may
be in the form of either registered share certificates or
bearer share certificates.
Article 134 A company issuing registered
share certificates shall maintain a record of shareholders,
which shall set forth the following:
(i) the name and domicile of each shareholder;
(ii) the number of shares held by each shareholder;
(iii) the serial numbers of share certificates
held by each shareholder;
(iv) the date on which each shareholder acquired
his shares.
A company issuing bearer share certificates
shall record the number of such share certificates, their
serial numbers and their issuing dates.
Article 135 The State Council may make separate
stipulations relating to a company's issuance of shares of
classes other than those prescribed herein.
Article 136 Upon registration and establishment,
a joint stock limited company shall promptly deliver the share
certificates to its shareholders officially. Prior to registration
and establishment, the company may not deliver any share certificate
to its shareholders.
Article 137 Issuance of new shares by a company
is subject to the following conditions:
(i) Previously issued shares have been fully
subscribed for, and at least one year has passed since the
previous share issue;
(ii) The company has been profitable consecutively
for the most recent three years, and is able to pay dividends
to its shareholders;
(iii) The financial and accounting documents
of the company contain no misrepresentation for the most recent
three years;
(iv) the company's projected profit rate
reaches the interest rate of bank deposits for a like period.
Where the company distributes its current
year profit in the form of new shares, issuance of such shares
are exempt from the restriction prescribed in Item (ii) of
the previous Paragraph.
Article 138 Where a company is to issue new
shares, the shareholder's general committee shall adopt a
resolution concerning the following:
(i) the classes and number of the new shares;
(ii) the issuing price of the new shares;
(iii) the commencing and ending dates of
issuance of the new shares;
(iv) the classes and number of new shares
issued to the existing shareholders.
Article 139 Upon adoption of a resolution
by the shareholders' general committee to issue new shares,
the board of directors shall apply to the department authorized
by the State Council or the People's Government at the provincial
level for approval. Where the new shares are offered to the
public, approval by the securities regulatory authority is
required.
Article 140 When a company is approved to
issue new shares to the public, it shall make public the prospectus
for the issue of new shares, its financial and accounting
statements and subsidiary statements, and shall prepare the
subscription form.
If the company offers new shares to the public,
such share offer shall be underwritten by a lawfully established
securities underwriter, and the company shall execute an underwriting
agreement therewith.
Article 141 In issuing new shares, a company
may determine the pricing scheme in light of the sustainable
profitability of the company and the appreciation of the company's
assets.
Article 142 Upon full receipt of the share
proceeds from the company's newly issued shares, the company
shall carry out amendment registration with the company registration
authority and shall make a public announcement.
Section Two Assignment Of Shares
Article 143 Shares held by a shareholder
may be assigned in accordance with the law.
Article 144 Assignment of shares by a shareholder
must be carried out at a lawfully established securities exchange.
Article 145 Assignment of registered share
certificates is effected by the shareholder's endorsement
thereof or by other methods prescribed by the relevant national
statutes or administrative regulations.
In the case of assignment of registered share
certificates, the company shall record the assignee's name
and domicile on the record of shareholders.
Recording change of shareholders on the record
of shareholders referred to in the previous Paragraph may
not be carried out for a period of 30 days prior to the holding
of a meeting of shareholders' general committee, or 5 days
prior to the record date for the purpose of dividend distribution
determined by the company.
Article 146 Assignment of bearer share certificates
takes effect upon delivery thereof by the shareholder to the
assignee at a lawfully established securities exchange.
Article 147 Shares of a company held by its
sponsors may not be assigned for a period of 3 years commencing
from the date of the company's establishment.
The directors, supervisors and general manager
of the company shall report to the company the number of the
company's shares held thereby, and may not assign such shares
while they are in office.
Article 148 A state authorized investment
institution may assign shares held by it in accordance with
the law, and may also purchase shares held by other shareholders.
The authority of approval for, and regulatory measures concerning,
such assignment or purchase of shares shall be separately
prescribed by the relevant national statutes or administrative
regulations.
Article 149 A company may not purchase its
own shares, except in the case of share cancellation for the
purpose of reducing the company's capital, or in the case
of merger with another company holding shares of the company.
Upon repurchase of its shares pursuant to
the previous Paragraph, the company shall cancel such shares
within 10 days, and carry out amendment registration in accordance
with the relevant national statutes or administrative regulations,
and shall make a public announcement.
The company may not accept its own shares
as the collateral under a security arrangement.
Article 150 If a registered share certificate
is stolen, lost or destroyed, the shareholder may petition
a People's Court for the invalidation thereof through the
public notice procedure prescribed in the Civil Procedural
Law of the People's Republic of China.
After the People's Court has invalidated
such share certificate through the public notice procedure,
the shareholder may apply to the company for re-issuance of
a certificate for the share.
