【Title】 Company Law of the People's Republic of China (2005 Revision)[Effective]
Issuingauthority: Standing Committee of theNational People's Congress
Areaof law: Companies
（1993年12月29日第八屆全國人民代表大會常務委員會第五次會議通過 根據1999年12月25日第九屆全國人民代表大會常務委員會第十三次會議《關于修改〈中華人民共和國公司法〉的決定》第一次修正 根據2004年8月28日第十屆全國人民代表大會常務委員會第十一次會議《關于修改〈中華人民共和國公司法〉的決定》第二次修正 2005年10月27日第十屆全國人民代表大會常務委員會第十八次會議修訂）
Order of the President
(No. 42 )
TheCompany Law of the People's Republic of China was amended and adopted at the18th session of the Standing Committee of the Tenth National People's Congressof the People's Republic of China on October 27, 2005. The amended Company Lawof the People's Republic of China is hereby promulgated and shall come intoforce on January 1, 2006.
President of the People's Republic ofChina Hu Jintao
October 27, 2005
Company Law of the People's Republic ofChina
(Adoptedat the Fifth Session of the Standing Committee of the Eighth National People'sCongress on December 29, 1993. Revised for the first time on December 25, 1999according to the Decision of the Thirteenth Session of the Standing Committeeof the Ninth People's Congress on Amending the Company Law of the People'sRepublic of China. Revised for the second time on August 28, 2004 according tothe Decision of the 11th Session of the Standing Committee of the 10th NationalPeople's Congress of the People's Republic of China on Amending the Company Lawof the People's Republic of China. Revised for the third time at the 18thSession of the 10th National People's Congress of the People's Republic ofChina on October 27, 2005)
ChapterI General Provisions
ChapterII Establishment and Organizational Structure of A Limited Liability Company
Section2 Organizational structure
Section3 Special Provisions on One-person Limited Liability Companies
Section4 Special Provisions on Wholly State-owned Companies
ChapterIII Transfer of Stock Right of A Limited Liability Company
ChapterIV Establishment and Organizational Structure of A Joint Stock Limited Company
Section2 Shareholders' Assembly
Section3 Board of Directors, Managers
Section4 Board of Supervisors
Section5 Special Provisions on the Organizational Structure of A Listed Company
ChapterV Issuance and Transfer of Shares of A Joint Stock Limited Company
Section1 Issuance of Shares
Section2 Transfer of Shares
ChapterVI Qualifications and Obligations of the Directors, Supervisors and SeniorManagers of A Company
ChapterVII Corporate Bonds
ChapterVIII Financial Affairs and Accounting of A Company
ChapterIX Merger and Split-up of Company; Increase and Deduction of Registered Capital
ChapterX Dissolution and Liquidation of A Company
ChapterXI Branches of Foreign Companies
ChapterXII Legal Liabilities
ChapterXIII Supplementary Provisions
ChapterI General Provisions
Article 1 This Law is enacted for the purposesof regulating the organization and operation of companies, protecting thelegitimate rights and interests of companies, shareholders and creditors,maintaining the socialist economic order, and promoting the development of thesocialist market economy
Article 2 The term "company" asmentioned in this Law refers to a limited liability company or a joint stockcompany limited set up within the territory of the People's Republic of Chinaaccording to the provisions of this Law.
Article3 A company is an enterprise legal person, which has independent legal personproperty and enjoys the right to legal person property. It shall bear theliabilities for its debts with all its property. For a limited liabilitycompany, a shareholder shall be liable for the company to the extent of thecapital contributions it has paid. For a joint stock limited company, ashareholder shall be liable for the company to the extent of the shares it hassubscribed to.
Article 4 The shareholders of a company shallbe entitled to enjoy the capital proceeds, participate in making importantdecisions, choose managers and enjoy other rights.
Article 5 When conducting business operations,a company shall comply with the laws and administrative regulations, socialmorality, and business morality. It shall act in good faith, accept thesupervision of the government and general public, and bear socialresponsibilities.
