(Adopted by the 5th session of the Standing Committee of the 8th National People's Congress on 29 December 1993, amended by the 13th session of the Standing Committee of the 9th National People's Congress pursuant to the Decision concerning the Amendment of the Company Law of the People's Republic of China on 25 December 1999)
CONTENTS
Chapter 1 General Provisions
Chapter 2 Establishment and Organisational Structure of a Limited Liability Company
Section 1 Establishment
Section 2 Organisational Structure
Section 3 Wholly State-Owned Companies
Chapter 3 Establishment and Organisational Structure of a Company Limited by Shares
Section 1 Establishment
Section 2 Shareholders' General Meeting
Section 3 Board of Directors; Manager
Section 4 Supervisory Committee
Chapter 4 Issue and Transfer of Shares by a Company Limited by Shares
Section 1 Issue of Shares
Section 2 Transfer of Shares
Section 3 Listed Companies
Chapter 5 Corporate Bonds
Chapter 6 Financial Affairs and Accounting of a Company
Chapter 7 Merger and Division of a Company
Chapter 8 Insolvency, Dissolution and Liquidation of a Company
Chapter 9 Branches of Foreign Companies
Chapter 10 Legal Liabilities
Chapter 11 Supplementary Articles
CHAPTER 1 GENERAL PROVISIONS
Article 1 This Law is formulated in accordance with the Constitution in order to adapt to the needs to establish a modern enterprise system, standardize the organization and activities of companies, protect the legitimate rights and interests of companies, shareholders and creditors, safeguard social and economic order and promoter the development of the socialist market economy.
Article 2 In this Law, the term "Company" refers to a limited liability company or a company limited by shares established within Chinese territory in accordance with this Law.
Article 3 All limited liability companies and companies limited by shares are enterprise legal persons.
In the case of a limited liability company, a shareholder is liable to the company to the extent of the amount of the shareholder's capital contribution. A limited liability company is liable for the debts of the company with all its assets.
In the case of a company limited by shares, its entire capital is divided into shares of equal value and shareholders shall be liable to the company to the extent of the shares held by them. A company limited by shares is liable for the debts of the company with all its assets.
Article 4 The shareholders of a company, as capital contributors, have the right to enjoy the benefits of the assets of the company, make major decisions and choose the managers in accordance with the amount of capital they have invested in the company.
A company enjoys all legal person property rights constituted by the shareholder's investment, enjoys civil rights and assumes civil liabilities in accordance with the law.
Ownership of the state-owned assets in a company belongs to the state.
Article 5 With respect to all its corporate property, a company conducts its business autonomously in accordance with law and is responsible for its own profits and losses.
Under the state's macro regulation and control adjustment, a company organizes its production and operations autonomously according to market demand with the objectives of raising economic efficiency and labour productivity and preserving and increasing the value of assets.
Article 6 A company implements an internal management structure with a clear division of rights and responsibilities, scientific management and combined incentives and restrictions.
Article 7 A state-owned enterprise which is being reorganised as a company, must replace its system of operation, gradually and systematically take inventory of its assets and verify its capital, determine property rights, clear creditors' rights and indebtedness, value assets and set up a standardised internal management structure, in accordance with the conditions and requirements of the law and administrative regulations.
Article 8 The establishment of a limited liability company or a company limited by shares must comply with the conditions set out in this Law. A company complying with the conditions of this Law is registered as a limited liability company or a company limited by shares. A company which does not comply with the conditions set out in this Law cannot be registered as a limited liability company or a company limited by shares.
Where the law or administrative regulations require that the establishment of a company be submitted for examination and approval, the procedures for such examination and approval are carried out before the company is registered.
Article 9 A limited liability company established in accordance with this Law must have the words "limited liability company" in its name.
A company limited by shares established in accordance with this Law must have the words "company limited by shares" in its name.
Article 10 The domicile of a company is the place where its principal place of business is located.
Article 11 In establishing a company, the company's articles of association must be prepared in accordance with this Law. The articles of association are binding on the company, the shareholders, directors, supervisors and managers.
A company's business scope is specified in its articles of association and registered in accordance with the Law. For items in a company's business scope which are restricted by law or administrative regulations, approval shall be obtained in accordance with the law.
A company shall conduct business activities within its registered business scope. A company may change its business scope by amendments to its articles of association in accordance with procedures provided by law and after changing its registration with the company registration authority.
Article 12 A company may invest in other limited liability companies or companies limited by shares and be liable to the companies which it has invested in to the extent of the amount of capital invested in such companies.
Except for investment companies and holding companies specified by the State Council, where a company invests in other limited liability companies or company limited by shares, the aggregate amount of investment may not exceed fifty per cent of the net assets of the company, not including any increase in the capital of the other limited liability companies or companies limited by shares in which the company invests arising from any conversion of profits of these companies into capital following such investment.
Article 13 A company may set up branches. Branches of a company do not have the status of enterprise legal persons and the company assumes the civil liabilities of its branches.
A company may set up subsidiaries. Subsidiaries of a company have the status of enterprise legal persons and assume civil liabilities independently in accordance with the law.
Article 14 A company must abide by the law and by business ethics in conducting its business activities, strengthen the construction of socialist spiritual civilisation and accept the supervision of the government and the public.
The legitimate rights and interests of a company are protected by law and may not be infringed.
Article 15 A company must protect the legitimate rights and interests of its staff and workers, strengthen labour protection and bring about production safety.
A company uses various means to enhance vocational education and on-the-job training for staff and workers to increase their work quality.
Article 16 The staff and workers of a company organise a trade union in accordance with the law to carry out union activities and protect the lawful rights and interests of staff and workers. A company shall provide the necessary conditions for activities of the trade union of the company.
Limited liability companies established with investment by a wholly state-owned company and those established with investment by two or more state-owned enterprises or two or more other state-owned investment entities practice democratic management in accordance with the provisions of the Constitution and provisions of the relevant laws through general meetings of the staff and workers and otherwise.
Article 17 The activities of the base-level organisations of the Chinese Communist Party in the company are dealt with in accordance with the Charter of the Chinese Communist Party.
Article 18 This Law applies to limited liability companies with foreign investment. Where the laws on Sino-foreign equity joint venture enterprises, Sino-foreign co-operative joint venture enterprises and wholly- foreign owned enterprises otherwise provide, the provisions of such laws apply.
CHAPTER 2 ESTABLISHMENT AND ORGANISATIONAL STRCTURE OF A LIMITED LIABILITY COMPANY Section 1 Establishment
Article 19 Establishment of a limited liability company shall be subject to the fulfilment of the following conditions:
(1) the number of shareholders meets the requirements of the law;
(2) the investment contributed by shareholders meets the minimum amount of capital required by law;
(3) the company's articles of association are formulated jointly by the shareholders:
(4) there is a company name, and an organisational structure complying with the requirements for establishing a limited liability company;
(5) there is a fixed site for production and operations and the necessary conditions for production and operation.
Article 20 A limited liability company is established by capital contributions made jointly by at least two and on more than fifty shareholders.
A state-authorised investment institution or a department authorised by the state may invest on its own to establish a wholly state-owned limited liability company.
Article 21 A state-owned enterprise established before the implementation of this Law which fulfils the conditions for the establishment of a limited liability company under this Law may be reorganised as a wholly sate-owned limited liability company in the case of an investment entity with a single investor, or as a limited liability company as provided in the first paragraph of the preceding Article in the case of an investment entity with many investors.
Implementing procedures and specific means for the reorganisation of state-owned enterprises into companies are specified by the State Council in separate provisions.
Article 22 The articles of association of a limited liability company shall set out the following:
(1) the company's name and domicile;
(2) the company's business scope;
(3) the company's registered capital;
(4) shareholders' names or titles;
(5) shareholders' rights and obligations;
(6) the form and amount of shareholders' capital contributions;
(7) conditions for shareholders' transfer of capital contributions;
(8) the company's organs and the method of establishing them, their powers and rules of procedure for discussion;
(9) the company's legal representative;
(10) grounds for the dissolution of the company and method for its liquidation; and
(11) other matters which the shareholders consider necessary to provide for.
The shareholders shall sign and seal the company's article of association.
Article 23 A limited liability company's registered capital is the capital actually contributed by all the shareholders and registered with the company registration authorities.
The registered capital of a limited liability company may not be less than the following minimum amounts:
(1) for a company engaging principally in production operations, RMB 500,000;
(2) for a company engaging principally in wholesaling commodities, RMB 500,000;
(3) for a company engaging principally in commercial retailing, RMB 300,000;
(4) for a company engaging in technology development, consultancy and service, RMB 100,000.
Requirement for the minimum amount of registered capital for a limited liability company in a particular line of business to be higher than the amount stated in the preceding paragraphs are provided for in separate laws or administrative regulations.
Article 24 Shareholders may make capital contributions in currency, or may invest in kind, use industrial property, non-patented technology or land use rights to make capital contributions based on their appraised value. For investment in kind, industrial property, non-patented technology or land use rights which are capital contributions, a valuation must be carried out and the property contributed verified, without overvaluation or undervaluation. The valuation of land use rights is to be dealt with in accordance with the provisions of laws and administrative regulations.
The amount of industrial property or non-patented technology contributed as capital based on its appraised value may not exceed twenty percent of the registered capital of a company, except as otherwise specified by the state for the use of the results of new and high technology.
Article 25 Shareholders shall pay in full their respective subscribed capital contributions specified in the articles of association. If a shareholder makes its contribution in currency, the currency contribution shall be deposited in full into a temporary account established with a bank by the proposed limited liability company; if the contribution is to be made in investment in kind, industrial property, non-patented technology or land use rights, procedures for transfer of the property rights shall be dealt with in accordance with the law.
If a shareholder does not pay its subscribed capital contribution in accordance with the provisions of the preceding paragraph, such shareholder shall be liable for default to the other shareholders who have fully paid their capital contributions.
