NATIONAL LAWS, RULES AND REGULATIONS OF FOREIGN DIRECT INVESTMENTS IN
Company Law of the People's Republic of China
Adopted at the Fifth session of the Standing Committee of the Eighth National People's Congress on December 29, 1993
Chapter I General Provisions
This Law is formulated in accordance with the Constitution in order to adapt to the needs to establish a modem enterprise system, standardize the organization and activities of companies, protect the legitimate rights and interests of companies, shareholders and creditors, safeguard social and economic order and promote the development of the socialist market economy.
In this Law, the term "company" refers to a limited liability company or a company limited by shares established within Chinese territory in accordance with this Law.
All limited liability companies and companies limited by shares are enterprise legal persons. In the case of a limited liability company, a shareholder is liable to the company to the extent of the amount of the shareholder's capital contribution. A limited liability company is liable for the debts of the company with all its assets. In the case of a company limited by shares, its entire capital is divided into shares of equal value and shareholders shall be liable to the company to the extent of the shares held by them. A company limited by shares is liable for the debts of the company with all its assets.
The shareholders of a company, as capital contributors, have the right to enjoy the benefits of the assets of the company, make major decisions, choose managers etc. in accordance with the amount of capital they have invested in the company.
A company enjoys all legal person property rights constituted by the shareholders' investment, enjoys civil rights and assumes civil liabilities in accordance with law. Ownership of the State-owned assets in a company belongs to the state.
With respect to all its corporate property, a company conducts its business autonomously in accordance with law and is responsible for its own profits and losses. Under the state's macro regulation and control adjustment, a company organizes its production and operations autonomously according to market demand with the objectives of raising economic efficiency and labor productivity and preserving and increasing the value of assets.
A company implements an internal management structure with a clear division of rights and responsibilities, scientific management and combined incentives and restrictions.
A state owned enterprise which is being reorganized as a company shall replace its system of operation, gradually and systematically take inventory of its assets and verify its capital, determine property rights, clear creditors' rights and indebtedness, value assets and set up a standardized internal management structure in accordance with the law and conditions and requirements of administrative regulations.
The establishment of a limited liability company or a company limited by shares shall comply with the conditions set out in this Law. A company complying with the conditions of this Law is registered as a limited liability company or a company limited by shares. A Company which does not comply with the conditions set out in this Law shall not be registered as a limited liability company or a company limited by shares.
Where the law or administrative regulations require that the establishment of a company be submitted for examination and approval, the procedures for such examination and approval are carried out before the company is registered.
A limited liability company established in accordance with this Law shall have the words "limited liability company" in its name.
A company limited by shares established in accordance with this Law shall have the words "company limited by shares" in its name.
The domicile of a company is the place where its principal place of business is located.
In establishing a company, the company's articles of association shall prepared in accordance with this Law. The articles of association are binding on the company, the shareholders, directors, supervisors and managers.
A company's business scope is specified in its articles of association and registered in accordance with the law. For items in a company's business scope which are restricted by law or administrative regulations, approval shall be obtained in accordance with the law.
A company shall conduct business activities within its registered business scope. A company may change its business scope by amendments to its articles of association in accordance with procedures provided by law and after changing its registration with the company registration authority.
A company may invest in other limited liability companies or companies limited by shares and be liable to the companies which it has invested in to the extent of the amount of capital invested in such companies.
Except for investment companies and holding companies specified by the State Council, where a company invests in other limited liability companies or companies limited by shares, the aggregate amount of investment shall not exceed fifty per cent of the net assets of the company, not including any increase in the capital of the other limited liability companies or companies limited by shares in which the company invests arising from any conversion of profits of these companies into capital following such investment.
A company may set up branches. Branches of a company do not have the status of enterprise legal persons and the company assumes the civil liabilities of its branches.
A company may set up subsidiaries. Subsidiaries of a company have the status of enterprise legal persons and assume civil liabilities independently in accordance with the law.
In conducting its business activities, a company shall abide by the law and by business ethics, strengthen the construction of socialist spiritual civilization and accept the supervision of the government and the public.
The legitimate rights and interests of a company are protected by law and shall not be infringed.
A company shall protect the legitimate rights and interests of its staff and workers, strengthen labour protection and bring about production safety.
A company should use various means to enhance vocational education and on-the-job training for staff and workers to increase their work quality.
The staff and workers of a company organize a trade union in accordance with the law to carry out union activities and protect the lawful rights and interests of the staff and workers. A company shall provide the necessary conditions for activities of the trade union of the company.
Limited liability companies established with investment by a wholly state-owned company and those established with investment by two or more state-owned enterprises or two or more other state-owned investment entities practice democratic management in accordance with the provisions of the Constitution and of relevant laws through the representative conferences of the staff and workers and otherwise.
The activities of the base-level organizations of the Communist Party of China in the company are dealt with in accordance with the Charter of the Communist Party of China.
