Document Number：Order No. 15 of the President of the People's Republic of China

Area of Law： General Provisions on Companies Optimization of Doing Business

Level of Authority： Laws

Issuing Authority： Standing Committee of the National People's Congress

Date Issued：12-29-2023

Effective Date：07-01-2024

Status： Effective

Order of the President of the People's Republic of China
(No.15)
The Company Law of the People's Republic of China, as revised and adopted at the 7th Session of the Standing Committee of the Fourteenth National People's Congress of the People's Republic of China on December 29, 2023, is hereby issued, with effect from July 1, 2024.
Xi Jinping, President of the People's Republic of China
December 29, 2023
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; amended for the first time in accordance with the Decision on Amending the Company Law of the People's Republic of China adopted at the 13th Session of the Standing Committee of the Ninth National People's Congress on December 25, 1999; amended for the second time in accordance with the Decision on Amending the Company Law of the People's Republic of China adopted at the 11th Session of the Standing Committee of the Tenth National People's Congress on August 28, 2004; revised for the first time at 18th Session of the Standing Committee of the Tenth National People's Congress on October 27, 2005; and amended for the third time in accordance with the Decision on Amending Seven Laws Including the Marine Environment Protection Law of the People's Republic of China adopted at the Sixth Session of the Standing Committee of the 12th National People's Congress on December 28, 2013; amended for the fourth time in accordance with the Decision of the Standing Committee of the National People's Congress on Amending the Company Law of the People's Republic of China (2018) adopted at the Sixth Session of the Standing Committee of the 13th National People's Congress on October 26, 2018; revised for the second time at the 7th Session of the Standing Committee of the Fourteenth National People's Congress on December 29, 2023)
Contents
Chapter I General Provisions
Chapter II Company Registration
Chapter III Formation and Organizational Structure of a Limited Liability Company
Section 1 Formation
Section 2 Organizational Structure
Chapter IV Transfer of Equities of a Limited Liability Company
Chapter V Formation and Organizational Structure of a Joint Stock Limited Company
Section 1 Formation
Section 2 Shareholders' 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 VI Issuance and Transfer of Shares of a Joint Stock Limited Company
Section 1 Issuance of Shares
Section 2 Transfer of Shares
Chapter VII Special Provisions on the Organizational Structure of State-funded Companies
Chapter VIII Qualifications and Obligations of the Directors, Supervisors and Senior Executives of a Company
Chapter IX Corporate Bonds
Chapter X Financial Affairs and Accounting of a Company
Chapter XI Merger, Split-up, and Increase or Decrease of Registered Capital of a Company
Chapter XII Dissolution and Liquidation of a Company
Chapter XIII Branches of Foreign Companies
Chapter XIV Legal Liabilities
Chapter XV Supplemental Provisions
Chapter I General Provisions
Article 1 This Law is enacted in accordance with the Constitution for the purposes of regulating the organization and operation of companies, protecting the lawful rights and interests of companies, shareholders, employees, and creditors, improving the modern enterprise system with Chinese characteristics, promoting the entrepreneurial spirit, maintaining the socialist economic order, and promoting the development of the socialist market economy
Article 2 The term "company" as mentioned in this Law refers to a limited liability company or a joint stock company formed in the territory of the People's Republic of China in accordance with this Law.
Article 3 A company is an enterprise legal person, which has independent legal person property and enjoys the right to legal person property. It shall bear the liabilities for its debts with all its property.
The legitimate rights and interests of a company shall be protected by laws and may not be trespassed.
Article 4 For a limited liability company, a shareholder shall be liable for the company to the extent of the capital contributions it has paid. For a joint stock limited company, a shareholder shall be liable for the company to the extent of the shares it has subscribed to.
The shareholders of a company shall be entitled to enjoy the capital proceeds, participate in making important decisions, choose managers and other rights in the company.
Article 5 A company formed in accordance with this Law shall formulate its bylaws, binding on the company and its shareholders, directors, supervisors, and senior executives.
Article 6 A company shall have a name. The name of the company shall comply with relevant provisions issued by the state.
The right of name of the company shall be protected by law.
Article 7 A limited liability company formed in accordance with this Law shall include the words of "limited liability company" or "limited company" in its name.
A joint stock limited company formed in accordance with this Law shall include words of "joint stock limited company" or "joint stock company."
Article 8 A company shall regard its main office as its domicile.
Article 9 A company's business scope shall be defined in its bylaw. The company may modify its business scope by modifying its bylaws.
If the law or administrative regulations so require, any matter in the business scope of the company shall be approved according to the law.
Article 10 The legal representative of a company shall be the director or manager who represents the company in attending to company affairs in accordance with the company's bylaw.
If a director serving as the legal representative or manager resigns, he shall be deemed to have resigned as the legal representative concurrently.
If the legal representative resigns, the company shall determine a new legal representative within 30 days of resignation of the legal representative.
Article 11 The legal consequences of civil activities performed by a legal representative in the name of the company shall be borne by the company.
Any restriction on the power of the legal representative imposed by the company's bylaw or shareholders' meeting shall not be set up against bona fide opposite parties.
Where the legal representative causes damage to any other person in the performance of duties, the company shall assume civil liability for such damage. The company may, after assuming such civil liability, claim reimbursement from the legal representative at fault in accordance with the law or its bylaws.
Article 12 A limited liability company to be changed into a joint stock limited company shall satisfy the requirements as prescribed in this Law for joint stock limited companies. A joint stock limited company to be changed into a limited liability company shall conform to the conditions as prescribed in this Law for limited liability companies.
In either of the aforesaid cases, the creditor's rights and debts of the company prior to the change shall be succeeded by the company after the change.
Article 13 A company may set up subsidiaries which enjoy the status of an enterprise legal person and shall be independently responsible for their own civil liabilities.
A company may set up branches. A branch shall not enjoy the status of an enterprise legal person and its civil liabilities shall be borne by its parent company.
Article 14 A company may invest in other enterprises,
subject to the law under which it shall not become a capital contributor severally and jointly liable for the debts of the enterprises in which it invests.
Article 15 Where a company intends to invest in any other enterprise or provide guaranty for others, the company shall make a resolution through the board of directors, shareholders' meeting according to its bylaw. If the bylaw prescribes any limit on the total amount of investments or guaranties, or on the amount of a single investment or guaranty, the aforesaid total amount or amount shall not exceed the limited amount.
If a company intends to provide guaranty to a shareholder or actual controller of the company, it shall make a resolution through the shareholder's meeting.
The shareholder as mentioned in the preceding paragraph or the shareholder dominated by the actual controller as mentioned in the preceding paragraph shall not participate in voting on the matter as mentioned in the preceding paragraph. Such matter requires the affirmative votes of more than half of the other shareholders attending the meeting.
Article 16 Every company shall protect the lawful rights and interests of its employees, sign employment contracts with its employees, buy social insurances, and strengthen labor protection so as to ensure work safety.
Every company shall, in various forms, intensify the professional education and in-service training of its employees so as to improve their personal quality.
Article 17 The employees of a company shall, according to the Labor Union Law of the People's Republic of China, organize a labor union, which shall carry out union activities and safeguard the lawful rights and interests of the employees. The company shall provide necessary conditions for its labor union to carry out activities. The labor union shall, on behalf of the employees, sign collective contracts with the company with respect to the remuneration, working hours, rest and leave, work safety and sanitation, insurance and welfare, and other matters.
In accordance with the Constitution and other relevant laws, a company shall establish and improve a democratic management system in the form of assembly of the representatives of the employees, and adopt democratic management in such form or any other ways.
To make a decision on restructuring, dissolution, application for bankruptcy, or any important issue relating to business operations, or to formulate any important bylaw, a company shall solicit the opinions of its labor union, and shall solicit the opinions and proposals of the employees through the assembly of the representatives of the employees or in any other way.
Article 18 The Chinese Communist Party may, according to the Constitution of the Chinese Communist Party, establish its branches in companies to carry out activities of the Chinese Communist Party. The company shall provide necessary conditions to facilitate the activities of the Party.
Article 19 When conducting business operations, a company shall comply with the laws, regulations, social morality, and business morality, act in good faith, and accept the supervision of the government and general public.
Article 20 When conducting business operations, a company shall fully consider the interests of the company's employees, consumers, and other stakeholders and ecological and environmental protection and other public interests, and assume social responsibility.
The state shall encourage companies to participate in public welfare activities and publish social responsibility reports.
Article 21 A shareholder of a company shall abide by the laws, administrative regulations, and the company's bylaw and exercise shareholder's rights under the law, and may not injure the interests of the company or of other shareholders by abusing the shareholder's rights.
A shareholder of the company shall be liable for any loss caused to the interests of the company or other shareholders by abusing shareholder's rights.
Article 22 Neither the controlling shareholder, nor the actual controller, nor any of the directors, supervisors or senior management of the company may injure the interests of the company by taking advantage of its connection relationship.
Anyone who causes any loss to the company due to violating the preceding paragraph shall be liable for the compensation.
Article 23 Where a shareholder of a company evades the payment of its debts by abusing the independent status of legal person or the shareholder's limited liabilities, if it seriously injures the interests of any creditor, it shall bear several and joint liabilities for the debts of the company.
If the shareholder uses two or more companies under its control to commit the act prescribed in the preceding paragraph, each company shall be jointly and severally liable for the debts of any of the other companies.
If the shareholder of a company with only one shareholder is unable to prove that the property of the company is independent from his own property, he shall bear joint liabilities for the debts of the company.
Article 24 A shareholders' meeting or meeting of the board of directors or board of supervisors of a company, or a vote at such meeting, may be held by electronic communication, unless otherwise stipulated in the company's bylaw.
Article 25 A resolution of the shareholders' meeting or board of directors of the company that is in violation of any law or administrative regulation shall be null and void.
Article 26 If the procedures for calling a shareholders' meeting or meeting of the board of directors, or the voting form, is in violation of any law, administrative regulation or the bylaw, or if a resolution is in violation of the bylaw of the company, the shareholders may, within 60 days from the day when the resolution is made, request the people's court to revoke it, unless the procedures or the voting form contains a minor defect without a substantial impact on the resolution.
If a shareholder has not been given notice of participation in the shareholders' meeting, the shareholder may request the people's court to revoke the resolution within 60 days from the date when the shareholder knows or should know that the resolution has been made; if the shareholder fails to exercise the right of revocation within one year from the date the resolution is made, the right of revocation shall be extinguished.
Article 27 Under any of the following circumstances, a resolution of the shareholders' meeting or the board of directors of a company shall be untenable:
(1) The resolution is adopted without holding a shareholders' meeting or a meeting of the board meeting.
(2) A matter to be decided fails to be put to a vote at a shareholders' meeting and a meeting of the board of directors.
(3) The number of attendees at a meeting, or the number of voting rights held, is less than the quorum or the number of voting rights held as specified by this Law or the company's bylaw.
(4) The number of attendees at a meeting, or the number of voting rights held, is less than that specified by this Law or the company's bylaw.
Article 28 If a people's court declares invalid, revokes, or confirms the untenability of a resolution of the shareholders' meeting or board of directors of a company, the company shall apply to the company registration authority for revocation of the registration which has been made based on the resolution.
If a people's court declares invalid, revokes, or confirms the untenability of a resolution of a shareholders' meeting or board of directors, a civil legal relation established between the company and a bona fide opposite party based on the resolution shall not be affected.
Chapter II Company Registration
Article 29 To form a company, an application for formation registration shall be filed with the company registration authority.
If any law or administrative regulation provides that the formation of a company shall be subject to approval, and relevant approval formalities shall be gone through prior to the registration of the company.
Article 30 To apply for the formation of a company, an application for formation registration, the company's bylaw, and other documents shall be submitted, and the relevant materials submitted shall be authentic, lawful, and valid.
If the application materials are incomplete or are not in the statutory form, the company registration authority shall give notification of required supplements and corrections at one time.
Article 31 If an application for formation of a company meets the formation requirements of this Law, the company registration authority shall register the company as a limited liability company or joint stock limited company. If the application does not meet the formation requirements of this Law, it shall not be registered as a limited liability company or joint stock limited company.
Article 32 Company registration matters shall include:
(1) name;
(2) domicile;
(3) registered capital;
(4) business scope;
(5) the name of the legal representative; and
(6) the names of shareholders, in the case of a limited liability company, or the names of promoters, in the case of a joint stock limited company.
The company registration authority shall publish company registration matters as specified in the preceding paragraph on the National Enterprise Credit Information Publicity System.
Article 33 For a lawfully formed company, the company registration authority shall issue a company business license to the company. The date of issuance of the company business license shall be the date of formation of the company.
The company business license shall state the name, domicile, registered capital, business scope, legal representative, etc.
The company registration authority may issue an electronic business license. The electronic business license shall have the same legal effect as a paper one.
Article 34 If a company registration matter is modified, the modification shall be registered in accordance with the law.
A company registration matter without being registered or without its modification being registered shall not be set up against bona fide opposite parties.
Article 35 When a company applies for registration of modification, it shall submit to the company registration authority an application for registration of modification signed by the company's legal representative, a modification resolution or decision made in accordance with the law, and other documents.