Article 26 After the shareholders have paid in full their subscribed capital contributions, a legally authorised investment verification authority must verify the investment and issue a certificate.
Article 27 Upon verification by a legally authorised investment verification authority of all capital contributions of shareholders, a designated representative or jointly appointed agent of all the shareholders applies to the company registration authority to register the establishment of the company, submitting the company registration application, the company's articles of association, investment verification certificate and other documents.
If examination and approval form relevant departments is required in accordance with any law or administrative regulation, the approval documents shall be submitted when applying to register the establishment of the company.
Where the conditions required by this Law are met, the company registration authority registers the company and issues a company business licence. Where the conditions of this Law are not met, the company is not registered.
The date of issue of the business licence is the date of establishment of a limited liability company.
Article 28 After the establishment of a limited liability company, if the actual values of the investment in kind, industrial property, non-patented technology or land use rights are obviously lower than the values set in the articles of association, the difference shall be made up by the shareholder(s) who contributed such investment, and other shareholders at the time of the establishment of the company shall be jointly liable for the difference.
Article 29 If a branch or branches of a limited liability company are established at the same time a limited liability company is established, application for the registration of the branch(es) shall be made to the company registration authority to obtain the business licence(s).
If a branch or branches of a limited liability company are established after the establishment of the company, application of registration shall be made by the legal representative of the company to the company registration authority to obtain the business licence(s).
Article 30 An investment certificate shall be issued to each of the shareholders upon the establishment of a limited liability company.
An investment certificate shall set out the following:
(1) the company's name;
(2) the company's date of registration;
(3) the company's registered capital;
(4) the shareholder's name and the amount and date of payment of capital contribution;
(5) the number and date of issue of the investment certificate.
An investment certificate is sealed with company's seal.
Article 31 A limited liability company shall establish a register of shareholders setting out the following:
(1) the shareholder's names and domiciles;
(2) the shareholder's amounts of capital contributions;
(3) the numbers of the investment certificates.
Article 32 Shareholders have the right to examine the minutes of shareholders' meetings and the company's financial and accounting reports.
Article 33 Shareholders are entitled to receive dividends in accordance with the proportions of their capital contributions. Shareholders have a pre-emptive right to subscribe capital when a company increases its capital.
Article 34 Shareholders may not withdraw their capital contributions after the registration of a company.
Article 35 Shareholders may transfer among themselves all or part of their capital contributions.
Where a shareholder transfers its capital contribution to a person other than a shareholder, the consent of more than half of all shareholders is required. A shareholder objecting to such transfer shall purchase the capital contribution to be transferred and such shareholder is deemed to have agreed to the transfer if he does not purchase the capital contribution.
For a transfer of capital contribution which is transferred with the consent of the shareholders, other shareholders have a pre-emptive right to purchase it on the same conditions.
Article 36 After a shareholder transfers its capital contribution in accordance with the law, the company records in the register of shareholders the name of the transferee, its domicile and the amount of the capital contribution transferred.
Section Organisational Structure
Article 37 The shareholders' meetings of a limited liability company are made up of all shareholders. The shareholders' meeting is the company's authoritative organisation, exercising its powers in accordance with this Law.
Article 38 The shareholders' meeting exercises the following powers:
(1) to decide on the company's operational policies and investment plans;
(2) to elect and replace directors and decide on matters relating to the remuneration of directors;
(3) to elect and replace the supervisor who are representatives of the shareholders, and decide on matters relating to the remuneration of supervisors;
(4) to examine and approve reports of the board of directors;
(5) to examine and approve reports of the supervisory committee or any supervisor(s);
(6) to examine and approve the company's proposed annual financial budget and final accounts;
(7) to examine and approve the company's plans for profit distribution and recovery of losses;
(8) to decide on increases in or reductions of the company's registered capital;
(9) to decide on the issue of bonds by the company;
(10) to decide on transfers of capital contribution by shareholders to a person other than a shareholder;
(11) to decide on issues such as merger, division, change in corporate form or dissolution and liquidation of the company;
(12) to amend the company's articles of association.
Article 39 Except as otherwise provided in this Law, methods of discussion and voting procedures for shareholders' meetings are specified in the company's articles of association.
A resolution for an increase in or reduction of registered capital, division, merger, dissolution or change in corporate form of the company must be passed by shareholders representing two-thirds or more of the voting rights.
Article 40 A company may amend its articles of association. A resolution to amend the company's articles of association must be passed by shareholders representing two-thirds or more of the voting rights.
Article 41 Shareholders exercise voting rights at shareholders' meetings in accordance with the proportions of their capital contributions.
Article 42 The first shareholders' meeting is convened and presided over by the shareholder whose capital contribution is the largest. Such shareholder exercises its rights in accordance with this Law.
Article 43 Shareholders' meetings are divided into regular meetings and interim meetings.
Regular meetings shall be convened on time in accordance with the provisions of the articles of association. Shareholders representing one-fourth or more of the voting rights or one-third or more of the directors or supervisors may request that an interim meeting be convened.
Where a limited liability company has a board of directors, shareholders' meetings are convened by the board of directors and presided over by the chairman of the board of directors. If the chairman of the board of directors is unable to perform his duties for a particular reason, the vice-chairman or another director designed by the chairman presides over the meeting.
Article 44 When convening a shareholders' meeting, notice shall be given to all shareholders fifteen days before the meeting is convened.
Shareholders' meeting s shall keep minutes of decisions made on matters discussed. The minutes shall be signed by the shareholders present at the meeting.
Article 45 A limited liability company has a board of directors with three to thirteen members.
For a limited liability company established with the investment of two or more state-owned enterprises or two or more state-owned investment entities, members of its board of directors shall include representatives of the staff and workers of the company. Representatives of staff and workers on the board of directors are chosen by the company's staff and workers by democratic election.
The board of directors has one chairman and may have one or two vice-chairmen. The method of election of the chairman and vice-chairman is specified in the articles of association.
The chairman of the board of directors is the legal representative of the company.
Article 46 The board of directors is responsible to the shareholders' meeting and exercises the following powers:
(1) to be responsible for convening shareholders' meetings and report on its work to the shareholders' meeting;
(2) to implement the resolutions of the shareholders' meeting;
(3) to decide on the operational plans and investment plan of the company;
(4) to formulate the company's proposed annual financial budget and final accounts;
(5) to formulate plans for profit distribution and recovery of losses;
(6) to formulate plans for increases in or reductions of the company's registered capital;
(7) to prepare plans for merger, division, change in corporate form and dissolution of the company;
(8) to decide on the set up of the company's internal management structure;
(9) to appoint or dismiss the company's manager (general manager)(the "manager") and pursuant to the manager's nominations to appoint or dismiss the deputy manager and the financial officers of the company and decide upon their remuneration;
(10) to formulate the company's basic management system.
Article 47 The term of office of the directors is as provided in the company's articles of association, provided that each term may not be longer than three years. At the end of a director's term, the director may serve another term if re-appointed.
The shareholders' meeting may not without reason remove a director from office before the expiry of that director's term.
Article 48 Meetings of the board of directors are convened and presided over by the chairman. When the chairman is unable to perform his duties for a particular reason, the vice-chairman or another director designated by the chairman convenes and presides over the meetings. One-third or more of the directors may request that an interim meeting be convened.
Article 49 Except as otherwise provided in this Law, methods of discussion and voting procedures for the board of directors are provided for in the company's article of association.
When convening a meeting of the board of directors, notice of the meeting shall be given to all directors ten days before the meeting is convened.
The board of directors shall keep minutes of decisions made on matters discussed. Such minutes shall be signed by the directors present at the meeting.
Article 50 A limited liability company has a manager who is appointed or dismissed by the board of directors. The manager is responsible to the board of directors and exercises the following powers:
(1) to be in charge of the company's production, operations and management and organise the implementation of the resolutions of the board of directors;
(2) to organise the implementation of the company's annual business plan and investment plan;
(3) to propose plans for the putting in place of the company's internal management structure;
(4) to propose the company's basic management system;
(5) to formulate specific rules and regulations for the company;
(6) to propose the appointment or dismissal of the company's deputy manager(s) and financial officers;
(7) to appoint or dismiss management officers other than those required to be appointed or dismissed by the board of directors;
(8) other powers conferred by the company's articles of association and the board of directors.
The manager is present at meetings of the board of directors.
Article 51 A limited liability company with a relatively small number of shareholders and of a relatively small scale may have one executive director and no board of directors. The executive director may also be the company's manager.
The powers of the executive director shall be specified in the company's articles of association with reference to the provisions of article 46 of this Law.
Where a limited liability company has no board of director, the executive director is the legal representative of the company.
Article 52 A limited liability company with a relatively large scale of operations has a supervisory committee with not less than three members. The supervisory committee elects a convenor from among its members.
The supervisory committee is made up of representatives of shareholders and a reasonable proportion of representatives from the company's staff and workers, the specific proportion to be provided in the company's articles of association. Representatives of the staff and workers on the supervisory committee are chosen by the company's staff and workers by democratic election.
A limited liability company with a relatively small number of shareholders and of a small scale may have one or two supervisors.
The directors, manager and financial officers of the company may not act concurrently as supervisors.
Article 53 The term of office of the supervisors is three years. At the end of a supervisor's term, the supervisor may serve another term if reappointed.
Article 54 The supervisory committee exercises the following powers:
(1) to inspect the company's financial situation;
(2) to exercise supervision over acts of the directors and manager carried out while performing their corporate functions which violate laws, regulations or the company's articles of association;
(3) to demand remedies from a director or manager when the acts of such director or manager are harmful to the company's interests;
(4) to propose the convening of an interim shareholders' meeting;
(5) other powers specified in the company's articles of directors.
The supervisors are present at meetings of the board of directors.
Article 55 When considering and deciding on the wages, welfare and production safety of staff and workers and labour protection, labour insurance and other issues involving the personal interests of the staff and workers, the company shall first solicit and consider the opinions of the company's trade union and staff and workers, and shall invite representatives from the trade union and the staff and workers to attend the relevant meetings.
