Company Law of the People's Republic of China (Revised in 2005)

Company Law of the People's Republic of China (Revised in 2005)


Company Law of the People's Republic of China (Revised in 2005)

Order of the President No.42

October 27, 2005

The Company Law of the People's Republic of China was revised and adopted at the 18th Session of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on October 27, 2005. The revised Company Law of the People's Republic of China is hereby promulgated for implementation as of January 1, 2006.

Hu Jintao President of the People's Republic of China

Company Law of the People's Republic of China

(Adopted at the Fifth Session of the Standing Committee of the Eighth National People's Congress on December 29, 1993; revised for the first time in accordance with the Decision of the 13th Session of the Standing Committee of the Ninth People's Congress on Revising the Company Law of the People's Republic of China dated December 25, 1999; revised for the second time in accordance with the Decision of the 11th Session of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on Revising the Company Law of the People's Republic of China dated August 28, 2004; and revised at the 18th Session of the Tenth National People's Congress of the People's Republic of China on October 27, 2005)

Contents
Chapter I General Provisions
Chapter II Establishment and Organizational Structure of a Limited Liability Company
Section 1 Establishment
Section 2 Organizational Structure
Section 3 Special Provisions on Single Shareholder Limited Liability Companies
Section 4 Special Provisions on Wholly State-owned Companies
Chapter III Transfer of Stock Rights in Limited Liability Companies
Chapter IV Establishment and Organizational Structure of a Joint Stock Limited Company
Section 1 Establishment
Section 2 General Meeting
Section 3 Board of Directors and Managers
Section 4 Board of Supervisors
Section 5 Special Provisions on the Organizational Structure of a Listed Company
Chapter V Issuance and Transfer of Shares in a Joint Stock Limited Company
Section 1 Issuance of Shares
Section 2 Transfer of Shares
Chapter VI Qualifications and Duties of Company Directors, Supervisors and Senior Officers
Chapter VII Corporate Bonds
Chapter VIII Financial Affairs and Accounting of Companies
Chapter IX Combination and Division of Companies; Increase and Reduction of Registered Capital
Chapter X Company Dissolutions and Liquidations
Chapter XI Branches of Foreign Companies
Chapter XII Legal Liability
Chapter XIII Supplementary Provisions

Chapter I General Provisions

Article 1 The Company Law of the People's Republic of China (Revised in 2005) (hereinafter referred to as the "Law") is enacted for the purposes of regulating the organization and activities of companies, protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining the social economic order, and promoting the development of the socialist market economy.

Article 2 For the purpose of the Law, the term "company" refers to a limited liability company or a joint stock limited company established within the territory of the People's Republic of China in accordance with the Law.


Article 3 A company is an enterprise legal person which has independent legal person property and enjoys legal person property rights. A company shall be liable for its debts to the extent of all its assets.
A shareholder of a limited liability company is liable to the company to the extent of its/his respective capital contribution. A shareholder of a joint stock limited company is liable to the company to the extent of the shares it/he has subscribed for.


Article 4 Shareholders of a company are entitled to enjoy the return on equity, participate in important decision-making, select managers and enjoy other rights in accordance with the law.

Article 5 In conducting its business operations, a company shall abide by laws and administrative regulations, observe social ethics and business ethics, act in good faith, accept the supervision of the government and the general public, and bear social responsibility.
The legitimate rights and interests of a company shall be protected by law and shall not be violated.

Article 6 To establish a company, an application for registration shall be filed with the company registration authority in accordance with the law. Where the application meets the establishment requirements of the Law, the company registration authority shall register the company as a limited liability company or joint stock limited company. Where the application does not meet the establishment requirements of the Law, it shall not be registered as a limited liability company or joint stock limited company.
Where any law or administrative regulation provides that the establishment of a company is subject to the approval, the relevant approval formalities shall be gone through in accordance with the law prior to the registration of the company.
The public may apply to the company registration authority for inquiring about the registration details of any company, and the company registration authority shall provide the public with such inquiry services.

Article 7 A lawfully established company shall be issued with a company business license by the company registration authority. The date of issuance of the company business license shall be the date of establishment of the company.
The company business license shall state the company's name, domicile, registered capital, paid-in capital, business scope, name of the legal representative and other information.
In the event of any change in the details recorded in the company business license, the company shall go through the formalities for registration of changes in accordance with the law and the company registration authority shall reissue the company business license.