If the modification of the company registration matter involves the amendment of the company's bylaws, the company's bylaws as amended shall be submitted.
If the company modifies its legal representative, the application for registration of modification shall be signed by the replacement legal representative.
Article 36 If any matter as stated in the business license is modified, the company registration authority shall issue a replacement business license, after the company registers the modification.
Article 37 If dissolution, declaration of bankruptcy, or any other statutory cause entails termination of a company, the company shall apply to the company registration authority for deregistration according to the law, and the company registration authority shall announce the termination of the company.
Article 38 To set up a branch, a company shall file a registration application with the company registration authority and shall obtain a business license.
Article 39 Where company formation registration is obtained by misreporting registered capital, submitting false materials, or otherwise fraudulently concealing important facts, the company registration authority shall revoke the company formation registration according to laws and administrative regulations.
Article 40 A company shall publish the following matters on the National Enterprise Credit Information Publicity System according to the applicable provisions:
(1) The amount of capital contribution subscribed for or paid by each shareholder, the method of capital contribution, and the date of capital contribution, in the case of a limited liability company, or the number of shares subscribed for by each promoter, in the case of a joint stock limited company.
(2) Information on modifications in the equities or shares of the shareholders of the limited liability company or the promoters of the joint stock limited company.
(3) Information on the obtainment, modification, and cancellation of administrative permission.
(4) Other information specified by laws and administrative regulations.
The company shall ensure that the information published in the preceding paragraph is authentic, accurate, and complete.
Article 41 The company registration authority shall optimize the process of company registration, improve the efficiency of company registration, strengthen informatization, promote easy methods such as online processing, and improve the facilitation of company registration.
The market supervision and administration department of the State Council shall formulate specific measures for company registration in accordance with this Law and relevant laws and administrative regulations.
Chapter III Formation and Organizational Structure of a Limited Liability Company
Section 1 Formation
Article 42 A limited liability company shall be formed by not less than one but not more than 50 shareholders that make capital contributions.
Article 43 Shareholders at the time of formation of a limited liability company may sign a formation agreement, specifying their respective rights and obligations during the formation of the company.
Article 44 A limited liability company shall bear the consequences of the civil activities in which shareholders at the time of formation of the company engage for formation of the company.
If the company is not formed, the legal consequences shall be borne by the shareholders at the time of formation of the company; if there are two or more shareholders at the time of formation, they shall enjoy joint and several claims and bear joint and several debts.
A third party shall, at its option, have the right to request the company or its shareholders at the time of formation to assume the civil liability arising from the civil activities in which the shareholders at the time of formation engage in their own name in order to form the company.
If a shareholder at the time of formation causes damage to another person by performing the duty of formation of the company, the company or the shareholder not at fault may exercise recovery against the shareholder at fault after paying compensatory liability.
Article 45 To form a limited liability company, shareholders shall jointly formulate its bylaws.
Article 46 A limited liability company shall state the following items:
(1) The name and domicile of the company;
(2) The business scope of the company;
(3) The company's registered capital;
(4) Names of shareholders;
(5) Amount, method, and date of capital contributions made by shareholders;
(6) The organizations of the company and its formation, their functions and rules of procedure;
(7) Methods for the selection and modification of the legal representative of the company;
(8) Other matters deemed necessary by the shareholders' meeting.
The shareholders should affix their signatures or seals to the bylaw of the company.
Article 47 The registered capital of a limited liability company shall be the amount of capital contributions subscribed for by all its shareholders as registered with the company registration authority. The capital contributions subscribed for by all shareholders shall be fully paid within five years of formation of the company in accordance with the company's bylaw.
Where any law or administrative regulation or any decision of the State Council provides otherwise for the paid-in registered capital, the minimum amount of registered capital of a limited liability company, or the period for shareholders to make capital contributions, such provisions shall prevail.
Article 48 A shareholder may make capital contributions in cash, in kind, or intellectual property right, land use right, equities, claims, or other non-monetary properties that may be assessed on the basis of currency and may be transferred according to the law, excluding the properties that shall not be treated as capital contributions under any law or administrative regulation.
The value of the non-monetary properties as capital contributions shall be assessed and verified, which shall not be over-valued or under-valued. If any law or administrative regulations provides for the value assessment, such law or administrative regulation shall be followed.
Article 49 Each shareholder shall make full payment for the capital contributions he has subscribed to according to the bylaw.
If a shareholder makes his capital contribution in cash, he shall deposit the full amount of such cash capital contribution into a temporary bank account opened for the limited liability company. If any capital contributions are made in non-monetary properties, the appropriate transfer procedures for the property rights therein shall be followed according to law.
Where a shareholder fails to make his capital contribution in full within the specified period, he shall not only make his capital contribution in full to the company but also bear the liabilities for the losses caused to the company.
Article 50 Where, at the time of formation of a limited liability company, a shareholder fails to pay the capital contribution according to the company's bylaw, or the value of the non-monetary property as capital contribution is apparently lower than the capital contribution subscribed for, the other shareholders at the time of formation shall be jointly and severally liable to the extent of the shortfall in the shareholder's capital contribution.
Article 51 After formation of a limited liability company, its board of directors shall check the capital contributions of its shareholders, and the company shall issue a written demand for payment to a shareholder, demanding payment of capital contribution, if it discovers that the shareholder has not made full payment of capital contributions on schedule according to the company's bylaw.
If the board of directors fails to promptly perform its obligations specified in the preceding paragraph and causes losses to the company, any liable director shall be liable for compensation.
Article 52 When a shareholder fails to pay capital contribution as required by the company's bylaw, and the company issues a written demand for payment of capital contribution in accordance with paragraph 1 of the preceding article, it may specify a grace period for payment of capital contribution, which grace period shall not be less than 60 days from the date when the company issues the written demand. If a shareholder fails to perform the obligation of capital contribution after expiration of the grace period, the company may, under the resolution introduced by the board of directors, issue a notice of forfeiture to the shareholder in written form. The shareholder shall forfeit the equities with respect to which it has not paid the capital contribution, on the date of issuance of the notice of forfeiture.
The equities forfeited in accordance with the provisions of the preceding paragraph shall be transferred in accordance with the law, or the registered capital shall be reduced accordingly, with the equities canceled; if no transfer or cancellation is made within six months, the other shareholders of the company shall pay the corresponding capital contribution in full in proportion to their capital contributions.
If the shareholder challenges the forfeiture, it shall, within 30 days of receiving the notice of forfeiture, sue in the people's court.
Article 53 After the formation of a company, no shareholder may illegally take away the registered capital.
If the provisions of the preceding paragraph are violated, the shareholder shall return the registered capital illegally taken away; if losses are caused to the company, any liable director, supervisor, or officer shall be jointly and severally liable for compensation with the shareholder.
Article 54 Where a company is unable to discharge debts when they become due, the company or creditors to whom the due debts are owed shall have the right to require shareholders who have subscribed for capital contributions to pay the capital contributions before expiration of the period of payment of capital contribution.
Article 55 After the formation of a limited liability company, each shareholder shall be issued a capital contribution certificate, specifying the following:
(1) the company's name;
(2) The date of formation of the company;
(3) The company's registered capital;
(4) The name of the shareholder, the subscribed and paid-in capital contribution, the method of capital contribution, and the date of capital contribution;
(5) The serial number and date of issuance of the capital contribution certificate.
The capital contribution certificate shall be signed by the legal representative and sealed by the company.
Article 56 A limited liability company shall prepare a registry of shareholders and the registry shall record the following information:
(1) The name and domicile of each shareholder;
(2) The subscribed and paid-in capital contribution, the method of capital contribution, and the date of capital contribution of each shareholder;
(3) The serial numbers for all capital contribution certificates;
(4) The date of obtaining and losing shareholder's qualifications.
The shareholders recorded in the registry of shareholders may, pursuant to the registry of shareholders, claim to and exercise the shareholder's rights.
Article 57 Every shareholder shall be entitled to review and duplicate the company's bylaw, registry of shareholders, the minutes of the shareholders' meetings, the resolutions of the board of directors' meetings, the resolutions of the board of supervisors' meetings, as well as the financial reports.
Every shareholder may request to review the accounting books and accounting vouchers of the company. Where a shareholder requests to review the accounting books and accounting vouchers of the company, it shall submit a written request, which shall state his motives. If the company, has the legitimate reason to believe that the shareholder's requests to review the accounting books and accounting vouchers has an improper motive and may impair the legitimate interests of the company, it may reject the request of the shareholder to review the books and shall, within in 15 days after the shareholder submits a written request, give the shareholder a written reply, which shall include an explanation. If the company rejects the request of any shareholder to review the accounting books, the shareholder may initiate action in the people's court.
The shareholder may retain an accounting firm, a law firm, or any other intermediary to review the materials specified in the preceding paragraph.
The shareholder and the accounting firm, law firm, or other intermediary retained by it shall comply with the provisions of laws and administrative regulations on the protection of state secrets, trade secrets, personal privacy, and personal information, among others, when reviewing and duplicating the relevant materials.
If a shareholder requests for a review or reproduction of the relevant materials of the company's wholly-owned subsidiary, the provisions of the preceding four paragraphs shall apply.
Section 2 Organizational Structure
Article 58 The shareholders' meeting of a limited liability company shall be composed of all the shareholders. It is the company's organ of power, which shall exercise its powers in accordance with this Law.
Article 59 The shareholders' meeting shall exercise the following functions:
(1) Electing and changing the directors and supervisors and deciding the matters relating to their salaries and compensations;
(2) Deliberating and approving reports of the board of directors;
(3) Deliberating and approving reports of the board of supervisors;
(4) Deliberating and approving company profit distribution plans and loss recovery plans;
(5) Making resolutions about the increase or reduction of the company's registered capital;
(6) Making resolutions about the issuance of corporate bonds;
(7) Adopting resolutions about the assignment, split-up, change of company form, dissolution, liquidation of the company;
(8) Revising the bylaw of the company;
(9) Other functions as specified in the bylaw.
The shareholders' meeting may authorize the board of directors to adopt resolutions on the issuance of corporate bonds.
If all the shareholders consent to any of the matters listed in the paragraph 1 of this article by writing, they do not need to hold a shareholders' meeting and may made decisions and have the decisions signed and sealed by all the shareholders.
Article 60 A limited liability company with only one shareholder has no board of directors. When the shareholder makes a decision on any of the matters as listed in paragraph 1 of the preceding article, he shall make it in writing, sign or seal it, and keep it in the company.
Article 61 The first shareholders' meeting shall be convened and presided over by the shareholder who made the largest capital contributions, and he shall exercise his powers in accordance with this Law.
Article 62 The shareholders' meetings shall be classified into regular meetings and interim meetings.
Regular meetings shall be called according to the provisions of the articles of association of the company. Where an interim meeting is proposed by the shareholders representing 1/10 of the voting rights or more, or by directors representing 1/3 of the voting rights or more, or by the board of supervisors, an interim meeting shall be held.
Article 63 The shareholders' meetings shall be convened by the board of directors and presided over by the chairman of the board of directors. If the chairman is unable or fails to perform his duties, the meetings thereof shall be presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or fails to perform his duties, the meetings shall be presided over by a director elected by a majority of the directors.
If the board of directors is unable or fails to fulfill the duties of convening the shareholders' meeting, the board of supervisors may convene and preside over such meetings. If the board of supervisors does not convene or preside over such meetings, the shareholders representing 1 / 10 or more of the voting rights may convene and preside over such meetings on their own initiatives.
Article 64 Every shareholder shall be given a notice 15 days before a shareholders' meeting is held unless it is otherwise specified by the bylaw or it is otherwise stipulated by all the shareholders.
A shareholders' meeting shall make the minutes for the decisions about the matters discussed at the meeting. The shareholders who attended the meeting shall affix their signatures or seals to the minutes.
Article 65 The shareholders shall exercise their voting rights at the shareholders' meetings based on their respective percentage of the capital contributions unless it is otherwise prescribed by the bylaw.
Article 66 Methods of discussion and voting procedures of the meeting of shareholders shall be provided for in the articles of association except otherwise provided for by this Law.
Resolutions adopted at the shareholders' meeting shall be passed by shareholders representing a majority of the voting rights.
A resolution made at a shareholders' meeting on revising the bylaw, increasing or reducing the registered capital, merger, split-up, dissolution or change of the company form shall be adopted by the shareholders representing two-thirds or more of the voting rights.
Article 67 A limited liability company shall establish a board of directors, subject to Article 75 of this Law.
The board of directors shall exercise the following functions:
(1) Convening shareholders' meetings and presenting reports thereto;
(2) Implementing the resolutions made at the shareholders' meetings;
(3) Determining the company's business and investment plans;
(4) Working out the company's profit distribution plans and loss recovery plans;
(5) Working out the company's plans on the increase or reduction of registered capital, as well as on the issuance of corporate bonds;
(6) Working out the company's plans on merger, split, change of the company form, or dissolution, etc.;
(7) Making decisions on the establishment of the company's internal management departments;
(8) Making decisions on hiring or dismissing the company's manager and his salary and compensation, and, according to the nomination of the manager, deciding on the hiring or dismissal of vice manager(s) and the persons in charge of finance as well as their salaries and compensations;
(9) Working out the company's basic management system; and
(10) Other functions as specified in the company's bylaw or conferred by the shareholders' meeting.
