Company Law of the People's Republic of China (Revised in 2013)

Order of the President of the People's Republic of China No.8

December 28, 2013

(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 of the 13th Session of the Standing Committee of the Ninth People's Congress on Revising the Company Law of the People's Republic of China dated December 25, 1999; amended for the second time in accordance with the Decision of the 11th Session of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on Revising the Company Law of the People's Republic of China dated August 28, 2004; revised at the 18th Session of the Tenth National People's Congress of the People's Republic of China on October 27, 2005; and amended for the third time in accordance with the Decision on Revising Seven Laws Including the Law of the People's Republic of China on the Protection of the Marine Environment at the Sixth Session of the Standing Committee of the 12th National People's Congress of the People's Republic of China dated December 28, 2013)

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

Chapter I General Provisions

Article 1 The Company Law of the People's Republic of China (Revised in 2013) (hereinafter referred to as the "Law") is enacted for the purposes of regulating the organization and activities of companies, protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining the social economic order, and promoting the development of the socialist market economy.


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

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


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

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

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


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


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

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


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


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


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

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


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


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


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


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

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


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

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


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


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


Chapter II Establishment and Organizational Structure of a Limited Liability Company

Section 1 Establishment

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


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

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


Article 26 The registered capital of a limited liability company shall be the total capital contributions subscribed for by all the shareholders as registered with the company registration authority.
Where the paid-in registered capital and the minimum registered capital for limited liability companies are otherwise provided for in any other laws, administrative regulations and decisions of the State Council, the relevant provisions shall prevail.


Article 27 A shareholder may contribute capital in cash, in kind or with intellectual property rights, land use rights or other non-monetary assets the value of which may be assessed in financial terms and the ownership of which may be transferred in accordance with the law, except for those assets that shall not be used as capital contributions under any other law or administrative regulation.
The value of any non-financial asset used as capital contribution shall be assessed and verified, and shall not be overestimated or underestimated. Any law or administrative regulation that provides for the assessment of values shall be followed.


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


Article 29 After shareholders subscribe for the full amount of capital contributions as provided for by the articles of association, the representative designated by the shareholders or the agent appointed by the shareholders shall submit such documents as a company registration application and articles of association to the company registration authority for registration of establishment.


Article 30 After the incorporation of a limited liability company, in the event that the actual value of non-monetary assets as capital contributions for its incorporation is found to be notably lower than the value specified in the articles of association of the company, the shortfall shall be made up for by the shareholder or shareholders who contributed that capital, and the other shareholders of the company at the time of incorporation shall be jointly and severally liable therefor.

Article 31 Following the incorporation of a limited liability company, each shareholder shall be issued with a capital contribution certificate, which shall specify the following items:
1. the name of the company;
2. the date of incorporation of the company;
3. the registered capital of the company;
4. the name of the shareholder, and the amount and date of its capital contribution; and
5. the serial number and date of issue of the capital contribution certificate.
The capital contribution certificate shall bear the seal of the company.


Article 32 A limited liability company shall prepare a register of members, which shall record the following items:
1. the name and domicile of each shareholder;
2. the capital contribution made by each shareholder; and
3. the serial number of each capital contribution certificate.
The shareholders recorded in the register of members may, pursuant to the register of members, claim and exercise shareholders' rights.
A company shall register the name of each shareholder with the company registration authority. The company shall handle the registration of change in the event of any change in the registered details. Any registration detail that fails to be registered or amended shall not be valid against any third party.


Article 33 Any shareholder is entitled to consult and copy the articles of association, minutes of meetings of the board of shareholders, resolutions of meetings of the board of directors, resolutions of meetings of the board of supervisors and financial reports.
Any shareholder may request to consult the accounting books of the company. Where a shareholder requests to consult the accounting books of the company, a written request shall be submitted to the company, stating the purpose thereof. Where the company, for any justifiable reason, considers that the shareholder's request for consultation of the accounting books is made for any improper purpose and may impair the legitimate interests of the company, the company may decline the shareholder's request and shall, within 15 days as of the date on which the shareholder submits the written request, issue the shareholder with a written reply, stating the reasons therefor. Where a company declines the request of any shareholder for consultation of the company's accounting books, the shareholder may request a people's court to require the company to allow the consultation sought.


Article 34 Shareholders shall draw dividends in proportion to their actual capital contributions and when a company increases its capital, shall have a pre-emptive right to subscribe for the increased capital in proportion to their actual capital contributions, unless otherwise agreed by the shareholders.


Article 35 No shareholder shall withdraw its capital contribution following the incorporation of the company.


Section 2 Organizational Structure

Article 36 The board of shareholders of a limited liability company shall consist of all its shareholders. The board of shareholders is the highest authoritative body of the company and shall exercise its functions and powers in accordance with the Law.


Article 37 The board of shareholders shall exercise the following functions and powers:
1. determine the company's operational guidelines and investment plans;
2. elect and replace non-employee representative directors and supervisors and determine matters relating to their remunerations;
3. deliberate on and approve reports of the board of directors;
4. deliberate on and approve reports of the board of supervisors or of the supervisor(s);
5. deliberate on and approve annual budgets and final accounts of the company;
6. deliberate on and approve the company's profit distribution plans and loss recovery plans;
7. make resolutions on any increase or reduction of the company's registered capital;
8. make resolutions on the issuance of corporate bonds;
9. make resolutions on any combination, division, dissolution, liquidation or transformation of the company;
10. revise the articles of association of the company; and
11. any other function or power specified in the articles of association.
In respect of any of the matters listed in the preceding paragraph, where the shareholders have unanimously agreed in writing, a decision may be made directly without convening a meeting of the board of shareholders and the decision document shall bear the signatures or seals of all the shareholders.


Article 38 The first meeting of the board of shareholders shall be convened and presided over by the shareholder with the largest capital contribution, and shall exercise its functions and powers in accordance with the Law.


Article 39 Meetings of the board of shareholders shall be classified into regular meetings and interim meetings.
Regular meetings shall be held on time as prescribed in the company's articles of association. An interim meeting shall be held where it is proposed by shareholders representing one tenth or more of the voting rights, by one third or more of the directors or by the board of supervisors or, where there is no board of supervisors, by a supervisor of the company.


Article 40 Where a limited liability company has established the board of directors, a meeting of the board of shareholders shall be convened by the board of directors and presided over by the chairman of the board of directors. Where the chairman is unable or fails to perform his duties, the deputy chairman of the board of directors shall preside over the meeting. Where the deputy chairman of the board of directors is unable or fails to perform his duties, a director shall be nominated by a majority of the directors to preside over the meeting.
Where a limited liability company has no board of directors, meetings of the board of shareholders shall be convened and presided over by the executive director.
Where the board of directors or the executive director is unable or fails to fulfill its or his duty to convene a meeting of the board of shareholders, the board of supervisors or, where there is no board of supervisors, a supervisor of the company shall convene and preside over the meeting. Where the board of supervisors or supervisor does not convene or preside over such a meeting, shareholders representing one tenth or more of the voting rights may convene and preside over the meeting on their own initiative.


Article 41 Unless otherwise specified in the articles of association or otherwise agreed by all shareholders, a notice of the meeting of the board of shareholders shall be given to shareholders 15 days in advance of the meeting.
Minutes shall be taken of decisions made on matters discussed at the meeting of the board of shareholders and shall be signed by shareholders who attend the meeting.


Article 42 Unless otherwise specified in a company's articles of association, shareholders shall exercise their voting rights at meetings of the board of shareholders in proportion to their respective capital contributions.


Article 43 Unless otherwise provided in the Law, methods of deliberation and voting procedures of the board of shareholders shall be specified by a company's articles of association.
Any resolution made at the meeting of the board of shareholders on any revision to the company's articles of association, any increase or reduction of its registered capital, or any combination, division, dissolution or transformation of the company must be passed by shareholders representing two thirds or more of the voting rights.


Article 44 Except otherwise provided in Article 50 of the Law, the board of directors of a limited liability company shall comprise three to 13 members.
Where a limited liability company is established by two or more state-owned enterprises or two or more other state-owned investment entities, the board of directors shall include employee representatives of the company. The board of directors of any other limited liability company may include employee representatives of the company. Employee representatives to serve as members of the board of directors shall be democratically elected by the employees of the company through the employee representatives' assembly, the employees' assembly or otherwise.
The board of directors shall have a chairman and may have deputy chairmen. The method of appointment of the chairman and deputy chairmen shall be specified by the articles of association.


Article 45 The term of office of directors shall be specified by the articles of association, but in any case shall not exceed three years. Any director may, upon the expiration of his term of office, hold the directorship in consecutive terms if re-elected.
Where the re-election of directors is not held in time after the term of office of the existing directors has expired, or where the number of members of the board of directors falls below the quorum due to the resignation of any director during his term of office, the original director shall, before the newly-elected director assumes his post, carry out duties as a director in accordance with the laws, administrative regulations and articles of association.