Article 8 A limited liability company established in accordance with the Law shall include the words "limited liability company" or "limited company" in its name.
A joint stock limited company established in accordance with the Law shall include the words "joint stock limited company" or "joint stock company" in its name.

Article 9 A limited liability company that seeks to be converted into a joint stock limited company shall satisfy the conditions prescribed in the Law for joint stock limited companies. A joint stock limited company that seeks to be converted into a limited liability company shall satisfy the conditions prescribed in the Law for limited liability companies.
In either of the aforesaid cases, the claims and debts of the company prior to the conversion shall be succeeded by the company after the conversion.

Article 10 A company shall regard its main office as its domicile.

Article 11 A company shall formulate its articles of association in accordance with the law. The articles of association shall be binding on the company and its shareholders, directors, supervisors and senior officers.


Article 12 A company's business scope shall be defined in its articles of association and shall be registered in accordance with the law. A company may change its business scope by amending its articles of association, provided that it shall go through the formalities for registration of changes.
Where the business scope of a company includes any item subject to approval pursuant to any law or administrative regulation, the approval shall be obtained in accordance with the law.

Article 13 The legal representative of a company shall be the chairman of its board of directors, its executive director or its manager in accordance with the articles of association of the company, and shall be registered as such in accordance with the law. In the event of a change of the legal representative of the company, the company shall go through the formalities for registration of the change.

Article 14 A company may set up branches. To set up a branch, the company shall file a registration application with the company registration authority to obtain a business license. A branch shall not enjoy the status of a legal person and its civil liabilities shall be borne by the company.
A company may establish subsidiaries which enjoy the status of legal persons and shall independently bear their own civil liabilities in accordance with the law.

Article 15 A company may invest in other enterprises. However, unless otherwise provided for in any law, a company shall not become a capital contributor that shall be jointly and severally liable for the debts of an enterprise so invested in.

Article 16 Where a company intends to invest in any other enterprise or provide a guaranty for any other person, a resolution shall be passed, pursuant to the company's articles of association, by the company's board of directors, board of shareholders or general meeting. Where the articles of association prescribe any limit on the total amount of investments or guaranties allowed, or on the amount of a single investment or guaranty allowed, the said total amount or amount shall not exceed the limits prescribed.
Where a company intends to provide a guaranty for any shareholder or actual controller of the company, a resolution shall be passed by the board of shareholders or general meeting.
No shareholder referred to in the preceding paragraph or under the control of the actual controller referred to in the preceding paragraph shall participate in voting on any matter described in the preceding paragraph. Any such resolution shall be passed by a majority vote from the other shareholders attending the meeting.

Article 17 A company shall protect the legitimate rights and interests of its employees, enter into employment contracts with its employees in accordance with the law, purchase social insurance for employees, and strengthen labor protection so as to ensure work safety.
A company shall, through various means, enhance the professional education and in-service training of its employees so as to improve their quality as employees.

Article 18 The employees of a company shall, in accordance with the Labor Union Law of the People's Republic of China, organize a labor union, which shall carry out labor union activities and safeguard the legitimate rights and interests of the employees. The company shall provide the necessary conditions for its labor union to carry out its activities. The labor union shall, on behalf of the employees, enter into collective contracts with the company with respect to matters such as remuneration, working hours, welfare, insurance, and work safety and sanitation of the employees in accordance with the law.
In accordance with the Constitution and other relevant laws, a company shall practice democratic management through the employee representatives' assembly or otherwise.
When making a decision on company restructuring or any important issue relating to its business operations, or formulating any important rule or regulation, a company shall take into account the opinions of its labor union, and the opinions and proposals of its employees through the employee representatives' assembly or otherwise.


Article 19 Organizations of the Communist Party of China shall, in accordance with the Constitution of the Communist Party of China, be set up in companies and shall carry out Party activities. Companies shall provide the necessary conditions to facilitate the Party activities.

Article 20 The shareholders of a company shall abide by laws, administrative regulations and articles of association and exercise shareholders' rights in accordance with the law. They shall neither damage the interests of the company or other shareholders by abusing shareholders' rights nor damage the interests of any creditor of the company by abusing the company's independent status as a legal person or the limited liability of shareholders.
Any shareholder of a company who causes any loss to the company or to other shareholders by abusing shareholders' rights shall be liable for compensation in accordance with the law.
Where any of the shareholders of a company evades the payment of debts by abusing the company's independent status as a legal person or the limited liability of shareholders, thereby seriously damaging the interests of any creditor of the company, it shall be jointly and severally liable for the debts of the company.

