Company Law of the People's Republic of China (Amended in 2004)
Company Law of the People's Republic of China (Amended in 2004)
Company Law of the People's Republic of China (Amended in 2004)
Order of the President [2004] No. 20
August 28, 2004
(Adopted at the 5th Session of the Standing Committee of the Eighth National People's Congress on December 29, 1993; amended for the first time pursuant to the Decision to Amend the Company Law of the People's Republic of China passed by the 13th session of the Standing Committee of the Ninth People's Congress on December 25, 1999; and amended for the second time pursuant to the Decision to Amend the Company Law of the People's Republic of China passed at the 11th session of the Standing Committee of the tenth National People's Congress of the People's Republic of China on August 28, 2004)
Contents
Chapter I General Provisions
Chapter II Establishment and Organization of a Limited Liability Company
Section 1 Establishment
Section 2 Organization
Section 3 Wholly State-owned Companies
Chapter III Establishment and Organization of a Joint Stock Limited Company
Section 1 Establishment
Section 2 The Board of Shareholders
Section 3 The Board of Directors and Managers
Section 4 The Board of Supervisors
Chapter IV Issuance and Transfer of Stock in a Joint-stock Limited Company
Section 1 Issuance of Shares
Section 2 The Transfer of Shares
Section 3 Listed Companies
Chapter V Corporate Bonds
Chapter VI Financial Affairs and Company Accounts
Chapter VII Company Mergers and Demergers
Chapter VIII Bankruptcy,Dissolution and Liquidation
Chapter IX The Branches of Foreign Companies
Chapter X Legal Liabilities
Chapter XI Supplementary Provisions
Chapter I General Provisions
Article 1 This Law is formulated in accordance with the Constitution of the People's Republic of China with the objective of adapting to the needs of a modern enterprise system, standardizing the organization and activities of companies, protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining the order of the social economy and promoting the development of a socialist market economy.
Article 2 The term "company" referred to in this Law 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 this Law.
Article 3 Limited liability companies and joint stock limited companies are enterprise legal persons.
In a limited liability company, a shareholder bears liability for the company to the extent of the amount of capital contribution of the shareholder. The company bears liability for its debts with all its assets.
In a joint stock limited company, the full capital of the company is divided into equal shares, and a shareholder bears liability for the company to the extent of the shares held by the shareholder; the company bears liability for its debts with all its assets.
Article 4 Shareholders of a company, as capital contributors, shall, proportionate to the amount of their respective capital contributions, have rights such as the right to capital returns, the right to participate in major decision-making and the right to appoint the management of the company.
A company shall enjoy all legal person property rights as formed by the investments of its shareholders and, in accordance with law, enjoy civil rights and bear civil responsibilities.
State-owned property rights in a company belong to the state.
Article 5 A company shall independently manage all its assets and be responsible for its profits and losses with all its legal person property rights.
Under the State's general control and regulation, a company shall have autonomy in organizing production and operations according to market demands with an objective to increase economic benefits and productivity and to maintain or increase the value of its assets.
Article 6 A company shall implement an internal management system that divides powers and responsibilities clearly, applies scientific management principles and combines the use of incentives and restrictions.
Article 7 When converting into a company, a state-owned enterprise shall, in compliance with relevant laws and administrative regulations, make changes to its operational mechanisms, inventory its assets, define and classify its property rights, settle outstanding claims and debts, appraise its assets and establish a standard internal organizational structure.
Article 8 Limited liability companies or joint stock limited companies must be established according to the requirements of this Law. Where a company meets the relevant requirements, it may be registered as a limited liability company or joint stock limited company; those that do not meet the relevant requirements shall not be registered as such.
Where relevant laws and administrative regulations stipulate that examination and approval is required for the establishment of a company, examination and approval shall be obtained prior to registration in accordance with law.
Article 9 A limited liability company established pursuant to this Law shall include the words "limited liability company" in its name.
A joint stock limited company established pursuant to this Law shall include the words "joint stock limited company" in its name.
Article 10 The main office of a company shall be its domicile.
