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)

CHAPTER ONE GENERAL PROVISIONS

  Article 1 The law is formulated in conformity with the Constitution in view to establishing a modern enterprise system, standardizing the organization and operation of companies,protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining the socialist economic order and promoting the development of the socialist market economy.

  Article 2 The term "company" used in this law refers to a limited liability company or a joint stock company limited set up within the territory of the People's Republic of China according to the provisions of this law.

  Article 3 A limited liability company and a joint stock company limited are enterprise legal persons.

  For a limited liability company, a shareholder bears the responsibility to the company within the limit of the amount of investment made by the shareholder per se and the company shall bear the responsibility for its debts with all its assets.

  For a joint stock company limited the entire capital is divided into shares of equal amount and the shareholders bear responsibilities to their company within the scope of the number of shares they hold and the company shall bear responsibilities for its debts with all its assets.

  Article 4 Shareholders of a company, as capital contributor, shall have the right to enjoy capital gains, take major policy decisions and choose managers in proportion to share of the investment they make in the company.

  A company shall enjoy all legal person property rights formed by the investment by shareholders, enjoy civil rights, and bear the civil responsibilities according to law.

  Ownership of the State-owned property rights in a company belongs to the State.

  Article 5 A company shall operate independently with all its assets, and be responsible for its own profits and losses.

  Under the macro-economic control and regulation by the State, a company shall have the autonomy in organizing its own production and operations according to market demand so as to raise its economic efficiency, step up its productivity and preserve and accrete the value of its assets.

  Article 6 A company shall institute an internal management system that is of a clear division of power and responsibility, a scientific management, and a combine mechanism of incentives and restrictions.

  Article 7 In changing over to a company, a State-owned enterprise shall first of all change its original operational mechanism, gradually and sysmatically make an inventory of its own assets, define its own property right, clear its own credits and debts, appraise its own assets and establish a standard internal organizational setup according to law and administrative decrees concerned.

  Article 8 A limited liability company or a joint stock company limited shall be set up according to this law. Only those that can meet the requirements as set in this law can be registered as limited liability companies or joint stock companies limited those that cannot meet such requirements cannot be registered as a limited liability company or joint stock company limited.

  Article 9 A limited liability company established according to this law shall include the words "limited liability" in its name. A joint stock company limited established according to this law shall be clearly indicated as a joint stock company limited in its name.

  Article 10 A company shall make the location of its main office as its address.

  Article 11 A company established according to this law shall formulate its articles of association that have a binding force on the company, its shareholders, directors, supervisors and managers alike.

  The scope of business shall be defined in the articles of association and registered according to law. If the scope of business covers items restricted by law or administrative decrees, it shall be subject to approval according to law.

  A company shall conduct its business activities within the scope registered. If a company has revised its articles of association according to legal procedures and registered for alteration with the registration authorities, it may change the scope of business.

  Article 12 A company may invest in other limited liability companies or joint stock companies limited and bear responsibility to the companies in which it has invested in proportion to the amount of investment it has made.

  Except for investment companies and holding companies as specified by the State Council, where a company invests in other limited liability companies or joint stock companies limited, the aggregate amount of the investment shall not exceed 50% of the net assets of the company, not including the capital gains of the latters put in by the company from its profits gained from the latters.

  Article 13 A company may set up branches, which shall not enjoy the status of enterprise legal persons, and the parent company shall be responsible for civil liabilities of its branches.

  A company may set up subsidiaries which shall enjoy the status of enterprise legal persons and be independently responsible for their own civil liabilities.

  Article 14 In conducting business operations, a company shall abide by law, observe business ethics, promote socialist culture and ethics, and accept the supervision by the government and the public.

  The legitimate rights and interests of a company shall be protected by law against any infringement.

  Article 15 A company shall protect the legitimate rights and interests of its staff and workers, strengthen labor protection, and ensure safe production.

  A company shall provide its workers with vocational education and in job training in various forms to improve their working quality.

  Article 16 Workers of a company shall organize a trade union in accordance with the law to carry out trade union activities and protect their legitimate rights and interests. A company shall provide the necessary conditions for activities of its trade union.