Article 21 No controlling shareholder, actual controller, director, supervisor or senior officer of a company may damage the interests of the company by taking advantage of his/her/its insider connection.
Any person who causes any loss to the company by violating the preceding paragraph shall be liable for compensation.

Article 22 Any resolution of the board of shareholders or general meeting, or board of directors of a company that violates any law or administrative regulation shall be null and void.
Where the procedures for calling a meeting of the board of shareholders or general meeting, or a meeting of the board of directors, or the voting method used therein violates any law, administrative regulation or the company's articles of association, or where any resolution violates the company's articles of association, the shareholders may, within 60 days as of the date on which the resolution is passed, petition a people's court to nullify it.
Where the shareholders initiate a lawsuit under the preceding paragraph, the people's court may, at the request of the company, require the shareholders to provide a corresponding guaranty.
Where a company has, according to a resolution of the board of shareholders or general meeting, or board of directors, gone through the formalities for registration of changes, and a people's court declares the resolution null and void or strikes out the resolution, the company shall file an application with the company registration authority for cancellation of the change registration.

Chapter II Establishment and Organizational Structure of a Limited Liability Company

Section 1 Establishment

Article 23 To establish a limited liability company, the following conditions shall be met:
1. the number of shareholders constitutes a quorum;
2. the amount capital contributions made by shareholders reaches the statutory minimum capital;
3. the articles of association are formulated collectively by shareholders;
4. the company has a name and an organizational structure that complies with the requirements for limited liability companies; and
5. the company has a domicile.


Article 24 A limited liability company shall be funded and established by no more than 50 shareholders.

Article 25 The articles of association of a limited liability company shall include the following items:
1. the name and domicile of the company;
2. the business scope of the company;
3. the registered capital of the company;
4. the names of the shareholders;
5. the forms, amounts and dates of capital contributions made by the shareholders;
6. the institutions of the company and their establishment, functions and powers and rules of procedure;
7. the legal representative of the company; and
8. any other matter deemed necessary by the board of shareholders of the company.
The shareholders shall affix their signatures or seals on the articles of association of the company.


Article 26 The registered capital of a limited liability company shall be the total capital contributions subscribed for by all the shareholders as registered with the company registration authority. The amount of initial capital contributions made by all shareholders shall not be less than 20% of its registered capital and shall not be less than the statutory minimum amount of the registered capital. The shareholders shall pay in the remaining amount of the registered capital within two years as of the date of the company's incorporation; in the case of an investment company, the relevant period may be five years.
The minimum amount of the registered capital of a limited liability company shall be CNY30,000. Where any other law or administrative regulation provides for a higher minimum registered capital for limited liability companies, the provisions of that law or administrative regulation shall prevail.

Article 27 A shareholder may contribute capital in cash, in kind or with intellectual property rights, land use rights or other non-monetary assets the value of which may be assessed in financial terms and the ownership of which may be transferred in accordance with the law, except for those assets that shall not be used as capital contributions under any other law or administrative regulation.
The value of any non-financial asset used as capital contribution shall be assessed and verified, and shall not be overestimated or underestimated. Any law or administrative regulation that provides for the assessment of values shall be followed.
The amount of capital contributions made by all shareholders in cash shall be no less than 30% of the registered capital of a limited liability company.

Article 28 Each shareholder shall within the prescribed time limit fully pay in the capital contribution it subscribes for as stipulated in the articles of association. A shareholder making capital contribution in cash shall deposit the capital contribution in full in a bank account opened by the limited liability company. A shareholder making capital contribution with non-monetary assets shall complete the transfer procedures for the relevant property rights in accordance with the law.
Where any shareholder fails to make a capital contribution in the manner as specified in the preceding paragraph, the relevant shareholder shall not only make full payment to the company but shall also be liable for breach of contract to shareholders who have paid their capital contributions in full on time.

Article 29 Capital contributions made by shareholders shall be verified and certified by a lawfully established capital verification institution.

Article 30 Following the verification of the shareholders' initial capital contributions by a lawfully established capital verification institution, the representative designated by the shareholders or the agent appointed by the shareholders shall submit such documents as a company registration application, articles of association and the capital verification certificate to the company registration authority for registration of establishment.