Any restriction on the power of the board of directors imposed by the company's bylaws or shareholders' meeting shall not be set up against bona fide opposite parties.
Article 68 The board of directors of a limited liability company shall have three or more members, who may include a representative of the company's employees. The board of directors of a limited liability company which has 300 or more employees shall include representatives of the employees of the company, unless a board of supervisors has been established in accordance with the law and has representatives of the employees of the company. The representatives of the employees who serve as board directors shall be democratically elected through the assembly of the representatives of the employees, the assembly of employees, or other methods.
The board of directors shall have one chairman and may have deputy chairmen. The appointment of the chairman and deputy chairman shall be specified in the bylaw.
Article 69 A limited liability company may establish an audit committee composed of directors of the board of directors in accordance with the company's bylaw which exercises the functions of the board of supervisors specified in this Law, and is not required to have a board of supervisors or supervisors. Employee representatives who are members of the company's board of directors may serve as members of the audit committee.
Article 70 The term of office of the directors shall be provided for by the bylaw, but each term of office shall not exceed 3 years. The directors may, after the expiry of their term of office, hold a consecutive term upon re-election.
If no reelection is timely carried out after the expiry of the term of office of the directors, or if the number of the members of the board of directors is less than the quorum due to the resignation of some directors from the board of directors prior to the expiry of their term of office, the original directors shall, before the newly elected directors assume their posts, perform the powers of the directors according to the laws, administrative regulations, as well as the bylaw.
Where a director resigns, he shall notify the company in writing, and the resignation shall take effect on the day the company receives the notice, provided that if there is a circumstance specified in the preceding paragraph, the director shall continue to perform his powers.
Article 71 The shareholders' meeting may resolve to remove a director, with effect on the date of resolution.
If a director is removed before expiration of his term of office without good reason, the director may request compensation from the company.
Article 72 A meeting of the board of directors shall be convened and presided over by the chairman of the board of directors. If the chairman of the board of directors is unable or fails to perform his duties, it may be convened or presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or fails to perform his duties, it may be convened or presided over by a director elected by a majority of the directors.
Article 73 Unless it is otherwise provided for by this Law, the discussion methods and voting procedures of the board of directors shall be specified by the bylaw.
No meeting of the board of directors may be held unless a majority of the directors are present. When the board of directors makes a resolution, it shall be adopted by a majority of all the directors.
For the voting on a resolution of the board of directors, each director shall have one vote only.
The board of directors shall make minutes of the decisions about the matters discussed at the meetings thereof. The shareholders who attend the meeting shall affix their signatures to the minutes.
Article 74 A limited liability company may have a manager, who shall be hired or dismissed upon decision of the board of directors.
The manager shall be responsible to the board of directors, and perform functions in accordance with the company's bylaw or under the authority of the board of directors. The manager attends the meetings of the board of directors as a non-voting representative.
Article 75 A limited liability company that is small or has a small number of shareholders is not required to establish a board of directors, and may have one director who exercises the functions of the board of directors as provided for in this Law. The director may concurrently hold the post of the company's manager.
Article 76 A limited liability company shall have a board of supervisors, except as otherwise provided for in Articles 69 and 83 of this Law.
The board of supervisors shall consist of three or more members. The members of the board of supervisors shall include representatives of shareholders and an appropriate percentage of representatives of the company's employees. The percentage of the representatives of employees shall account for no less than 1/3 of all the supervisors, but the concrete percentage shall be specified in the bylaw. The representatives of employees who serve as members of the board of supervisors shall be democratically elected through the assembly of representatives of the company's employees, the shareholders' assembly or by other means.
The board of supervisors shall have one chairman, who shall be elected by a majority of all the supervisors. The chairman of the board of supervisors shall convene and preside over the meetings of the board of supervisors. If the chairman of supervisors is unable or fails to perform his duties, the supervisor elected by a majority of the supervisors shall convene and preside over the meetings of the board of supervisors.
No director or senior manager may concurrently act as a supervisor.
Article 77 Each term of office of the supervisors shall be 3 years. The supervisors may, after the expiry of their term of office, hold a consecutive term upon reelection.
If no reelection is timely carried out after the expiry of the term of office of the supervisors, or if the number of the members of the board of directors is less than the quorum due to the resignation of some directors from the board of supervisors prior to the expiry of their term of office, the original supervisors shall, before the newly elected supervisors assume their posts, exercise the powers of the supervisors according to laws, administrative regulations, as well as the bylaw.
Article 78 The board of supervisors may exercise the following powers:
(1) To check the financial affairs of the company;
(2) To supervise the duty-related acts of the directors and senior managers, to put forward proposals to relieve any director or senior manager who violates any law, administrative regulation, the bylaw or any resolution of the shareholders' meeting;
(3) To demand any director or senior manager to make corrections if his act has injured the interests of the company;
(4) To propose to call interim shareholders' meetings, to call and preside over shareholders' meetings when the board of directors does not exercise the function of calling and presiding over shareholders' meetings as prescribed in this Law;
(5) To put forward proposals at shareholders' meetings;
(6) To initiate actions against directors or senior managers according to Article 189 of this Law; and
(7) Other duties as provided for by the bylaw.
Article 79 The supervisors may attend the meetings of the board of directors as non-voting attendees, and may raise questions or suggestions about the meeting agenda discussed by the board of directors.
If the board of supervisors finds that the company is running abnormally, they may conduct an investigation. Where necessary, they may hire an accounting firm to help them with the investigation and the related expenses shall be borne by the company.
Article 80 The board of supervisors may require directors and senior managers to submit reports on the performance of their duties.
Directors and senior managers shall truthfully provide relevant information and materials to the board of supervisors, and shall not obstruct the board of supervisors or supervisors in exercising their functions.
Article 81 The board of supervisors shall hold meetings at least once a year. Any supervisors may propose to hold interim meetings of the board of supervisors.
The discussion methods and voting procedures of the board of supervisors shall be specified in the bylaw unless it is otherwise provided for by this Law.
The resolution of the board of supervisors requires the approval of more than half of the members of board of supervisors.
For the voting on a resolution of the board of supervisors, each supervisor shall have one vote only.
The board of supervisors shall prepare minutes for the decisions about the matters discussed at the meeting, which shall be signed by the supervisors in presence.
Article 82 The expenses necessary for the board of supervisors to exercise its functions shall be borne by the company.
Article 83 A limited liability company that is small or has a small number of shareholders is not required to establish a board of supervisors, and may either have one supervisor who exercises the functions of the board of supervisors specified in this Law or have no supervisor with the unanimous consent of all shareholders.
Chapter IV Transfer of Equities of a Limited Liability Company
Article 84 All or some of the stock rights of the shareholders of a limited liability company may be transferred among the shareholders.
Where a shareholder intends to transfer his stock rights to a person other than a shareholder, he shall notify the other shareholders in writing of such matters as the quantity, price, payment method, and period of the equity transfer, and the other shareholders shall have a preemptive right under the same conditions. If a shareholder fails to reply within 30 days of receipt of the written notice, he shall be deemed to have waived the preemptive right. If two or more shareholders exercise the preemptive right, they shall determine their respective purchase percentage through negotiation. If they fail to reach an agreement during the negotiation, they shall exercise the preemptive right on the basis of their respective percentage of capital contributions.
Unless it is otherwise provided for the transfer of stock rights in the bylaw, the bylaw shall be followed.
Article 85 When the people's court transfers the stock rights of a shareholder pursuant to the mandatory enforcement procedure as provided in laws, the court shall notify the company and all the shareholders that the other shareholders have a preemptive right under the same conditions. If any of the other shareholders fails to exercise the preemptive right within 20 days after he/it receives the notice of the court, it shall be deemed to have waived his preemptive right.
Article 86 If a shareholder transfers his equities, he shall notify the company in writing, request the registry of shareholders to be modified, and request the company to make modification registration with the company registration authority, if necessary. If the company refuses or fails to reply within a reasonable period, the transferor or transferee may initiate an action in the people's court in accordance with the law.
In an equity transfer, the transferee may present a claim for exercise of shareholder rights to the company at or after the time the transferee is recorded in the registry of shareholders.
Article 87 After a company transfers its stock rights in accordance with this Law, it shall cancel the capital contribution certificate of the former shareholder, issue a capital contribution certificate to the new shareholder and modify the shareholders and their capital contributions in the bylaw and the registry of shareholders. No voting of the shareholders' meeting is needed for the modification of the bylaw regarding the transfer of stock rights.
Article 88 If a shareholder transfers his equities with respect to the capital contribution subscribed for before expiration of the period of payment of capital contribution, the transferee shall have an obligation to pay the capital contribution; if the transferee fails to pay the capital contribution in full on schedule, the transferor shall bear supplementary liability for the capital contribution the transferee fails to pay on schedule.
If a shareholder transfers his equities without paying capital contributions on the date as specified by the company's bylaw, or with the actual value of the non-monetary property as capital contribution being apparently lower than the capital contribution subscribed for, the transferor and the transferee shall be jointly and severally liable to the extent of the shortfall in the capital contributions. If the transferee neither knows nor should know the foregoing circumstance, the transferor shall be liable.
Article 89 Under any of the following circumstances, a shareholder, who votes against the resolution of the shareholders' meeting, may request the company to purchase its stock rights at a reasonable price:
(1) The company that has made profits for five consecutive years has failed to distribute any dividends to the shareholders for 5 consecutive years and conforms to the profit distribution conditions as prescribed in this Law;
(2) The company is going to merge with others, to be split up, or transfer the major properties of the company to others;
(3) When the business term as specified in the bylaw expires or other reasons for dissolution as prescribed in the bylaw occur, the shareholders' meeting makes the company exist continuously by adopting a resolution to modify the bylaw.
Within 60 days after the resolution is adopted at the shareholders' meeting, if the shareholder and the company fail to reach an agreement on the purchase of stock rights, the shareholder may initiate a lawsuit in the people's court within 90 days after the resolution is adopted at the shareholders' meeting.
If a controlling shareholder of the company abuses shareholder rights with prejudice to the interest of the company or other shareholders, the other shareholders have the right to request the company to acquire the controlling shareholder's equities at a reasonable price.
The equities of the company purchased by the company in accordance with paragraph 1 or 3 of this article shall be transferred or canceled in accordance with the law within six months.
Article 90 After the death of a natural-person shareholder, his lawful inheritor may inherit the shareholder's qualifications unless it is otherwise provided for by the bylaw.
Chapter V Formation and Organizational Structure of a Joint Stock Limited Company
Section 1 Formation
Article 91 A joint stock limited company may be formed by the way of promotion or stock floatation.
The formation of a company by promotion means that the promoters form a company by subscribing to all of the shares that should be issued at the time of formation of the company.
The formation of a company by stock floatation means that the promoters form a company by subscribing to some of the shares that should be issued at the time of formation of the company and offering the remaining shares to specific offerees or to the general public for subscription.
Article 92 To form a joint stock limited company, there shall not be less than one but not more than 200 promoters, a majority of whom shall have a domicile within the territory of the People's Republic of China.
Article 93 The promoters of a joint stock limited company shall undertake the preparatory work of the company.
They shall conclude a promoter's agreement to clarify their respective rights and obligations during the course of forming the company.
Article 94 To form a joint stock limited company, promoters shall jointly formulate its bylaw.
Article 95 The bylaw of a joint stock limited company shall specify the following matters:
(1) The name and domicile of the company;
(2) The business scope of the company;
(3) The form of company formation;
(4) The registered capital of the company, the number of shares issued, the number of shares issued when the company is formed, and the par value of each par value share.
(5) Where classified shares are to be issued, the number of each class of shares and the rights and obligations carried by them;
(6) The name of each promoter, the shares it has subscribed to, as well as the form of capital contributions;
(7) The composition, powers, term of office, and rules of procedure of the board of directors;
(8) Methods for the selection and modification of the legal representative of the company;
(9) The composition, powers, term of office, and rules of procedure of the supervisory board;
(10) The method for profit distribution of the company;
(11) The reasons for dissolution of the company and liquidation methods;
(12) The methods for issuing notices or public announcements of the company; and
(13) Other matters deemed necessary by the shareholders' meeting.
Article 96 The registered capital of a joint stock limited company shall be the capital stock of which the shares have been issued, registered with the company registration authority. Before all its promoters have fully paid for their subscriptions, the company may not offer shares to other investors.
Where any law or administrative regulation or any decision of the State Council provides otherwise for the minimum amount of registered capital of a joint stock limited company, such provisions shall prevail.
Article 97 Where a joint stock limited company is formed by promotion, the promoters shall fully subscribe for the shares that shall be issued at the time of formation of the company as specified in the company's bylaw.
For a joint stock limited company formed by stock flotation, the shares subscribed by the promoters shall not be less than 35 % of the total shares that shall be issued at the time of formation of the company as specified in the company's bylaw. However, if it is otherwise provided for by any law or administrative regulation, such law or administrative regulation shall prevail.