Article 56 When considering and deciding on major issues relating to the company's production and operations and formulating important rules and regulations, the company shall solicit and consider the opinions and proposals of the company's trade union and staff and workers.
Article 57 The following persons may not serve as a director, supervisor or manager of a company:
(1) persons without civil capacity or with restricted civil capacity;
(2) persons who have committed the offences of corruption, bribery, infringement of property, misappropriation of property or sabotaging the social economic order, and have been sentenced to criminal penalties, where less than five years have elapsed since the date of completion of the sentence; or persons who have been deprived of their political rights due to criminal offences, where less than five years have elapsed since the date of the completion of implementation of this deprivation;
(3) persons who are former directors, factory directors or mangers of a company or enterprise which has become bankrupt and been liquidated as a result of mismanagement and are personally liable for the bankruptcy of such company or enterprise, where less than three years have elapsed since the date of the completion of the bankruptcy and liquidation of the company or enterprise;
(4) persons who were legal representatives of a company or enterprise which had its business licence revoked due to a violation of the law and who are personally liable, where less than three years have elapsed since the date of the revocation of the business licence;
(5) persons who have a relatively large amount of debts due and outstanding.
Where a company elects, nominates or appoints any director or supervisor or employs a manager contrary to the provisions of the preceding clause, such election, appointment or employment is ineffective.
Article 58 State civil servants may not act concurrently as a company's director, supervisor or manager.
Article 59 The directors, supervisors or manager shall abide by the company's articles of association, shall faithfully execute their official duties and shall protect the company's interests. They may not exploit their position and power in the company to advance their own private interests.
The directors, supervisors or managers of a company may not exploit their position to accept bribes or other illegal income or wrongfully take over company property.
Article 60 The directors or manager may not misappropriate company funds or loan such funds to others.
The directors or manager may not open accounts in their own names or in the names of other individuals for the deposit of the company's assets.
The directors or manager may not provide a guarantee for debts of a shareholder of the company or other individual(s) with the company's assets.
Article 61 The directors or manager may not engage on their own behalf or on behalf of others in any business similar to the business of the company in which they hold office or in activities harmful to the company's interests. The proceeds from any such business or activity shall belong to the company.
Unless otherwise provided in the company's articles of association or with the consent of a shareholders' meeting, a director or manager may not enter into any contracts or transactions with the company.
Article 62 The directors, supervisors or manager may not disclose the secrets of the company except in accordance with the provisions of the law or with the consent of a shareholder's meeting.
Article 63 Where a director, supervisor or manager of a company violates the law, administrative regulations or the company's articles of association while performing his official corporate duties resulting in harm to the company, such director, supervisor or manager shall be liable for damages.
Section 3 Wholly State-Owned Companies
Article 64 "A wholly state-owned company" in this Law refers to a limited liability company in which a state-authorised investment institution or a state-authorised department is the sole investor and which is established solely by a state-authorised investment institution or by a state-authorised department.
A company designated by the State Council for the production of special products or belonging to a specified trade shall be established in the form of a wholly state-owned company.
Article 65 The articles of association of a wholly state-owned company are formulated in accordance with this Law by the state-authorised investment institution or the state-authorised department or formulated by the board of directors, and reported to the state-authorised investment institution or the state-authorised department for approval.
Article 66 A wholly state-owned company does not have shareholders' meetings. The company's board of directors is authorised by the state-authorised investment institution or the state-authorised department to exercise part of the powers of the shareholders' meetings, decide on the major issues of the company, provided that decisions on merger, decision, dissolution of the company, increase or decrease in capital and issue of corporate bonds must be decided by the state-authorised investment institution or the state-authorised department.
Article 67 The board of supervisors of a wholly state-owned company mostly consist of persons from the State Council or institutions authorized by the State Council, together with the participation of representatives of the company's employees. The member of the board of supervisors may not be less than 3. the board of supervisors exercise its powers as stipulated in Article 54 (1), (2) and as provided by the State Council.
Supervisors are present at meetings of the board of directors.
The directors, manager and financial officers may not act concurrently as supervisors.
Article 68 A wholly state-owned company has a board of directors which carries out its duties in accordance with the provisions of article 46 and 66 of this Law. The term of office of the directors is three years.
The board of directors has three to nine members, appointed or replaced by the state-authorised investment institution or the state-authorised department in accordance with the directors' terms. Members of the board of directors shall include representatives of the staff and workers of the company. Representatives of the staff and workers on the board of directors are chosen by the company's staff and workers by democratic election.
The board of directors has a chairman and may have one vice-chairman if necessary. The chairman and the vice-chairman are designated from among the directors by the state-authorised investment institution or the state-authorised department.
The chairman of the board of directors is the legal representative of the company.
Article 69 A wholly state-owned company has a manager who is appointed or dismissed by the board of directors. The manager exercises his powers in accordance with the provisions of article 50 of this Law.
With the consent of the state-authorised investment institution or the state-authorsied department, members of the board of directors may act concurrently as manager.
Article 70 The chairman and vice-chairman of the board of directors, directors and the manager of a wholly state-owned company may not act concurrently as officers of other limited liability companies, companies limited by shares or other economic organisations without the consent of the state-authorsied investment institution or the state-authorised department.
Article 71 To transfer assets of a wholly state-owned company, in accordance with the provisions of law and administration regulations, the examination and approval and procedures for transfer of property rights are handled by the state-authorised institution or the state-authorised department.
Article 72 Large scale wholly state-owned companies with a sound system of operation and management and whose operational situation is relatively good may be authorised by the State Council to exercise rights as the owner of the assets.
CHAPTER 3 ESTABLISHMENT AND ORGANISATIONAL STRUCTURE OF A COMPANY LIMITED BY SHARES
Section 1 Establishment
Article 73 Establishment of a company limited by shares shall be subject to fulfillment of the following conditions:
(1) the number of promoters meets the requirement of the law;
(2) the share capital subscribed by the promoters and by public offer meets the minimum amount of capital required by law;
(3) the issue of shares and related preliminary matters comply with the provisions of law;
(4) articles of association are formulated by the promoters and adopted by the founding meeting;
(5) there is a company name and the establishment of an organisational structure complying with the requirements for the establishment of a company limited by shares;
(6) there is a fixed site for production and operations and necessary conditions for production and operation.
Article 74 A limited liability company may be established by means of promotion or offer.
Establishment by the promoter method means the establishment of a company by the subscription by the promoters for all the shares to be issued by the company.
Establishment by the offer method means establishment of a company by the subscription by the promoters of part of the shares to be issued by a company and a public offer of the remaining part of the shares.
Article 75 The establishment of a company limited by shares shall have at least five promoters including more than half of the promoters with domiciles within Chinese territory.
When a sate-owned enterprise is reorganised into a company limited by shares, there may be less than five promoters, but the method of establishment by the offer method shall be adopted.
Article 76 The promoters of a company limited by shares must subscribe for shares for which they are required to subscribe in accordance with this Law and must be responsible for the preparation of the establishment of the company.
Article 77 The establishment of a company limited by shares must be approved by the department authorised by the State Council or by the provincial level people's government.
Article 78 The registered capital of a company limited by shares is the total share capital which has been registered with the company registration authority and which has been registered with the company registration authority and which has been actually received.
The minimum amount of registered capital of a company limited by shares is RMB 10,000,000. Requirements for the minimum amount of the registered capital of a company limited by shares to be higher than the above amount are provided for in separate laws or administrative regulations.
Article 79 The articles of association of a company limited by shares shall set out the following:
(1) the company's name and domicile;
(2) the company's scope of business;
(3) the company's method of establishment;
(4) the total shares, value per share and registered capital of the company;
(5) the names of the promoters and the number of shares subscribed by them;
(6) the rights and obligations of the shareholders;
(7) the composition, powers, term of office and rules of procedure for discussion of the board of directors;
(8) the company's legal representative;
(9) the composition, powers, term of office and rules of procedure for discussion of the supervisory committee;
(10) the company's method of profit distribution;
(11) grounds for the dissolution of the company and method for its liquidation;
(12) procedures for company notices and announcements;
(13) other matters which the shareholder's general meeting considers necessary to specify.
Article 80 The promoters may make capital contributions in currency, or may invest in kind, use industrial property, non-patented technology or land use rights to make capital contributions based on their appraised value. For investment in kind, industrial property, non-patented technology or land use rights which are capital contributions, a valuation must be carried out, the property contributed verified and conversion into shares made, without over-valuation or under-valuation. The valuation of land use rights is to be dealt with in accordance with the provisions of laws and administration regulations.
The amount of industrial property or non-patented technology contributed as capital based on its appraised value may not exceed twenty per cent of the registered capital of a company.
Article 81 When a state-owned enterprise is reorganised into a company limited by shares, it is strictly prohibited to under-value state-owned assets for conversion into shares, sell them at prices below their value, or distribute them without compensation to individuals.
Article 82 Where a company limited by shares is to be established by the promoter method, the promoters shall pay the full amount for the shares immediately after they have subscribed in writing for all shares which the articles of association provide are to be issued. If investment in kind, industrial property, non-patented technology or land use rights are used as payment for the shares procedures for the transfer of the property rights shall be dealt with in accordance with the law.
The board of directors and the supervisory committee shall be elected after the promoters have paid all capital contributions. The board of directors submits to the company registration authority the approval document(s), the company's articles of association, the investment verification certificate and other documents for the establishment of the company and applies to register the establishment of the company.
Article 83 Where a company limited by shares is to be established by the offer method, the shares subscribed for by the promoters may not be less than thirty-five per cent of the total number of shares of the company. The remaining portion shall be offered to the public.
Article 84 When the promoters offer shares to the public, an application for the offer must be submitted to the securities administration authorities of the State Council together with the following major documents:
(1) document(s) approving the establishment of the company;
(2) the company's articles of association;
(3) the operating budget;
(4) the promoters' names, the number of shares subscribed by the promoters, the type(s) of capital contribution and investment verification certificate;
(5) the prospectus;
(6) the names and addresses of the receiving bankers;
(7) the names of the underwriters and relevant agreements.