Section Three Listed Companies
Article 151 A Listed company referred to
herein means a joint stock limited company whose issued shares
have been approved by the State Council or the securities
regulatory authority authorized by the State Council to be
listed and traded on a securities exchange.
Article 152 A joint stock limited company
applying for listing of its shares shall meet the following
requirements:
(i) The company's shares have been issued
to the public with approval by the securities regulatory authority
under the State Council;
(ii) The amount of total share capital of
the company is at least Renminbi 50,000,000 Yuan;
(iii) The company has been in operation for
at least three years, and has been profitable consecutively
for the most recent three years; where the company is reorganized
from a former state-owned enterprise in accordance with the
law, or newly established after the implementation hereof,
with its principal sponsor being a large-scaled or medium-scaled
state-owned enterprise, the required period may be counted
continuously;
(iv) There are at least 1,000 shareholders
each of whom holds shares with face value of not less than
Renminbi 1,000 Yuan, and the shares issued to the public amount
to at least 25 percent of the total number of shares of the
company; and where the amount of total share capital of the
company exceeds Renminbi 400,000,000 Yuan, the shares issued
to the public amount to at least 15 percent of the total number
of shares of the company;
(v) The company has not engaged in any material
illegal act for the most recent three consecutive years, and
the financial and accounting reports thereof contain no misrepresentation;
(vi) other requirements prescribed by the
State Council.
Article 153 The application by a joint stock
limited company for listing of its shares shall be submitted
to the State Council or the securities regulatory authority
authorized thereby for approval, and the relevant documents
shall be submitted in accordance with the applicable national
statutes and administrations regulations.
The State Council or the securities regulatory
authority authorized thereby shall approve an application
for listing of shares which meets the requirements prescribed
herein; and shall not approve any application which fails
to meet the requirements prescribed herein.
Upon approval of its application for listing
of shares, the company approved for listing shall make public
its share listing report, and shall maintain its application
documents at a designated place for inspection by the public.
Article 154 The shares of a company approved
for listing shall be listed in accordance with the provisions
of applicable national statutes and administrative regulations.
Article 155 Upon approval by the securities
regulatory authority under the State Council, the shares of
a company may be listed abroad, and the detailed measures
shall be specially prescribed by the State Council.
Article 156 A listed company shall make public
its financial conditions and operating conditions at regular
intervals in accordance with the relevant national statutes
and administrative regulations, and shall make public its
financial and accounting reports semiannually in each fiscal
year.
Article 157 The securities regulatory authority
under the State Council shall suspend the trading of a listed
company in any of the following circumstances:
(i) Matters such as the total share capital
or the composition of equity ownership of the company have
changed so that the company no longer meets the requirements
for listing;
(ii) The company fails to make public its
financial condition as required, or has made misrepresentations
in its financial and accounting reports;
(iii) The company has engaged in material
illegal act;
(iv) The company has been suffering losses
for the most recent three consecutive years.
Article 158 Where a listed company is in
a circumstance set forth in either Item (ii) or (iii) of the
previous Article, and after investigation, it is confirmed
that the circumstance is serious, or the listed company is
in a circumstance set forth in either Item (i) or (iv) and
has not been able to eliminate such circumstance within a
prescribed time limit, and hence no longer meets the requirements
for listing, the securities regulatory authority under the
State Council shall issue a decision to de-list its shares.
Where the company is to be dissolved pursuant
to a resolution, is ordered to cease its operation by the
relevant authority in charge in accordance with the law, or
is declared bankrupt, the securities regulatory authority
under the State Council shall issue a decision to de-list
its shares.
Chapter Five: Company Bonds
Article 159 For the purpose of financing
production and operation, a joint stock limited company, a
wholly state-owned company or a limited liability company
established through investment by two or more state-owned
enterprises or two or more state authorized investment entities
may issue company bonds in accordance herewith.
Article 160 Company bonds referred to herein
means a form of security which is issued by a company in accordance
with legally prescribed procedure, and which provides that
the principal thereof and interest thereon shall be paid at
specified times.
Article 161 In order to issue company bonds,
the following requirements must be met:
(i) The net assets of the company shall be
not less than Renminbi 30,000,000 Yuan in the case of a joint
stock limited company, and not less than Renminbi 60,000,000
Yuan in the case of a limited liability company;
(ii) The cumulative value of company bonds
shall not exceed 40 percent of the company's net assets;
(iii) The average distributable profit for
the most recent three years is sufficient to pay one year's
interest on the company bonds;
(iv) The proceeds received shall be invested
in a manner consistent with state industrial policy;
(v) The interest rate on the bonds shall
not exceed the level of interest rate set by the State Council;
(vi) Other requirements prescribed by the
State Council.
The proceeds from issuance of company bonds
shall be used for the purpose approved by the approval authority,
and may not be used to cover losses and non-operating expenditures.