Thelegitimate rights and interests of a company shall be protected by laws and maynot be trespassed.
Article 6 To establish a company, anapplication for establishment registration shall be filed with the companyregistration authority. If the application meets the establishment requirementsof this Law, the company registration authority shall register the company as alimited liability company or joint stock limited company. If the applicationdoes not meet the establishment requirements of this Law, it shall not beregistered as a limited liability company or joint stock limited company.
If anylaw or administrative regulation provides that the establishment of a companyshall be subject to approval, and relevant approval formalities shall be gonethrough prior to the registration of the company.
Thegeneral public may go to a company registration authority to search and consultthe registration information filed by a company and the authority shall providethe research services for the public.
Article 7 For a lawfully established company,the company registration authority shall issue a company business license tothe company. The date of issuance of the company business license shall be thedate of establishment of the company. The company business license shall statethe name, domicile, registered capital, actually paid capital, business scope,legal representative, etc. If any of the items as stated in the businesslicense is changed, the company shall modify the registration and the company registrationauthority shall replace its old business license by a new one.
Article 8 A limited liability companyestablished according to this Law shall include the words of "limitedliability company" or "limited company" in its name. A jointstock limited company established according to this Law shall include words of"joint stock limited company" or "joint stock company".
Article 9 A limited liability company to bechanged into a joint stock limited company shall satisfy the requirements asprescribed in this Law for joint stock limited companies. A joint stock limitedcompany to be changed into a limited liability company shall conform to theconditions as prescribed in this Law for limited liability companies. In eitherof the aforesaid cases, the creditor's rights and debts of the company prior tothe change shall be succeeded by the company after the change.
Article 10 A company shall regard its mainoffice as its domicile.
Article 11 A company established according tothis Law shall formulate its bylaw that are binding on the company, itsshareholders, directors, supervisors and senior managers.
Article 12 A company's business scope shall bedefined in its bylaw and shall be registered according to law. The company maychange its business scope by modifying its bylaw, but it shall go through theformalities for modifying the registration.
If thebusiness scope a company covers any item subject to approval pursuant to anylaw or administrative regulation, approval shall be obtained according to thelaw.
Article 13 The legal representative of acompany shall, be assumed by the chairman of the board of directors, actingdirector or manager according to the company's bylaw and shall be registeredaccording to law. If the legal representative of the company is changed, thecompany shall go through the formalities for modifying the registration.
Article 14 A company may set up branches. Toset up a branch, the company shall file a registration application with thecompany registration authority and shall obtain a business license. A branchshall not enjoy the status of an enterprise legal person and its civilliabilities shall be born by its parent company.
Acompany may set up subsidiaries which enjoy the status of an enterprise legalperson and shall be independently responsible for their own civil liabilities.
Article 15 A company may invest in otherenterprises. However, unless it is otherwise provided for by any law, it shallnot become a capital contributor that shall bear several and joint liabilitiesfor the debts of the enterprises in which it invests.
Article 16 Where a company intends to investin any other enterprise or provide guaranty for others, the company shall makea resolution through the board of directors, shareholders' meeting orshareholders' assembly according to its bylaw. If the bylaw prescribe any limiton the total amount of investments or guaranties, or on the amount of a singleinvestment or guaranty, the aforesaid total amount or amount shall not exceedthe limited amount. If a company intends to provide guaranty to a shareholderor actual controller of the company, it shall make a resolution through theshareholder's meeting or shareholders' assembly.
Theshareholder as mentioned in the preceding paragraph or the shareholderdominated by the actual controller as mentioned in the preceding paragraphshall not participate in voting on the matter as mentioned in the precedingparagraph. Such matter requires the affirmative votes of more than half of theother shareholders attending the meeting.
Article 17 Every company shall protect thelawful rights and interests of its employees, sign employment contracts withits employees, buy social insurances, and strengthen labor protection so as toensure work safety.