The promoters may not offer any shares to the public without prior approval of the securities administration authorities of the State Council.
Article 85 Subject to the approval of the securities administration authorities of the State Council, promoters may publicly offer shares to investors outside China. The concrete procedures for such offers are set out in specific regulations of the State Council.
Article 86 The securities administration authorities of the State Council grant approval to applications for offers which comply with the conditions provided in this Law. If the application does not comply with the conditions provided in this Law, no approval is granted.
If, after the approval has been granted, the offer is found not to comply with the provisions of this Law, approval shall be revoked. If shares have not been offered, the offer will not be carried out. If shares have already been offered, the subscribers may demand that the promoters refund their payments for shares with interest at the bank's rate for a deposit of the same term.
Article 87 The articles of association formulated by the promoters shall be attached to the prospectus which shall set out the following:
(1) the number of shares subscribed by the promoters;
(2) the par value per share and issue price for each share;
(3) the total number of non-registered shares issued;
(4) the rights and obligations of the subscribers;
(5) the duration of the offer and explanation that subscribers may revoke their subscription to shares if the offer is under-subscribed at the close of the offer.
Article 88 In making a public offer of shares, promoters must publish a prospectus and prepare share subscription application. Share subscription applications shall set out the items stated in the preceding article. Subscribers fill in the number of shares subscribed, the amount of payment and their domiciles, and sign and seal the share subscription application. Subscribers make payment for shares according to the number of shares they have subscribed.
Article 89 A public offer of shares by promoters shall be underwritten by securities institutions established in accordance with the law, and an underwriting agreement shall be entered into.
Article 90 In making a public offer of shares, the promoters shall enter into an agreement with the receiving bankers.
The receiving bankers shall receive and hold as agents the payments for shares, issue receipts to subscribers making payments, and shall be obliged to issue evidence of receipt of payments to the relevant departments.
Article 91 After payment in full has been made for the shares issued, an authorised investment verification authority must verify the investments and issue an investment verification certificate. The promoters shall convene a founding meeting within thirty days. The founding meeting is made up of the subscribers.
If the shares issued are not fully subscribed after the closing date specified in the prospectus; or if the promoters do not convene the founding meeting within thirty days of payment in full having been made for the shares offered, the subscribers may demand that the promoters refund their payments for shares plus interest at the bank's rate for a deposit of the same term.
Article 92 The promoters shall give notice to all subscribers or make an announcement of the date of the founding meeting fifteen days before the meeting. The founding meeting shall be held only if subscribers representing half or more of the total shares are present.
The founding meeting exercises the following powers:
(1) to examine the report of the promoters on preparations for the establishment of the company;
(2) to adopt the company's articles of association;
(3) to elect the members of the board of directors;
(4) to elect the members of the supervisory committee;
(5) to examine and verify the expenses incurred for the establishment of the company;
(6) to examine and verify the valuation of property used by promoters as payments for shares;
(7) in the case of the occurrence of force majeure or substantial changes to operating conditions which have a direct effect on the establishment of the company, a resolution not to establish the company may be made.
A resolution at the founding meeting on any of the matters set out above requires the approval of subscribers with half or more of the voting rights present at the meeting.
Article 93 The promoters and subscribers may not withdraw their share capital after making payments for shares or making their contribution of capital as payment for shares, except where the shares have not been fully subscribed within the offer period, the promoters have not convened the founding meeting within the period specified, or resolution not to establish the company is adopted at the founding meeting.
Article 94 Within 30 days of the conclusion of the founding meeting, the board of directors shall submit to the company registration authority the following documents and shall apply to register the establishment of the company:
(1) approval document from the relevant supervising departments;
(2) minutes of the founding meeting;
(3) the company's articles of association;
(4) the auditors' report on financial matters relating to the preparation of the establishment of the company;
(5) investment verification certificate;
(6) the names and domiciles of members of the board of directors and supervisory committee; and
(7) the name and domicile of the legal representative.
Article 95 The company registration authority decides within thirty days of the date of receipt of an application to register the establishment of a company limited by shares whether or not to grant registration. Registration is granted and a business licence issued if all the conditions set out in this Law are met. Registration is not granted if the conditions set out in this Law are not met.
The date of issue of the business licence is the date of establishment of a company limited by shares. After the company is established, a public announcement shall be made.
After the registration and establishment of a company limited by shares, in the case of establishment by the offer method, a report on the offer of shares shall be filed with the State Council for the record.
Article 96 Where a branch or branches are to be set up at the same time as the establishment of a company limited by shares, application shall be made to the company registration authority to register them and obtain business licence(s).
Where a branch or branches are to be set up after the establishment of a company limited by shares, the legal representative of the company shall apply to the company registration authority to register them and obtain business licence(s).
Article 97 Promoters of a company limited by shares shall assume the following responsibilities:
(1) to be jointly liable for debts and expenses arising from actions to establish the company, if the company cannot be established;
(2) to be jointly liable to refund subscribers' payments for shares plus interest at the bank's rate for a deposit of the same term, if the company cannot be established;
(3) to be responsible for compensating the company for damages to the interests of the company arising form negligence of the promoters during the process of establishing the company.
Article 98 A limited liability company being converted into a company limited by shares shall meet the conditions for a company limited by shares set out in this Law, and procedures for the establishment of a company limited by shares shall be carried out in accordance with this Law.
Article 99 When a limited liability company is converted into a company limited by shares in accordance with the law and with approval, the total amount of shares into which conversion is made shall be equivalent to the amount of the company's net assets. When a limited liability company is converted into a company limited by shares and increases its capital by public offer of shares, the provisions of this Law concerning public offer of shares shall be followed.
Article 100 Where a limited liability company is being converted into a company limited by shares, the creditors' rights and indebtedness of the original limited liability company are assumed by the company limited by shares after the conversion.
Article 101 A company limited by shares shall deposit its articles of association, register of shareholders, minutes of shareholders' general meetings and financial and accounting reports at the company.
Section 2 Shareholders' General meeting
Article 102 A company limited by shares shall have a shareholders' general meeting made up of all shareholders. The shareholder's general meeting is the company's authoritative organization which exercises its powers in accordance with this Law.
Article 103 The shareholders' general meeting exercises the following powers:
(1) to decide on the company's operational policies and investment plans;
(2) to elect and replace directors and decide on matters relating to the remuneration of directors;
(3) to elect and replace the supervisor who are representatives of shareholder and decide on matter relating to the remuneration of supervisor;
(4) to examine and approve report of the board of director,
(5) to examine and approve report of the supervisory committee;
(6) to examine and approve the company's proposed annual financial budget and final accounts;
(7) to examine and approve the company's profit distribution plan and plan for recovery of losses;
(8) to decide on increases in or reductions of the company's registered capital,
(9) to decide on the issue of bonds by the company;
(10) to decide on issues such as merger, division, dissolution and liquidation of the company and other matter;
(11) to amend the company's articles of association.
Article 104 Shareholders' general meetings shall be held once every year. An interim shareholder's general meeting shall be held within two months under any of the following circumstances:
(1) the number of directors is less than two-thirds of the number of director required by this Law or the number of directors specified in the company's articles of association;
(2) the unrecovered losses of the company's capital reach one-third of the company's total share capital,
(3) upon request by shareholder holding ten per cent or more of the shares of the company;
(4) when deemed necessary by the board of directors,
(5) when the board of supervisors proposes convening it.
Article 105 Convening shareholders' general meetings is the responsibility of the chairman of the board of director in accordance with the provisions of this Law and such meetings are presided over by the chairman. If the chairman is unable to perform his duties for a particular reason, the vice-chairman or another director designated by the chairman presides over the meeting. When convening a shareholders' general meeting, notice shall be given to all shareholders thirty days before the meeting, stating the matters to be considered at the meeting. An interim shareholders' general meeting may not adopt resolutions on matters not stated in the notice.
Where bearer shares are issued, a public announcement shall be made about the matters in the preceding paragraph forty-five days before the meeting.
Where shareholders of bearer shares are present at a shareholders' general meeting, their shares shall be deposited with the company from five days prior to the opening of the meeting until the adjournment of the meeting.
Article 106 Shareholders present at a shareholders' general meeting have one vote for each share they hold.
Resolutions of the shareholders' general meeting must be adopted with half or more of the voting rights held by shareholders present at the meeting. Resolutions of the shareholders' general meeting on merger, division or dissolution of a company must be adopted by shareholders with two-thirds or more of the voting rights present at the meeting.
Article 107 Amendments to the articles of association of the company must be adopted by shareholders with two-thirds or more of the voting rights present at the meeting.
Article 108 Shareholders may appoint proxies to attend shareholders' general meetings. A proxy shall present to the company a power of attorney from the shareholder and shall exercise his voting rights within the scope of his authorization.
Article 109 Minutes of decisions made on matters discussed by the shareholders' general meeting shall be kept. The minutes shall be signed by the shareholders present at the meetings. The minutes shall be kept together with the signed register of shareholders in attendance and the powers of attorney of shareholders who attended by proxy.
Article 110 Shareholders have the right to examine the company's articles of association, minutes of shareholders' general meetings and financial and accounting reports, and to make proposals or enquiries in respect of the company's operations.
Article 111 If any resolution adopted by a shareholders' general meeting or the board of directors violates any law or administrative regulation or infringes the lawful rights and interests of shareholders, shareholders have the right to initiate proceedings in the people's court to require that such acts of violation or infringement be stopped.
Section 3 Board of Directors, Manager
Article 112 A company limited by shares has a board of director with five to nineteen members.