Article 31 After the incorporation of a limited liability company, in the event that the actual value of non-monetary assets as capital contributions for its incorporation is found to be notably lower than the value specified in the articles of association of the company, the shortfall shall be made up for by the shareholder or shareholders who contributed that capital, and the other shareholders of the company at the time of incorporation shall be jointly and severally liable therefor.

Article 32 Following the incorporation of a limited liability company, each shareholder shall be issued with a capital contribution certificate, which shall specify the following items:
1. the name of the company;
2. the date of incorporation of the company;
3. the registered capital of the company;
4. the name of the shareholder, and the amount and date of its capital contribution; and
5. the serial number and date of issue of the capital contribution certificate.
The capital contribution certificate shall bear the seal of the company.

Article 33 A limited liability company shall prepare a register of members, which shall record the following items:
1. the name and domicile of each shareholder;
2. the capital contribution made by each shareholder; and
3. the serial number of each capital contribution certificate.
The shareholders recorded in the register of members may, pursuant to the register of members, claim and exercise shareholders' rights.
A company shall register the name of each shareholder and the shareholder's capital contribution with the company registration authority. The company shall handle the registration of change in the event of any change in the registered details. Any registration detail that fails to be registered or amended shall not be valid against any third party.

Article 34 Any shareholder is entitled to consult and copy the articles of association, minutes of meetings of the board of shareholders, resolutions of meetings of the board of directors, resolutions of meetings of the board of supervisors and financial reports.
Any shareholder may request to consult the accounting books of the company. Where a shareholder requests to consult the accounting books of the company, a written request shall be submitted to the company, stating the purpose thereof. Where the company, for any justifiable reason, considers that the shareholder's request for consultation of the accounting books is made for any improper purpose and may impair the legitimate interests of the company, the company may decline the shareholder's request and shall, within 15 days as of the date on which the shareholder submits the written request, issue the shareholder with a written reply, stating the reasons therefor. Where a company declines the request of any shareholder for consultation of the company's accounting books, the shareholder may request a people's court to require the company to allow the consultation sought.

Article 35 Shareholders shall draw dividends in proportion to their actual capital contributions and when a company increases its capital, shall have a pre-emptive right to subscribe for the increased capital in proportion to their actual capital contributions, unless otherwise agreed by the shareholders.

Article 36 No shareholder shall withdraw its capital contribution following the incorporation of the company.

Section 2 Organizational Structure

Article 37 The board of shareholders of a limited liability company shall consist of all its shareholders. The board of shareholders is the highest authoritative body of the company and shall exercise its functions and powers in accordance with the Law.

Article 38 The board of shareholders shall exercise the following functions and powers:
1. determine the company's operational guidelines and investment plans;
2. elect and replace non-employee representative directors and supervisors and determine matters relating to their remunerations;
3. deliberate on and approve reports of the board of directors;
4. deliberate on and approve reports of the board of supervisors or of the supervisor(s);
5. deliberate on and approve annual budgets and final accounts of the company;
6. deliberate on and approve the company's profit distribution plans and loss recovery plans;
7. make resolutions on any increase or reduction of the company's registered capital;
8. make resolutions on the issuance of corporate bonds;
9. make resolutions on any combination, division, transformation, dissolution and liquidation of the company;
10. revise the articles of association of the company; and
11. any other function or power specified in the articles of association.
In respect of any of the matters listed in the preceding paragraph, where the shareholders have unanimously agreed in writing, a decision may be made directly without convening a meeting of the board of shareholders and the decision document shall bear the signatures or seals of all the shareholders.

Article 39 The first meeting of the board of shareholders shall be convened and presided over by the shareholder with the largest capital contribution, and shall exercise its functions and powers in accordance with the Law.

Article 40 Meetings of the board of shareholders shall be classified into regular meetings and interim meetings.
Regular meetings shall be held on time as prescribed in the company's articles of association. An interim meeting shall be held where it is proposed by shareholders representing one tenth or more of the voting rights, by one third or more of the directors or by the board of supervisors or, where there is no board of supervisors, by a supervisor of the company.

Article 41 Where a limited liability company has established the board of directors, a meeting of the board of shareholders shall be convened by the board of directors and presided over by the chairman of the board of directors. Where the chairman is unable or fails to perform his duties, the deputy chairman of the board of directors shall preside over the meeting.
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