Article 162 No additional company bonds may
be issued in any of the following circumstances:
(i) Company bonds previously issued have
not been fully subscribed for;
(ii) The fact that the company is in default
of any of the previously issued company bonds or company debt
or is late in payment of principal and interest has occurred,
and is currently existing.
Article 163 Where a joint stock limited company
or limited liability company is to issue company bonds, its
board of directors shall prepare a plan and the shareholders'
committee shall adopt a resolution on such matter.
Where a wholly state-owned company is to
issue company bonds, the decision shall be made by the state
authorized investment entity or state authorized department.
After a resolution has been adopted or a
decision has been made pursuant to the previous two Paragraphs,
the company shall apply to the securities regulatory authority
under the State Council for approval.
Article 164 The overall volume of company
bonds issue shall be determined by the State Council. In examining
and approving application for company bonds issue, the securities
regulatory authority under the State Council may not extend
its approval beyond the volume set by the State Council.
The securities regulatory authority under
the State Council shall approve an application for company
bonds issue which complies with the provisions hereof, and
shall not approve an application which fails to comply with
the provisions hereof.
Where it has been discovered that an approval
given for company bonds issue is not in compliance with the
provisions hereof, such approval shall be revoked. If the
company bonds have not been issued, the issue shall be terminated;
if the company bonds have been issued, the issuing company
shall return the proceeds paid by the subscribers together
with the interest thereon as if they have been deposited in
a bank for a like period.
Article 165 For an application to the securities
regulatory authority under the State Council for company bonds
issue, the following documents shall be submitted:
(i) the company's registration certificate;
(ii) the articles of association of the company;
(iii) the plan for company bonds offer;
(iv) the assets appraisal report and capital
verification report.
Article 166 Upon approval of an application
for company bonds issue, the plan for company bonds offer
shall be made public.
The plan for company bonds offer shall set
forth the following major items:
(i) the name of the company;
(ii) the total value of the bonds and the
par value of each bond;
(iii) the rate of interest on the bonds;
(iv) the time limit and method for payment
of the principal of and interest on the bonds;
(v) the commencing and ending date of the
bonds issue;
(vi) the net assets value of the company;
(vii) the total value of issued and outstanding
company bonds;
(viii) the underwriter of the company bonds.
Article 167 In the case of company bonds
issue, a company must state on each bond certificate the name
of the company, the par value of the bond, interest rate,
and repayment period, and the bond certificate shall be signed
by the chairman of the board, and the company's chop shall
be impressed thereon.
Article 168 company bonds may be classified
as either registered bonds or bearer bonds.
Article 169 If a company has issued bonds,
it shall maintain a record of bondholders.
If registered bonds are issued, the following
shall be recorded on the company's record of bondholders:
(i) the name and domicile of each bondholder;
(ii) the dates on which the bondholders acquired
the bonds and the serial numbers of the bond certificates;
(iii) the total value of the bonds, the par
value of each bond, the interest thereon, the term thereof
and method for payment of principal and interest;
(iv) the date of issue of the bonds.
If bearer company bonds are issued, the company's
record of bondholders shall record the total value of such
bonds, the interest rate thereon, the term thereof and the
method for repayment, and the date of issue and the serial
numbers of the bond certificates.
Article 170 Company bonds may be assigned.
Assignment of company bonds shall be carried out at a lawfully
established securities exchange.
The assignment price of company bonds shall
be agreed upon between the assignor and the assignee.
Article 171 Assignment of registered bonds
is effected by the bondholder's endorsement of the bonds or
by other methods prescribed by the relevant national statutes
or administrative regulations.
In the case of assignment of registered bonds,
the company shall record the assignee's name and domicile
on the record of bondholders.
Assignment of bearer bonds takes effect upon
delivery thereof by the bondholder to the assignee at a lawfully
established securities exchange.
Article 172 Upon adoption of a resolution
by the shareholders' general committee, a listed company may
issue bonds which are convertible to its shares, and it shall
prescribe the specific method for such conversion in the plan
for company bonds offer.
In order to issue convertible company bonds,
an application shall be submitted to the securities regulatory
authority under the State Council for approval. In order to
issue convertible company bonds, in addition to meeting the
requirements for issue of bonds, the company shall also meet
the requirements for issue of shares.
In the case of issue of convertible company
bonds, the face of the bond certificate shall be marked with
the word "Convertible," and the number of convertible
company bonds shall be specified in the company's record of
bondholders.
Article 173 Where convertible company bonds
are issued, the company shall exchange its shares for the
bonds held by the bondholders using the prescribed method
of conversion, provided that the bondholders have the option
on whether or not to convert their bonds.
Chapter Six: Financial And Accounting Affairs
Of Company
Article 174 A company shall establish its
financial and accounting system in accordance with the relevant
national statutes, administrative regulations and the stipulations
of the finance authority under the State Council.