The board of directors is responsible to the shareholders' general meeting and exercises the following powers:
(1) to be responsible for convening the shareholders' general meeting and reporting on its work to the shareholders' general meeting;
(2) to implement the resolutions of the shareholders' general meetings;
(3) to decide on the company's business plans and investment plans,
(4) to formulate the company's proposed annual financial budget and final accounts;
(5) to formulate the company's profit distribution plan and plan for recovery of losses;
(6) to formulate proposals for increases in or reductions of the company's registered capital and the issue of corporate bonds;
(7) to prepare plans for the merger, division or dissolution of the company;
(8) to decide on the putting in place of the company's internal management structure;
(9) to appoint or dismiss the company's manager, and pursuant to the manager nominations to appoint or dismiss the deputy general manager and financial officer of the company and decide on their remuneration;
(10) to formulate the company's basic management system.
Article 113 The board of directors has one chairman and may have one or two vice-chairmen. The chairman and vice-chairmen are elected from the directors with the approval of more than half of all the directors.
The chairman of the board of directors is the legal representative of the company.
Article 114 The chairman of the board of directors exercises the following powers:
(1) to preside over shareholders' general meetings and convene and preside over meetings of the board of directors;
(2) to check on the implementation of resolutions of the board of directors.
(3) to sign the company's share certificates and bonds.
The vice-chairmen assist the chairman in his work. When the chairman is unable to perform his duties, the vice-chairman designated by the chairman performs his duties on his behalf.
Article 115 The term of office of the directors is specified in the company's articles of association, provided, however, that each term may not be longer than three years. At the end of a director's term, the director may serve another term if re-appointed.
The shareholders' general meeting may not without reason remove a director from office before the expiry of that director's term.
Article 116 Meetings of the board of directors are convened at least twice a year. Notice of each meeting shall be given to all directors ten days before the meeting.
For convening an interim meeting of the board of directors, the board of directors may provide for a different method of giving notice and notice period.
Article 117 Meetings of the board of directors shall be held only if half or more of the directors are present. Resolutions of the board of directors require the approval of more than half of all directors.
Article 118 The directors shall attend the meeting of the board of directors in person. If a director is unable to attend a meeting for any reason, he may appoint another director by a written power of attorney to attend the meeting on his behalf. The power of attorney shall set out the scope of the authorisation.
The board of directors shall keep minutes of resolutions on matters discussed at meetings. The minutes are signed by the directors present at the meeting and the person who recorded the minutes.
The directors shall be responsible for the resolutions of the board of directors. If a resolution of the board of directors violates the law, administrative regulations or the company's articles of association and this results in the company sustaining serious losses, the directors participating in the resolution are liable to compensate the company. However, if it can be proven that a director expressly objected to the resolution when the resolution was voted on, and that such objections were recorded in the minutes of the meeting, such director may be free of liability.
Article 119 A company limited by shares has a manager appointed and dismissed by the board of directors. The manager is responsible to the board of directors and exercises the following powers:
(1) to be in chare of the company's production, operation and management and organize the implementation of the resolutions of the board of directors;
(2) to organize the implementation of the company's annual business plan and investment plan;
(3) to propose plans for the putting in place of the company's internal management structure;
(4) to propose the company's basic management system;
(5) to formulate specific rules and regulations for the company;
(6) to propose the appoint or dismissal of the company's deputy manager and financial officers;
(7) to appoint or dismiss management personnel other than those required to be appointed or dismissed by the board of directors;
(8) other powers conferred by the company's articles of association and the board of directors.
The manager is present at meetings of the board of directors.
Article 120 The board of directors may, as required, authorize the chairman of the board of directors to exercise part of the powers of the board of directors during the period when the board of directors is not in session.
Article 121 When considering and deciding on the wages, welfare and production safety of staff and workers and labour protection, labour insurance and other issues involving the personal interests of staff and workers, the company shall first solicit and consider the opinions and proposals of the company's trade union and the staff and workers, and shall invite representatives from the company's trade union and the staff and workers to attend the relevant meetings.
Article 122 When considering and deciding on major issues relating to the company's production and operation and formulating important rules and regulations, the company shall solicit and consider the opinions and proposals of the company's trade union and the staff and workers.
Article 123 The directors and manager shall abide by the company's articles of association, shall faithfully execute their official duties, and shall protect the company's interests. They may not exploit their position and power in the company to advance their own private interests.
The provisions of Article 57 to Article 63 on persons not eligible for the positions of director and manager and on the obligations and duties of the directors and manager are applicable to the directors and manager of a company limited by shares.
Section 4 Supervisory Committee
Article 124 A company limited by shares has a supervisory committee made up of not less than three members. The supervisory committee shall choose a convenor from among its members.
The supervisory committee is made up of representatives of the shareholders and a reasonable proportion of representatives of the company's staff and workers, the specific proportion to be provided for in the company's articles of association. Representatives of the staff and workers on the supervisory committee are chosen by the company's staff and workers by democratic election.
The directors, manager and financial officers may not act concurrently as supervisors.
Article 125 The term of office of the supervisors is three years. At the end of a supervisor's term, the supervisor may serve another term if re-appointed.
Article 126 The supervisory committee exercises the following powers:
(1) to inspect the company's financial situation;
(2) to exercise supervision over acts of the directors and manager carried out while performing their corporate functions which violate laws, regulations or the company's articles of association;
(3) to demand remedies from a director or manager when the acts of such director or manager are harmful to the company's interests;
(4) to propose the convening of an interim shareholder's general meeting;
(5) other powers specified in the company's articles of association.
Supervisors are present at meetings of the board of directors.
Article 127 The discussion methods and voting procedures of the supervisory committee are specified in the company's articles of association.
Article 128 The supervisors shall faithfully execute their supervisory duties in accordance with laws, administrative regulations and the company's articles of association.
The provisions of articles 57 to articles 59 and articles 62 to articles 63 of this Law on persons not eligible for the position of supervisor and on the obligations and duties of supervisors are applicable to supervisors of a company limited by shares.
CHAPTER 4 ISSUE AND TRANSFER OF SHARES BY A COMPANY LIMITED BY SHARES
Section 1 Issue of Shares
Article 129 The capital of a company limited by shares is divided into shares. Each share is of equal value.
Shares in a company take the form of share certificates. A share certificate signed and issued by the company is evidence that the share is held by the shareholder.
Article 130 The issue of shares is public, fair and impartial. Shares of the same class must have the same rights and benefits.
For shares certificates issued at the same time, each share shall have the same issue terms and price. The share price for each share purchased by any organization or individual must be the same.
Article 131 The share certificate issue price may be equal to or greater than the par value, but may not be less than the par value.
Share certificates with an issue price above par value must be approved by the securities administration departments of the State Council.
The premium obtained from the issue of share certificates above par value is allocated to the company's capital common reserve fund.
Specific regulations governing the issue of share certificates at a premium are separately issued by the State Council.
Article 132 Share certificates take the form of paper certificates or such other form as specified by the securities administration departments of the State Council.
The following items shall be set out on a share certificate:
(1) the company's name;
(2) the company's registration and establishment date;
(3) the class of the share certificate, the par value and the number of shares represented by the share certificate;
(4) the number of the share certificate.
The share certificate is signed by the chairman of the board of directors and sealed by the company.
Share certificates of promoters shall bear the notation "promoter's share certificate."
Article 133 Shares issued to promoters, state-authorised investment organizations and legal persons shall be in the form of registered share certificates, shall bear the name of such promoter, state-authorised investment organization or legal person, and may not carry a different account name or be registered in the name of an agent.
Shares issued to the general public may be in the form of registered certificates and also may be in the form of bearer certificates.
Article 134 A company issuing registered shares shall prepare a register of shareholders setting out the following:
(1) the name and address of the shareholders;
(2) the number of shares held by each shareholder;
(3) the number(s) of the share certificate(s) held by each shareholder;
(4) the date on which each shareholder acquired its shares.
A company issuing bearer share certificates shall record the number of such share certificates issued, their numbers and dates of issue.
Article 135 The State Council may separately issue regulations governing the issue of classes of share certificates not covered by this Law.
Article 136 A company limited by shares formally delivers share certificates to its shareholders immediately upon its registration and establishment. No share certificates may be delivered prior to the registration and establishment of the company.
Article 137 A company issuing new shares must meet the following conditions:
(1) the previous issue of shares has been fully subscribed and at least one year have elapsed since that issue;
(2) the company has been continuously profitable for the last three years and is able to make dividend payments to its shareholders;
(3) there has been no false reporting in the company's financial and accounting documents during the last three years;
(4) the projected profit rate of the company equals or exceeds the rate of interest on bank deposits for the same term.
A company which uses a given year's profits to issue new shares is not subject to clause (2) above.
Article 138 In order for a company to issue new shares, resolutions must be passed on the following matters at a meeting of the shareholders;
(1) the class and quantity of the new shares;
(2) the issue price of the new shares;
(3) the commencement and closing dates of the new share issue;
(4) the class and quantity of shares to be issued to existing shareholders.
Article 139 Once the shareholders at a shareholder's meeting have passed a resolution to issue new shares, the board of directors must apply to the authorized department of the State Council or to the provincial level people's government for approval. Public offers require the approval of the securities administration departments of the State Council.
Article 140 Upon a company receiving approval to issue new shares in a public offer, the company must publish a prospectus for the new shares and the company's financial statements with their detailed schedules, and prepare a share subscription application.
A public offer of new shares shall be underwritten by a legally established securities institution and an underwriting agreement shall be executed.
Article 141 A company issuing new shares may determine its pricing plans in the light of the company's continuous profitability and the increase in the value of its property.
Article 142 After a company issuing new shares has fully collected the payments for shares, the company must change its registration with the company registration authority and issue a public notice.
Section 2 Transfer of Shares
Article 143 A shareholder may transfer his shares in accordance with the law.
Article 144 A shareholder's transfer of its shares must be carried out through a legally established stock exchange.
Article 145 Registered share certificates are transferred by means of endorsement or by other means as stipulated by law or by administrative regulations.
Upon the transfer of registered share certificates, the company records the name and address of the transferee in the register of shareholders.