Article 98 A promoter shall make full payment of the shares subscribed for by him before the formation of the company.
The capital contributions of promoters shall be governed by the provisions of Article 48 and paragraph 2 of Article 49 of this Law on capital contributions of shareholders of a limited liability company.
Article 99 If a promoter fails to make payment of the shares subscribed for by him, or the actual value of the non-monetary property as capital contribution is apparently lower than the shares subscribed for, the promoter and other promoters shall be jointly and severally liable to the extent of the shortfall in the capital contribution.
Article 100 For the public offer shares, the promoters shall publish a prospectus and prepare share subscription forms. The share subscription form shall contain the items listed in paragraphs 2 and 3 of Article 154, and a subscriber shall fill in the number and amount of shares he subscribes to and his domicile, and shall affix his signature or seal thereto. A subscriber shall pay the shares in full amount according to the number of shares he has subscribed to.
Article 101 After full payments have been made for the public offer shares, they shall be verified by a lawfully formed capital verification institution and a certification shall be issued thereby.
Article 102 A joint stock limited company shall prepare a registry of shareholders and make it available in the company. The registry of shareholders shall state the following matters:
(1) The name and domicile of each shareholder;
(2) The type and number of shares subscribed for by each shareholder;
(3) The serial numbers of stocks, if issued in paper form;
(4) The date on which each shareholder acquired his shares.
Article 103 Promoters who form a joint stock limited company by promotion shall hold a formation meeting of the company within 30 days of full payment of the shares that shall be issued at the time of formation of the company. The promoters shall notify each subscriber of the date of the formation meeting or make a public announcement about the meeting 15 days in advance. The formation meeting may be held only if subscribers for shares holding a majority of the voting rights are present.
The holding and voting procedures for the formation meeting of a joint stock limited company formed by promotion shall be governed by the company's bylaw or the promoter's agreement.
Article 104 The formation meeting of a company shall exercise the following functions:
(1) Deliberating the report on the pre-formation activities prepared by the sponsors;
(2) Adopting the bylaw;
(3) Electing directors and supervisors;
(4) Verifying expenses incurred for the formation of the company;
(5) Verifying the assessed value of the non-monetary property contributed the promoters to capital.
(6) Where the force majeure or a material change of the operational conditions makes the formation of a company impossible, the promoters may decide not to form the company.
A resolution adopted at the formation meeting on any of the matters as mentioned in the previous paragraph requires affirmative votes by subscribers representing more than half of the votes of those attending the meeting.
Article 105 If the shares that shall be issued at the time of formation are not fully subscribed to, or if the promoters fail to hold a formation meeting within 30 days after full payment for the public offer shares is made, the subscribers may demand the promoters to make repayments for the public offer shares plus an interest calculated at the bank deposit interest rate for the same period.
The promoters and subscribers shall not withdraw their share capital after making payments for the shares they have subscribed to or after making capital contributions by using non-monetary property, unless the public offer shares have not been fully subscribed within the time limit, the promoters fail to convene the formation meeting within the time limit, or the formation meeting has decided not to set up the company.
Article 106 The board of directors shall authorize a representative to apply to the company registration authority for formation registration within 30 days of conclusion of the company's formation meeting.
Article 107 The provisions of Article 44, paragraph 3 of Article 49, Article 51, Article 52, and Article 53 of this Law shall apply to joint stock limited companies.
Article 108 Where a limited liability company is changed into a joint stock limited company, the total amount of the paid capital shall not be more than the total amount of the net assets. Where a limited liability company is changed into a joint stock limited company, the public offer stocks issued for the purpose of increasing the registered capital shall comply with the law.
Article 109 A joint stock limited company shall make and keep the bylaw, the register of shareholders, the minutes of shareholders' meetings, the minutes of the meetings of the board of directors, the minutes of the meetings of the board of supervisors, the financial reports, and the register of bondholders in the company.
Article 110 The shareholders shall be entitled to review the bylaw, the register of the shareholders, the minutes of shareholders' meetings, the minutes of the meetings of the board of directors, the minutes of the meetings of the board of supervisors, and the financial reports, and may put forward proposals or raise questions about the business operations of the company.
If shareholders who individually or aggregately hold 3% or more of the company's shares for 180 consecutive days or more requests for review of the company's accounting books and accounting vouchers, the provisions of paragraphs 2, 3, and 4 of Article 57 of this Law shall apply. If the company's bylaw requires a lower percentage of shares, the company's bylaw shall prevail.
If a shareholder requests for a review or reproduction of the relevant materials of the company's wholly-owned subsidiary, the provisions of the preceding two paragraphs shall apply.
If a shareholder of a listed company reviews or reproduces relevant materials, the shareholder shall comply with the Securities Law of the People's Republic of China and other laws and administrative regulations.
Section 2 Shareholders' Meeting
Article 111 The shareholders' meeting of a joint stock limited company shall be composed of all the shareholders. It is the company's organ of power, which shall exercise its powers in accordance with this Law.
Article 112 The provisions regarding the powers of the shareholders' assembly of a limited liability company as prescribed in paragraphs 1 and 2 of Article 59 of this Law shall apply to the shareholders' meeting of a joint stock limited company.
Article 60 of this Law: “A limited liability company with only one shareholder has no board of directors” shall apply to joint stock limited companies with only one shareholder.
Article 113 An annual session of the shareholders' meeting shall be held each year. Under any of the following circumstances, an interim shareholders' meeting session shall be held within 2 months:
(1) The number of directors is less than two-thirds of the number of directors as required by this Law or the number of directors as specified in the bylaw;
(2) The un-recovered losses of the company reach one-third of the total capital;
(3) At the request of the shareholders separately or aggregately holding 10% or more of the company's shares;
(4) The board of directors deems it necessary;
(5) At the request of the board of supervisors; and
(6) Other circumstances as specified in the bylaw.
Article 114 Shareholders' meetings shall be convened by the board of directors and presided over by the chairman of the board of directors. If the chairman is unable or fails to perform his duties, the meetings thereof shall be presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or fails to perform his duties, the meetings shall be presided over by a director elected by a majority of the directors.
If the board of directors or the executive director is unable or fails to fulfill the obligation of convening the shareholders' meetings, the board of supervisors shall convene and preside over such meetings. If the board of supervisors does not convene or preside over such meetings, the shareholders separately or aggregately holding 1/10 or more of the shares may convene and preside over such meetings on their own initiative.
If shareholders, separately or aggregately holding 10% or more of the company's shares, request the convening of an interim shareholders' meeting, the board of directors and the board of supervisors shall decide whether to convene such a meeting within 10 days of receiving the request, and provide a written reply to the shareholders.
Article 115 For a shareholders' meeting to be held, a notice shall be given to each shareholder 20 days in advance, which shall state the time and place of the meeting, and the matters to be deliberated at the meeting. For an interim shareholders' meeting, a notice shall be given to each shareholder 15 days in advance.
The shareholders separately or aggregately holding 1% or more of the shares of the company may put forward a written interim proposal to the board of directors 10 days before a shareholders' meeting is held. The interim proposal shall have a topic for discussion and matters to be decided. The board of directors shall notify the other shareholders within two days after receiving the interim proposal, and submit the interim proposal for deliberation at the shareholders' meeting, unless the interim proposal violates the provisions of laws, administrative regulations, or the company's bylaw, or does not fall within the purview of the shareholders' meeting. The company shall not increase the percentage of shares required for shareholders to submit an interim proposal.
A company that publicly offers shares shall issue the notices prescribed in the preceding two paragraphs in the form of announcement.
No resolutions may be adopted on matters not stated in the notices at a shareholders' meeting.
Article 116 When a shareholder attends the shareholders' meeting, he shall have one voting right for each share he holds, except for a classified shareholder. The company has no voting right for its own shares it holds.
When any resolution is to be made by the shareholders' meeting, it shall be adopted by shareholders representing a majority of the voting rights of the shareholders in presence.
When the shareholders' meeting makes a decision to modify the bylaw, or to increase or reduce the registered capital, or a resolution about the merger, split-up, dissolution or change of the company form, such a decision shall be adopted by shareholders representing two-thirds or more of the voting rights of the shareholders in presence.
Article 117 A shareholders' meeting may adopt a cumulative voting system to elect the directors or supervisors according to the bylaw or its resolutions.
The term "cumulative voting system" as mentioned in this Law refers to a system of voting by shareholders for the election of directors or supervisors at the shareholders' meeting in which the shareholder can multiply his voting rights by the number of candidates and vote them all for one candidate for director or supervisor.
Article 118 A shareholder that appoints a proxy to attend a shareholders' meeting shall specify the matters in which the proxy will act, the authority, and period. The proxy shall present a proxy form issued by the shareholder to the company, and exercise his voting rights within the scope of the proxy form.
Article 119 The shareholders' meeting shall scribe the minutes for the decisions about the matters discussed at the meeting. The chair of the meeting and the directors in presence shall affix their signatures to the minutes, which shall be preserved together with the book of signatures of the shareholders in presence as well as the power of attorney thereof.
Section 3 Board of Directors and Managers
Article 120 A joint stock limited company shall have a board of directors, unless otherwise specified in Article 128 of this Law.
The provisions of Article 67, paragraph 1 of Article 68, Article 70, and Article 71 of this Law shall apply to joint stock limited companies.
Article 121 A joint stock limited company may establish an audit committee composed of directors of the board of directors in accordance with the company's bylaw which exercises the functions of the board of supervisors specified in this Law, and is not required to have a board of supervisors or supervisors.
The audit committee shall have three or more members, and a majority of the members shall neither hold a position other than directorship in the company nor have any relationship with the company that may affect his independent and objective judgments. Employee representatives who are members of the company's board of directors may serve as members of the audit committee.
The audit committee shall adopt resolutions by a majority vote of its members.
Each audit committee member is entitled to one vote when voting on a resolution.
The methods of discussion and voting procedures of the audit committee shall be specified in the bylaws, unless otherwise provided by this Law.
The company may establish other committees of the board of directors in accordance with the company's bylaw.
Article 122 The board of directors shall have one chairman and may have a deputy chairman. The chairman and deputy chairmen shall be elected by more than half of all the directors.
The chairman of the board of directors shall call and preside over the meetings of the board of directors and check the implementation of the resolutions of the board of directors. The deputy chairman shall assist the chairman to work. If the chairman is unable or fails to perform his duties, the deputy chairman shall perform such duties. If the deputy chairman of the board of directors is unable or fails to perform his duties, a director elected by a majority of the directors shall perform such duties.
Article 123 The board of directors shall convene at least two meetings every year and shall give a notice to all directors and supervisors 10 days before it holds a meeting.
The shareholders representing one-tenths or more of the voting rights, or one-thirds of the directors, or the board of supervisors may put forward a proposal to hold an interim meeting of the board of directors. The chairman of the board of directors shall, within 10 days after he receives such a proposal, call and preside over a meeting of the board of directors.
If the board of directors holds an interim meeting, it may separately decide the method and time limit for the notification about convening meetings of the board of directors.
Article 124 No meeting of the board of directors may be held unless a majority of the directors are present. When the board of directors makes a resolution, it shall be adopted by a majority of all the directors.
For the voting on a resolution of the board of directors, each director shall have one vote only.
The board of directors shall make minutes of the decisions about the matters discussed at the meetings thereof. The shareholders who attend the meeting shall affix their signatures to the minutes.
Article 125 The meetings of the board of directors shall be attended by the directors in person. Where any director is unable to attend the meeting for a certain reason, he may, by issuing a written proxy, entrust another director to attend the meeting on his behalf, and the proxy shall state the scope of authorization.
The directors shall be responsible for the resolutions of the board of directors. Where a resolution of the board of directors is in violation of any law, administrative regulation, bylaw, or resolution of the shareholders' meeting and causes any serious loss to the company, the directors who participate in adopting the resolution shall make compensation; if a director is proven to have expressed his objection to the vote on such resolution and his objection was recorded in the minutes, then the director may be exempted from liability.
Article 126 A joint stock limited company may have a manager whom may be hired or dismissed by the board of directors.
The manager shall be responsible to the board of directors, and perform functions in accordance with the company's bylaw or under the authority of the board of directors. The manager attends the meetings of the board of directors as a non-voting representative.
Article 127 The board of directors of a company may decide to appoint a member of the board of directors to concurrently take up the post of the manager.
Article 128 A joint stock limited company that is small or has a small number of shareholders is not required to establish a board of directors, and may have one to two directors who exercise the functions of the board of directors as provided for in this Law. The director may concurrently hold the post of the company's manager.
Article 129 A Company shall regularly disclose to its shareholders with the information about remunerations received by the directors, supervisors and senior managers from the company.
Section 4 Board of Supervisors
Article 130 A joint stock limited company shall have a board of supervisors paragraph, unless otherwise provided for in paragraph 1 of Article 121 and Article 133 of this Law.