The Law applies to limited liability companies with foreign investment. Where the laws on Sino-foreign equity joint venture enterprises, Sino-foreign co-operative joint venture enterprises and wholly-owned foreign enterprises otherwise provide, the provisions of such as apply.
Chapter 2 Establishment and Organizational Structure of A Limited Liability Company
Establishment of a limited liability company shall be subject to fulfillment of the following conditions;
(1) the number of shareholders meets the requirements of the law;
(2) the investment contributed by shareholders meets the minimum amount of capital required by law;
(3) the company's articles of association are formulated jointly by the shareholders;
(4) there is a company name, and an organizational structure complying with the requirements for establishing a limited liability company; and
(5) there is a fixed site for production and operations and the necessary conditions for production and operations.
A limited liability company is established by capital contributions made jointly by at least two and no more than fifty shareholders.
A state-authorized investment institution or a department authorized by the state may invest on its own to establish a wholly state-owned limited liability company.
A state-owned enterprise established before the implementation of this Law which fulfills the conditions for the establishment of a limited liability company under this Law may be reorganized as a wholly state-owned limited liability company in the case of an investment entity with a single investor, or as a limited liability company as provided in the first paragraph of the preceding Article in the case of an investment entity with many investors.
Implementing procedures and specific means for the reorganization of state-owned enterprises into companies are specified by the State Council in separate provisions.
The articles of association of a limited liability company shall set out the following:
(1) the company's name and domicile;
(2) the company's business scope;
(3) the company's registered capital;
(4) shareholders' names or titles;
(5) shareholders' rights and obligations;
(6) the form and amount of shareholders' capital contributions;
(7) conditions for shareholders' transfer of capital contributions;
(8) the company's organs and the method of establishing them, their powers and rules of procedure for discussion;
(9) the company's legal representative;
(10) grounds for the dissolution of the company and method for its liquidation; and
(11) other matters which the shareholders consider necessary to provide for. The shareholders shall sign and seal the company's articles of association.
A limited liability company's registered capital is the capital actually contributed by all the shareholders and registered with the company registration authorities.
The registered capital of a limited liability company shall not be less than the following minimum amounts:
(1) for a company engaging principally in production operations, RMB500,000 yuan;
(2) for a company engaging principally in wholesaling commodities, RMB500,000 yuan;
(3) for a company engaging principally in commercial retailing, RMB300,000 yuan;
(4) for a company engaging principally in technology development, consultancy and services, RMB100,000 yuan.
Requirements for the minimum amount of registered capital for a limited liability company in a particular line of business to be higher than the amount stated in the preceding paragraphs are provided for in separate laws or administrative regulations.
Shareholders may make capital contributions in currency, or may invest in kind, use industrial property, non-patented technology or land use rights to make capital contributions based on their appraised value. For investment in kind, industrial property, non-patented technology or land use rights which are capital contributions, a valuation shall be carried out and the property contributed verified, without overvaluation or undervaluation.
The valuation of land use rights is to be dealt with in accordance with the provisions of laws and administrative regulations. The amount of industrial property or non-patented technology contributed as capital based on its appraised value shall not exceed twenty percent of the registered capital of a company, except as otherwise specified by the state for the use of the results of new and high technology.
Shareholders shall pay in full their respective subscribed capital contributions specified in the article of association. If a shareholder makes its contribution in currency, the currency contribution shall be deposited in full into a temporary account established with a bank by the proposed limited liability company; if the contribution is to be made in investment in kind, industrial property, non-patented technology or land use rights, procedures for transfer of the property rights shall be dealt with in accordance with the law.
If a shareholder does not pay its subscribed capital contribution in accordance with the provisions of the preceding paragraph, such shareholder shall be liable for default to the other shareholders who have fully paid their capital contributions.
After the shareholders have paid in full their subscribed capital contributions a legally authorized investment verification authority must verify the investment and issue certificate.
Upon verification by a legally authorized investment verification authority of all capital contributions of shareholders, a designated representative or jointly appointed agent of all the shareholders applies to the company registration authority to register the establishment of the company, submitting the company registration application, the company's Article of association, investment verification certificate and other documents.
If examination and approval from relevant departments is required in accordance with any law or administrative regulation, the approval documents shall be submitted when applying to register the establishment of the company. Where the conditions required by this Law are met, the company registration authority registers the company and issues a company business licence. Where the conditions of this Law are not met, the company is not registered.
The date of issue of the business licence is the date of establishment of a limited liability company.
After the establishment of a limited liability company, if the actual values of the investment in kind, industrial property, non-patented technology or land use rights are obviously lower than the values set in the articles of association, the difference shall be made up by the shareholder(s) who contributed such investment, and other shareholders at the time of the establishment of the company shall be jointly liable for the difference.
If a branch or branches of a limited liability company is established at the same time a limited liability company is established, application for the registration of the branch(es) shall be made to the company registration authority to obtain the business licence(s).
If a branch or branches of a limited liability company are established after the establishment of the company, application for registration shall be made by the legal representative of the company to the company registration authority to obtain the business licence(s).
[ Return ] [ Top ]