Article 11 A company shall formulate its articles of association in accordance with this Law. The articles of association shall be binding on the company, its shareholders, directors, supervisors and managers.
The company's business scope shall be specified in the articles of association and registered in accordance with law. If the business scope includes activities restricted by laws or administrative regulations, they shall be subject to approval in accordance with law.
A company shall conduct its business activities within its registered business scope. If a company has revised its articles of association in accordance with legal procedures and altered its registration through the registration authorities, it may alter its business scope.
Article 12 A company may invest in other limited liability companies or joint stock limited companies, bearing liabilities for the company or companies to the extent of the amount of its capital contribution. Except for investment and holding companies specified by the State Council, the total amount of investment of a company in another limited liability company or joint stock limited company shall not exceed 50% of the former's net assets, not including any profit-converted capital increase received from the company invested in after the investment.
Article 13 A company may establish branches. The branches shall not have enterprise legal person status, and its civil liability shall be borne by the company.
A company may establish subsidiaries, which will have enterprise legal person status and bear independent civil liability in accordance with law.
Article 14 When carrying out business activities, companies shall abide by the law, uphold professional ethics, promote the development of the socialist spirit and culture, and accept supervision by the government and the general public.
The legitimate rights and interests of companies are protected by law and shall not be infringed upon.
Article 15 A company shall protect the legitimate rights and interests of its staff, strengthen labor protection and implement safe production.
A company shall provide its staff with various forms of vocational and on-the-job training to improve the quality of their work.
Article 16 Company employees shall, as provided for by law, organize unions, engage in union activities and safeguard their legitimate rights and interests. A company shall provide the necessary conditions for carrying out union activities.
Wholly state-owned companies or limited liability companies established by the investment of two or more state-owned enterprises or other state-owned investment entities shall, through the means of employees' representative assemblies or other methods, implement democratic management in accordance with the Constitution of the People's Republic of China and other relevant laws.
Article 17 The grassroots organization activities of the Communist Party of China within a company shall be conducted according to the Constitution of the Communist Party of China.
Article 18 This Law applies to foreign-invested limited liability companies except where otherwise stipulated in laws relevant to Sino-foreign joint ventures, Sino-foreign joint cooperative ventures and foreign enterprises in which case the latter laws shall apply.
Chapter II Establishment and Organization of a Limited Liability Company
Section 1 Establishment
Article 19 A limited liability company shall meet the following conditions:
1. The number of shareholders meets the legal requirement;
2. The amount of shareholders paid in capital meets the legal minimum capital;
3. The articles of association are formulated by shareholders;
4. The company has a name and an organizational structure that complies with requirements applicable to limited liability companies.
5. The company has a permanent site for production and/or operation and necessary conditions for production and/or operation.
Article 20 A limited liability company shall be established with the paid in capital of at least two but no more than fifty shareholders.
State-authorized investment entities or state-authorized departments may establish wholly state-owned limited liability companies.
Article 21 State-owned enterprises established before the coming into force of this Law that meet the requirements for a limited liability company under this Law and is invested by a single entity may be converted into a wholly state-owned limited liability company, or, where it is invested by multiple entities, into a limited liability company as provided for in Paragraph 1 of the preceding Article.
The measures and specific procedures for the conversion of state-owned enterprises into companies shall be formulated separately by the State Council.
Article 22 The articles of association of a limited liability company shall specify the following:
1. The name and domicile of the company;
2. The business scope;
3. The registered capital of the company;
4. The names of the shareholders of the company;
5. The rights and obligations of the shareholders;
6. The forms and amounts of capital contributions made by the shareholders of the company;
7. Conditions that must be satisfied for shareholders to transfer their paid in capital;
8. The institutions of the company and their establishment, functions, and procedural rules for their meetings;
9. The legal representative of the company;
10. Grounds for dissolution of the company and the methods of its liquidation; and
11. Any other matter deemed necessary by a shareholder of the company..
Shareholders shall affix their signatures and seals on the articles of association of the company.