No changes in the register of shareholders may be made pursuant to the previous paragraph within 30 days before the convening of the shareholders general meeting or with 5 days before the record date for the issue of dividends.
Article 146 A transfer of bearer share certificates is effective upon delivery of the share certificates to the transferee through a legally established stock exchange.
Article 147 Shares of a company held by a promoter of that company may not be transferred for three years after the company's establishment.
Directors, supervisors and the manager of a company shall report to that company all the shares that he holds in the company, and may not transfer them during his term of office.
Article 148 A state-authorised investment institution may transfer shares it holds in accordance with the law and may also purchase shares held by other shareholders. The approval limits and regulatory regime for such share transfers and purchases are separately determined by law and by administrative regulations.
Article 149 A company may not purchase the company's own share certificates, except in order to decrease its capital by canceling its shares or when it merges with another company that holds its shares.
Within ten days following the purchase of the company's own share certificates pursuant to the terms of the preceding paragraph, a company must in accordance with applicable law and administrative regulations cancel that portion of its shares, change its registration and issue a public notice.
A company may not accept the company's own share certificates as collateral.
Article 150 In the event registered share certificates are stolen, lost or destroyed, the shareholder may, pursuant to the procedures for public invitation to assert claims contained in the Code of Civil Procedure, request the people's court to declare the share certificates invalid.
After the share certificates are declared invalid by the people's court pursuant to the procedures for public invitation to assert claims, the shareholder may apply to the company to have share certificates re-issued.
Section 3 Listed Companies
Article 151 A listed company referred to in this Law means a company limited by shares whose issued shares are approved for trading on a stock exchange by the State Council or its authorized securities administration departments.
Article 152 A company limited by shares must meet the following requirements before applying for its shares to be listed on a stock exchange:
(1) the securities administration departments of the State Council have approved the company's stock being issued to the public;
(2) the company's total share capital is no less than RMB 50,000,000;
(3) the company has been in operation for over three years and has been profitable in each of the last three years; if an original state-owned enterprise has been converted and the company established according to the law, or the company has been reorganized and established after the effective date of this Law with a large or medium sized state-owned enterprise as its main promoter, the three year periods may be calculated continuously (including the period before its establishment/ reorganization);
(4) the number of shareholders each holding shares of a par value totaling at least RMB 1,000 is not less than one thousand; the company's shares* already issued to the public account for over 25% of the company's total shares; if the company's total share capital exceeds RMB 400,000,000, company shares already issued to the public account for over 15% of the company's total shares; (note: literal translation would be "share certificates")(gu piao))
(5) during the last three years, the company has not committed any significant acts in violation of the law and the company's financial statements have not contained any false statements;
(6) such other conditions as may be specified by the State Council.
Article 153 A company limited by shares applying to have its shares listed for trading shall file an application for approval with the State Council or its authorized securities administration departments and submit relevant documents in accordance with applicable laws and administrative regulations.
The State Council or its authorized securities administration departments grant approval to those listing applications which meet the requirements specified in this Law and deny approval to those listing applications which do not meet the requirements specified in this Law.
A company which has been granted approval for listing must publish a share listing report and keep its application documents on file in a designated place for public inspection.
Article 154 Shares of a company which have been approved for listing trade on a stock exchange in accordance with applicable laws and administrative regulations.
Article 155 If granted approval by the securities administration departments of the State Council, shares* of a company may be listed abroad. The specific means are stipulated by special regulations issued by the State Council. (*note: literal translation would be "share certificates")(gu piao))
Article 156 Pursuant to laws and administrative regulations, a listed company must periodically make public its financial and operational conditions. A listed company shall publish its financial statements once every six months in each fiscal year.
Article 157 A listed company in one of the following situations has its listing temporarily suspended upon determination by the securities administration departments of the State Council:
(1) the company's total share capital, share distribution, or other circumstance have changed such that the company no longer meets the listing requirements;
(2) the company does not make public its financial condition as required by the regulations, or its financial statements contain false statements;
(3) the company commits a significant violation of law;
(4) the company has had a loss in each of the three previous years.
Article 158 A listed company in the situation described in clause (2) or clause (3) of the preceding article which upon investigation is found to have caused serious consequences, or a listed company which is in the situation described in clause (1) or clause (4) and is unable to eliminate it within a limited time, does not meet the listing requirements, and its listing is terminated upon decision by the securities administration departments of the State Council.
If a company resolves to dissolve itself, or if a company is legally ordered to close down by the responsible administrative department, of if a company is declared to be bankrupt, the company has its listing terminated upon decision by the securities administration departments of the State Council.
CHAPTER 5 CORPORATE BONDS
Article 159 A company limited by shares, and a limited liability company established with investment by a wholly state-owned enterprise or established by investment by two or more state-owned enterprises or two or more state-owned investment entities, in order to raise funds for production and operations, may issue corporate bonds in accordance with this Law.
Article 160 "Corporate bonds" as used in this Law mean valuable securities issued by a company in accordance with legally specified procedures and pursuant to which the company covenants to repay principal and interest within a certain period of time.
Article 161 The issue of corporate bonds is subject to the following conditions:
(1) the net assets of a company limited by shares are not less than RMB 30,000,000, and the net assets of a limited liability company are not less than RMB 60,000,000;
(2) the aggregate amount of bonds of the company does not exceed forty per cent of the net assets of the company;
(3) the average distributable profits over the previous three years is sufficient to defray one year's interest payments on the company's bonds;
(4) the funds raised are used in a manner consistent with state industrial policy;
(5) the interest rate payable on the corporate bonds does not exceed the levels set by the State Council;
(6) Such other conditions as may be provided for by the State Council.
The funds raised by corporate bonds are used for the purposes approved by the approval authority and may not be used to cover losses or for non-productive expenditures.
Article 162 A company may not re-issue corporate bonds under the following circumstances:
(1) the corporate bonds issued the previous time have not yet been fully subscribed;
(2) the company has defaulted on previously issued corporate bonds or other indebtedness, or is late in the payment of principal or interest, and such situation is still continuing.
Article 163 When a company limited by shares or a limited liability company proposes to issue corporate bonds, its board of directors drafts a proposal for approval by resolution at a meeting of the shareholders.
The issue of corporate bonds by a wholly state-owned enterprise shall be decided by a state-authorised investment organization or a sate-authorised department.
Once a resolution or decision has been made pursuant to the preceding two paragraphs, the company shall submit an application for approval to the securities administration departments of the State Council.
Article 164 The scale of an issue of corporate bonds is determined by the State Council. Approvals by the securities administration departments of the State Council of an issue of corporate bonds may not exceed the scale determined by the State Council.
The securities administration departments of the State Council grant approval if an application to issue corporate bonds satisfies the requirements of this Law and deny approval if an application to issue corporate bonds does not satisfy the requirements of this Law.
If approval has previously been granted for an application found not to satisfy the requirement of this Law, the approval shall be revoked. With respect to corporate bonds already issued, the issuing company shall return funds paid to the subscribers, together with interest calculated at the rate on bank deposits for the same term.
Article 165 The company shall submit the following documents when applying to the securities administration departments of the State Council for approval to issue corporate bonds:
(1) the company's registration certificate;
(2) the company's articles of association;
(3) corporate bond offer procedure;
(4) an asset appraisal report and investment verification report.
Article 166 Upon approval of the company's application to issue corporate bonds, the company shall make public its corporate bond offer procedure.
The corporate bond offer procedure shall set out the following:
(1) the company's name;
(2) the total amount and face value of the bonds;
(3) the bond's interest rate;
(4) the periods and method for paying principal and interest;
(5) the commencement and closing dates of the issue;
(6) the net assets of the company;
(7) the total amount of corporate bonds already issued but not yet due;
(8) the underwriter for the corporate bonds.
Article 167 When the company issues corporate bonds, the bonds must show information including the company's name, the face value of the bond, the interest rate, and the date of maturity, and be signed by the chairman of the board of directors and sealed by the company.
Article 168 Corporate bonds may be either bearer or registered bonds.
Article 169 A company which issues corporate bonds shall keep a corporate bonds register.
When registered bonds are issued, the following items shall be set out in the register:
(1) the names and addresses of the bondholders;
(2) the date on which the bond was acquired and its number;
(3) the total amount of the bond, its face value, interest rate, principal and interest payment dates and method of payments;
(4) the issue date.
When bearer bonds are issued, the register shall set out the total amount of the bonds, the interest rate, the maturity date and payment method, the date of issue and the number of the bonds.
Article 170 Corporate bonds may be transferred . Transfers of corporate bonds shall be carried out through a legally established stock exchange.
The transfer price is negotiated and agreed upon by the transferor and transferee.
Article 171 Registered corporate bonds are transferred by the bondholder through endorsement or by other means as stipulated by law or administrative regulations. Upon the transfer of a registered corporate bond, the company records in its corporate bond register the name and address of the transferee.
A transfer of a bearer corporate bond becomes effective upon the delivery of the corporate bond to the transferee at a legally established stock exchange.
Article 172 Subject to a resolution at a general meeting of the shareholders, a listed company may issue corporate bonds convertible into shares of the company. The procedures for conversion are specified in the corporate bond offer procedures.
The issue of corporate bonds convertible into shares shall be submitted to the securities administration departments of the State Council for approval. Corporate bonds convertible into shares shall meet not only the requirements for the issue of bonds but also the requirements for the issue of shares.
Corporate bonds convertible into shares shall be marked "convertible corporate bonds", and the quantity of convertible corporate bonds shall be recorded in the corporate bond register.
Article 173 A company which issues corporate bonds convertible into shares shall issue share certificates to bondholders in accordance with its conversion procedure, provided that the bondholder has the option whether or not to convert.
CHAPTER6 FINANCIAL AFFAIRS AND ACCOUNTING OF A COMPANY
Article 174 A company shall establish its financial and accounting systems according to laws, administrative regulations and the regulations of the responsible finance department of the State Council. Article 175 At the end of each fiscal year, the company shall prepare a financial report and shall be examined and verified as provided by law. The company's financial statements shall include the following accounting statements and schedules:
(1) balance sheet;
(2) profit and loss statement;
(3) statement of financial changes;
(4) explanation of financial condition;
(5) profit distribution statement.