Article 46 The board of directors shall be responsible to the board of shareholders and shall exercise the following functions and powers:
1. convene meetings of the board of shareholders and report to the board of shareholders on its work;
2. execute resolutions of the board of shareholders;
3. determine the company's operational plans and investment plans;
4. formulate the company's annual budgets and final accounts;
5. formulate the company's profit distribution plans and loss recovery plans;
6. formulate the company's plans on the increase or reduction of its registered capital and on the issuance of corporate bonds;
7. formulate the company's plans on the combination, division, dissolution or transformation of the company;
8. make decisions on the establishment of the company's internal management departments;
9. make decisions on the appointment or dismissal of the company's manager and his remuneration, and, according to the nomination by the manager, make decisions on the appointment or dismissal of any deputy manager and financial principal and their remunerations;
10. develop the company's basic management system; and
11. any other function or power specified in the articles of association.


Article 47 A meeting of the board of directors shall be convened and presided over by the chairman of the board of directors. Where the chairman of the board of directors is unable or fails to perform his duties, the meeting shall be convened and presided over by the deputy chairman of the board of directors. Where the deputy chairman of the board of directors is unable or fails to perform his duties, the meeting shall be convened and presided over by a director nominated by a majority of the directors.


Article 48 Unless otherwise provided in the Law, methods of deliberation and voting procedures of the board of directors shall be specified by the company's articles of association.
The board of directors shall take minutes of decisions made on matters discussed at its meetings. Directors who attend the meeting shall sign on the minutes.
Each director shall have one vote for voting on resolutions of the board of directors.


Article 49 A limited liability company may have a manager, who shall be appointed or dismissed by its board of directors. The manager shall be responsible to the board of directors and shall exercise the following functions and powers:
1. oversee the production and business operations of the company and organize the implementation of the resolutions of the board of directors;
2. organize the implementation of the company's annual operational plans and investment plans;
3. draw up plans on the establishment of the company's internal management departments;
4. draw up the company's basic management system;
5. formulate the company's specific rules and regulations;
6. propose the appointment or dismissal of the company's any deputy manager and financial principal;
7. decide on the appointment or dismissal of executive personnel other than those whose appointment or dismissal is to be decided by the board of directors; and
8. any other function or power conferred on the manager by the board of directors.
Where the functions and powers of the manager are otherwise provided in the articles of association, the articles of association shall prevail.
The manager shall attend meetings of the board of directors as a non-voting attendee.


Article 50 Limited liability companies with a smaller number of shareholders or those of a smaller scale may have an executive director without setting up the board of directors. The executive director may concurrently hold the post of a company manager.
The functions and powers of the executive director shall be specified by the articles of association.


Article 51 A limited liability company shall have the board of supervisors composed of no less than three members. Limited liability companies with a smaller number of shareholders or those of a smaller scale may have one to two supervisors without setting up the board of supervisors.
The board of supervisors shall include shareholders' representatives and an appropriate proportion of employee representatives which shall not be less than one third of the members of the board of supervisors, the specific proportion of which shall be prescribed by the articles of association. Employee representatives to serve as members of the board of supervisors shall be democratically elected by the employees of the company through the employee representatives' assembly, the employees' assembly or otherwise.
The board of supervisors shall have a chairman, who shall be elected by a majority of the supervisors. The chairman of the board of supervisors shall convene and preside over meetings of the board of supervisors. Where the chairman of the board of supervisors is unable or fails to perform his duties, a supervisor nominated by a majority of the supervisors shall convene and preside over meetings of the board of supervisors.
No director or senior officer of the company may concurrently serve as a supervisor.


Article 52 The term of office of a supervisor shall be three years. Any supervisor may, upon the expiration of his term of office, hold the supervisor's post in consecutive terms if re-elected.
Where the re-election of a supervisor is not held in time after the expiration of the term of office of the existing supervisor, or where the number of members of the board of supervisors falls below the quorum due to the resignation of any supervisor during his term of office, the original supervisor shall, before the newly-elected supervisor assumes his post, carry out duties as a supervisor in accordance with the relevant laws, administrative regulations and articles of association.


Article 53 The board of supervisors or, where there is no board of supervisors, the supervisor(s) of a company shall exercise the following functions and powers:
1. inspect the financial affairs of the company;
2. supervise performance of the directors and senior officers of their respective company duties and propose the removal of any director or senior officer who violates any law, administrative regulation, the articles of association or any resolution of the board of shareholders;
3. require any director or senior officer to take corrective action where his actions damage the interests of the company;
4. propose the holding of interim meetings of the board of shareholders and convene and preside over meetings of the board of shareholders where the board of directors does not exercise its duties in this regard as prescribed in the Law;
5. put forward proposals at meetings of the board of shareholders;
6. initiate lawsuits against a director or senior officer in accordance with Article 151 of the Law; and
7. any other function or power specified in the articles of association.


Article 54 Supervisors may attend meetings of the board of directors as non-voting attendees, and may raise questions or put forward suggestions about matters to be decided by the board of directors.
The board of supervisors or, where there is no board of supervisors, the supervisors of a company find that the company is running abnormally, they may commence an investigation. Where necessary, they may, at the company's expense, hire an accounting firm to assist with the investigation.


Article 55 The board of supervisors shall hold at least one meeting a year. Any supervisor may propose an interim meeting of the board of supervisors.
Unless otherwise specified in the Law, the methods of deliberation and voting procedures of the board of supervisors shall be specified by the articles of association.
A resolution of the board of supervisors shall be passed by a majority of supervisors.
The board of supervisors shall take minutes of decisions made on matters discussed at its meetings, and the minutes shall be signed by the supervisors attending the meetings.


Article 56 All expenses necessarily incurred by the board of supervisors or, where there is no board of supervisors, supervisor(s) of a company in the performance of their functions and powers shall be borne by the company.


Section 3 Special Provisions on Single Shareholder Limited Liability Companies

Article 57 The provisions of this Section shall apply to the establishment and organizational structure of a single shareholder limited liability company. Any matter not covered by this Section shall be governed by the provisions of Sections 1 and 2 of this Chapter.
For the purpose of the Law, the term "single shareholder limited liability company" refers to a limited liability company with only one natural or legal person as a shareholder.

Article 58 Any natural person may only establish one single shareholder limited liability company. Such single shareholder limited liability company shall not establish a new single shareholder limited liability company.


Article 59 The company registration and business license of a single shareholder limited liability company shall both clearly indicate whether the company is funded by a natural or legal person.

Article 60 The articles of association of a single shareholder limited liability company shall be formulated by the shareholder.

Article 61 A single shareholder limited liability company shall have no board of shareholders. Where the shareholder makes a decision on any of the matters listed in Paragraph 1 of Article 37 of the Law, it shall be recorded in writing, signed by the shareholder and kept in the company.


Article 62 The financial reports of a single shareholder limited liability company shall be prepared at the end of each financial year and shall be audited by an accounting firm.

Article 63 Where the shareholder of a single shareholder limited liability company is unable to prove that the property of the company is independent of the shareholder's own property, the shareholder shall be jointly and severally liable for the debts of the company.

Section 4 Special Provisions on Wholly State-owned Companies

Article 64 The provisions of this Section shall apply to the establishment and organizational structure of wholly state-owned companies. Any matter not covered by this Section shall be governed by the provisions of Sections 1 and 2 of this Chapter.
For the purpose of the Law, the term "wholly state-owned company" refers to a limited liability company solely invested in by the State and for which the State Council or the local people's government has authorized the state-owned assets supervision and administration institution of the people's government at the same level to act as capital contributor.

Article 65 The articles of association of a wholly state-owned company shall be formulated by the state-owned assets supervision and administration institution, or shall be drafted by the board of directors and submitted to the state-owned assets supervision and administration institution for approval.

Article 66 Wholly state-owned companies shall have no board of shareholders. The state-owned assets supervision and administration institution shall exercise the functions and powers of the board of shareholders. The state-owned assets supervision and administration institution may authorize the company's board of directors to exercise some of the functions and powers of the board of shareholders and decide important matters of the company, other than those relating to the combination, division or dissolution of the company, the increase or reduction of its registered capital or the issuance of corporate bonds, which must be decided by the state-owned assets supervision and administration institution. Specifically, the combination, division, dissolution or petition for bankruptcy of an important wholly state-owned company shall be examined by the state-owned assets supervision and administration institution and shall then be submitted to the people's government at the same level for approval.
For the purpose of the preceding paragraph, the term "important wholly state-owned company" shall be determined in accordance with the State Council's provisions.


Article 67 A wholly state-owned company shall have a board of directors, which shall exercise its functions and powers in accordance with Articles 46 and 66 of the Law. The term of office of its directors shall not exceed three years. The board of directors shall include employee representatives of the company.
The members of the board of directors shall be appointed by the state-owned assets supervision and administration institution, except for employee representatives, who shall be elected through the employee representatives' assembly of the company.
The board of directors shall have a chairman and may have deputy chairmen. The chairman and deputy chairmen shall be designated by the state-owned assets supervision and administration institution from among the members of the board of directors.

Article 68 A wholly state-owned company shall have a manager, who shall be appointed or dismissed by the board of directors. The manager shall exercise his functions and powers in accordance with Article 49 of the Law.
Subject to the consent of the state-owned assets supervision and administration institution, a member of the board of directors may concurrently hold the post of a manager.

Article 69 The chairman and deputy chairmen of the board of directors, directors and senior officers of a wholly state-owned company are prohibited from holding concurrent posts in other limited liability companies, joint stock limited companies or business entities unless with the consent of the state-owned assets supervision and administration institution.