The board of supervisors shall consist of three or more members. The members of the board of supervisors shall include representatives of shareholders and an appropriate percentage of representatives of the company's employees. The percentage of the representatives of employees shall account for no less than 1/3 of all the supervisors, but the concrete percentage shall be specified in the bylaw. The representatives of employees who serve as members of the board of supervisors shall be democratically elected through the assembly of representatives of the company's employees, the shareholders' assembly or by other means.
The board of supervisors shall have one chairman and may have a deputy chairman. The chairman and deputy chairman shall be elected by more than half of all the supervisors. The chairman of the board of supervisors shall call and preside over the meetings of the board of supervisors. If the chairman of the board of supervisors is unable or fails to perform his duties, the deputy chairman of the board of supervisors shall call and preside over the meeting of the board of supervisors. If the deputy chairmen of the board of supervisors are unable or fail to perform their duties, a supervisor jointly recommended by a majority of the supervisors shall call and preside over the meetings of the board of supervisors.
No director or senior manager may concurrently act as a supervisor.
The provisions of Article 77 of this Law on the term of office of the supervisors of a limited liability company shall apply to the supervisors of a joint stock limited company.
Article 131 The provisions of Articles 78 through 80 of this Law shall apply to the board of supervisors of a joint stock limited company.
The expenses necessary for the board of supervisors to exercise its functions shall be borne by the company.
Article 132 The board of supervisors shall hold at least one meeting every 6 months. The supervisors may propose to call interim meetings of the board of supervisors.
The discussion methods and voting procedures of the board of supervisors shall be specified in the bylaw unless it is otherwise provided for by this Law.
The resolution of the board of supervisors requires the approval of more than half of the members of board of supervisors.
For the voting on a resolution of the board of supervisors, each supervisor shall have one vote only.
The board of supervisors shall prepare minutes for the decisions about the matters discussed at the meeting, which shall be signed by the supervisors in presence.
Article 133 A joint stock limited company that is small or has a small number of shareholders is not required to establish a board of supervisors, but shall have one supervisor who exercises the functions of the board of supervisors as provided for in this Law.
Section 5 Special Provisions on the Organizational Structure of a Listed Company
Article 134 The term "listed company" as mentioned in this Law refers to the joint stock limited companies whose stocks are listed and traded in a stock exchange.
Article 135 Where a listed company purchases or sells any important asset, or provides guaranties that exceed 30% of the company's total assets within a year, such actions shall be authorized the resolutions made by the shareholders' assembly and adopted by the shareholders representing two-thirds of the voting rights of the shareholders who attend the assemblies.
Article 136 A listed company shall have independent directors, and specific administrative measures shall be prescribed by the securities regulatory agency of the State Council.
In addition to the matters specified in Article 95 of this Law, the bylaw of a listed company shall state the composition and powers of the committees of the board of directors, the compensation and assessment mechanism for directors, supervisors, and senior managers, and other matters in accordance with laws and administrative regulations.
Article 137 Where a listed company establishes an audit committee of the board of directors, the board of directors shall obtain the approval of more than half of all members of the audit committee before adopting resolutions on the following matters:
(1) Engaging and dismissing the accounting firm that undertakes the company's audit business.
(2) Appointing and dismissing the person in charge of finance.
(3) Disclosing financial and accounting reports.
(4) Other matters prescribed by the securities regulatory agency of the State Council.
Article 138 A listed company may have a secretary of the board of directors, who shall be responsible for the preparation of the sessions of shareholders' assembly and meetings of the board of directors, the preservation of documents, the management of the company's stock rights, and the information of disclosure, etc.
Article 139 If a director of a listed company has an affiliation relationship with an enterprise or individual involved in the matter to be decided at the meeting of the board of directors, the director shall report to the board of directors in writing in a timely manner. The director in the affiliation relationship shall not vote on this resolution, nor may he vote on behalf of any other person. The meeting of the board of directors shall not be held unless more than half of the unrelated directors are present at the meeting. A resolution of the board of directors shall be adopted by more than half of the unrelated directors. If the number of unrelated directors in presence is less than 3 persons, the matter shall be submitted to the shareholders' meeting of the listed company for deliberation.
Article 140 A listed company shall disclose information on shareholders and actual controllers in accordance with the law, which information shall be authentic, accurate, and complete.
Nominee stock holdings in listed companies in violation of laws and administrative regulations shall be prohibited.
Article 141 A controlled subsidiary of a listed company shall not acquire shares of the listed company.
Where the controlled subsidiary of the listed company holds shares of the listed company by reason of a company merger or exercise of a pledge, among others, it shall not exercise the voting rights of the shares it holds, and shall dispose of the relevant shares of the listed company in a timely manner.
Chapter VI Issuance and Transfer of Shares of a Joint Stock Limited Company
Section 1 Issuance of Shares
Article 142 The capital of a company is divided into shares. All the shares of the company shall be either par value shares or no par shares according to the company's bylaw. In the case of par value shares, each share shall be with equal par value.
The company may convert all issued par value shares into no par shares or vice versa in accordance with the company's bylaw.
In the case of no par shares, more than half of the proceeds of the issuance of shares shall be included in the registered capital.
Article 143 The issuance of shares shall comply with the principle of fairness and impartiality. The shares of the same class shall have the same rights and benefits.
The shares of the same class issued at the same time shall be equal in price and shall be subject to the same conditions. The price of each share purchased by any subscriber shall be the same.
Article 144 A company may issue the following classified shares carrying rights different from common shares in accordance with the company's bylaw:
(1) Shares with a preferential or subordinated right of distribution of profit or remaining property.
(2) Shares each with voting rights more or less than common shares.
(3) Shares subject to transfer restrictions, among others, that their transfer is subject to the approval of the company.
(4) Other classified shares as prescribed by the State Council.
A company that publicly offers shares shall not issue the classified shares specified in subparagraphs (2) and (3) of the preceding paragraph, unless such classified shares have been issued before the public offering.
Where a company issues classified shares as specified in paragraph 1(2) of this article, each classified share shall have the same number of voting rights as common shares on the election and replacement of supervisors or members of the audit committee.
Article 145 A company that issues classified shares shall specify the following in the company's bylaw:
(1) The order in which classified shares receive a distribution of profits or remaining property.
(2) The number of voting rights of classified shares.
(3) Restrictions on the transfer of classified shares.
(4) Measures to protect the rights and interests of minority shareholders.
(5) Other matters which the shareholders' meeting deems require to be specified.
Article 146 Where a company issuing classified shares has any matter specified in paragraph 3 of Article 116 of this Law, among others, that may affect the rights of classified shareholders, the matter shall be subject to the approval of more than two-thirds of the voting rights held by shareholders present at the classified shareholders' meeting, in addition to the resolution of the shareholders' meeting according to paragraph 3 of Article 116.
The company's bylaw may provide for other matters subject to the resolution of the classified shareholders' meeting.
Article 147 The shares of a company are represented by stocks. A stock is a certificate issued by the company to certify the share held by a shareholder.
The stocks issued by the company shall be registered stocks.
Article 148 The stocks representing par value shares may be issued at a price equal to or in excess of par value, but not below par value.
Article 149 The stocks shall be in paper form or in other forms prescribed by the securities regulatory institution of the State Council.
A stock, if in paper form, shall state the following major items:
(1) the company's name;
(2) The date of formation of the company or the time of issuance of shares;
(3) The class and par value of the stock and the number of shares it represents, or if no par shares are issued, the number of shares represented by the stock.
If the stock is in paper form, the serial number of the stock shall also be stated, signed by the legal representative, and sealed by the company.
The stocks held by the promoters, if in paper form, shall be marked with the words "promoters' stocks."
Article 150 After a joint stock limited company is formed, it shall formally deliver the stocks to the shareholders. No company may deliver any stock to the shareholders prior to its formation.
Article 151 Where a company intends to issue new stocks, it shall, under its bylaw, make a resolution about the following matters through the shareholders' meeting or board of directors:
(1) The class and amount of new stocks;
(2) The issuing price of the new stocks;
(3) The beginning and ending dates for the issuance of new stocks;
(4) The class and amount of the new stocks to be issued to the original shareholders;
(5) If no par shares are issued, the proceeds of the issuance of new shares shall be included in the amount of registered capital.
When a company issues new stocks, it may make a pricing plan according to its business operations and financial status.
Article 152 The bylaw or shareholders' meeting of a company may authorize the board of directors to decide within three years to issue shares not exceeding 50% of the issued shares. Nevertheless, if non-monetary property is contributed as capital at an assessed value, such issuance shall be subject to the resolution of the shareholders' meeting.
If the board of directors decides to issue shares in accordance with the provisions of the preceding paragraph, resulting in changes in the company's registered capital and the number of issued shares, the modification of the matter in the company's bylaw is exempt from a vote at the shareholders' meeting.
Article 153 If the bylaw or shareholders' meeting of a company authorizes the board of directors to decide to issue new shares, the resolution of the board of directors shall be approved by more than two-thirds of all directors.
Article 154 A company making a public offering of shares shall obtain registration with the securities regulatory agency of the State Council and announce the prospectus.
The prospectus shall be accompanied by the bylaw and shall state the following:
(1) The total number of shares to be offered.
(2) The par value and offering price of par value shares, or the offering price of no par shares.
(3) The use of proceeds.
(4) The rights and obligations of subscribers.
(5) The class of shares and the rights and obligations carried by them.
(6) The beginning and ending dates for the public offering and a statement to indicate that the subscribers may revoke their subscriptions if the offered stocks cannot be fully subscribed at the closing time of the public offering.
If a company offers shares at the time of its formation, the number of shares subscribed for by its promoters shall also be stated.
Article 155 The public offer shares of a company shall be underwritten by a lawfully formed securities company and an underwriting agreement shall be concluded.
Article 156 For the public offer shares, the company shall sign an agreement with the bank receiving the funds to purchase the shares.
The receiving bank shall receive and hold as agent the payments for shares according to the agreement, produce receipts to subscribers who have made the payments, and shall be obliged to produce evidence of receipt of payments to the relevant departments.
The company shall make an announcement after receiving full payments for the offering of shares.
Section 2 Transfer of Shares
Article 157 Shares held by a shareholder of a joint stock limited company may be transferred to the other shareholders or persons other than shareholders; shares subject to transfer restrictions provided for by the company's bylaw shall be transferred in accordance with the company's bylaw.
Article 158 Where a stockholder intends to transfer its shares, it shall transfer its shares in a lawfully formed stock exchange or by any other means as prescribed by the State Council.
Article 159 Stocks may be assigned by their stockholders' endorsement or by any other means prescribed by the relevant laws or administrative regulations. After the assignment, the company shall record the name and domicile of the transferee in the register of shareholders.
Within 20 days before the shareholders' meeting is held, or within 5 days prior to the benchmark date decided by the company for the distribution of dividends, no modification may be made to the registry of shareholders, subject to the provisions on the modification in the register of shareholders of listed companies established by laws, administrative regulations, or the securities regulatory authority of the State Council.
Article 160 The shares issued before the company publicly issues shares shall not be transferred within one year from the day when the stocks of the company get listed and are traded in a stock exchange, subject to the provisions on the transfer of shares of a listed company by its shareholders and actual controllers, as established by laws, administrative regulations, or the securities regulatory authority of the State Council.
The directors, supervisors and senior managers of the company shall declare to the company the shares held by them and the changes thereof. According to the determination at the time of taking office, during the term of office, the shares transferred by any of them each year shall not exceed 25% of the total shares of the company he holds. The shares of the company held by the aforesaid persons shall not be transferred within 1 year from the day when the stocks of the company get listed and are traded in a stock exchange. Within six months after any of the aforesaid persons is removed from his post, he shall not transfer the shares of the company he holds. The bylaw may have other restrictions on the transfer of shares held by the directors, supervisors and senior managers.
If shares are pledged within the transfer restriction period specified by laws and administrative regulations, the pledgee shall not exercise the pledge within the transfer restriction period.
Article 161 Under any of the following circumstances, a shareholder, who votes against the resolution of the shareholders' meeting, may request the company to purchase its stock rights at a reasonable price, unless the company makes a public offering of shares:
(1) The company that has made profits for five consecutive years has failed to distribute any dividends to the shareholders for 5 consecutive years and conforms to the profit distribution conditions as prescribed in this Law;
(2) The company is going to transfer the major properties of the company to others;
(3) When the business term as specified in the bylaw expires or other reasons for dissolution as prescribed in the bylaw occur, the shareholders' meeting makes the company exist continuously by adopting a resolution to modify the bylaw.
Within 60 days after the resolution is adopted at the shareholders' meeting, if the shareholder and the company fail to reach an agreement on the purchase of shares, the shareholder may initiate a lawsuit in the people's court within 90 days after the resolution is adopted at the shareholders' meeting.
The shares of the company purchased by the company in accordance with paragraph 1 of this article shall be transferred or canceled in accordance with the law within six months.
Article 162 A company shall not purchase its own shares except under any of the following circumstances:
(1) To reduce the registered capital of the company.
(2) To merge with another company that holds its shares.
(3) To use shares for employee stock ownership plan or equity incentives.
(4) A shareholder requests the company to purchase the shares held by him since he objects to a resolution of the shareholders' meeting on the combination or division of the company.