Article 176 A limited liability company shall present its financial statements to the shareholders in accordance with the time periods specified in the company's articles of association.
A company limited by shares shall deposit its financial statements at the company for inspection by the shareholders at least twenty days before the convening of the annual general meeting of shareholders.
A company limited by shares established by the offer method must make public its financial statements.
Article 177 When distributing each year's after-tax profits, the company shall set aside ten per cent of its after tax profits for the company's statutory common reserve fund and five per cent to ten per cent of its profits for the company's statutory common welfare fund. When the aggregate balance in the statutory common reserve fund is fifty per cent or more of the registered capital of the company, the company need not make any further allocations to that fund.
When the company's statutory common reserve fund is not sufficient to make up for the company's losses of the previous year, current year profits shall be used to make up for the losses before allocations are set aside for the statutory common reserve fund or the statutory common welfare fund in accordance with the previous clause.
Subject to a resolution of the shareholders' meeting, after the company has set aside funds from after-tax profits for the statutory common reserve fund, the company may set aside funds for a discretionary common reserve fund.
After the company has made up its losses and made allocations to its common reserve fund and statutory common welfare fund, the remaining profits are distributed in proportion to the shareholders' capital contributions if the company is a limited liability company and in proportion to the number of shares held by the shareholders if the company is a company limited by shares.
If a shareholders meeting or the board of directors violates the above provisions and profits are distributed to the shareholders before the company makes up for losses or makes allocations to the statutory common reserve fund and the statutory common welfare fund, the profits distributed in violation of the provisions must be returned to the company.
Article 178 In accordance with this Law, the premium a company limited by shares obtains when it issues shares at a price which exceeds par value, and any other income designated for the capital common reserve fund by the regulations of the responsible finance department of the State Council shall be allocated to the company's capital common reserve fund.
Article 179 The common reserve fund of a company is used to make up its losses, expand its production and operations or for conversion into additional capital of the company.
When the common reserve fund of a company limited by shares is converted to capital in accordance with a revolution passed at a general meeting of the shareholders, the company either distributes new shares in proportion to the shareholders' number of shares, or increases the par value of each share, provided, however, that when the statutory common reserve fund is converted to capital, the balance of the statutory common reserve fund may not fall below 25% of the registered capital.
Article 180 The company's statutory common welfare fund is used for the collective welfare of the company's staff and workers.
Article 181 A company may not keep accounting books and records other than those provided by law.
The company's assets may not be held in an account opened in the name of any individual.
CHAPTER 7 MERGER AND DIVISION OF A COMPANY
Article 182 A resolution to effect the merger and division of a company shall be passed at a meeting of the shareholders.
Article 183 The merger and division of a company limited by shares must be approved by the authorized department of the State Council or by the provincial government.
Article 184 The merger of a company may take the form of either merger by absorption or merger by the establishment of a new company.
Where one company is absorbed by another in a merger by absorption, the absorbed company is dissolved. Where two or more companies establish a new company in a merger by re-establishment, all merged parties are dissolved.
In the event of a merger, the merging parties shall execute a merger agreement and prepare a balance sheet and an inventory of property. The company shall notify its creditors within ten days of the date of the company's resolution to merge and shall publish public notices in a newspaper at least three times within thirty days of the date of the company's resolution to merge. A creditor has the right within thirty days of receiving such notice from the company (or, for creditors who do not receive the notice within ninety days of the date of the first public notice) to demand that the company repay its debts to that creditor or provide a corresponding guarantee for such debt. A company which does not repay its debts or provide corresponding guarantees for such debts may not be merged.
At the time of merger, the creditors' rights and indebtedness of each of the merged parties shall be assumed by the company which survives the merger or the newly established company.
Article 185 When a company is divided, its property shall be split up according.
At the time a company is divided, the company shall prepare a balance sheet and an inventory of property. The company shall notify its creditors within ten days of the date of the company's resolution to divide and shall publish public notices in a newspaper at least three times within thirty days of the date of the company's resolution to divide. A creditor has the right within thirty days of receiving such notice from the company (or, for creditors who do not receive the notice, within ninety days of the date of the first public notice) to demand that the company repay its debts to that creditor or provide a corresponding guarantee for such debt. A company which does not repay its debts or provide corresponding guarantees for such debts may not be divided.
Debts of the company prior to division are assumed by the post-division companies in accordance with the agreements entered into.
Article 186 When a company needs to reduce its registered capital, it prepares a balance sheet and an inventory of property.
The company shall notify its creditors within ten days of the date of the company's resolution to reduce its registered capital and shall publish public notices in a newspaper at least three times within thirty days of the date of the company's resolution to reduce its registered capital. A creditor has the right within thirty days of receiving such notice from the company (or, for creditors who do not receive notice, within ninety days of the date of the first public notice) to demand that the company repay its debts to that creditor or provide a corresponding guarantee for such debt.
The registered capital of a company following such capital reduction may not be less than the minimum levels set by law.
Article 187 When a limited liability company increases its registered capital, the shareholders' subscription and payment of contributions for the newly increased capital are carried out in accordance with the relevant provisions of this Law governing payment of capital contributions for the establishment of a limited liability company.
When a company limited by shares issues new shares in order to increase its registered capital, the process by which shareholders subscribe for new shares shall be carried out in accordance with the relevant provisions of this Law governing payment for shares for the establishment of a company limited by shares.
Article 188 When a company merges or divides and there is a change in any item in its registration, the company shall change its registration with the company registration authority in accordance with the law. When a company dissolves, the company shall cancel its registration in accordance with the law. When a new company is established, its establishment shall be registered in accordance with the law.
When a company increases or decreases its registered capital, the company shall carry out a change of registration with the company registration authority.
CHAPTER 8 INSOLVENCY, DISSOLUTION AND LIQUIDATION OF A COMPANY
Article 189 In the case of a company legally declared bankrupt because it is unable to repay debts due, the people's court in accordance with the provisions of relevant laws organizes the shareholders, relevant organizations and relevant professional personnel to establish a liquidation group to carry out bankruptcy liquidation procedures with respect to the company.
Article 190 A company may dissolve in any of the following situations:
(1) pursuant to the provisions of the company's articles of association, the term of the company has expired or one of the other events which are grounds for dissolution has occurred;
(2) a resolution for dissolution is passed by a shareholder's meeting;
(3) dissolution is necessary due to a merger or division of the company.
Article 191 A liquidation group shall be set up within fifteen days of a company being dissolved pursuant to provisions (1) or (2) of the preceding article. The liquidation group of a company limited by shares is determined by a general meeting of the shareholders. If a liquidation group to carry out liquidation procedures is not set up within the specified time limit, the creditors may apply to the people's court to have it designate relevant persons to form a liquidation group in order to carry out liquidation procedures. The people's court shall accept and hear such applications and timely designate the members of the liquidation group in order to carry out liquidation procedures.
Article 192 A company which is ordered according to law to close down for violating laws and administrative regulations shall be dissolved, and the relevant responsible authority shall organize the shareholders, relevant institutions and professional personnel to establish a liquidation group to carry out liquidation procedures.
Article 193 During the liquidation period, the liquidation group shall exercise the following powers:
(1) to check the company's property and separately prepare a balance sheet and an inventory of property;
(2) to send notices to creditors or notify them by public notice;
(3) to deal with and liquidate relevant uncompleted business matters of the company;
(4) to pay off outstanding taxes;
(5) to clear creditors' rights and indebtedness;
(6) to deal with the property remaining after the company's debts have been repaid;
(7) to represent the company in any civil litigation proceedings.
Article 194 The liquidation group shall within ten days of its establishment send notices to creditors, and within sixty days of its establishment publish public notices in a newspaper at least three times or for creditors who do not receive notice, within ninety days of the date of the first public notice. A creditor shall within thirty days of receiving notice report its creditors' rights to the liquidation group.
When reporting creditors' rights, the creditor shall provide an explanation of matters relevant to the creditor's rights and shall provide evidentiary materials. The liquidation group shall carry out registration of creditor's rights.
Article 195 After checking the company's property and preparing a balance sheet and an inventory of property, the liquidation group shall formulate a liquidation plan and present it to a meeting of the shareholders or to the relevant responsible authority for confirmation.
To the extent that the company is able to repay its debts, it respectively pays all liquidation expenses, wages of staff and workers, labour insurance fees and taxes owing, and shall repay the company's debts.
The assets of the company remaining after its debts have been repaid in accordance with the provisions of the previous clause are distributed in proportion to shareholders capital contributions if the company is a limited liability company and in proportion to the number of shares held by the shareholders if the company is a company limited by shares.
During the liquidation period, a company shall not commence any new operational activities. The property of the company shall not be distributed to the shareholders until the settlement provided for in the second paragraph of this article is complete.
Article 196 After putting the company's property in order and preparing a balance sheet and an inventory of property in connection with liquidation of the company resulting from dissolution, the liquidation group discovers that the company's assets are insufficient to repay the company's debts, the liquidation group shall immediately apply to the people's court for a bankruptcy declaration.
After a company is declared bankrupt by a ruling of the people's court, the liquidation group shall transfer liquidation matters to the people's court.
Article 197 After liquidation of the company is completed, the liquidation group shall prepare a liquidation report and present it for confirmation to a meeting of the shareholders or to the relevant responsible authority, apply to the company registration authority for cancellation of the company's registration and publish by public notice of the termination of the company. Where no application is made for cancellation of the company's registration, the company's business license is revoked by the company registration authority and a public notice is published.
Article 198 The members of a liquidation group shall faithfully carry out their tasks and shall carry out their liquidation duties in accordance with the law. The members of a liquidation group may not exploit their position to accept bribes or other illegal income, nor may they wrongfully take over the property of the company.