Article 70 The board of supervisors of a wholly state-owned company shall comprise at least five members. Specifically, employee representatives shall constitute no less than one third, the specific proportion of which shall be prescribed by the company's articles of association.
Other than employee representatives who shall be elected through the employee representatives' assembly of the company, the members of the board of supervisors shall be appointed by the state-owned assets supervision and administration institution. The chairman of the board of supervisors shall be designated by the state-owned assets supervision and administration institution from among the members of the board of supervisors.
The board of supervisors shall exercise the functions and powers set out in Items 1 to 3 of Article 53 of the Law and any other function or power prescribed by the State Council.

Chapter III Transfer of Stock Rights in Limited Liability Companies

Article 71 Stock rights of the shareholders in a limited liability company may be transferred among the shareholders in whole or in part.
Where any shareholder proposes transferring his/its stock rights to any person other than the shareholders, any such proposal shall be subject to the consent of a majority of the other shareholders. The relevant shareholder shall give the other shareholders a written notice of the details of the proposed transfer of stock rights and seek their consent. Any of the other shareholders who fails to respond within 30 days upon receipt of the written notice shall be deemed to have consented to the transfer. Where a majority of the other shareholders whose consent is sought disagree with the proposed transfer, the shareholders who disagree with the proposed transfer shall purchase the stock rights to be transferred. In the event that they refuse to purchase the stock rights in question, they shall be deemed to have consented to the transfer.
Under the same conditions, the other shareholders shall have the right of first refusal for the purchase of the stock rights to be transferred upon their consent. Where two or more shareholders exercise such a right of first refusal, they shall determine their respective purchase percentages by negotiation, failing which they shall exercise the right of first refusal in proportion to their respective capital contributions at the time of transfer.
Where there any provisions regarding the transfer of stock rights in the articles of association, such provisions shall prevail.


Article 72 Where a people's court transfers the stock rights of a shareholder pursuant to a mandatory enforcement procedure provided by law, it shall notify the company and all shareholders of the right of first refusal enjoyed by other shareholders under the same conditions. Any other shareholder's failure to exercise such a right of first refusal within 20 days upon receipt of a notice from the court shall be deemed as a waiver of the right of first refusal.


Article 73 Where any transfer of stock rights is made in accordance with Article 71 or 72 of the Law, the company shall cancel the capital contribution certificate of the original shareholder, issue a capital contribution certificate to the new shareholder and modify its records of shareholders and their capital contributions in the articles of association and register of members. No vote of the board of shareholders is required to modify the articles of association due to such a transfer of stock rights.

Article 74 Under any of the following circumstances, any shareholder who votes against the relevant resolution of the board of shareholders may require the company to purchase his/its stock rights at a reasonable price:
1. where the company has not distributed any profits to the shareholders for five consecutive years but has made profits during such period and conforms to the profit distribution requirements of the Law;
2. in the event of any combination, division, or transfer of the principal assets of the company; or
3. where the business term specified in the articles of association expires or any of the other grounds for dissolution prescribed in the articles of association is satisfied, and the meeting of the board of shareholders makes the company continue exist by modifying the articles of association through adopting a resolution.
Where the relevant shareholder and the company fail, within 60 days of the date on which the relevant resolution is adopted at the meeting of the board of shareholders, to reach an agreement on the purchase of stock rights, the shareholder may initiate a legal action in the people's court within 90 days of the date on which the resolution is adopted at the meeting of the board of shareholders.


Article 75 Unless otherwise provided for in the articles of association, the lawful successor of a natural person may assume the qualifications of shareholders following that person's death.


Chapter IV Establishment and Organizational Structure of a Joint Stock Limited Company

Section 1 Establishment

Article 76 A joint stock limited company shall:
1. have the minimum number of promoters required by law;
2. have total share capital or total paid-in capital subscribed for and raised by all promoters in compliance with the articles of association;
3. issue its shares and make preparations according to the law;
4. have its articles of association formulated by its promoters and adopted at the establishment meeting of the company in case of a joint stock limited company founded by stock floatation;
5. have a name and organization structure that complies with that of a joint stock limited company; and
6. have a corporate domicile.

Article 77 A joint stock limited company may be established either by way of promotion or by way of stock flotation.
Establishment of a company by way of promotion refers to that the promoters establish a company by subscribing for all the shares to be issued by the company.
Establishment of a company by way of stock flotation refers to that the promoters establish a company by subscribing for some of the shares to be issued by the company and offer the remaining shares to the general public or to particular classes of investor.


Article 78 A joint stock limited company shall have no less than two and no more than 200 promoters, of whom a majority shall be domiciled within the territory of China.


Article 79 The promoters of a joint stock limited company shall carry out all necessary preliminary procedures relating to the establishment of the company.
The promoters shall conclude a promoters' agreement clarifying their respective rights and obligations during the course of establishing the company.


Article 80 Where a joint stock limited company is established by way of promotion, its registered capital shall be the total share capital subscribed for by all of its promoters as recorded in the company registration authority. No shares shall be offered to any other person before the shares subscribed for by the promoters are paid up.
Where a joint stock limited company is established by way of stock flotation, its registered capital shall be the total paid-in capital as recorded in the company registration authority.
Where otherwise provided for in any other laws, administrative regulations and decisions of the State Council in respect of the actual paid-in registered capital and the minimum registered capital for joint stock limited companies, the provisions thereof shall prevail.


Article 81 The articles of association of a joint stock limited company shall specify the following matters:
1. the name and address of the company;
2. the business scope of the company;
3. the form of company establishment;
4. the total number of shares, the par value per share, and the amount of registered capital of the company;
5. the name of each promoter, the number of shares each promoter has subscribed for, and the form and date of capital contributions made;
6. the rules relating to the composition, functions and powers and rules of procedure of the board of directors;
7. the legal representative of the company;
8. the composition, functions and powers and rules of procedure of the board of supervisors;
9. the procedures for the distribution of company profits;
10. the grounds for dissolution of the company and liquidation procedures;
11. the procedures for issuing company notices or public announcements; and
12. any other matter deemed necessary by the general meeting.


Article 82 The form of capital contributions made by promoters shall be governed by the provisions of Article 27 of the Law.


Article 83 Where a joint stock limited company is established by way of promotion, the promoters shall fully subscribe in writing for the shares and pay the corresponding capital provided for in its articles of association. In the case of capital contributions made with non-monetary assets, the promoters shall go through the relevant procedures for the transfer of property rights in accordance with the law.
Any promoter who fails to make capital contributions in accordance with the provisions of the preceding paragraph shall be liable for breach of contract in accordance with the promoters' agreement.
After promoters subscribe for all the capital contributions as provided for by the articles of association of the company, they shall elect the board of directors and the board of supervisors. The board of directors shall submit such documents as the articles of association and any other documents provided for by laws and administrative regulations to the company registration authority for registration of establishment.


Article 84 The promoters of a joint stock limited company established by way of stock flotation shall subscribe for no less than 35% of the total shares unless otherwise required by any law or administrative regulation.


Article 85 In any public offer of shares, the promoters shall issue a prospectus and prepare application for shares. The application for shares shall include the items listed in Article 86, and a subscriber shall indicate the number of and total consideration to be paid for the shares he subscribes for, and shall note his address and affix his signature or seal thereon. A subscriber shall pay for the number of shares he has subscribed for.


Article 86 Any prospectus issued shall be accompanied by the articles of association as formulated by the promoters and shall include the following details:
1. the number of shares subscribed for by the promoters;
2. the par value and issue price per share;
3. the total number of bear shares issued;
4. the purposes of proceeds;
5. the rights and obligations of subscribers; and
6. the offer period and a statement that subscribers may withdraw their subscriptions in the event that the offer is under-subscribed at the close of the offer period.


Article 87 A public offer of shares shall be underwritten by a lawfully established securities company and an underwriting agreement shall be concluded thereon.


Article 88 The promoters of any public offer of shares shall sign an agreement with a bank on the collection of payments for shares on behalf of the company.
The receiving bank appointed shall receive and hold as agent payments made for shares in accordance with the agreement, issue receipts to subscribers who make payments, and shall be obliged to produce evidence demonstrating the receipt of payments to the relevant departments.


Article 89 Where full payment has been made for any public offer of shares, the subscriptions shall be verified and certified by a lawfully established capital verification institution. The promoters shall hold a company establishment meeting composed of the promoters and subscribers within 30 days of receipt of all subscriptions.
In the event that shares offered to the public are not fully subscribed for within the offer period disclosed in the prospectus, or the promoters fail to hold an establishment meeting within 30 days of receipt of all subscriptions, the subscribers may require the promoters to refund their subscriptions and pay interest calculated at the bank deposit interest rate for the relevant period.


Article 90 The promoters shall notify each subscriber of or publicly announce the date of the establishment meeting no less than 15 days in advance of the establishment meeting. The establishment meeting may not be held unless promoters and subscribers representing a majority of the total shares attend. The establishment meeting shall:
1. deliberate the report on pre-establishment activities prepared by the promoters;
2. adopt the Articles of association;
3. elect members of the board of directors;
4. elect members of the board of supervisors;
5. verify expenses incurred in establishing the company;
6. verify the value of any asset contributed by the promoters by way of capital contribution; and
7. in the event of any force majeure or material change in operating conditions that may affect the establishment of the company, consider adopting a resolution not to establish the company.
Any resolution made at the establishment meeting on any of the matters described in the previous paragraph requires an affirmative vote passed by subscribers representing a majority of the votes of those attending the meeting.


