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 modem 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 promote 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,  choose managers etc. in accordance with the amount of  capital  they  have  invested in the company.

A company enjoys all legal person property rights constituted  by  the  shareholders   investment,  enjoys  civil   rights   and   assumes   civil  liabilities in accordance with 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 reorganized as a company shall  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  standardized internal management structure in accordance with the law  and  conditions and requirements of administrative regulations.

Article 8

The establishment of a limited liability company or a company  limited  by shares shall 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 shall not 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  shall have the words "limited liability company" in its name.

A company limited by shares established in accordance  with  this  Law  shall 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 shall  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  companies  limited  by  shares,  the  aggregate  amount  of
investment shall 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

In conducting its business activities, a company shall  abide  by  the  law and by business ethics,   strengthen  the  construction  of  socialist  spiritual civilization and accept the supervision of  the  government  and  the public.

The legitimate rights and interests of a company are protected by  law  and shall not be infringed.

Article 15

A company shall protect the legitimate rights  and  interests  of  its  staff and workers, strengthen labour protection and bring about production  safety.

A company should use 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  organize  a  trade  union  in  accordance with the law to carry out  union  activities  and  protect  the  lawful rights and interests of the 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  of  relevant  laws  through  the  representative   conferences of the staff and workers and otherwise.

Article 17

The activities of the base-level organizations of the Communist  Party  of China in the company are dealt with in accordance with the  Charter  of  the Communist Party of China.

Article 18

The  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-owned foreign enterprises otherwise provide, the provisions of such  laws apply.

  
Chapter 2 Establishment and Organizational Structure of A  Limited Liability Company
    
 
          Section 1 Establishment

Article 19

Establishment of a limited  liability  company  shall  be  subject  to  fulfillment 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 organizational structure complying  with the requirements for establishing a limited liability company; and
    (5) there is a fixed  site  for  production  and  operations  and  the  ecessary conditions for production and operations.

Article 20

A limited liability company is established  by  capital  contributions  made jointly by at least two and no more than fifty shareholders.

A state-authorized investment institution or a  department  authorized  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 fulfills the conditions  for  the  establishment  of  a  limited  liability  company  under  this  Law  may  be  reorganized  as  a   wholly  state-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  reorganization  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  articles  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  shall  not  be  less than the following minimum amounts:

    (1) for a company engaging principally in production  operations,  RMB  500,000 yuan;
    (2) for a company engaging principally in wholesaling commodities, RMB  500,000 yuan;
    (3) for a company engaging principally in  commercial  retailing,  RMB  300,000 yuan;
    (4) for a company  engaging  principally  in  technology  development,  consultancy and services, RMB 100,000 yuan.

Requirements 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 shall  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  shall  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 article 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 authorized investment verification authority  must  verify the investment and issue certificate.

Article 27

Upon verification by  a  legally  authorized  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  article of association,  investment  verification  certificate  and  other
documents.

If examination and approval from 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 is  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  for  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; and
    (5) the number and date of issue of the investment certificate.

An investment certificate is sealed with the company s seal.

Article 31

A limited liability company shall establish a register of shareholders  setting out the following:

    (1) the shareholders names and domiciles;
    (2) the shareholders amounts of capital contributions; and
    (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 preemptive  right to subscribe capital when a company increases its capital.

Article 34

Shareholders shall 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 shall be 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 2 Organizational Structure

Article 37

The shareholder s meetings of a limited liability company are made  up  of  all  shareholders.  The  shareholders   meeting   is   the   company s  authoritative organization, 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 supervisors 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 board of supervisors 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 issue such as merger, division,  change in corporate  form or dissolution and liquidation of the company; and
    (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  shall 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  shall  be  passed  by  shareholders  representing two-thirds or more of the voting rights.

Article 41

Shareholders shall exercise voting rights at shareholders meetings in  accordance with the proportions of their capital contribution.

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 meeting 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 designated 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 meetings shall keep minutes of  the  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-chairmen 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   meetings  and exercises the following powers:

    (1)  to  be  responsible  for  convening  shareholders   meetings  and  accountable 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; and
    (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 shall not be longer  than  three years. At the end of a  director s  term,  the  director  may  serve  another term if re-elected.

The shareholders meeting shall not without reason remove  a  director  from office before the expire 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 articles 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  the  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 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;