The members of a liquidation group who intentionally or through gross negligence cause losses to the company or its creditors shall be responsible for providing compensation.
CHAPTER 9 BRANCHES OF FOREIGN COMPANIES
Article 199 Pursuant to this Law, a foreign company may set up branches within Chinese territory, and may engage in production and operational activities. Under this Law, "foreign company" means a company registered and established outside Chinese territory in accordance with the law of a foreign country.
Article 200 To set up a branch or branches within Chinese territories, a foreign company must file an application with the responsible Chinese authorities, and present its company's articles of association, the company's registration certificate issued by its home country and other relevant documents. After receiving approval, the company registers with the company registration authority as provided by law and obtains a business license.
The approval procedures for branches of foreign companies are separately provided for in regulations issued by the State Council.
Article 201 A foreign company which establishes a branch within Chinese territory must appoint a representative or agent in charge of the branch and allocate to the branch appropriate funds for the operational activities it is engaged in.
Where it is necessary to provide for a minimum amount of operational funds for branches of foreign companies, separate regulations are issued by the State Council.
Article 202 The branch of a foreign company shall indicate in its name the nationality of the foreign company and whether it has limited or unlimited liability.
The articles of association of the foreign company shall be available at its branches.
Article 203 A foreign company is a foreign legal person and its branches established within Chinese territory do not have the status of Chinese legal persons.
A foreign company assumes civil liability for the operational activities of its branches within Chinese territory.
Article 204 A branch of a foreign company who intends to engage in business activities within Chinese territory must be established with approval and must abide by the laws of China and may not harm the social and public interests of China. Its legitimate rights and interests are protected by the laws of China.
Article 205 When a foreign company withdraws its branches from Chinese territory, it must repay its debts according to law and carry out liquidation in accordance with the provisions of the relevant company liquidation procedures set out in this Law. Until such debts are repaid, the property of the branch may not be transferred outside of Chinese territory.
CHAPTER 10 LEGAL LIABILITIES
Article 206 A company which violates this Law by falsely reporting its registered capital when registering, presenting false documentation or employing other deceptions to conceal important facts in order to obtain registration of the company is ordered to remedy the situation. A company that falsely reports its registered capital is fined at least five per cent and no more than ten per cent of the amount of the registered capital falsely reported. A company that presents false documentation or employs other deceptions to conceal important facts is fined at least RMB 10,000 and no more than RMB100,000. In serious cases, the company's registration is cancelled. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 207 A company which prepares a false prospectus, share subscription application or corporate bond offer procedure in connection with the issue of shares or corporate bonds is ordered to halt such issue and return all funds raised together with interest, and is fined an amount of at least one per cent and no more than five per cent of the amount of the funds illegally raised. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 208 A promoter or shareholder who does not pay cash or property in kind or does not transfer property rights, so making a false capital contribution and committing fraud against creditors and the general public, is ordered to remedy his wrongs and is fined at least five per cent and no more than ten percent of the capital which he falsely contributed. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 209 A promoter or shareholder who illicitly withdraws his capital contribution after the establishment of the company is ordered to correct his wrongs and is fined at least five per cent and no more than ten per cent of the capital contribution illicitly withdrawn. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 210 A company which without having obtained approval as provided by this Law from the relevant responsible authority arbitrarily issues shares or corporate bonds is ordered to halt such issue and return all funds raised together with interest, and is fined at least one per cent and no more than five per cent of the amount of the funds illegally raised. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 211 A company which violates this Law by keeping accounting books and records other than those provided for by law is ordered to remedy the situation and is fined at least RMB 10,000 and no more than RMB 100,000. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Where assets of the company are held in an account opened in the name of an individual, illegal income is confiscated and there is a fine of at least the same amount and less than five times the amount of the illegal income. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 212 If a company furnishes to shareholders or the general public financial statements which are false or which conceal important facts, the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility are fined at least RMB 10,000 and no more than RMB 100,000. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 213 If in violation of this Law, state assets are converted into shares, sold at a low price or given to individuals without compensation, the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 214 If a director, supervisor or manager exploits his position to accept bribes or other illegal income or to take property of the company wrongfully, the illegal income is confiscated, he is ordered to return the company's property and he is subject to sanctions by the company. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
If a director or manager misappropriates company funds or takes company funds and lends them to another, he is ordered to return the funds to the company, is subject to sanctions by the company, and turns over to the company all income obtained. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
When a director or manager in violation of this Law uses the company's assets to provide a guarantee for the debts of its shareholders or other individuals, he is ordered to cancel the guarantee, is responsible according to law for providing compensation, and turns over to the company all income derived from the illegal provision of the guarantee. If the circumstances are serious, he is subject to sanctions by the company.
Article 215 If a director or manager in violation of this Law operates for himself or on behalf of another a business in the same line of business as the company in which he holds a position, in addition to turning over all income obtained, he is subject to sanctions by the company.
Article 216 If a company does not make allocations to its statutory common reserve fund or its statutory common welfare fund in accordance with this Law, the company is ordered to make up the exact amount which should have been allocated and is subject to a fine of at least RMB 10,000 and no more than RMB 100,000.
Article 217 In the event of a merger, division, reduction of registered capital or liquidation, if the company does not send notice to or publish public notices for its creditors in accordance with the provisions of this Law, the company is ordered to remedy the situation and is subject to a fine of at least RMB 10,000 and no more than RMB 100,000.
If at the time of liquidation, a company conceals its property, makes false entries on its balance sheet or its inventory of property, or distributes the company's property before repaying its debts, the company is ordered to remedy the situation and is subject to fine of at least one per cent and no more than five per cent of the assets concealed or the debts not repaid before distribution. The personnel in charge of the matter who have direct responsibility and the other personnel with direct responsibility are subject to fine of at least RMB 10,000 and no more than RMB 100,000. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 218 If a liquidation group does not file a liquidation report with the company registration authority in accordance with the provisions of this Law, or the liquidation report conceals important facts or contains significant omissions, the wrongs are ordered to be remedied.
If a member of the liquidation group exploits his position for corrupt or improper ends, obtains illegal income or wrongfully takes over assets belonging to the company, he is ordered to return the company's property, the illegally obtained income is confiscated, and he may be fined at least the amount of and no more than five times the amount of the income illegally obtained. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 219 If an institution responsible for assessing, verifying, or examining and certifying assets provides false documentation, its unlawful income is confiscated and it is subject to a fine of at least the amount of and no more than five times the amount of the unlawful income. The institution may also be ordered to cease doing business, and the certification of the qualifications of the personnel directly responsible may be revoked by the relevant responsible authority. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
If an institution responsible for assessing, verifying, or examining and certifying assets, as a result of negligence, prepares a report which contains important omissions, the institution is ordered to remedy the situation. If the circumstances are relatively serious, it is subject to a fine of at least the amount of and no more than three times the amount of the income received. The institution may also be ordered to cease doing business, and the certification of the qualifications of the personnel directly responsible may be revoked by the relevant responsible authority.
Article 220 If the relevant department authorised by the State Council approves an application for the establishment of a company which does not meet the requirements of this Law or approves an application for an issue of shares which does not meet the requirements of this Law, and the circumstances are serious, the personnel who have direct responsibility and other personnel with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 221 If the securities administration departments of the State council grant approval for share offers, listings of shares and issues of bonds which do not meet the requirements of this Law, and the circumstances are serious, the personnel who have direct responsibility and other personnel with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 222 If the company registration authority registers a company which does not meet the registration requirements of this Law, and the circumstances are serious, the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 223 If a higher level department orders the company registration authority to register a company which does not meet the registration requirements of this Law, or covers up an unlawful registration, the personnel in charge of the matter who have direct responsibility and such other persons with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 224 A company not lawfully registered as a limited liability company or a company limited by shares which falsely makes use of the title"limited liability company" or "company limited by shares" is ordered to remedy the situation or is cancelled. It may also be subject to a fine of at least RMB 10,000, and no more than RMB 100,000. If the violation constitutes a criminal offence, criminal liability is investigated in accordance with the law.
Article 225 A company which without justification fails to commence business more than six months after establishment or ceases to do business for more than six consecutive months after commencing business, has its business license revoked by the company registration authority.
When items in a company's registration have changed, and the company fails to carry out a change of registration as required by this Law, the company is ordered to register such changes within a certain time period, and if the company fails to do so, it is subject to a fine of at least RMB 10,000 and no more than RMB 100,000.
Article 226 If a foreign company in violation of the provisions of this Law, arbitrarily establishes a branch or branches within Chinese territory, it is ordered to remedy the situation or to close down, and may be subject to a fine of at least RMB 10,000 and no more than RMB 100,000.
Article 227 If the responsible authority whose duty is to process approvals pursuant to this Law fails to grant approval to an application which meets the requirements of this Law or the company registration authority fails to register a company whose application meets the requirements of this Law, the interested party may apply for reconsideration according to law or may bring an administrative suit.
Article 228 If a company which violates the provisions of this Law shall be subject to civil claims for compensation and to payment of fines and penalties, but has insufficient assets, it first assumes responsibility for payment of the civil claims.
CHAPTER 11 SUPPLEMENTARY ARTICLES
Article 229 Companies registered and established prior to the effective date of this Law pursuant to laws, administrative regulations, local regulations and pursuant to the "Standard Opinion on Limited Liability Companies" or the "Standard Opinion on Companies Limited by Shares" issued by the relevant responsible department of the State Council continue to exist. Those companies not completely satisfying the requirements of this Law shall meet the requirements of this Law within the specified time limit. Specific methods for implementation of this Law are to be set out in separate regulations issued by the State Council.
The proportion of industry properties and non-patent technologies as contributions by promoters to the registered capital, conditions for issue of new shares and application for its shares to be listed on a stock exchange of a company limited falling into high-tech industry, shall be provided by the State Council separately.
Article 230 This Law comes into effect on 1 July 1994.
This translation, together with any explanatory material, is provided courtesy of Lehman Tax & Accounting.