Article 175 A company shall prepare its financial
and accounting reports at the end of each fiscal year, which
shall be reviewed and verified in accordance with the law.
The financial and accounting reports shall
include the following financial and accounting statements
and subsidiary statements:
(i) balance sheet;
(ii) income statement;
(iii) statement of cash flow;
(iv) explanation of financial conditions;
(v) statement of profit distribution;
Article 176 A limited liability company shall
deliver its financial and accounting reports to each shareholder
within the time limit prescribed by the articles of association.
The financial and accounting reports of a
joint stock limited company shall be available at the company's
premises for shareholders' inspection as from the 20th day
prior to the annual meeting of shareholders' general committee.
A joint stock limited company established
through public share offer shall make public its financial
and accounting reports.
Article 177 In distribution of its current
year after-tax profit, a company shall allocate 10 percent
to its statutory reserve fund, 5 to 10 percent to its statutory
welfare fund. Allocation to the company's statutory reserve
fund may be waived once the cumulative amount of funds therein
exceeds 50 percent of the company's registered capital.
Where the statutory reserve fund is not sufficient
to cover the company's loss from the previous year, the current
year profit shall be used to cover such loss before allocation
is made to the statutory reserve fund and the statutory welfare
fund pursuant to the previous Paragraph.
After allocation to the statutory reserve
fund has been made from the after-tax profit of the company,
and upon adoption of a resolution by the shareholders' committee,
allocation may be made to the discretionary reserve fund.
After the company has covered its losses,
and made allocation to the reserve funds and statutory welfare
fund, the remainder of the profit shall be distributed to
the shareholders in proportion to their capital contribution
in the case of a limited liability company, and in proportion
to their share holdings in the case of a joint stock limited
company.
If the shareholders' committee or the board
of directors, in violation of the previous Paragraph, distributes
profit to the shareholders before covering company losses
and making allocation to company statutory reserve fund and
statutory welfare fund, the profit so distributed must be
returned to the company.
Article 178 The premium received by a joint
stock limited company through issuance of shares at prices
above par value in accordance herewith, as well as other incomes
to be allocated to the capital reserve fund as stipulated
by the finance authority under the State Council, shall be
allocated to the capital reserve fund.
Article 179 The reserve funds of the company
shall be used to cover company losses, expand its production
and operation, or be converted to the company's increased
capital.
Where a joint stock limited company, upon
adoption of a resolution by the shareholders' general committee,
is to convert the reserve funds into company capital, new
shares shall be distributed to the shareholders in proportion
to their original share holdings, or the par value of each
share shall be increased. Provided, however, upon conversion
of statutory reserve fund into capital, the amount remaining
in the statutory reserve fund may not fall below 25 percent
of the registered capital.
Article 180 The statutory welfare fund allocated
by the company shall be used for the collective welfare of
the workers thereof.
Article 181 The company may not establish
any separate accounting book besides the accounting books
prescribed by law. The company's assets may not be deposited
into any account established under an individual's name.
Chapter Seven: Merger And Division Of Company
Article 182 If a company is to undergo merger
or division, its shareholders' committee shall adopt a resolution.
Article 183 The merger or division of a joint
stock limited company is subject to approval by the department
authorized by the State Council or the People's Government
at the provincial level.
Article 184 Companies may be merged in two
forms, i.e. merger by absorption and merger by consolidation.
One company absorbing another company is
merger by absorption, and the company being absorbed shall
be dissolved. Merger of two or more Companies through establishment
of a new company is a consolidation, and the companies being
consolidated shall be dissolved.
In a merger of companies, the companies shall
execute a merger agreement, and prepare their respective balance
sheets and schedules of assets. The companies shall notify
their creditors within 10 days of adoption of merger resolutions,
and shall publish a notice at least 3 times in a newspaper
within 30 days. Creditors are entitled to claim full payment
of the debts of the companies or require the provision of
appropriate assurances within 30 days of receipt of the notice,
or within 90 days of publication of the first notice if such
creditors did not receive the notice. The companies may not
be merged unless debts are fully paid or appropriate assurances
are provided.
Once the companies are merged, the creditor's
rights and debtor's liabilities of the merged companies shall
be assumed by the surviving company or the newly formed company
after merger.
Article 185 Where a company is to undergo
division, its assets shall be divided accordingly.
In dividing the company, a balance sheet
and a schedule of assets shall be prepared. The company shall
notify its creditors within 10 days of adoption of a division
resolution, and shall publish a notice at least 3 times in
a newspaper within 30 days. Creditors are entitled to claim
full payment of the company's debts or require the provision
of appropriate assurances within 30 days of receipt of the
notice, or within 90 days of publication of the first notice
if such creditors did not receive the notice. The company
may not be divided unless debts are fully paid or appropriate
assurances are provided.