(5) To use shares for converting convertible corporate bonds issued by the company.
(6) It is necessary for a listed company to protect the corporate value and the rights and interests of shareholders.
A company purchasing its own shares under any of the circumstances set forth in subparagraphs (1) and (2) of the preceding paragraph shall be subject to a resolution of the shareholders' meeting; and a company purchasing its own shares under any of the circumstances set forth in subparagraphs (3), (5) and (6) of the preceding paragraph may, pursuant to the bylaws or the authorization of the shareholders' meeting, be subject to a resolution of a meeting of the board of directors at which more than two-thirds of directors are present.
After purchasing its own shares pursuant to the provisions of the first paragraph of this article, a company shall, under the circumstance set forth in subparagraph (1), cancel them within 10 days after the purchase; while under the circumstance set forth in either subparagraph (2) or (4), transfer or cancel them within six months; and while under the circumstance set forth in subparagraph (3), (5) or (6), aggregately hold not more than 10% of the total shares that have been issued by the company, and transfer or cancel them within three years.
A listed company purchasing its own shares shall perform the obligation of information disclosure according to the Securities Law of the People's Republic of China. A listed company purchasing its own shares under any of the circumstances set forth in paragraph 1(3), (5) and (6) of this article shall carry out trading in a public and centralized manner.
No company may accept its own shares as the subject matter of a pledge.
Article 163 A company shall not provide gifts, loans, guaranties, or other financial assistance for another person to acquire shares of the company or its parent company, unless the company implements an employee stock ownership plan.
For the benefit of the company, the company may provide financial assistance for another person to acquire shares of the company or its parent company, under a resolution of the shareholders' meeting, or under a resolution adopted by the board of directors in accordance with the company's bylaw or under the authority of the shareholders' meeting, provided that the cumulative total of financial assistance shall not exceed 10% of the issued capital stock. The resolution adopted by the board of directors shall be approved by more than two-thirds of all directors.
If any loss is caused to the company by violating the provisions of the preceding two paragraphs, each liable director, supervisor, and senior manager shall be liable for compensation.
Article 164 Where any stocks are stolen, lost or destroyed, the shareholder may request the people's court to declare these stocks invalid according to the public notice procedure prescribed in the Civil Procedural Law of the People's Republic of China. After the people's court has invalidated these stocks, the shareholder may file an application to the company for the issuance of new stocks.
Article 165 The stocks of a listed company shall get listed and traded according to the relevant laws, administrative regulations, as well as the trading rules of the stock exchange.
Article 166 A listed company shall disclose relevant information in accordance with laws and administrative regulations.
Article 167 After the death of a natural-person shareholder, his lawful inheritor may inherit the shareholder's qualifications unless it is otherwise provided for by the bylaw of the joint stock limited company imposing share transfer restrictions.
Chapter VII Special Provisions on the Organizational Structure of State-funded Companies
Article 168 The organizational structure of state-funded companies shall be governed by the provisions of this Chapter, or the other provisions of this Law, if this Chapter is silent.
For the purposes of this Law, "state-funded company" means a wholly state-owned company or a company in which the state holds controlling shares, to which the state makes a capital contribution, including a limited liability company or joint stock limited company to which the state makes a capital contribution.
Article 169 For state-funded companies, the State Council or local people's governments shall represent the state in performing the duties of capital contributor and enjoying the rights and interests of capital contributor. The State Council or local people's governments may authorize a state-owned assets supervision and administration institution or any other department or agency to represent the people's government at the same level in performing the duties of capital contributor with respect to state-funded companies.
Institutions and departments that represent the people's government at the same level in performing the duties of capital contributor are hereinafter collectively referred to as institutions performing the duties of capital contributor.
Article 170 The organizations of the Communist Party of China in state-funded companies shall play a leading role in accordance with the Constitution of the Communist Party of China, study and discuss material business management matters of the companies, and support the departments of the companies in exercising their functions in accordance with the law.
Article 171 The bylaw of a wholly state-owned company shall be formulated by an institution performing the duties of capital contributor.
Article 172 A wholly state-owned company does not have a shareholders' meeting, and an institution performing the duties of capital contributor shall exercise the functions of a shareholders' meeting. The institution performing the duties of capital contributor may authorize the board of directors of the company to exercise part of the functions of a shareholders' meeting, provided that the formulation and amendment of the company's bylaw, the merger, split, dissolution, and bankruptcy petition of the company, an increase or decrease in its registered capital, and profit distribution are subject to the decision of the institution performing the duties of capital contributor.
Article 173 The board of directors of a wholly state-owned company exercises functions in accordance with this Law.
Among the members of the board of directors of the wholly state-owned company, more than half shall be outside directors, and there shall be representatives of the company's employees.
The members of the board of directors shall be appointed by an institution performing the duties of capital contributor, but of whom the representatives of the employees shall be elected through the assembly of the representatives of the employees of the company.
The board of directors shall have one chairman and may have deputy chairmen. A chairman, or a vice-chairman, shall be designated by the institution performing the duties of capital contributor from the members of the board of directors.
Article 174 The manager of a wholly state-owned company shall be hired or dismissed by the board of directors.
Upon consent of the institution performing the duties of capital contributor, the members of the board of directors may concurrently hold the post of manager.
Article 175 None of the directors and senior managers of a wholly state-owned company may concurrently take up a post in any other limited liability company, joint stock limited company or any other economic organization unless it is so consented by the institution performing the duties of capital contributor.
Article 176 Where the board of directors of a wholly state-owned company has an audit committee composed of directors that exercises the functions of the board of supervisors specified in this Law, the wholly state-owned company is not required to have a board of supervisors or a supervisor.
Article 177 State-funded companies shall establish and improve internal supervision, management, and risk control systems in accordance with the law, and strengthen internal compliance management.
Chapter VIII Qualifications and Obligations of the Directors, Supervisors and Senior Executives of a Company
Article 178 A person may not serve as the director, supervisor or officer of a company if he falls under any of the following circumstances:
(1) He has no or limited capacity for civil conduct;
(2) He has been sentenced to criminal penalty due to an offense of corruption, bribery, encroachment of property, misappropriation of property or disrupting the order of the socialist market economy, or deprived of political rights for crime, and five years have not elapsed since the completion date of the execution of the penalty, or two years have not elapsed since the expiration of the probation period for suspended sentence, if applicable;
(3) He was a former director, factory director or manager of a company or enterprise which was bankrupt and liquidated, and was personally liable for the bankruptcy of such company or enterprise, and three years have not elapsed since the date of completion of the bankruptcy and liquidation of the company or enterprise;
(4) He was the legal representative of a company or enterprise whose business license was revoked and which was ordered to close due to a violation of the law, for which he is personally liable, and three years have not elapsed since the date of the revocation of the business license thereof or the order for its close;
(5) He is listed as a dishonest party subject to enforcement by the people's court for failure to pay a relatively large amount of debts when they become due.
Where any director or supervisor is elected or appointed, or any officer is hired, by violating the provisions in the preceding paragraph, such elections, appointments, or hiring shall be invalid.
Where any director, supervisor or officer, during his term of office, is under any of the circumstances as mentioned in the preceding paragraph, the company shall remove him from his post.
Article 179 The directors, supervisors and senior executives shall comply with the laws, administrative regulations, and bylaw.
Article 180 Directors, supervisors, and senior executives shall have a duty of loyalty to the company, and take measures to avoid conflicts between their own interests and the interests of the company, and shall not use their powers to seek improper interests.
Directors, supervisors, and senior executives shall have an obligation of diligence to the company, and exercise reasonable care that managers shall ordinarily exercise, in the best interests of the company in performing their duties.
If a controlling shareholder or actual controller of the company does not serve as its director, but attends to the company's affairs, the provisions of the first two paragraphs shall apply.
Article 181 No director, supervisor, or officer may commit any of the following acts:
(1) Embezzling company property and misappropriating the company's funds;
(2) Depositing the company's fund into an account under his own name or any other individual's name;
(3) Taking advantage of power to accept bribes or other illegal income;
(4) Taking commissions on the transactions between others and the company into his own pocket;
(5) Illegally disclosing the company's confidential information;
(6) Other acts inconsistent with the obligation of fidelity to the company.
Article 182 A director, supervisor, or officer who directly or indirectly contracts or conducts a transaction with the company shall report to the board of directors or the shareholders' meeting on matters related to the contracting or conducting the transaction, and seek approval by resolution of the board of directors or the shareholders' meeting in accordance with the company's bylaw.
If the close relatives of directors, supervisors, and senior executives, enterprises under direct or indirect control of directors, supervisors, senior executives, or their close relatives, and affiliates in any other affiliation relationship with directors, supervisors, and senior executives contract or conduct transactions with the company, the provisions of the preceding paragraph shall apply.
Article 183 A director, supervisor, or officer shall not take advantage of his position to take a business opportunity belonging to the company for himself or another person, except under any of the following circumstances:
(1) He has reported to the board of directors or the shareholders' meeting and received approval by resolution of the board of directors or the shareholders' meeting according to the company's bylaw.
(2) According to laws, administrative regulations, or the company's bylaw, the company is unable to take the business opportunity.
Article 184 A director, supervisor, or officer of a company shall not conduct the same kind of business as the company on his own account or on the account of another person, without reporting to the board of directors or the shareholders' meeting, without approval by resolution of the board of directors or the shareholders' meeting according to the company's bylaw.
Article 185 When the board of directors resolves as to a matter specified in Articles 182 through 184 of this Law, an affiliated director shall not participate in the vote, and their voting rights shall not be counted in the total number of voting rights. If the number of unrelated directors in presence is less than three persons, the matter shall be submitted for deliberation at the shareholders' meeting.
Article 186 The income of any director, supervisor, or officer from any act in violation of Articles 181 through 184 of this Law shall belong to the company.
Article 187 If the shareholder's meeting demands a director, supervisor or officer to attend the meeting as a non-voting representative, he shall do so and shall answer the shareholders' inquiries.
Article 188 Where any director, supervisor or officer violates any law, administrative regulation, or the bylaw during the course of performing his duties, if any loss is caused to the company, he shall be liable for compensation.
Article 189 Where a director or officer is under the circumstance as mentioned in the preceding article, the shareholder(s) of the limited liability company or joint stock limited company separately or aggregately holding 1% or more of the total shares of the company for 180 consecutive days or more may request in writing the board of supervisors to initiate a lawsuit in the people's court. If a supervisor is under the circumstance as mentioned in the preceding article, the aforesaid shareholder(s) may request in writing the board of directors to lodge an action in the people's court.
If the board of supervisors or board of directors refuses to lodge a lawsuit after receiving a written request as mentioned in the preceding paragraph, or if they fail to initiate a lawsuit within 30 days after receiving the request, or if, in an emergency, the failure to lodge an action immediately will cause unrecoverable damages to the interests of the company, the shareholder(s) as listed in the preceding paragraph may, on their own behalf, directly lodge a lawsuit in the people's court.
If the legitimate rights and interests of a company are impaired and any losses are caused to the company, the shareholders as mentioned in the preceding paragraph may initiate a lawsuit in the people's court according to the provisions of the preceding two paragraphs.
If a director, supervisor, or officer of the company's wholly-owned subsidiary falls under the circumstances specified in the preceding article, or if another person infringes upon the legitimate rights and interests of the company's wholly-owned subsidiary, causing losses, the shareholders of a limited liability company or a joint-stock company separately or aggregately hold 1% or more of the company's shares may, in accordance with the provisions of the first three paragraphs, request in writing the board of supervisors or board of directors of the wholly-owned subsidiary to file a lawsuit with the people's court, or directly file a lawsuit with the people's court in their own name.
Article 190 If any director or officer damages the shareholders' interests by violating any law, administrative regulation, or the bylaw, the shareholders may lodge a lawsuit in the people's court.
Article 191 Where directors and senior executives cause damage to others by performing their duties, the company shall be liable for compensation; if directors and senior executives are intent or grossly negligent, they shall also be liable for compensation.
Article 192 Where the controlling shareholder or actual controller of a company instructs a director or officer to engage in an act against the interests of the company or shareholders, the controlling shareholder or actual controller shall be jointly and severally liable with the director or officer.
Article 193 A company may purchase liability insurance for directors against liability for compensation arising from performance of the company's duties during the directors' term of office.
After the company purchases liability insurance for directors or renews the insurance, the board of directors shall report to the shareholders' meeting on the insured amount, coverage, and premium rates, among others, of the liability insurance.
Chapter IX Corporate Bonds
Article 194 For the purposes of this Law, "corporate bond" means a denominated security issued by a company under which it pays scheduled principal and interest as agreed.
A corporate bond may be offered publicly or non-publicly.
The offering and trading of a corporate bond shall comply with the Securities Law of the People's Republic of China and other laws and administrative regulations.
Article 195 A public offering of a corporate bond shall be registered with the securities regulatory agency of the State Council, and a corporate bond prospectus shall be announced.