Article 91 Promoters and subscribers shall not withdraw any share capital after they paid the stock capital or made contributions for setting off the stock capital unless the offer is not fully subscribed for within the offer period; the promoters fail to convene the establishment meeting within the relevant time limit, or the establishment meeting has resolved not to establish the company.

Article 92 The board of directors shall, within 30 days of the conclusion of the establishment meeting, submit the following documents to the company registration authority to apply for registration:
1. an application for company registration;
2. the minutes of the establishment meeting;
3. the articles of association;
4. a capital verification certificate;
5. the appointment documents and identification of the legal representative, directors and supervisors;
6. documents evidencing the legal person or natural person status of the promoters; and
7. proof of the corporate domicile.
A joint stock limited company established by way of stock flotation that makes a public offer of its stock shall, in addition to the documents referred to above, submit to the company registration authority the approval documents issued by the securities regulatory institution under the State Council.


Article 93 Following the establishment of a joint stock limited company, any promoter who fails to make full payment for capital contributions as stipulated in the articles of association shall pay the outstanding amount, failing which, other promoters shall be jointly and severally liable for the shortfall.
Following the establishment of a joint stock limited company, where it is found that the actual value of any non-financial asset used as a capital contribution for the establishment of the company is clearly lower than its value as stipulated in the articles of association, the promoter who made the capital contribution shall make up the shortfall, failing which, other promoters shall be jointly and severally liable for the shortfall.


Article 94 The promoters of a joint stock limited company shall be liable as follows:
1. in the event that the company is not established, the promoters shall be jointly and severally liable for the debts and expenses incurred in pre-establishment activities;
2. in the event that the company is not established, the promoters shall be jointly and severally liable for refunding the paid-in capital of the subscribers plus interest thereon calculated at the bank interest rate for the relevant period; and
3. where, in the course of establishing the company, its interests are damaged due to the negligence of the promoters, the promoters shall be liable to compensate the company.


Article 95 Where a limited liability company is changed into a joint stock limited company, the total amount of paid-in capital shall be no less than its net assets, and any offer of shares to the public for the purpose of increasing the capital of the company shall be made in accordance with the law.


Article 96 A joint stock limited company shall prepare and maintain on company premises its articles of association, register of members, corporate bond receipts, minutes of general meetings, minutes of meetings of the board of directors, minutes of meetings of the board of supervisors, and financial reports.


Article 97 Shareholders shall be entitled to inspect the articles of association, register of members, corporate bond receipts, minutes of general meetings, minutes of meetings of the board of directors, minutes of meetings of the board of supervisors, and financial reports, and may put forward proposals and raise questions about the business operations of the company.


Section 2 General Meeting

Article 98 The general meeting of a joint stock limited company shall be comprised of all the shareholders. The general meeting shall govern the company and shall exercise its functions and powers in accordance with the Law.


Article 99 The provisions of the Paragraph 1 of Article 37 of the Law prescribing the functions and powers of the board of shareholders of a limited liability company shall apply to the general meeting of a joint stock limited company.


Article 100 A general meeting shall be held annually. Under any of the following circumstances, an interim general meeting shall be held within two months:
1. where the number of directors falls below two thirds of the minimum number of directors as required by the Law or as specified in the articles of association;
2. where the bad debts of the company reach one third of its total paid-in capital;
3. where it is requested by a shareholder who holds or by shareholders who together hold 10% or more of the company's shares;
4. where the board of directors deems necessary;
5. on the request of the board of supervisors; or
6. any other circumstances specified in the articles of association.


Article 101 A general meeting shall be convened by the board of directors and shall be presided over by the chairman of the board of directors. Where the chairman is unable or fails to perform his duties, the meeting shall be presided over by the deputy chairman of the board of directors. Where the deputy chairman of the board of directors is unable or fails to perform his duties, the meeting shall be presided over by a director nominated by a majority of the directors.
Where the board of directors is unable or fails to fulfill its obligations to convene a general meeting, the board of supervisors shall convene and preside over the meeting. Where the board of supervisors does not convene or preside over the meeting, a shareholder who holds or shareholders who together hold 10% or more of the company's shares for 90 consecutive days or more may convene and preside over the meeting on his or their own initiative.


Article 102 Shareholders shall be notified no less than 20 days in advance of a general meeting of the time and place of the meeting and the matters to be considered at the meeting. Shareholders shall be notified no less than 15 days in advance of an interim general meeting. Holders of bearer shares shall be notified by way of public announcement no less than 30 days in advance of any general meeting of the time and place of the meeting and the matters to be considered at the meeting.
Any shareholder who holds or shareholders who together hold 3% or more of the shares of the company may put forward an interim proposal and submit to the board of directors for the proposal in writing ten days in advance of a general meeting. The board of directors shall notify other shareholders of the interim proposal within two days as of the receipt thereof and submit the proposal to the general meeting for consideration. Any interim proposal put forward shall fall within the purview of the general meeting and shall have clear discussion points and matters to be decided.
The general meeting shall not make any resolution on any matter not listed in a notice as stipulated in either of the preceding two paragraphs.
Shares of holders of bearer shares who attend the general meeting shall be kept in the company during the period from five days prior to the meeting until the meeting is closed.


Article 103 Other than shares registered in the name of the company, which shall have no voting rights attached, each share shall have one vote at a general meeting.
Any resolution proposed at a general meeting shall be adopted by an affirmative vote of shareholders representing a majority of the voting rights of shareholders present; however, provided that resolutions proposing any modification to the articles of association, or any increase or decrease of registered capital, or any resolution about any proposed combination, division, dissolution or transformation of the company shall be adopted by shareholders representing two thirds or more of the voting rights of shareholders present.


Article 104 The board of directors shall promptly call a general meeting to decide any important matter within the purview of the general meeting either in accordance with the Law or in accordance with the articles of association, such as any transfer of company assets, taking an assignment of any significant asset or acting as guarantor for any other person.

Article 105 The general meeting may adopt a cumulative voting system for the election of directors and supervisors pursuant to the articles of association or by way of a resolution made at its meeting.
For the purpose of the Law, the term "cumulative voting system" refers to a voting system whereby shareholders can multiply their voting rights by the number of candidates and cast their votes for one candidate for director or supervisor.

Article 106 A shareholder may appoint a proxy to attend a general meeting. The proxy appointed shall present a proxy form issued by the shareholder to the company and shall exercise his voting rights within the scope of his authorization.


Article 107 The general meeting shall take minutes of decisions made on matters discussed at its meetings. The chair of the meeting and directors present shall sign the minutes, which shall be retained together with a list of signatures of shareholders present and any powers of attorney in case of proxy.

Section 3 Board of Directors and Managers

Article 108 A joint stock limited company shall establish the board of directors, members of which shall range from five to 19.
The board of directors may include employee representatives. Employee representatives who serve as board directors shall be democratically elected through the employee representatives' assembly, the employees' assembly or otherwise.
The provisions of Article 45 of the Law on the term of office of the directors of a limited liability company shall apply to the directors of a joint stock limited company.
The provisions of Article 46 of the Law on the functions and powers of the board of directors of a limited liability company shall apply to the board of directors of a joint stock limited company.


Article 109 The board of directors shall elect a chairman and may elect a deputy chairman. The chairman and deputy chairman shall be elected by a majority of directors.
The chairman of the board of directors shall call and preside over the meetings of the board of directors and monitor the implementation of resolutions of the board of directors. The deputy chairman shall assist the chairman in his responsibilities and shall perform the chairman's duties in the event that the chairman is unable or fails to perform his duties. Where the deputy chairman of the board of directors is unable or fails to perform his duties as described in this paragraph, a director nominated by a majority of directors shall perform those duties.


Article 110 The board of directors shall convene no less than two meetings per year and shall notify all directors and supervisors no less than ten days in advance of the meeting.
A proposal to hold an interim meeting of the board of directors may be put forward by shareholders representing one tenth or more of the voting rights, or by one third or more of the directors or supervisors. The chairman of the board of directors shall, within ten days of receiving such a proposal, call and preside over a meeting of the board of directors.
Where the board of directors holds an interim meeting, it may separately decide the method of and time limit applicable to notifications about meetings of the board of directors.


Article 111 No meeting of the board of directors may be held unless a majority of directors are present. Any board resolution shall be adopted by a majority of directors.
Each director shall have one vote in any resolution put to a vote of the board of directors.


Article 112 Directors shall attend meetings of the board of directors in person. Where any director is unable to attend the meeting for any reason, he may issue a written proxy appointing another director to attend the meeting on his behalf and stating the scope of his authorization.
The board of directors shall take minutes of decisions made on matters discussed at its meetings, which shall be signed by directors present.
Directors shall be responsible for resolutions of the board of directors. Where a resolution of the board of directors violates any law, administrative regulation, articles of association, or any resolution of the general meeting and causes any serious loss to the company, the directors who participated in adopting the resolution shall compensate the company. Where a director is proven to have raised an objection to the relevant resolution and his objection is recorded in the minutes, the director may be exempted from liability.