The liabilities of the company prior to its
division shall be assumed by the companies resulting from
the division according to the agreement reached among them.
Article 186 Where a company needs to reduce
its registered capital, a balance sheet and a schedule of
assets must be prepared.
The company shall notify its creditors within
10 days of adoption of a resolution to reduce its registered
capital, and shall publish a notice at least 3 times in a
newspaper within 30 days. Creditors are entitled to claim
full payment of the company's debts or require the provision
of appropriate assurances within 30 days of receipt of the
notice, or within 90 days of publication of the first notice
if such creditors did not receive the notice.
After capital reduction, the company's registered
capital may not fall below the statutory minimum capital level.
Article 187 When a limited liability company
is to increase its registered capital, after subscription
for the newly increased capital, the shareholders shall make
capital contribution in accordance with the provisions hereof
concerning capital contribution for the establishment of a
limited liability company.
When a joint stock limited company is to
issue new shares for the purpose of increasing its registered
capital, the shareholders' subscription for the new shares
shall be carried out in accordance with the provisions hereof
concerning payment of share proceeds for the establishment
of a joint stock limited company.
Article 188 In the case of merger or division
of a company, where any registered item requires change, amendment
registration shall be carried out with the company registration
authority in accordance with the law; where the company is
dissolved, company de-registration shall be carried out in
accordance with the law; where a new company is established,
establishment registration shall be carried out in accordance
with the law.
Where a company is to increase or reduce
its registered capital, a amendment registration shall be
carried out with the company registration authority in accordance
with the law.
Chapter Eight: Bankruptcy, Dissolution And
Liquidation Of Company
Article 189 Where a company is adjudged bankrupt
in accordance with the law due to its failure to repay debts
when due, the People's Court shall organize the shareholders,
the relevant authorities and professionals to establish a
liquidating committee to carry out the company's bankruptcy
liquidation in accordance with the provisions of the applicable
laws.
Article 190 A company may be dissolved in
any of the following circumstances:
(i) the term of operation prescribed by the
company's articles of association has expired, or any other
cause for dissolution prescribed by the company's articles
of association has occurred;
(ii) the shareholders' committee has adopted
a resolution for dissolution;
(iii) dissolution is required due to merger
or division of the company.
Article 191 Where a company is to be dissolved
pursuant to Item (i) or (ii) of the previous Article, a liquidating
committee shall be formed within 15 days; the liquidating
committee of a limited liability company shall be composed
of its shareholders, and members of the liquidating committee
of a joint stock limited company shall be determined by the
shareholders' general committee; where the company fails to
form a liquidating committee to carry out liquidation within
the prescribed time limit, its creditors may petition the
People's Court to appoint the relevant persons to form a liquidating
committee to carry out liquidation. The People's Court shall
accept such petition, and promptly appoint members of the
liquidating committee to carry out liquidation.
Article 192 Where the company is ordered
to terminate due to its violation of law or administrative
regulations, the company shall be dissolved, and the relevant
department in charge shall organize the shareholders, the
relevant authority and related professionals to form a liquidating
committee to carry out liquidation.
Article 193 The liquidating committee shall
exercise the following authorities in the course of liquidation:
(i) identifying the company's assets, and
preparing a balance sheet and a schedule of assets respectively;
(ii) notifying creditors through notice or
public announcement;
(iii) handling the company's ongoing businesses
which are related to liquidation;
(iv) making full payment of taxes owed;
(v) identifying the company's creditor's
rights and debtor's liabilities;
(vi) disposing of the remaining assets after
full payment of company debts;
(vii) participating in civil actions on behalf
of the company.
Article 194 The liquidating committee shall
notify creditors within 10 days of its establishment, and
shall make a public announcement in a newspaper at least 3
times within 60 days. Creditors shall file their creditor's
rights with the liquidating committee within 30 days of receipt
of the notice, and within 90 days of publication of the first
notice if such creditors did not receive the notice.
In filing for creditor's rights, the creditors
shall state the relevant matters relating to the creditor's
rights, and provide supporting materials. The liquidating
committee shall record such creditor's rights.
Article 195 After identifying the company's
assets and preparing the balance sheet and schedule of assets,
the liquidating committee shall prepare a liquidating plan,
which shall be submitted to the shareholders' committee or
the relevant authority for ratification.
Where the company's assets are sufficient
for payment of company debts, such assets shall be paid out
in the following order: payment of liquidating expenses, payment
of wages and expenses for labor insurance of the workers,
payment of taxes owed, and payment of company debts.
After payments have been made in accordance
with the previous Paragraph, the remaining assets shall be
distributed to the shareholders in proportion to their shares
of capital contribution in the case of a limited liability
company, and in proportion to their share holdings in the
case of a joint stock limited company.