  A solely State-owned company or a limited liability company established by more than two State-owned enterprises or by more than two State-owned investment entities shall exercise democratic management in accordance with the provisions of the Constitution and relevant laws through the general meetings of the staff and workers or otherwise.

  Article 17 The grassroots organizations of the Communist Party of China in a company shall carry out their activities according to the Constitution of the Communist Party of China.

  Article 18 This law applies to limited liability companies established with foreign investment except otherwise provided foreign the laws concerning Sino-foreign joint equity ventures, Sino-foreign joint cooperative ventures and foreign enterprises.

CHAPTER TWO ESTABLISHMENT AND ORGANIZATIONAL SETUP OF A LIMITED LIABILITY COMPANY

SECTION ONE ESTABLISHMENT

  Article 19 The establishment of a limited liability company shall be subject to the fulfillment of the following conditions:

  1. The number of shareholders tallies with that provided for by law; 2. The investment contributed by shareholders reaches the minimum amount of capital required by law;

  3. Shareholders participate in the formulation of articles of association;

  4. The company has a suitable name and its organizational setup complies with that of a limited liability company.

  5. The company has fixed production or operational site(s) and necessary conditions for production or operations.

  Article 20 A limited liability company shall be set up by capital contributions made up by at least two and no more than 50 shareholders. Investment entities or departments authorized by the State may set up limited liability companies with sole State investment.

  Article 21 A State-owned enterprise set up before the implementation of this law if can fulfill the condition of a limited liability company under this law may be reorganized into a solely State-owned limited liability company in the case of an investment entity with a single investor, or into a limited liability company as provided for in the first paragraph of the preceding Article in the case of an investment entity with many investors.

  The steps and specific methods for State-owned enterprises to convert into companies shall be formulated separately by the State Council.

  Article 22 The articles of association of a limited liability company shall specify clearly:

  1. Name and address of the company;

  2. Scope of business of the company;

  3. Registered capital of the company;

  4. Names of shareholders;

  5. Rights and obligations of shareholders;

  6. Forms and amount of investment made by shareholders;

  7. Conditions for shareholders to transfer their investment;

  8. The organizations of the company and the methods of establishment, their powers and functions and rules of procedures for meetings;

  9. Legal representative of the company;

  10.Grounds for dissolution of the company and liquidation methods; and

  11.Other matters deemed necessary by shareholders.Shareholders should sign and seal the articles of association of the company.

  Article 23 The registered capital is the total amount of investment paid in by all the shareholders registered with the registration department.

  The amount of registered capital should not be less than the amount specified below:

  1. for a company mainly engaging in production operations, RMB500,000;

  2. for a company mainly engaging in wholesales, RMB500,000;

  3. for a company mainly engaging in retail sales, RMB300,000;

  4. for a company engaging in technology development, consulting and services, RMB100,000.

  If the minimum amount of registered capital of a limited liability company of a given trade should be higher than those provided for in the preceding paragraph, it shall be determined separately by law or administrative decrees.

  Article 24 Shareholders may make their investment in cash, in kind, in industrial property rights, in non-patented technology or land use rights must be correctly assessed and verified in value terms without any over or under-valuation. The assessment of land use rights in value shall be made according to law or administrative decrees.

  The amount of industrial property rights or non-patented technology in value shall not exceed 20 percent of the total value of the registered capital of a limited liability company, except otherwise provided for by the State for the use of high and new technology.

  Article 25 Shareholders shall pay in full their subscribed capital contributions as specified in the articles of association. In cases of making investment in cash, the contribution in cash should be deposited in full into a temporal account opened by the proposed limited liability company in a bank. In cases of using investment in kind, industrial property rights, non-patented technology or land use rights, the procedures for transfer of the property rights shall be completed according to law. Shareholders who fail to pay in the subscribed amount of investment as provided for in the preceding paragraph should be liable to breach of contract.

  Article 26 After all the shareholders have paid in their investment, the investment shall be verified by a legal investment verification institution and a certificate shall be produced by the institution.