Article 113 A joint stock limited company shall have a manager, who shall be appointed or dismissed by the board of directors.
The provisions of Article 49 of the Law on the functions and powers of the manager of a limited liability company shall apply to the manager of a joint stock limited company.


Article 114 The board of directors of a company may appoint one of its members to serve concurrently as the manager of the company.


Article 115 No company may, either directly or via any of its subsidiaries, lend money to any of its directors, supervisors or senior officers.


Article 116 A Company shall regularly disclose the information about the remuneration it pays to its directors, supervisors and senior officers to its shareholders.

Section 4 Board of Supervisors

Article 117 A joint stock limited company shall have the board of supervisors comprised of no less than three members.
The board of supervisors shall include shareholders' representatives and an appropriate proportion of employee representatives. The proportion of employee representatives shall be specified in the articles of association but in any event shall account for no less than one third of the supervisors appointed. Employee representatives who serve as members of the board of supervisors shall be democratically elected through the employee representatives' assembly, the employees' assembly or otherwise.
The board of supervisors shall have one chairman and may have a deputy chairman. The chairman and deputy chairman shall elected by a majority of supervisors. The chairman of the board of supervisors shall call and preside over meetings of the board of supervisors. Where 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 meetings of the board of supervisors. Where the deputy chairman of the board of supervisors is unable or fails to perform his duties, a supervisor nominated by a majority of supervisors shall call and preside over meetings of the board of supervisors.
No director or senior officer of a company may concurrently act as one of its supervisors.
The provisions of Article 52 of the 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 118 The provisions of Articles 53 and 54 of the Law on the functions and powers of the board of supervisors of a limited liability company shall apply to the board of supervisors of a joint stock limited company.
All necessary expenses incurred by the board of supervisors in exercising its functions and powers shall be borne by the company.


Article 119 The board of supervisors shall hold no less than one meeting every six months. The supervisors may propose an interim meeting of the board of supervisors.
Unless otherwise specified in the Law, the methods of deliberation and voting procedures of the board of supervisors shall be specified in the articles of association.
A resolution of the board of supervisors shall be passed by a majority of supervisors.
The board of supervisors shall take minutes of decisions made on matters discussed at its meetings, which shall be signed by all supervisors present.


Section 5 Special Provisions on the Organizational Structure of a Listed Company

Article 120 For the purpose of the Law, the term "listed company" refers to any joint stock limited company whose shares are listed and traded on a stock exchange.


Article 121 Where a listed company purchases or sells any important asset or provides a guaranty for any amount exceeding 30% of its total assets such a transaction shall be subject to a resolution of the general meeting passed by shareholders representing two thirds of the voting rights of shareholders present.

Article 122 A listed company shall have independent directors, who shall be subject to any specific measures of the State Council.


Article 123 A listed company may have a secretary to the board of directors, who shall be responsible for preparing for general meetings and meetings of the board of directors, the preservation of documents, the management of shareholders' materials, information disclosure, and similar duties.

Article 124 Where any director of a listed company is affiliated with any enterprise involved in a matter on which a resolution is to be made at a meeting of the board of directors, he shall not exercise his voting right on the resolution either on his own behalf or on behalf of any other director. Such a meeting of the board of directors may be held with the attendance of a majority of unaffiliated directors, and any resolution made at the meeting of the board of directors shall be subject to adoption by a majority of unaffiliated directors. Where less than three unaffiliated directors are present at the meeting of the board of directors, the matter shall be submitted to the listed company's general meeting for deliberation.

Chapter V Issuance and Transfer of Shares in a Joint Stock Limited Company

Section 1 Issuance of Shares

Article 125 The capital of a joint stock limited company shall be divided into shares of equal value.
The shares of a company shall be represented by share certificates. A share certificate issued by the company shall certify ownership of one or more shares by a shareholder.


Article 126 Any issuance of shares shall be conducted with fairness and impartiality.
Shares of the same class shall have the same rights and benefits. Shares of the same class issued at the same time shall be issued at the same price and shall be subject to the same conditions. The price of shares purchased by any organization or individual shall be the same.


Article 127 Shares may be issued at a price equal to or at a premium to their par value, but shall not be issued at a price below par value.


Article 128 Share certificates shall be issued in certificated form or any other form prescribed by the securities regulatory institution under the State Council.
Share certificates shall state the following principal details:
1. the company name;
2. the date of incorporation of the company;
3. the class and par value of the share certificate, and the number of shares it represents; and
4. the serial number of the share certificate.
Share certificates shall bear the signature of the legal representative and the seal of the company.
Share certificates held by promoters shall be inscribed with the words "promoters' share certificate".


Article 129 Share certificates issued by a company may be in registered form or bearer form.
Share certificates issued by a company to promoters or legal persons shall be in registered form, shall state the relevant name of the promoter or legal person, and shall not be registered in the name of any other person or in the name of any representative thereof.


Article 130 Any company that issues share certificates in registered form shall prepare a register of members, which shall record the following matters:
1. the name and address of each shareholder;
2. the number of shares held by each shareholder;
3. the serial numbers of share certificates held by each shareholder; and
4. the date on which each shareholder acquired his shares.
Any company that issues share certificates in bearer form shall record the amount, serial numbers and date of issuance of the share certificate.


Article 131 The State Council may separately make provisions on enterprises' offering of stocks other than those as stipulated by this Law.


Article 132 A joint stock limited company shall formally deliver share certificates to its shareholders following its establishment and no share certificate shall be delivered to its shareholders before such establishment.


Article 133 For any company that proposes to issue new shares, a resolution on the following matters shall be made by its general meeting:
1. the class and number of new shares to be issued;
2. the issue price of the new shares;
3. the offering period for the new shares; and
4. the class and amount of new shares to be issued to the existing shareholders.


Article 134 Where any company offers new shares to the public upon the approval of the securities regulatory institution under the State Council, it shall issue a new share prospectus and financial reports, and shall produce an application for shares.
The provisions of Articles 87 and 88 of the Law shall apply to any public offer of new company shares.


Article 135 A company that issues new shares may set the offer price according to its business operations and financial status.


Article 136 Any company that successfully completes a new offer of shares shall amend its registered details maintained by the company registration authority and make a public announcement thereon.


Section 2 Transfer of Shares

Article 137 Shareholders may transfer their shares in accordance with the law.


Article 138 Any transfer of shares by a shareholder shall be carried out via a lawfully established stock exchange or by any other means prescribed by the State Council.


Article 139 A transfer of registered stock shall be effected by way of a shareholder's endorsement or by any other means prescribed by the relevant laws or administrative regulations. Following any transfer, the company shall record the name and address of the transferee in the register of members.
The register of members may not be modified within the 20 days preceding any general meeting or within five days preceding any ex-dividend date fixed by the company. Any law that provides otherwise in relation to the amendment of details recorded in the register of members of a listed company shall prevail over the provisions of this Article.


Article 140 Any transfer of stock issued in bearer form shall take effect immediately on delivery of the share certificate to the transferee by the transferor.


Article 141 Company shares held by the promoters of the company shall not be transferred within one year of the date of incorporation of the company. Shares issued prior to any public offer of shares shall not be transferred within one year of the date on which the shares of the company are first listed and traded on a stock exchange.
Directors, supervisors and senior officers of a company shall notify the company of the shares they hold and any changes therein. During their respective terms of office, any shares transferred by any of the company's directors, supervisors and senior officers in any year shall not exceed 25% of the relevant individual's total stake in the company. Company shares held by any director, supervisor or senior officer shall not be transferred within one year of the date on which the shares are first listed and traded on a stock exchange. Any of the aforesaid persons who ceases to hold his post shall not transfer any of his shares within six months of the date on which he ceased to hold his post. Any other restrictions on transfers of shares held by directors, supervisors and senior officers may be specified in the articles of association.


Article 142 No company shall purchase its own shares other than in any of the following circumstances:
1. where a company reduces its registered capital;
2. where the company plans to merge with a company which is one of its existing shareholders;
3. pursuant to an employee share award incentive scheme; or
4. pursuant to a request from any shareholder to purchase his shares because of his objection to any company resolution concerning a combination or division of the company made at any general meeting.
Any company purchase of its own shares for any reason specified in Items 1 to 3 of the preceding paragraph shall be subject to a resolution of the general meeting. Following any company purchase of its own shares pursuant to the provisions of this Article, the company shall, in the event of a purchase made pursuant to Item 1, cancel the relevant shares within ten days of the purchase, or in the event of a purchase made pursuant to Item 2 or 4, transfer or cancel the relevant shares within six months of the purchase.
Any shares purchased by the company in accordance with Item 3 of Paragraph 1 hereof shall not exceed 5% of the total shares issued by the company. The funds used to acquire the shares shall be derived from the after-tax profits of the company. The shares purchased by the company shall be transferred to the relevant employees within one year of the company's purchase thereof.
No company may take a pledge of its own stock.


Article 143 Where any registered stock is stolen, lost or destroyed, the relevant shareholder may request the people's court to declare the stock invalid in accordance with the public notification procedure prescribed in the Civil Procedure Law of the People's Republic of China. Where the people's court invalidates stock pursuant to this procedure, the relevant shareholder may file an application with the company for the issuance of new stock.


Article 144 The shares of a listed company shall be listed and traded in accordance with relevant laws, administrative regulations, and with the dealing rules of the stock exchange on which they are listed and traded.