In the course of liquidation, the company
may not conduct new business. Before payments have been made
in accordance with Paragraph 2 above, the assets of the company
may not be distributed to the shareholders.
Article 196 Where a company commences liquidation
due to its dissolution, and after identification of company
assets and preparation of the balance sheet and schedule of
assets, the liquidating committee discovers that the company
does not have sufficient assets to fully repay company debts,
the liquidating committee shall immediately file a bankruptcy
application with the People's Court.
Once the company is adjudged bankrupt by
a ruling of the People's Court, the liquidating committee
shall transfer the liquidating affairs to the People's Court.
Article 197 Upon completion of a company's
liquidation, the liquidating committee shall prepare a liquidating
report, which shall be submitted to the shareholders' committee
or the relevant authority for ratification, and upon ratification,
the liquidating committee shall submit such report to the
company registration authority to apply for company de-registration,
and make a public announcement of the company's termination.
Where the company fails to apply for company de-registration,
the company registration authority shall revoke its business
license and make a public announcement.
Article 198 Members of the liquidating committee
shall faithfully perform their duties and carry out their
liquidating obligations in accordance with the law.
Members of the liquidating committee may
not abuse their authorities by accepting bribes or receiving
other illegal income, and may not misappropriate company assets.
A committee member who causes loss to the
company or its creditors due to his intentional misconduct
or gross negligence shall be liable for damages.
Chapter Nine: Branch Of Foreign Company
Article 199 Foreign companies may establish
branches within China to conduct business in accordance herewith.
A foreign company referred to herein means
a company registered and established outside China under foreign
laws.
Article 200 In order to establish a branch
within China, a foreign company must submit an application
to the Chinese authority in charge, together with the relevant
documents such as its articles of association, the company
registration certificate issued in its home country, etc.
Upon approval, it shall carry out registration with the company
registration authority and be issued a business license.
The examination and approval procedure for
branches of foreign companies shall be separately prescribed
by the State Council.
Article 201 In order to establish a branch
within China, a foreign company must appoint a representative
or agent in charge of such branch within China, and fund its
branch as appropriate in light of the nature of its intended
business.
Where operation of certain branches of foreign
companies is subject to a minimum level of funding, such level
shall be prescribed by the State Council separately.
Article 202 The branch of a foreign company
shall identify the nationality and form of liability in its
name.
The branch of a foreign company shall maintain
the articles of association of such foreign company on its
premises.
Article 203 A foreign company is a foreign
legal person, and its branch established within China does
not have the status of a Chinese legal person.
A foreign company shall bear civil liabilities
in respect of the business conducted by its branch within
China.
Article 204 While conducting business within
China, the branch of a foreign company established after approval
must abide by Chines law, and may not harm the public interest
of China, and its lawful rights and interests are protected
by Chinese law.
Article 205 When a foreign company cancels
its branch within China, such company must fully repay the
debts thereof in accordance with the law and carry out liquidation
in accordance with the provisions hereof concerning company
liquidation procedure. The company may not transfer the assets
of such branch abroad prior to full repayment of its debts.
Chapter Ten: Legal Liabilities
Article 206 In the case of company registration,
where an applicant obtains company registration in violation
hereof by making false statement of registered capital, submitting
false certificates or by concealing material facts through
other fraudulent means, the company shall be ordered to make
rectification, and in case false statement of registered capital
was made, the company shall be fined not less than 5 percent
but not more than 10 percent of the amount of registered capital
falsely stated; the company submitting false certificates
or concealing material facts shall be fined not less than
10,000 Yuan but not more than 100,000 Yuan; where the circumstances
are serious, the company registration shall be revoked. Where
such action constitutes a crime, criminal liability shall
be imposed in accordance with the law.
Article 207 In the case of issue of company
shares or bonds, where the prospectus, subscription form,
or plan for company bonds offer is falsely prepared, the issuing
activities shall be ordered to cease, and an order shall be
issued for the return of the proceeds received together with
interest thereon, and a fine of not less than 1 percent but
not more than 5 percent of the proceeds illegally received
shall be imposed. Where such action constitutes a crime, criminal
liability shall be imposed in accordance with the law.
Article 208 In the case of capital contribution,
where the sponsors or shareholders falsify capital contribution
by failing to pay money, to deliver tangible goods or to transfer
property rights, thus defrauding the creditors or the public,
rectification shall be ordered, and such persons shall be
fined not less than 5 percent but not more than 10 percent
of the amount of capital contribution falsified. Where such
action constitutes a crime, criminal liability shall be imposed
in accordance with the law.
Article 209 Where the sponsors or shareholders
of a company withdraw their capital contribution after the
establishment of the company, they shall be ordered to make
rectification, and such persons shall be fined not less than
5 percent but not more than 10 percent of the amount of capital
contribution withdrawn. Where such action constitutes a crime,
criminal liability shall be imposed in accordance with the
law.