Article 23 The registered capital of a limited liability company is the total amount of paid in capital contributed by all the shareholders registered at the registration authorities.
The registered capital of a limited liability company shall not be less than the amounts specified below:
1. For a company engaging primarily in production: CNY500,000;
2. For a company engaging primarily in wholesale: CNY500,000;
3. For a company engaging primarily in commercial retail: CNY300,000;
4. For a company engaging in technology development, consulting, or services, CNY100,000.
Where the minimum registered capital of limited liability companies of specific sectors needs to be higher than that stipulated in the preceding Paragraph, it shall be otherwise stipulated by laws or administrative regulations.
Article 24 Shareholders may make their contributions in the forms of cash, material assets, industrial property rights, non-patented technology or land use rights. Where material assets, industrial property rights, non-patented technologies or land use rights are to be used as capital contribution their value must be assessed and such assets and properties must be verified, and their value shall not be overestimated or underestimated. Value assessments for land use rights shall be conducted according to law or administrative regulations.
The value of industrial property rights or non-patented technologies to be used as capital contribution shall not exceed 20 percent of the limited liability company's total registered capital, except where the State makes special provisions for the use of new and advanced technologies.
Article 25 Shareholders shall pay in full the respective paid in capital that they subscribed to as specified in the articles of association. Where the contribution is in the form of cash, the funds shall be deposited into a temporary bank account opened by the limited liability company to be established. Where the contribution is in the form of material assets, industrial property rights, non-patented technologies or land use rights, the procedures for property right transfer shall be carried out in accordance with law.
A shareholder who fails to pay in the amount of capital subscribed to in accordance with the preceding Paragraph shall be liable for breach of contract to the other shareholders who have paid their capital contributions in full.
Article 26 Once all shareholders have paid their capital contributions in full, the paid in capital must be verified by a legally authorized capital verification institution and the said institution must issue a certificate to that effect.
Article 27 Once the full amount of the paid in capital has been verified, a representative jointly designated or an agent jointly authorized by all the shareholders shall apply to the company registration authorities to register the establishment of the company by submitting the application form for registration, the articles of association, the capital verification documents and other relevant documents.
Where prior examination and approval is required for the registration pursuant to relevant laws or administrative regulations, the relevant approval document shall be submitted with the application for registration of establishment.
The company registration authority shall grant registration and issue business licenses when the requirements of this Law have been met. Registration shall not be allowed where requirements of this Law are not met.
The date of issue of a company's business license shall be the date of establishment of the limited liability company.
Article 28 If, after the establishment of a limited liability company, the actual value of any material assets, industrial property rights, non-patented technology or land use rights contributed as paid in capital is found to be significantly lower than the value stipulated in the company's articles of association, the difference shall be made up for by the shareholder(s) concerned, with the other shareholders at the time of establishment bearing joint and several liability.
Article 29 When branches of a limited liability company are set up concurrently with its establishment, the company shall apply to the registration authorities for registration and to obtain business licenses for the said branches.
Where a limited liability company sets up branches after its establishment, the legal representative of the company shall apply to the registration authorities for registration and to obtain business licenses for the said branches.
Article 30 Once establishment is complete, the limited liability company shall issue capital contribution certificates to its shareholders. A certificate of contribution shall specify the following:
1. The name of the company;
2. The date of registration of the company;
3. The amount of registered capital of the company;
4. The name of the shareholder, the amount of paid in capital contributed and the date of contribution; and
5. The serial number and date of issue of the capital contribution certificate.
Capital contribution certificates shall be stamped with company seals.
Article 31 A limited liability company shall maintain a shareholders' register recording the following information:
1. The name and domicile address of each shareholder;
2. The amount of capital contributed by each shareholder;
3. The serial numbers of the capital contribution certificates.
Article 32 Shareholders of a company have the right to view the minutes of shareholders' meetings and the financial reports of the company.
Article 33 Shareholders shall receive dividends in proportion to the size of their contributions. If a company intends to increase its capital, shareholders shall have preemptive rights to subscribe to the increased shares.