Everycompany shall, in various forms, intensify the professional education andin-service training of its employees so as to improve their personal quality.
Article 18 The employees of a company shall,according to the Labor Union Law of the People's Republic of China, organize alabor union, which shall carry out union activities and safeguard the lawfulrights and interests of the employees. The company shall provide necessaryconditions for its labor union to carry out activities. The labor union shall,on behalf of the employees, sign collective contracts with the company withrespect to the remuneration, working hours, welfare, insurance, work safety andsanitation, and other matters.
Inaccordance with the Constitution and other relevant laws, a company shall adoptdemocratic management in the form of assembly of the representatives of theemployees or any other ways.
Tomake a decision on restructuring or any important issue relating to businessoperations, or to formulate any important bylaw, a company shall solicit theopinions of its labor union, and shall solicit the opinions and proposals ofthe employees through the assembly of the representatives of the employees orin any other way.
Article 19 The Chinese Communist Party may,according to the Constitution of the Chinese Communist Party, establish itsbranches in companies to carry out activities of the Chinese Communist Party.The company shall provide necessary conditions to facilitate the activities ofthe Party.
Article 20 The shareholders of a company shallabide by the laws, administrative regulations and bylaw and shall exercise theshareholder's rights under the law. None of them may injure any of theinterests of the company or of other shareholders by abusing the shareholder'srights, or injure the interests of any creditor of the company by abusing theindependent status of legal person or the shareholder's limited liabilities.
Whereany of the shareholders of a company causes any loss to the company or to othershareholders by abusing the shareholder's rights, it shall be liable forcompensation.
Whereany of the shareholders of a company evades the payment of its debts by abusingthe independent status of legal person or the shareholder's limitedliabilities, if it seriously injures the interests of any creditor, it shallbear several and joint liabilities for the debts of the company.
Article 21 Neither the controllingshareholder, nor the actual controller, nor any of the directors, supervisorsor senior management of the company may injure the interests of the company bytaking advantage of its connection relationship. Anyone who causes any loss tothe company due to violating the preceding paragraph shall be liable for thecompensation.
Article 22 A resolution of the shareholders'meeting, shareholders' assembly or board of directors of the company that is inviolation of any law or administrative regulation shall be null and void.
If theprocedures for calling a shareholders' meeting or shareholders' assembly, ormeeting of the board of directors, or the voting form, is in violation of anylaw, administrative regulation or the bylaw, or if a resolution is in violationof the bylaw of the company, the shareholders may, within 60 days from the daywhen the resolution is made, request the people's court to revoke it.
If theshareholders initiate a lawsuit under the preceding paragraph, the people'scourt shall, at the request of the company, demand the shareholders to providecorresponding guaranty.
Wherea company has, according to the resolution of the shareholders' meeting,shareholders' assembly or meeting of the board of directors, completed themodification registration, if the people's court declares the resolution nulland void or revoke the resolution, the company shall file an application withthe company registration authority for revoking the modification registration.
ChapterII Establishment and Organizational structure of A Limited Liability Company
Article 23 The establishment of a limitedliability company shall meet the following conditions:
(1)Thenumber of shareholders constitutes the quorum;
(2)Theamount of capital contributions paid by the shareholders reaches the statutoryminimum amount of the registered capital;
(3)Theshareholders jointly work out the bylaw;
(4)Thecompany has a name and its organizational structure complies with that of alimited liability company; and
(5)Thecompany has a domicile.
Article 24 A limited liability company shallbe established by no more than 50 shareholders that make capital contributions.
Article 25 A limited liability company shallstate the following items:
(1)Thename and domicile of the company;
(2)Business Scope of the company;
(3)Registeredcapital of the company;
(5)Forms, amount and date of capital contributions made by shareholders;
(6)Theorganizations of the company and its formation, their functions and rules ofprocedure;
(7)Legalrepresentative of the company;
(8)Othermatters deemed necessary by shareholders.
Theshareholders should affix their signatures or seals to the bylaw of thecompany.