Article 210 Where a company issues company
shares or bonds on its own without approval by the appropriate
authorities provided for herein, the issuing activities shall
be ordered to cease, and the proceeds received, together with
interest thereon, shall be returned, and a fine of not less
than 1 percent but not more than 5 percent of the proceeds
illegally received shall be imposed. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Article 211 Where a company, in violation
hereof, establishes another set of accounting books besides
those prescribed by law, it shall be ordered to make rectification,
and the company shall be fined not less than 10,000 Yuan but
not more than 100,000 Yuan. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Where company assets are deposited into an
account established under an individual's name, the illegal
gain shall be confiscated, and a fine of not less than 2 times
but not more than 5 times of the illegal gain shall be imposed.
Where such action constitutes a crime, criminal liability
shall be imposed in accordance with the law.
Article 212 Where a company provides to its
shareholders and the public financial and accounting reports
which are false or which conceal material facts, a fine of
not less than 10,000 Yuan but not more than 100,000 Yuan shall
be imposed on the supervisor directly in charge and the other
person(s) directly responsible. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Article 213 Where, in violation hereof, state-owned
assets are converted into shares at low prices or sold to
individuals at low prices, or distributed to individuals without
compensation, administrative penalty shall be imposed on the
supervisor directly in charge and the other person(s) directly
responsible. Where such action constitutes a crime, criminal
liability shall be imposed in accordance with the law.
Article 214 Where the directors, supervisors,
or the general manager abuse their authorities by accepting
bribes or receiving other illegal income, or convert company
assets, any such illegal gain shall be confiscated, and they
shall be ordered to return the company assets and shall be
disciplined by the company. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Where a director or the general manager misappropriates
company funds or loan company funds to third parties, he shall
be ordered to return the company funds and shall be disciplined
by the company, and the income derived from such transaction
shall be turned over to the company. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Where, in violation hereof, the directors
or the general manager gives company assets as security for
the personal debts of any director of the company or any other
person, the security arrangement shall be ordered to be canceled,
and such persons shall be held liable for damages in accordance
with the law, and the income derived from the illegal provision
of security shall be turned over to the company. Where the
circumstance is serious, such persons shall be disciplined
by the company.
Article 215 Where, in violation hereof, a
director or the general manager engages in the same business
as the company either for his own account or for another person's
account, in addition to turning over any income so derived
to the company, such person may also be disciplined by the
company.
Article 216 Where a company fails to make
allocation to the statutory reserve fund and statutory welfare
fund in accordance herewith, such company shall be ordered
to make full allocation to the required funds, and a fine
of not less than 10,000 Yuan but not more than 100,000 Yuan
may be levied on the company.
Article 217 Where a company fails to notify
creditors through notice or public announcement in accordance
herewith while carrying out merger, division, reduction of
registered capital, or liquidation, it shall be ordered to
make rectification, and the company shall be fined not less
than 10,000 Yuan but not more than 100,000 Yuan.
Where in the course of liquidation, the company
conceals its assets, makes false statements in its balance
sheet or schedule of assets, or distributes company assets
prior to full repayment of company debts, it shall be ordered
to make rectification, and the company shall be fined not
less than 1 percent but not more than 5 percent of the value
of the concealed assets, or the value of the assets distributed
prior to full repayment of company debts. A fine of not less
than 10,000 Yuan but not more than 100,000 Yuan shall be imposed
on the supervisor directly in charge and the other person(s)
directly responsible. Where such action constitutes a crime,
criminal liability shall be imposed in accordance with the
law.
Article 218 Where the liquidating committee
fails to submit the liquidating report to the company registration
authority in accordance herewith, or conceals any material
fact or makes any material omission in the liquidating report
submitted, it shall be ordered to make rectification.
Where a member of the liquidating committee
abuses his authority to engage in fraudulent activity for
private gain, to obtain illegal income or convert company
assets, such member shall be ordered to return the company
assets, and the illegal income shall be confiscated, and such
member may be fined not less than 2 times but not more than
5 times the illegal income. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Article 219 Where an institution conducting
assets appraisal, capital verification, or testing and verification
provides a false certificate, the illegal income so derived
shall be confiscated, and a fine of not less than 2 times
but not more than 5 times the illegal income shall be imposed,
and the relevant authority in charge may order such institution
to cease operation, and revoke the qualification certificates
of the persons directly responsible. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Where an institution conducting assets appraisal,
capital verification or testing and verification provides
a report with material omission due to its negligence, it
shall be ordered to make rectification, and where the circumstance
is relatively serious, a fine of not less than 2 times but
not more than 3 times the income so derived shall be imposed,
and the relevant authority in charge may order such institution
to cease operation, and revoke the qualification certificates
of the persons directly responsible.