Article 145 A listed company shall, in accordance with laws and administrative regulations, publicly announce matters relating to its financial status, business operations and any significant litigation to which it is a party, and shall publish its financial reports once in every six month period in each financial year.

Chapter VI Qualifications and Duties of Company Directors, Supervisors and Senior Officers

Article 146 None of the following people shall be eligible for appointment as a director, supervisor or senior officer of a company:
1. any person who does not have civil capacity or who has limited civil capacity;
2. any person who has been convicted of any criminal offence in the nature of corruption, bribery, disseizin, misappropriation or disrupting the economic order of the socialist market and five years have not elapsed since any penalty imposed has been completed, or any person who has ever been deprived of his political rights due to any crime and five years have not elapsed since the penalty imposed was completed;
3. any former director, factory director or manager of a company or enterprise which has been declared bankrupt and liquidated in circumstances where he was personally responsible for the bankruptcy of the company or enterprise, and three years have not elapsed since the bankruptcy and liquidation of the company or enterprise was completed;
4. any former legal representative of a company or enterprise which has had its business license revoked and has been ordered to close its business operations due to any violation of law in circumstances where the former legal representative was personally liable for the revocation of the business license and three years have not elapsed since the date of revocation; or
5. any person who has significant unpaid due debts.
Any election or appointment of any director, supervisor, or senior officer made in violation of the provisions of this Article shall be invalid.
Any existing director, supervisor or senior officer the appointment of whom would violate the provisions of this Article shall be removed from his post.


Article 147 The directors, supervisors and senior officers of a company shall comply with laws, administrative regulations, and the articles of association and shall owe duties of fidelity and due diligence to the company.
No director, supervisor or senior officer may take any bribe or other illegal gain by taking advantage of his position or misappropriate company assets for personal use.


Article 148 No director or senior officer may:
1. misappropriate company funds;
2. divert company funds into an account held in his own name or in the name of any other individual;
3. loan company funds or provide any guaranty to any other person by using company property in violation of the articles of association without first obtaining the consent of the board of shareholders, the general meeting or the board of directors;
4. become a party to any contract or business dealings with the company in violation of the articles of association without first obtaining the consent of the board of shareholders or the general meeting;
5. seek business opportunities for himself or for any other person by taking advantage of his position, or operate on his own behalf or on behalf of any other person any business similar in nature to that of the company, without first obtaining the consent of the board of shareholders or the general meeting;
6. personally accept any commission on any transaction to which the company is a party;
7. unlawfully disclose confidential company information; or
8. act in any way that is inconsistent with his duty of fidelity to the company.
Any income received by any director or senior officer in violation of this Article shall be treated as the property of the company.


Article 149 Where any director, supervisor or senior officer violates any law, administrative regulation, or the articles of association in the course of performing his duties, he shall be liable to compensate the company for any loss thereby caused to the company.


Article 150 Where the board of shareholders or the general meeting requires any director, supervisor or senior officer to attend the meeting as a non-voting attendee, he shall do so and shall answer the shareholders' inquiries.
Directors and senior officers shall faithfully provide relevant information and materials to the board of supervisors or to the supervisor(s) of a limited liability company with no board of supervisors, and may not obstruct the board of supervisors or any supervisor in the exercise of its or his functions and powers.


Article 151 Where a director or senior officer falls into the circumstance as specified in Article 149 of the Law, any shareholder or group of shareholders of the limited liability company or joint stock limited company concerned who has or have held 1% or more of the shares in the company for 180 consecutive days or more may make a written request to the board of supervisors or to the supervisor(s) of a limited liability company with no board of supervisors to initiate a legal action in the people's court against the relevant director or senior officer. Where any supervisor falls into the circumstance as specified in Article 149 of the Law, the aforesaid shareholder(s) may make a written request to the board of directors or to the acting director of a limited liability company with no board of directors to initiate a legal action in the people's court.
Where any board of supervisors, any supervisor of a limited liability company with no board of supervisors, or any board of directors or acting director refuses to initiate a legal action after receiving a written request described in the preceding paragraph, or fails to initiate a legal action within 30 days of receiving the request, or if, in the event of any urgent situation in which failing to initiate a legal action forthwith will cause irreparable damage to the interests of the company, the shareholder(s) described in the preceding paragraph may initiate a legal action in the people's court in his or their own name(s).
Where the legitimate rights and interests of a company are damaged and the company thereby suffers any loss, the shareholder(s) described in Paragraph 1 of this Article may initiate a legal action in the people's court in accordance with the provisions of the preceding two paragraphs.


Article 152 Where any director or senior officer damages the shareholders' interests by violating any law, administrative regulation, or the articles of association, the shareholders may initiate a legal action in the people's court.


Chapter VII Corporate Bonds

Article 153 For the purpose of the Law, the term "corporate bonds" refers to negotiable securities issued by a company under the relevant statutory procedures with guaranteed payment of principal and interest by a specified future date or dates.
Any company that issues corporate bonds shall satisfy the issuance requirements specified in the Securities Law of the People's Republic of China.


Article 154 Following the approval of any application to issue corporate bonds by the department authorized by the State Council, the issuing company shall publish an offering circular which shall include the following key information:
1. the company name;
2. the purpose(s) for which the proceeds of the corporate bond issue will be used;
3. the total amount of corporate bonds to be issued and the par value thereof;
4. the method for determining the coupon rate of the bonds;
5. the maturity date and the method for principal and coupon payments;
6. the terms of any bond guaranty;
7. the issue price of the bonds and the offer period;
8. the net assets of the company;
9. the total amount of the company's corporate bonds outstanding; and
10. the underwriters of the corporate bonds.

Article 155 Any bonds issued by a company in certificated form shall state the company's name, the par value, the coupon rate, the maturity date and similar details, and shall bear the signature of the legal representative of the company and the company seal.

Article 156 Corporate bonds may be issued in registered or bearer form.

Article 157 Any company that issues corporate bonds shall maintain a corporate bond stub.
The stub for any registered corporate bond shall state:
1. the name and address of the bondholder;
2. the date on which the bondholder acquired the bond and the serial number of the bond;
3. the total face value of the bond, par value, coupon rate, maturity date and method for payments of principal and coupon; and
4. the date on which the bond was issued.
The stub for any corporate bond issued in bearer form shall state the total face value of the bond, the coupon rate, the maturity date and payment method, the issue date and the serial number of the bond.

Article 158 The registration and settlement institution for registered corporate bonds shall establish rules on the registration, custody, and acceptance of bonds, and on the payment of coupons.

Article 159 Corporate bonds may be transferred. The transfer price shall be negotiated by the transferor and the transferee.
Any transfer of corporate bonds which are listed and traded on a stock exchange shall be carried out in accordance with the dealing rules of the stock exchange.


Article 160 Any transfer of registered corporate bonds shall be effected by the bondholder's endorsement or by any other method prescribed in the relevant laws and administrative regulations, and after such transfer, the company shall record the transferee's name and address on the corporate bond stub.
Any transfer of unregistered corporate bonds shall take effect when the bondholder delivers the bonds to the transferee.


Article 161 A listed company may, pursuant to a resolution of the general meeting, issue convertible bonds on terms specified in the corporate bond offering circular. To issue convertible bonds, a listed company shall file an application with the securities regulatory institution under the State Council for examination and approval.
Convertible bonds shall be inscribed with the words "convertible bonds" and the number of convertible bonds issued shall be specified in the corporate bond stub.


Article 162 Any company that issues convertible bonds shall exchange its shares for convertible bonds held by bondholders in accordance with the conversion formula prescribed, provided that bondholders shall in any event retain an option to convert their bonds.

Chapter VIII Financial Affairs and Accounting of Companies

Article 163 A company shall establish its financial and accounting policies in accordance with laws, administrative regulations, and the provisions of the finance department under the State Council.


Article 164 A company shall, at the end of each financial year, prepare a financial report and have it audited by an accounting firm.
The financial report shall be prepared in accordance with laws, administrative regulations, and the provisions of the finance department under the State Council.

Article 165 A limited liability company shall submit its financial report to each shareholder within the time limit prescribed in the articles of association.
The financial report of a joint stock limited company shall be prepared for inspection by shareholders at the offices of the company 20 days in advance of the date on which the annual general meeting is held. A joint stock limited company that has offered its shares to the public shall publicize its financial report.

Article 166 Where a company distributes its after-tax profits for the current financial year, it shall draw 10% of its profits as the company's statutory common reserve, provided that a company with an aggregate common reserve of more than 50% of the company's registered capital may elect not to draw any statutory common reserve any more.
Where the aggregate balance of the company's statutory common reserve is insufficient to cover any loss the company made in the previous financial year, the current financial year's profits shall first be used to cover the loss before any statutory common reserve is drawn therefrom in accordance with the provisions of the preceding paragraph.
Where any company has drawn a statutory common reserve from its after-tax profits, it may, subject to a resolution of the board of shareholders or the general meeting, draw a discretionary common reserve from its after-tax profits.
Where losses have been covered and the statutory and discretionary common reserves have been drawn, any remaining after-tax profits shall be distributed to shareholders in accordance with Article 34 of the Law in case of a limited liability company or on a pro rata basis in case of a joint stock limited company, unless its articles of association provides distribution shall not be made on a pro rata basis.
Where the board of shareholders, general meeting or board of directors distributes profits in violation of the provisions of the preceding paragraph before losses are covered and the statutory common reserve is drawn, the profits distributed must be returned to the company.
No profit may be distributed for shares held by the company itself.