Article 26 The registered capital of a limitedliability company shall be the total amount of capital contributions subscribedto by all the shareholders registered in the company registration authority.The amount of the initial capital contributions made by all shareholders shallnot be less than 20% of the registered capital, nor less than the statutoryminimum amount of registered capital, the margin shall be paid off by theshareholders within 2 years from the day when the company is established; foran investment company, it may be paid off within 5 years. The minimum amount ofregistered capital of a limited liability company shall be RMB 30, 000 yuan. Ifany law or administrative regulation prescribes a relatively higher minimumamount of registered capital of a limited liability company, the provisions ofthat law or administrative regulation shall be followed.
Article 27 A shareholder may make capitalcontributions in cash, in kind, or intellectual property right, land use right,or other non-monetary properties that may be assessed on the basis of currencyand may be transferred according to the law, excluding the properties thatshall not be treated as capital contributions under any law or administrativeregulation.
Thevalue of the non-monetary properties as capital contributions shall be assessedand verified, which shall not be over-valued or under-valued. If any law oradministrative regulations provides for the value assessment, such law oradministrative regulation shall be followed.
Theamount of the capital contributions in cash paid by all the shareholders shallbe no less than 30% of the registered capital of the limited liability company.
Article 28 Each shareholder shall make fullpayment for the capital contributions he has subscribed to according to thebylaw. If a shareholder makes his capital contribution in cash, he shalldeposit the full amount of such cash capital contribution into a temporary bankaccount opened for the limited liability company. If any capital contributionsare made in non-monetary properties, the appropriate transfer procedures forthe property rights therein shall be followed according to law.
Wherea shareholder fails to make his capital contribution as specified in thepreceding paragraph, he shall not only make full payment to the company butalso bear the liabilities for breach of contract to the shareholders who havemake full payment of capital contributions on schedule.
Article 29 The capital contributions made bythe shareholders shall be verified by a lawfully established capitalverification institution and the institute shall issue a certification to provethe contribution.
Article 30 After the initial capitalcontributions made by the shareholders have been verified by a lawfullyestablished capital verification institution, the representative designated byall the shareholders or the agent entrusted by all the shareholders shall applyfor establishment registration by submitting a company registrationapplication, bylaw, capital verification and other documents to the companyregistration authority.
Article 31 After the establishment of alimited liability company, if the actual value of the capital contributions innon-monetary properties is found to be apparently lower than that set forth inthe bylaw of the company, the difference shall be made up by the shareholderwho offered them, and the other shareholders of the company who established thecompany shall bear several and joint liabilities.
Article 32 After the establishment of alimited liability company, each shareholder shall be issued a capitalcontribution certificate, which shall specify the following:
(1)The name of the company;
(2)The date of establishment of the company;
(3)The company's registered capital;
(4)The name of the shareholder, the amount of his capital contribution, and theday when the capital contribution is made; and
(5)The serial number and date of issuance of the capital contribution certificate.The capital contribution certificate shall bear the seal of the company.
Article 33 A limited liability company shallprepare a registry of shareholders and the registry shall record the followinginformation:
(1)Thenames of all shareholders and their domiciles thereof;
(2)Theamount of capital contributions made by each shareholder;
(3)Theserial numbers for all capital contribution certificates.
Theshareholders recorded in the registry of shareholders may, pursuant to theregistry of shareholders, claim to and exercise the shareholder's rights.
Acompany shall register each shareholder's name and its amount of capitalcontributions in the company registration authority. Where any of theregistered items is changed, the company shall modify the registration. If thecompany fails to do so, it shall not, on the basis of the unregistered orun-modified registration item, stand up to any third party.
Article 34 Every shareholder shall be entitledto review and duplicate the company's bylaw, the minutes of the shareholders'meetings, the resolutions of the board of directors' meetings, the resolutionsof the board of supervisors' meetings, as well as the financial reports.