Article 220 Where the relevant authority
in charge authorized by the State Council approves an application
for the establishment of a company which fails to meet the
requirements prescribed herein, or approves an application
for issue of shares which fails to meet the requirements prescribed
herein, and the circumstance is serious, administrative penalty
shall be imposed on the supervisor directly in charge and
the other person(s) directly responsible in accordance with
the law. Where such action constitutes a crime, criminal liability
shall be imposed in accordance with the law.
Article 221 Where the securities regulatory
authority under the State Council approves an application
for share offer, share listing, or bonds issue which fails
to meet the requirements prescribed herein, and the circumstance
is serious, administrative penalty shall be imposed on the
supervisor directly in charge and the other person(s) directly
responsible in accordance with the law. Where such action
constitutes a crime, criminal liability shall be imposed in
accordance with the law.
Article 222 Where the company registration
authority grants registration to an application which fails
to meet the requirements prescribed herein, and the circumstance
is serious, administrative penalty shall be imposed on the
supervisor directly in charge and the other person(s) directly
responsible in accordance with the law. Where such action
constitutes a crime, criminal liability shall be imposed in
accordance with the law.
Article 223 Where the department in charge
of the company registration authority compels it to grant
registration to an application which fails to meet the requirements
prescribed herein, or engages in cover up for an illegal registration,
administrative penalty shall be imposed on the supervisor
directly in charge and the other person(s) directly responsible
in accordance with the law. Where such action constitutes
a crime, criminal liability shall be imposed in accordance
with the law.
Article 224 Where an entity passes itself
off as a limited liability company or joint stock limited
company while not registered as such in accordance with the
law, it shall be ordered to make rectification or such entity
shall be closed down, and a fine of not less than 10,000 Yuan
but not more than 100,000 Yuan may be imposed. Where such
action constitutes a crime, criminal liability shall be imposed
in accordance with the law.
Article 225 Where a company fails to commence
operation for more than 6 months without proper cause, or
suspends operation on its own without proper cause for more
than 6 consecutive months after commencement of operation,
the company registration authority shall revoke its company
business license.
Where the company fails to carry out amendment
registration in accordance herewith when a registered item
of the company has changed, it shall be ordered to register
within a prescribed time limit, and where the company has
not carried out registration after expiration of the time
limit, a fine of not less than 10,000 Yuan but not more than
100,000 Yuan shall be imposed.
Article 226 Where, in violation hereof, a
foreign company establishes a branch within China without
approval, it shall be ordered to make rectification, or such
branch shall be ordered to terminate, and a fine of not less
than 10,000 Yuan but not more than 100,000 Yuan may be imposed.
Article 227 Where a relevant authority performing
approval function hereunder fails to approve an application
which meets conditions prescribed by law, or the company registration
authority fails to grant registration to an application which
meets conditions prescribed by law, the affected party may
apply for administrative review or institute an administrative
action in accordance with the law.
Article 228 Where a company violates of this
Law, and is therefore liable for civil damages as well as
for an administrative fine or criminal fine, and its assets
are not sufficient to cover both, its assets shall first be
used to cover the civil liability for damages.
Chapter Eleven: Supplementary Provisions
Article 229 (Amended) Companies registered
and established prior to the implementation of this Law, in
accordance with law, administrative regulations, local regulations,
and the Standard Opinions Concerning Limited Liability Companies
and the Standard Opinions Concerning Joint Stock Limited Companies
formulated by the relevant authority in charge under the State
Council, shall remain in existence, provided that those companies
which do not meet all the conditions prescribed herein shall
meet such conditions within the time limit prescribed. Detailed
implementing measures shall be formulated by the State Council
separately.
In the case of a Joint Stock Limited Liability
Company in the high and new technology category, the ratio
of capital contribution in the form of industrial technology
and non-patented proprietary technology by sponsors as a percentage
of registered capital, the conditions for issuance of new
shares or initial public offering shall be separately stipulated
by the State Council.
Article 230 This Law shall become operative
as of July 1, 1994.
Following are Articles 67 and 229 before
their amendment:
Article 67 A state authorized investment
entity or state authorized department shall safeguard and
manage state assets in a wholly state-owned company in accordance
with the relevant national statutes and administrative regulations.
Article 229 Companies registered and established
prior to the implementation of this Law in accordance with
national statutes, administrative regulations, local statutes,
and the Opinions Concerning Regulation of Limited Liability
Companies and the Opinions Concerning Regulation of Joint
Stock Limited Companies formulated by the relevant authority
in charge under the State Council, shall remain in existence,
provided that those companies which do not meet all the requirements
prescribed herein shall meet such requirements within a prescribed
time limit. Detailed implementing measures shall be formulated
by the State Council separately.
|
Download
Archive