Article 34 Shareholders are not permitted to withdraw contributions after the company has been registered.
Article 35 Shareholders may transfer some or all of their paid in capital to other shareholders.
When transferring paid in capital to persons other than shareholders, a shareholder shall obtain the consent of a simple majority of the shareholders. Shareholders who disapprove of the transfer shall purchase the shares to be transferred, failing which the shareholder shall be regarded as consenting to the transfer.
With regard to shares which have been approved for transfer, other shareholders shall have preemptive subscription rights thereto under the same terms.
Article 36 Once a shareholder has transferred his or her paid in capital in accordance with law, the company shall record in the shareholders' register the name and domicile address of each transferee and the amount of capital transferred.
Section 2 Organization
Article 37 A limited liability company's board of shareholders shall consist of all its shareholders. The board of shareholders shall be the highest authoritative body of the company and shall exercise its powers in accordance with this Law.
Article 38 The board of shareholders shall exercise the following powers and functions:
1. To decide upon the company's operational guidelines and investment plans;
2. To elect and replace directors and decide on issues related to directors' remunerations;
3. To elect and replace supervisors the positions of which are undertaken by shareholders' representatives and decide on the remuneration of supervisors;
4. To examine and approve reports of the board of directors;
5. To examine and approve reports of the board of supervisors or a supervisor;
6. To examine and approve the company's annual budget and final accounting plan;
7. To examine and approve company profit distribution plans and loss recovery plans;
8. To pass resolutions on the increase or decrease of registered capital;
9. To pass resolutions on the issuance of corporate bonds;
10. To pass resolutions on the transfer of paid in capital to persons other than shareholders;
11. To pass resolutions on issues such as mergers, demergers, change in company form, dissolution and liquidation of the company; and
12. To amend the company's articles of association.
Article 39 The deliberation and voting procedures of a board of shareholders shall be provided for in the company's articles of association except where otherwise stipulated by this Law.
Resolutions on the increase or decrease of registered capital, demergers, mergers, dissolution or change of company form must be approved by shareholders representing at least two-thirds of the shareholders' voting rights.
Article 40 A company may amend its articles of association. A resolution for the amendment of a company's articles of association must be approved by shareholders representing at least two-thirds of the shareholders' voting rights.
Article 41 Shareholder voting rights in a shareholders' meeting shall be exercised in accordance with the proportion of their respective capital contributions.
Article 42 The first shareholders' meeting shall be convened and chaired by the shareholder with the largest capital contribution and shall carry out his or her powers and obligations in accordance with this Law.
Article 43 Shareholders' meetings may be classified into regular meetings and interim meetings.
Regular meetings shall be convened at regular times according to the company's articles of association. Interim meetings may be convened by the motion of shareholders representing at least a quarter of the voting rights, directors representing at least one third of the directors, or a supervisor.
If a limited liability company has a board of directors, shareholders meetings shall be convened by the board of directors and chaired by the chairman of the board of directors. If the chairman of the board is unable to perform his or her duty due to special reasons, shareholder meetings shall be chaired by a vice-chairman of the board of directors or a director designated by the chairman of the board.
Article 44 When a shareholders' meeting is to be convened, the shareholders shall be notified 15 days before the meeting.
The board of shareholders shall keep minutes of decisions on matters discussed at their meetings which shall be signed by the shareholders present at the meetings.
Article 45 The board of directors of a limited liability company shall consist of 3 to 13 persons.
For a limited liability company established by the investment of two or more state-owned enterprises or two or more other state-owned investment entities, members of its board of directors shall include employees' representatives. Employees' representatives shall be elected democratically by the employees.
A board of directors shall have a chairman and may have vice-chairmen. The means by which the chairman and vice-chairmen of the board of directors are to be elected shall be stipulated by the company's articles of association.
The chairman of the board of directors is the legal representative of the company.
Article 46 The board of directors shall be responsible to the board of shareholders and shall exercise the following powers and functions:
1. Convene shareholders' meetings and report to the shareholders on the company's operations;
2.
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