The corporate bond prospectus shall mainly state:
(1) the company's name;
(2) the purposes of use of the corporate bonds;
(3) the total amount of corporate bonds and par value thereof;
(4) the method for determining the interest rate of the bonds;
(5) the time limit and method for paying the principal plus interest;
(6) guaranty of the bonds;
(7) issuing price of the bonds, beginning and ending dates of the issuance;
(8) net assets of the company;
(9) total amount of corporate bonds having been issued but not yet due; and
(10) underwriters of the corporate bonds.
Article 196 The bonds issued by a company and represented by paper certificates shall state the company's name, par value, interest rate, time limit for repayment, etc., and shall bear the signature of legal representative and seal of the company.
Article 197 Corporate bonds shall be registered bonds.
Article 198 A company that offers a corporate bond shall make available a list of corporate bondholders.
In the list of corporate bondholders, the company shall state:
(1) the name and domicile of the bondholders;
(2) the dates on which the bondholder acquires the bonds and the serial number of the bonds;
(3) the total amount of the bonds, par value, interest rate, time limit and method for repayment of principal plus interest; and
(4) the date on which the bonds are issued.
Article 199 The registration and settlement institution of corporate bonds shall establish bylaws on the registration, preservation, interest payment and acceptance of bonds.
Article 200 The corporate bonds may be transferred. The transfer price shall be negotiated between the transferor and transferee.
A transfer of corporate bonds shall comply with the provisions of laws and administrative regulations.
Article 201 Corporate bonds may be assigned by the bondholders' endorsement or by other methods prescribed by the relevant laws and administrative regulations. In the case of transfer of registered bonds the company shall record the transferee's name and domicile in the list of corporate bondholders.
Article 202 A joint stock limited company may, under a resolution of a shareholders' meeting or under a resolution of the board of directors under the authority of the company's bylaw or a shareholders' meeting, offer a corporate bond convertible into stock, and specify conversion methods. To issue corporate bonds that may be converted into stocks, a listed company shall register the issue with the securities regulatory agency of the State Council.
The corporate bonds that may be converted into stocks shall be marked with the words "convertible corporate bonds" and the number of convertible company bonds shall be specified in the company's list of corporate bondholders.
Article 203 Where any convertible company bonds are issued, the company shall exchange its stocks for the bonds held by the bondholders in the prescribed method of conversion, provided that the bondholders have the option on whether or not to convert their bonds, except as otherwise provided by any law or administrative regulation.
Article 204 Where a corporate bond is publicly offered, a bondholders' meeting shall be established for the holders of the corporate bond, and the bond prospectus shall specify the procedures for calling the bondholders' meeting, the rules of the meeting, and other important matters. The bondholders' meeting may resolve as to matters of interest to the bondholders.
Subject to the corporate bond prospectus, the resolution of the bondholders' meeting is binding on all the holders of the corporate bond.
Article 205 When publicly offering a corporate bond, the issuer shall hire a bond trustee for bondholders that handles collection for payment, preservation of debts, bond-related litigation, participation in any bankruptcy proceeding against the issuer, and other matters for bondholders.
Article 206 A bond trustee shall be diligent and dutiful, and fairly perform trusteeship, and shall not harm the interests of bondholders.
If the bond trustee is in a conflict of interest with bondholders that may harm their interests, the bondholders' meeting may resolve to replace the bond trustee.
The bond trustee shall be liable for compensation for any harm to the interests of bondholders caused by violating laws, administrative regulations, or a resolution of the bondholders' meeting.
Chapter X Financial Affairs and Accounting of a Company
Article 207 A company shall establish its own financial and accounting bylaws according to the laws, administrative regulations, and provisions of the treasury department of the State Council.
Article 208 A company shall, after the end of each fiscal year, formulate a financial report and shall have it audited by an accounting firm.
The financial report shall be work out according to the laws, administrative regulations, and provisions of the treasury department of the State Council.
Article 209 A limited liability company shall submit the financial report to each shareholder within the time limit as prescribed in the bylaw.
The financial report of a joint stock limited company shall be ready for the consultation of the shareholders at the company 20 days before the annual meeting of the shareholders' meeting is held. A joint stock limited company that publicly offers shares shall make a public announcement about its financial report.
Article 210 Where a company distributes its after-tax profits of the current year, it shall draw 10 percent of the profits as the company's statutory common reserve. The company may stop drawing the profits if the aggregate balance of the common reserve has already accounted for over 50 percent of the company's registered capital.
If the aggregate balance of the company's statutory common reserve is not enough to make up for the losses of the company of the previous year, the current year's profits shall first be used for making up the losses before the statutory common reserve is drawn according to the provisions of the preceding paragraph.
After the company has drawn statutory common reserve from the after-tax profits, it may, upon a resolution made by the shareholders' meeting, draw a discretionary common reserve from the after-tax profits.
The after-tax profit after the company makes up losses and draws common reserve shall be distributed in proportion to the paid-in capital contributions of shareholders, unless otherwise agreed on by all shareholders, in the case of a limited liability company; or distributed in proportion to the shares held by the shareholders, unless otherwise stipulated in the company's bylaw, in the case of a joint stock limited company.
No profit may be distributed for the company's shares held by this company.
Article 211 If a company distributes profit to shareholders in violation of this Law, the shareholders shall return to the company the profit so distributed; and shareholders and each liable director, supervisor, and officer shall be liable for compensation for losses caused to the company, if any.
Article 212 If a shareholders' meeting adopts a resolution distributing profit, the board of directors shall make distributions within six months of resolution of the shareholders' meeting.
Article 213 A company's premium from the issuance of stocks at a price above the par value of the stocks, proceeds of issuance of no par shares which have not been included in registered capital, and other items listed in the capital reserve under provisions of the treasury department of the State Council shall be listed as the company's capital reserve.
Article 214 The company's common reserves shall be used for making up losses, expanding the production and business scale or increasing the registered capital of the company.
When the company's losses are covered with common reserves, the discretionary common reserve and the statutory common reserve shall first be used; if they are insufficient, the capital common reserve may be used according to the applicable provisions.
When the statutory common reserve is changed to registered capital, the remainder of the common reserve shall not be less than 25 % of the registered capital prior to the increase.
Article 215 Where a company plans to hire or dismiss any accounting firms to undertake the auditing of the company, a resolution shall be made by the shareholders' meeting, the board of directors, or the board of supervisors according to the provisions of the bylaw.
When the shareholders' meeting, the board of directors, or the board of supervisors carries out a vote to dismiss an accounting firm, the accounting firm shall be allowed to state its own opinions.
Article 216 A company shall provide the accounting firm it hires with truthful and complete accounting vouchers, accounting books, financial and accounting statements, and other accounting materials, and shall not refuse to do so, conceal any of these materials, or make any false statements.
Article 217 Except for the statutory account books, no company may set up other accounting books.
No company funds may be deposited into any individual's account.
Chapter XI Merger, Split-up, and Increase or Decrease of Registered Capital of a Company
Article 218 The mergers of companies may take the form of mergers by absorption or mergers by new formation.
In the case of mergers by absorption, a company absorbs other companies and the absorbed company is dissolved. In the case of mergers by new formation, two or more companies combine together for the formation of a new one, and the pre-merger companies are dissolved.
Article 219 Where a company merges with a company of which it holds 90% or more of shares, the acquired company is not required to obtain approval by resolution of its shareholders' meeting, but shall notify the other shareholders, who have the right to request the company to buy its equities or shares at a reasonable price.
If the price paid for a company's merger does not exceed 10% of the company's net assets, approval by resolution of its shareholders' meeting is not required, unless otherwise required by the company's bylaw.
Where a company's merger is exempt from approval by resolution of the shareholders' meeting in accordance with the preceding two paragraphs, it shall be subject to approval by resolution of the board of directors.
Article 220 To carry out a corporate merger, both parties to the merger shall conclude an agreement with each other and formulate balance sheets and checklists of properties. The companies involved shall, within ten days after making the decision of merger, notify the creditors, and shall make a public announcement on a newspaper or the National Enterprise Credit Information Publicity System within 30 days. The creditors may, within 30 days after receiving the notice or within 45 days after the issuance of the public announcement if it fails to receive a notice, demand the company to clear off its debts or to provide corresponding guaranties.
Article 221 To carry out a merger, the credits and debts of the companies involved shall be succeeded by the company that survives the merger or by the newly formed company.
Article 222 To split a company, the properties thereof shall be divided accordingly.
To split the company, balance sheets and checklists of properties shall be worked out. The company shall, within 10 days after the decision of split-up is made, inform the creditors and make a public announcement on a newspaper or the National Enterprise Credit Information Publicity System within 30 days.
Article 223 The post-split companies shall bear several and joint liabilities for the debts of the company before its split unless it is otherwise prescribed in a written agreement reached by the company and the creditors before the split regarding the debt pay-off.
Article 224 Where a company reduces its registered capital, it shall work out balance sheets and checklists of properties.
The company shall, within ten days after its shareholders' meeting adopts a resolution reducing its registered capital, notify the creditors and make a public announcement on a newspaper or the National Enterprise Credit Information Publicity System within 30 days. The creditors shall, within 30 days after receiving the notice or within 45 days after the issuance of the public announcement if it fails to receive the notice, be entitled to demand the company to pay off the debts or to provide respective guaranties.
If a company reduces its registered capital, it shall proportionally reduce the capital contributions or shares held by the shareholders, unless otherwise provided by law, or agreed upon by all the shareholders in the case of a limited liability company, or stipulated in the bylaw in the case of a joint-stock limited company.
Article 225 If a company faces a shortfall in covering losses in accordance with the provisions of paragraph 2 of Article 214 of this Law, it may reduce the registered capital to make up losses. In such a case, the company may neither make distributions to shareholders nor release them from the obligation to pay capital contributions or pay for shares.
If a company reduces its registered capital according to the preceding paragraph, it is exempted from paragraph 2 of the preceding article. However, the company shall make a public announcement in a newspaper or on the National Enterprise Credit Information Publicity System within 30 days after the shareholders' meeting resolves to reduce the registered capital.
A company may not distribute profit after a reduction of registered capital under the preceding paragraphs, before the cumulative amount of the statutory common reserve and discretionary common reserve reaches 50% of the company's registered capital.
Article 226 If registered capital is reduced in violation of this Law, shareholders shall return the funds they received, and if shareholders are granted exemption from or a reduction in capital contributions, the original state shall be restored; and shareholders and each liable director, supervisor, and officer shall be liable for compensation for losses caused to the company, if any.
Article 227 When a limited liability company increases its registered capital, its shareholders have the preemptive right to subscribe to the new capitals based on the same percentages of the old capital that they contributed, under the same conditions. The exception shall be given if all shareholders agree that they will not have the preemptive right to subscribe to the new capitals based on the percentages of the old capital that they contributed.
When a joint-stock limited company issues new shares to increase its registered capital, shareholders shall have no preemptive right to subscribe unless otherwise stipulated by the company's bylaws or unless the shareholders' meeting resolves to grant such right.
Article 228 Where a limited liability company increases its registered capital, the capital contributions of the shareholders for the increased amount shall be governed by the relevant provisions of this Law regarding the capital contribution for the formation of a limited liability company.
Where a joint stock limited company issues new stocks for increasing its registered capital, the subscription to new stocks by shareholders shall be governed by the relevant provisions of the present Law regarding the payment of stock premium for the formation of a joint stock limited company.
Chapter XII Dissolution and Liquidation of a Company
Article 229 A company may be dissolved under one of the following circumstances:
(1) the term of business operation as prescribed by the bylaw expires or any of the situations for dissolution prescribed in the company's bylaw occurs;
(2) the shareholders' meeting decides to dissolve the company;
(3) it is necessary to be dissolved due to merger or split of the company;
(4) the business license is canceled, or it is ordered to close down or to be dissolved according to laws; or
(5) it is decided by the people's court to be dissolved according to Article 231 of this Law.
If the company has a cause of dissolution specified in the preceding paragraph, it shall publicize the cause of dissolution on the National Enterprise Credit Information Publicity System within ten days.
Article 230 If a company falls under the circumstance in paragraph 1(1) or (2) of the preceding article, and has not distributed property to shareholders, it may continue to exist by amending the company's bylaw or with approval by resolution of the shareholders' meeting.
To amend its bylaw or obtain the approval by resolution of the shareholders' meeting according to the provisions of the preceding paragraph, the consent of the shareholders who hold two thirds or more of the voting rights shall be obtained if it is a limited liability company, and the consent of two thirds or more of the voting rights the shareholders who attend the shareholders' meeting shall be obtained if it is a joint stock limited company.
Article 231 Where any company meets any serious difficulty in its operations or management so that the interests of the shareholders will face heavy loss if the company continues to exist and the difficulty cannot be solved by any other means, the shareholders who hold ten percent or more of the voting rights of all the shareholders of the company may plead the people's court to dissolve the company.
Article 232 Where a company is dissolved under the provisions of paragraph 1(1), (2), (4), or (5) of Article 229 of this Law, it shall go into liquidation. Directors as persons with obligations of liquidation of the company shall form a liquidation group to effect liquidation within 15 days from the date when the cause of dissolution occurs.
The liquidation group shall be composed of directors, unless otherwise provided for by the company's bylaw or a resolution of the shareholders' meeting.