Article 167 Any stock premium received by a joint stock limited company from the issuance of stock at a premium to par and any other income to be included in the capital reserve account under any relevant provisions of the finance department under the State Council shall be recorded as the company's capital reserve.


Article 168 A company's common reserves shall be used to cover losses made in past years, to enhance the company's productivity and expand its business or to increase its registered capital; however a company's capital reserve shall not be used to cover the company's losses.
Where the statutory common reserve is converted into capital, the value of the remaining common reserve shall be no less than 25% of the company's registered capital prior to the conversion.


Article 169 Any proposed appointment or dismissal of an accounting firm as the company's auditor shall be subject to a resolution of the board of shareholders, the general meeting or of the board of directors in accordance with the provisions of the articles of association.
Any meeting of the board of shareholders, general meeting or meeting of the board of directors that votes to dismiss any accounting firm as its auditor shall allow the accounting firm to express its own opinions.


Article 170 A company shall provide the accounting firm appointed as its auditor with accurate and complete accounting documents and books, financial reports, and other accounting information, and may not refuse to do so or conceal any such accounting records or make any false statement to its auditor.

Article 171 A company shall not maintain any set of accounts that differs from its statutory accounting books.
No company assets may be held in any account opened in the name of any individual.

Chapter IX Corporate Combination and Division; Increase and Reduction of Registered Capital

Article 172 A corporate combination may be effected by merger or consolidation.
In the case of a merger, one company absorbs another company and the company that has been absorbed is dissolved; in case of a consolidation, two or more companies combine to establish a new company, and the existing companies are dissolved.


Article 173 To carry out a corporate combination, parties to the combination shall conclude an agreement with each other and formulate balance sheets and schedules of assets. The parties to a combination shall, within ten days of making the resolution on combination, notify their respective creditors and, within 30 days, make a public announcement in a newspaper. Any creditor may, within 30 days of receiving the said notice or, in the event that the creditor does not receive such a notice, within 45 days as of the issuance of the said public announcement, require the company to repay its debts in full or to provide a corresponding guaranty.


Article 174 In any corporate combination, the claims and debts of the parties to the combination shall be succeeded by the company that survives the combination, or by the newly-established company in case of a consolidation.


Article 175 In a corporate division, the assets of any company shall be divided accordingly.
To enable a division to proceed, balance sheets and schedules of assets shall be formulated. The company shall inform its creditors within ten days of the date on which the decision to proceed with the division is made, and shall make a public announcement about the division proposal in a newspaper within 30 days of the date on which the decision to proceed with the division is made.


Article 176 Unless otherwise agreed by the company and its creditors in any written agreement regarding the repayment of company debts concluded prior to any division, the companies that result from the division shall be jointly and severally liable for the existing debts of the company.


Article 177 Where a company finds it necessary to reduce its registered capital, it must prepare its balance sheet and schedule of assets.
The company shall, within ten days of the date on which it decides to reduce its registered capital, notify its creditors and make a public announcement about the proposed reduction in capital in a newspaper within 30 days of the date on which it decides to reduce its registered capital. Any creditor shall, within 30 days of receipt of such a notice or, where it does not receive a notice, within 45 days of the date of the public announcement, be entitled to require the company to repay its debt in full or to provide a corresponding guaranty.


Article 178 Where a limited liability company increases its registered capital, the subscription by shareholders for the amount of the increase shall be governed by the relevant provisions of the Law regarding capital contributions in the establishment of a limited liability company.
Where a joint stock limited company issues new stock to increase its registered capital, shareholder subscriptions for new stock shall be governed by the relevant provisions of the Law regarding stock purchases in the establishment of a joint stock limited company.


Article 179 Where, as a result of any corporate combination or division to which a company is a party, any of the company's registered details change, the company shall amend its registered details with the company registration authority. In the event that any company that is a party to a combination or division is dissolved, it shall be deregistered in accordance with the law. In the event that any new company results from any combination or division, it shall comply with the procedures for establishment of a company as provided by law.
Where a company increases or reduces its registered capital, the company shall handle relevant procedures for change with the company's registration authority in accordance with the law.


Chapter X Company Dissolutions and Liquidations

Article 180 A company may be dissolved where:
1. its term of business operation as prescribed in the articles of association expires or any dissolution event as prescribed in the articles of association of the company occurs;
2. the board of shareholders or the general meeting resolves to dissolve the company;
3. dissolution of the company is necessary due to any combination or division to which the company is a party;
4. its business license is revoked or it is ordered to close down or be dissolved in accordance with the law; or
5. the people's court makes an order for dissolution of the company in accordance with Article 183 of the Law.


Article 181 Where any of the circumstances prescribed in Item 1 of Article 180 of the Law occurs, a company may nevertheless continue in existence by amending its articles of association.
Any amendment to the articles of association in accordance with the provisions of the preceding paragraph shall be subject to the consent of shareholders representing two thirds or more of the voting rights in case of a limited liability company, or to the consent of two thirds or more of the voting rights of shareholders who attend the relevant general meeting in case of a joint stock limited company.


Article 182 Where any company encounters serious difficulties in its operations or management that will lead to significant shareholder losses if they persist and the situation cannot be resolved by any other means, shareholders representing 10% or more of the voting rights of all shareholders may petition the people's court to dissolve the company.


Article 183 Where any company is dissolved in accordance with the provisions of Item 1, 2, 4, or 5 of Article 180 of the Law, a liquidation group shall be formed within fifteen days of the date on which the circumstances leading to the dissolution of the company occurred in order to effect the liquidation. The liquidation group of a limited liability company shall be comprised of its shareholders, while that of a joint stock limited company shall be comprised of its directors or any other individuals appointed by the general meeting. Where a liquidation group is not formed within the time limit specified, the company's creditors may petition the people's court to appoint appropriate individuals to form a liquidation group. The people's court shall approve such a petition and form a liquidation group in order to liquidate the company in a timely manner.


Article 184 A liquidation group shall exercise the following functions and powers during the course of the liquidation:
1. liquidate the company's assets and produce a balance sheet and schedule of assets;
2. notify the company's creditors by way of notice or public announcement;
3. manage and clear the remaining business of the company;
4. pay outstanding taxes and any tax liability incurred in the course of the liquidation;
5. pay the company's accounts payable and recover its accounts receivable;
6. dispose of the company's residual assets; and
7. represent the company in any civil litigation to which it is a party.


Article 185 A liquidation group shall, within ten days of its formation, notify the company's creditors of its formation, and shall make a public announcement in a newspaper on the formation of a liquidation group within 60 days of its formation. Any creditor shall, within 30 days of receipt of a notice or within 45 days of the public announcement in the event that the relevant creditor does not receive a notice, make a claim to the liquidation group on the debt owed to it/him.
In making a claim for any debt outstanding, a creditor shall describe the relevant details and provide supporting evidence. The liquidation group shall record all debts claimed.
The liquidation group may not repay any creditor during the debt claim period.


Article 186 A liquidation group shall, after liquidating the assets of the company and producing a balance sheet and schedule of assets, draft a liquidation plan and present it to the board of shareholders or the general meeting or to the people's court for confirmation.
Any remaining assets after payment of liquidation expenses, employee wages, social insurance premiums and statutory indemnity premiums, outstanding taxes and outstanding debts may, in case of a limited liability company, be distributed to shareholders on a pro rata basis in accordance with the respective proportion of capital contributed by each shareholder or, in case of a joint stock limited company, distributed on a pro rata basis in accordance with the respective proportion of stock held by each shareholder.
A company in liquidation shall continue in existence during the course of the liquidation but may not conduct any new business unconnected with the liquidation. No company assets may be distributed to any shareholder before being applied as described in the previous paragraph.


Article 187 Where, after liquidating the assets of a company and formulating a balance sheet and schedule of assets, a liquidation group finds that the company's assets are insufficient to meet its obligations in full, it shall file a bankruptcy petition with the people's court.
Where the people's court declares the company bankrupt, the liquidation group shall hand over administration of the liquidation to the people's court.

Article 188 On completion of any company liquidation, the liquidation group shall draft a liquidation report and submit it to the board of shareholders or the general meeting or to the people's court for confirmation, and shall submit it to the company registration authority to apply for the cancellation of the registration of the company. The liquidation group shall also make a public announcement about the fact that the company has been terminated.


Article 189 The members of a liquidation group shall, during the course of liquidation, carry out their duties and perform their obligations in accordance with the law.
No member of a liquidation group may take advantage of his position to take any bribe or any other unlawful payment, nor may he misappropriate any company asset.
Any member of a liquidation group who causes any loss to the company or to any of its creditors either intentionally or due to his gross negligence shall be liable to compensate the affected party.


Article 190 Any company adjudicated bankrupt in accordance with the law shall be liquidated in bankruptcy in accordance with the relevant laws on bankruptcy.

Chapter XI Branches of Foreign Companies

Article 191 For the purpose of the Law, the term "foreign company" refers to a company established outside the territory of China under any foreign law.