Where a person with obligations of liquidation of the company causes any loss to the company or any creditor by failing to perform the obligations of liquidation in a timely manner, he shall make respective compensations.
Article 233 Where a company required to go into liquidation in accordance with the provisions of paragraph 1 of the preceding article fails to form a liquidation group within the specified period, or to effect liquidation after formation of a liquidation group, an interested party may plead the people's court to designate relevant persons to form a liquidation group. The people's court shall accept such request and form a liquidation group so as to carry out the liquidation in a timely manner.
If a company is dissolved according to the provisions of paragraph 1(4) of Article 229 of this Law, the department or company registration authority that makes the decision to revoke its business license, order its closure, or effect abolishment may plead the people's court to designate relevant persons to form a liquidation group.
Article 234 The liquidation group may exercise the following functions during the process of liquidation
(1) liquidating the properties of the company, producing balance sheets and asset checklists;
(2) notifying creditors by mail or public announcement;
(3) handling and liquidating the unfinished business of the company;
(4) paying off the outstanding taxes and the taxes incurred in the process of liquidation;
(5) claiming credits and paying off debts;
(6) distributing the remaining properties after all the debates being paid off; and
(7) participating in the civil proceedings of the company.
Article 235 The liquidation group shall, notify the creditors within ten days after its formation and make a public announcement on newspapers or the National Enterprise Credit Information Publicity System within 60 days after its formation. The creditors shall, within thirty days after receiving the notice or within 45 days after the issuance of the public announcement in the case of failing to receiving a notice, declare their credits before the liquidation group.
To declare credits, a creditor shall describe the relevant matters and provide relevant evidential materials. The liquidation group shall record the declared credits
and may not pay off any debts to any creditors during the period of credit declaration.
Article 236 The liquidation group shall, after liquidating the properties of the company and producing balance sheets and checklists of properties, make a plan of liquidation and report the report to the shareholders' meeting, or the people's court for confirmation.
After paying off the liquidation expenses, wages of employees, social insurance premiums and legal indemnities, the outstanding taxes and the debts of the company, the remaining properties may, in the case of a limited liability company, be distributed according to the proportion of capital contribution of the shareholders, or, in the case of a joint stock limited company, distributed according to the proportion of stocks held by the shareholders.
During the liquidation, the company continues to exist but may not carry out any business operation that has nothing to do with liquidation. None of the properties of the company may be distributed to any shareholder before they are used for debate payoff as described in the preceding paragraph.
Article 237 If the liquidation group finds that the properties of the company is not sufficient for paying off the debts after liquidating the properties of the company and producing balance sheets and checklists of properties, it shall file an application to the people's court for bankruptcy liquidation.
After the people's court accepts the bankruptcy application, the liquidation group shall transfer the liquidation affairs to the trustee in bankruptcy designated by the people's court.
Article 238 The members of a liquidation group shall perform the duty of liquidation and have obligations of fidelity and diligence.
A member of the liquidation group shall be liable for compensation for losses caused to the company, if any, by his slackness in performing the duty of liquidation, or to creditors, if any, with intent or by gross negligence.
Article 239 After the liquidation of the company is completed, the liquidation group shall make a liquidation report and submit the report to the shareholders' meeting, the people's court for confirmation, and the company registration authority to deregister the company.
Article 240 A company which incurs no debt during its existence, or has repaid all debts may seek company deregistration under summary procedure according to the applicable provisions, after all its shareholders make an undertaking.
Company deregistration sought under summary procedure shall be announced on the National Enterprise Credit Information Publicity System, and the announcement period shall not be less than 20 days. If there is no objection, the company may apply to the company registration authority for deregistration of the company within 20 days after expiration of the announcement period.
If a company seeks company deregistration under summary procedure, shareholders that make false undertakings as to the content specified in paragraph 1 of this article shall be jointly and severally liable for the debts incurred before deregistration.
Article 241 If a company fails to apply for deregistration to the company registration authority three years after revocation of its business license, an order of its closure, or its abolishment, the company registration authority may make an announcement on the National Enterprise Credit Information Publicity System, and the announcement period shall not be less than 60 days. If there is no objection after expiration of the announcement period, the company registration authority may deregister the company.
Where the company is deregistered in accordance with the provisions of the preceding paragraph, the liability of the original company shareholders and persons with obligations of liquidation shall not be affected.
Article 242 Where a company is declared bankrupt according to law, it shall carry out a bankruptcy liquidation according to the legal provisions concerning bankruptcy liquidation.
Chapter XIII Branches of Foreign Companies
Article 243 The term "foreign company" as mentioned in this Law refers to a company formed beyond the territory of the People's Republic of China according to any foreign law.
Article 244 A foreign company which plans to establish any branch within the territory of the People's Republic of China shall submit an application to the competent authority of China and other relevant documents such as the articles of incorporation, the company registration certificate issued by the country where the foreign company was formed. After the application is approved, the foreign company shall go through registration formalities with the company registration authority according to law and obtain a business license.
The measures for the examination and approval of the branches of foreign companies shall be separately formulated by the State Council.
Article 245 Where a foreign company establishes any branch within the territory of the People's Republic of China, it shall designate a representative or agent within the territory of the People's Republic of China to take charge of the branch, and shall allocate to the branch funds which are in match with the business activities it is engaged in.
When it is necessary to set a minimum for the operation fund for a branch of a foreign company, it shall be provided for separately by the State Council.
Article 246 The branch of a foreign company shall indicate in its name the nationality and the form of liability of the foreign company concerned.
The branch of a foreign company shall keep a copy of the bylaw of the foreign company at its office.
Article 247 The branch of a foreign company established within the territory of the People's Republic of China does not have the status of a legal person.
A foreign company shall bear civil liabilities for the business operations of its branches carried out within the territory of the People's Republic of China.
Article 248 The branches of foreign companies which are established upon approval shall abide by the laws of China in their business activities within the territory of the People's Republic of China, and may not injure the social public interests of China, and the lawful rights and interests thereof shall be protected by Chinese law.
Article 249 Where a foreign company relinquishes any of its branches within the territory of the People's Republic of China, it shall clear off the debts thereof according to law, and shall carry out a liquidation according to the provisions of this Law regarding the procedures for the liquidation of companies. Before the debts are cleared off, it may not transfer any of the properties of the branch out of the People's Republic of China.
Chapter XIV Legal Liabilities
Article 250 Where anyone obtains the registration of a company by fabricating a registered capital, submitting false materials or by any other fraudulent means to conceal any important facts, he shall be ordered by the company registration authority to make a rectification. In the case of fabricating a registered capital, he shall be fined not less than 5% but not more than 15% of the fabricated registered capital; in the case of submitting false materials or by any other fraudulent means so that any important facts are concealed, he shall be fined not less than 50,000 yuan but not more than 2 million yuan; if the circumstances are serious, the business license shall be canceled; the directly liable executive in charge and other directly liable persons shall each be fined not less than 30,000 yuan nor more than 300,000 yuan.
Article 251 If a company fails to publish relevant information in accordance with Article 40 of this Law or to truthfully publish relevant information, the company registration authority shall order it to take corrective action, and may fine it not less than 10,000 yuan nor more than 50,000 yuan. If the circumstances are serious, the company registration authority shall fine it not less than 50,000 yuan nor more than 200,000 yuan and fine the directly liable executive in charge and other directly liable persons each not less than 10,000 yuan nor more than 100,000 yuan.
Article 252 Any of the promoters or shareholders of a company who makes any false capital contribution or fails to deliver or fails to deliver in good time the money or non-monetary properties used as capital contribution shall be ordered by the company registration authority to make a rectification and may be fined not less than 50,000 yuan but not more than 200,000 yuan, or if the circumstances are serious, not less than 5% but not more than 15% of false or unpaid capital contribution. The directly liable executive in charge and other directly liable persons shall each be fined not less than 10,000 yuan nor more than 100,000 yuan.
Article 253 Where any promoter or shareholder unlawfully withdraws his capital contribution after the company is formed, he shall be ordered by the company registration authority to make a rectification, and shall be fined not less than 5% but not more than 15% of the capital contribution he has unlawfully taken away; the directly liable persons in charge and other directly liable persons shall be fined not less than 30,000 yuan nor more than 300,000 yuan.
Article 254 Any of the following acts shall be punished by the finance authorities of the people's government at or above the county level in accordance with the Accounting Law of the People's Republic of China and other laws and administrative regulations:
(1) Keeping accounting books in addition to statutory accounting books.
(2) Providing a financial report that contains a misstatement or conceals an important fact.
Article 255 Where any company fails to notify its creditors by notice or by public announcement in the process of merger, split, reducing its registered capital or liquidation, the company shall be ordered by the company registration authority to make a rectification, and may be fined not less than 10, 000 yuan but not more than 100, 000 yuan.
Article 256 Where, in the process of liquidation, any company hides any of its properties or makes any false record in its balance sheet or property checklist or distributes any of the company's property before clearing off its debts, it shall be ordered by the company registration authority to make a rectification, and may be fined not less than 5% but not more than 10% of the value of the company properties it has hidden or distributed prior to the clearing of company debts, and the directly liable person-in-charge as well other directly liable persons may be fined not less than 10,000 yuan but not more than 100,000 yuan.
Article 257 Where an institution undertaking asset appraisal, capital verification, or testing provides false materials or a report with a material omission, the relevant authorities shall punish it according to the Asset Appraisal Law of the People's Republic of China, the Certified Public Accountant Law of the People's Republic of China, and other laws and administrative regulations.
Where the appraisal result or proof of asset verification or certificate verification as provided by any institution that undertakes the appraisal or verification of assets or the verification of certificates is proved to be untrue and has caused any loss to the creditors of the company, the institution shall bear the compensation liabilities within the sum that is found to be untrue, unless it could prove that the loss is not the result of its fault.
Article 258 If a company registration authority violates the law or administrative regulations by failing to perform its duties or performing its duties improperly, each leader and directly liable person shall be subject to administrative discipline in accordance with the law.
Article 259 Where anyone who fails to register as a limited liability company or joint stock limited company according to law but carries out its business operations in the name of the limited liability company or joint stock limited company or who fails to register as a subsidiary of any limited liability company or joint stock limited company according to law but carries out its business operations in the name of the subsidiary of any limited liability company or joint stock limited company, the company registration authority may order him to make a rectification or close down his business, and may also impose a fine of no more than 100,000 yuan on him.
Article 260 Where any company fails to commence its operation six months after it is formed without justifiable reasons or suspends its business operations on its own initiative for consecutively six months after it has started business operations, its business license may be canceled by the company registration authority, unless the company closes business according to law.
Where any registered item of any company changes, and the company fails to go through the corresponding modification procedures in accordance with this Law, it shall be ordered by the company registration authority to make modification registration within a time limit; if it still fails to make the registration, it shall be fined not less than 10, 000 yuan but not more than 100, 000 yuan.
Article 261 Where any foreign company violates this Law by unlawfully establishing a branch within the People's Republic of China, the company registration authority may order the company to make a rectification or to close down its branch, and may also impose a fine of not less than 50,000 yuan but not more than 200, 000 yuan on the company.
Article 262 Where a company conducts any serious illegal activities in the name of the company, which may endanger the security of the state or the public interest of the society, the business license of the company shall be revoked.
Article 263 Where any company violates any provision of this Law, it shall bear the respective civil liabilities of compensation and pay the respective fines and pecuniary penalties; if its property is not enough to pay for all the liabilities, it shall pay for the civil liabilities first.
Article 264 Where a violation of this Law is criminally punishable, the violator shall be held criminally liable in accordance with the law.
Chapter XV Supplemental Provisions
Article 265 Definitions of the following terms:
(1) "Senior executives" refer to the manager, vice managers, chief financial officers, the secretary of the board of directors of a listed company, or any other persons provided in the bylaw.
(2) "Controlling shareholder" refers to a shareholder whose capital contribution occupies 50% or more in the total capital of a limited liability company or a shareholder whose stocks occupies 50% or more of the total equity stocks of a joint stock limited company or a shareholder whose capital contribution or proportion of stock is less than 50% but who enjoys a voting right according to its capital contribution or the stocks it holds is large enough to impose an big impact upon the resolution of the shareholders' meeting.
(3) "Actual controller" refers to anyone who is able to hold actual control of the acts of the company by means of investment relations, agreements or any other arrangements.
(4) "Connection relationship" refers to the relationship between the controlling shareholders, actual controllers, directors, supervisors, or senior management persons of a company and the enterprise directly or indirectly controlled thereby and any other relationship that may lead to the transfer of any interest of the company. However, the enterprises controlled by the state do not incur a connection relationship simply because their shares are controlled by the state.
Article 266 This Law takes effect on July 1, 2024.
If a company has been registered and formed before this Law takes effect, and the capital contribution period exceeds the period specified by this Law, the company shall, unless otherwise provided by laws, administrative regulations, or the State Council, gradually make adjustments to ensure that the capital contribution period is not longer than the period specified in this Law. If the capital contribution period or capital contribution is abnormal, the company registration authority may require timely adjustment. The State Council shall develop the specific measures.