Article 192 Any foreign company that plans to establish a branch within the territory of China shall submit an application with the competent authority in China and shall submit supporting documents such as its articles of incorporation, its certificate of incorporation as issued in its country of domicile, and similar documents, and after the approval, shall handle relevant registration procedures with the company registration authority in accordance with the law, and obtain a business license.
The measures for the examination and approval of branches of foreign companies shall be separately formulated by the State Council.

Article 193 Where a foreign company establishes any branch within the territory of China, it must designate a representative or agent within the territory of China to take charge of the branch, and shall allocate to the branch funds commensurate with the business activities it engages in.
Where a minimum operating funds is required for any branch of a foreign company, it shall be otherwise provided by the State Council.

Article 194 The name of any branch of a foreign company shall indicate its country of domicile and its form of legal liability.
Any branch of a foreign company shall make its articles of incorporation available at its place of business.

Article 195 No branch of a foreign company established within the territory of China shall have the status of a legal person.
A foreign company shall bear civil liability for business operations of its branches carried on within the territory of China.


Article 196 Branches of foreign companies which are approved to be established shall abide by the laws of China in pursuing business activities carried on within the territory of China and may not injure the social or public interests of China. The legitimate rights and interests of branches of foreign companies shall be protected by Chinese law.

Article 197 Any foreign company that closes down any of its branches within the territory of China must pay the branch's debts in full in accordance with the law and shall liquidate the branch in accordance with the provisions of the Law on the procedures for the liquidation of a company. No branch of a foreign company established in China may transfer any of its assets out of China before first paying its outstanding debts in full.

Chapter XII Legal Liability

Article 198 Any person who, in the course of registering a company, misstates its registered capital, submits false documentation or uses any other fraudulent means in order to conceal any important fact shall be ordered by the company registration authority to remedy the defect. Where the registered capital of a company is misstated, the person responsible shall be fined between 5% and 15% of the amount by which the registered capital was misstated; where false documentation is submitted or where any other fraudulent means is used in order to conceal any important fact, the person responsible shall be fined between CNY50,000 and CNY500,000; where the circumstances are serious, the company's registration certificate or business license shall be revoked.


Article 199 Any promoter or shareholder of a company who makes any fraudulent capital contribution or fails to deliver or fails to promptly deliver the money or non-monetary assets to be used as a capital contribution shall be ordered by the company registration authority to remedy the defect and shall be fined between 5% and 15% of the purported value of the fraudulent capital contribution.


Article 200 Any promoter or shareholder who unlawfully withdraws his capital contribution after the company is incorporated shall be ordered by the company registration authority to remedy the defect and shall be fined between 5% and 15% of the capital contribution unlawfully withdrawn.


Article 201 Any company that maintains any set of accounts that differs from its statutory accounting books in violation of the Law shall be ordered by the finance department of the people's government at the county level or above to remedy the defect and shall be fined between CNY50,000 and CNY500,000.


Article 202 Where a company falsifies records or conceals any important matter in materials such as financial reports submitted to relevant government departments, the relevant government department shall impose a fine of between CNY30,000 and CNY300,000 on the directly responsible person or other persons directly liable.


Article 203 Any company that fails to draw a statutory common reserve in accordance with the Law shall be ordered by the finance department of the people's government at the county level or above to draw the required amount and may be fined up to CNY200,000.


Article 204 Any company that fails to make any notification to its creditors by way of notice or by way of public announcement of any combination, division, reduction of its registered capital or liquidation shall be ordered by the company registration authority to remedy the defect and may be fined between CNY10,000 and CNY100,000.
Where, in the course of any liquidation, any company conceals any of its assets or makes any false entry in its balance sheet or schedule of assets or distributes any of the company's assets before repaying its outstanding debts in full, it shall be ordered by the company registration authority to remedy the defect and may be fined between 5% and 10% of the value of company assets it has concealed or distributed prior to paying the company's outstanding debts in full, and the directly responsible person or other persons directly liable may be fined between CNY10,000 and CNY100,000.


Article 205 Any company that, in the course of any liquidation, carries on any business activity unconnected with the liquidation shall be reprimanded by the company registration authority and any unlawful proceeds shall be confiscated.


Article 206 Any liquidation group that fails to submit a liquidation report to the company registration authority in accordance with the provisions of the Law or conceals or omits any important fact in or from the liquidation report submitted shall be ordered by the company registration authority to remedy the defect.
Any member of a liquidation group who takes advantage of his position to seek any unlawful personal benefit either for himself or on behalf of any of his relatives or who procures any unlawful gain or who misappropriates any of the company's assets shall be ordered by the company registration authority to return any company assets and confiscate any unlawful benefits or gains as appropriate, and shall be fined between one and five times the value of the assets, benefits or gains unlawfully derived.

Article 207 Where any institution that undertakes an appraisal or verification of assets or a verification of certificates provides any false materials, it shall have its unlawful proceeds confiscated by the company registration authority, shall be fined between one and five times the value of any proceeds unlawfully gained, may be ordered by the competent administrative department to suspend its business operations or to cancel the qualification certificate(s) of the person or persons directly liable, and shall have its business license revoked.
Where any institution that undertakes the appraisal or verification of assets or a verification of certificates omits any important matter from the report it submits, it shall be ordered by the company registration authority to remedy the defect; where the circumstances are serious, it shall be fined between one and five times the value of any proceeds unlawfully obtained thereby, and may be ordered by the competent administrative department to suspend its business operations, to cancel the qualification certificate(s) of the person or persons directly liable, and may have its business license revoked.
Where any institution that undertakes an appraisal or verification of assets or a verification of certificates provides an appraisal result or proof of asset verification or certificate verification that is subsequently proven to be inaccurate, causing any loss to the creditors of the company, it shall be liable to compensate the creditors for the difference between the appraised or verified amount and the value at which the assets etc. should have been accurately appraised or verified, unless it is able to demonstrate that the inaccurate appraisal or verification did not contribute to any loss suffered.


Article 208 Where any company registration authority registers any application that does not meet the conditions prescribed in the Law or refuse any application which meets the conditions prescribed in the Law, the directly responsible person or other persons directly liable shall be subject to an administrative sanction.

Article 209 Where any company registration authority is required by its superior government department to register any application that does not meet the conditions prescribed in the Law or to refuse any application that meets the conditions prescribed in the Law or to suppress information relating to any unlawful registration, the directly responsible person or other persons directly liable shall be subject to an administrative sanction in accordance with the law.

Article 210 Any person who carries on business operations in the name of a limited liability company or joint stock limited company without registering as a limited liability company or joint stock limited company in accordance with the law or who carries on business operations in the name of a subsidiary of any limited liability company or joint stock limited company without registering as a subsidiary of any limited liability company or joint stock limited company in accordance with the law shall be ordered by the company registration authority to remedy the defect or be subject to its enforcement procedures, and may be fined up to CNY100,000.


Article 211 Any company that fails to commence business operations within six months of incorporation without reasonable justification or that suspends its business operations of its own volition for a period of six months or more after it has commenced business operations shall be liable to have its business license revoked by the company registration authority.
Any company that fails to handle relevant procedures for registration of change in accordance with the Law following any change in the company's registered details shall be ordered by the company registration authority to amend its registration within a specific period of time; if it still fails to make the required amendment, it shall be fined between CNY10,000 and CNY100,000.


Article 212 Any foreign company that unlawfully establishing any branch within China in violation of the Law shall be ordered by the company registration authority to remedy the defect or to close down the branch, and may be fined between CNY50,000 and CNY200,000.


Article 213 Where any person commits, in the name of a company, any serious violation of law that threatens the security of the state or injures the public interest or the interests of society, the business license of the company shall be revoked.


Article 214 Any company that violates any provision of the Law shall be liable in civil law to pay compensation and shall also pay the corresponding fines and other financial penalties. Where the company's assets are insufficient to pay any corresponding fines and other financial penalties, the company shall first meet any valid claim for compensation in civil law.


Article 215 Any company that commits any crime in violation of the Law shall be subject to criminal liability therefore.


Chapter XIII Supplementary Provisions

Article 216 For the purpose of the Law, the terms listed below are defined as follows:
1. A "senior officer" refers to any manager, deputy manager, financial principal, secretary to the board of directors of a listed company, or any other person specified in the articles of association.
2. A "controlling shareholder" refers to a shareholder whose capital contribution accounts for 50% or more of the total capital of a limited liability company or any shareholder whose stock accounts for more than 50% of the total share capital of a joint stock limited company or a shareholder whose capital contribution or proportion of stock is less than 50% of the total capital or share capital but whose voting rights are sufficient to have a significant influence on resolutions of the board of shareholders or the general meeting.
3. An "actual controller" refers to any person who is not a shareholder but is in a position to exercise actual control over the acts of the company by means of investment relationships, agreements or any other arrangements.
4. "affiliated relation" refers to any relation between the controlling shareholder, actual controller, director, supervisor, or senior officer of a company and the enterprise directly or indirectly controlled thereby and any other relation that may enable the transfer of any interest in the company. Enterprises controlled by the state do not have an affiliated relation as between themselves simply because their shares are controlled by the state.


Article 217 Limited liability companies and joint stock limited companies that have foreign investors shall be governed by the Law. Where provisions of any other law regarding foreign investment conflict with the Law, the former shall prevail.


Article 218 The Law shall take effect as of January 1, 2006.