Everyshareholder may request to review the accounting books of the company. Where ashareholder requests to review the accounting books of the company, it shallsubmit a written request, which shall state his motives. If the company, hasthe legitimate reason to believe that the shareholder's requests to review theaccounting books has an improper motive and may impair the legitimate interestsof the company, it may reject the request of the shareholder to review thebooks and shall, within in 15 days after the shareholder submits a writtenrequest, give the shareholder a written reply, which shall include anexplanation. If the company reject the request of any shareholder to review theaccounting books, the shareholder may plead a people's court to demand thecompany to open the books for his review.
Article 35 Shareholders shall be distributedwith the dividends based on the percentages of the capital that they actuallycontributed. When a company is going to increase the capital, its shareholdershave the preemptive right to subscribe to the new capitals based on the samepercentages of the old capital that they contributed. The exception shall begiven if all shareholders agree that they will not be distributed with thedividends or have the preemptive right to subscribe to the new capitals basedon the percentages of the old capital that they contributed.
Article 36 After the establishment of acompany, no shareholder may illegally take away the registered capital.
Section2 Organization Structure
Article 37 The shareholders' meeting of alimited liability company shall be composed of all the shareholders. It is theauthority of the company and shall exercise its powers according to this Law.
Article 38 The shareholders' meeting shallexercise the following functions:
(1)Determining the company's operational guidelines and investment plans;
(2)Electing and changing the directors and supervisors assumed bynon-representatives of the employees and deciding the matters relating to theirsalaries and compensations;
(3)Deliberating and approving reports of the board of directors;
(4)Deliberating and approving reports of the board of supervisors or thesupervisor;
(5)Deliberating and approving annual financial budget plans and final accountplans of the company;
(6)Deliberating and approving company profit distribution plans and loss recoveryplans;
(7)Making resolutions about the increase or reduction of the company's registeredcapital;
(8)Making resolutions about the issuance of corporate bonds;
(9)Adopting resolutions about the assignment, split-up, change of company form,dissolution, liquidation of the company;
(10)Revising the bylaw of the company;
(11)Other functions as specified in the bylaw.
If allthe shareholders consent to any of the matters listed in the precedingparagraph by writing , they do not need to hold a shareholders' meeting and maymade decisions and have the decisions signed and sealed by all theshareholders.
Article 39 The first shareholders' meetingshall be convened and presided over by the shareholder who made the largestcapital contributions, and he shall exercise his powers according to this Law.
Article 40 The shareholders' meetings shall beclassified into regular meetings and interim meetings. The regular meetingsshall be timely held according to the bylaw. Where an interim meeting isproposed by the shareholders representing 1/10 of the voting rights or more, orby directors representing 1/3 of the voting rights or more, or by the board ofsupervisors, or by the supervisors of the company with no board of supervisors,an interim meeting shall be held.
Article 41 Where a limited liability companyhas set up a board of directors. The shareholders' meetings shall be convenedby the board of directors and presided over by the chairman of the board ofdirectors. If the chairman is unable or fails to perform his duties, themeetings thereof shall be presided over by the deputy chairman of the board ofdirectors. If the deputy chairman of the board of directors is unable or failsto perform his duties, the meetings shall be presided over by a directorjointly recommended by half or more of the directors.
For alimited liability company with no board of directors, the shareholders'meetings shall be convened and presided over by the acting director.
If theboard of directors or the acting director is unable or fails to fulfill theduties of convening the shareholders' meeting, the board of supervisors or thesupervisor of the company with no board of supervisors may convene and preside oversuch meetings. If the board of supervisors or supervisor does not convene orpreside over such meetings, the shareholders representing 1 / 10 or more of thevoting rights may convene and preside over such meetings on their owninitiatives.
Article 42 Every shareholder shall be given anotice 15 days before a shareholders' meeting is held unless it is otherwisespecified by the bylaw or it is otherwise stipulated by all the shareholders.
Ashareholders' meeting shall make the minutes for the decisions about the mattersdiscussed at the meeting. The shareholders who attended the meeting shall affixtheir signatures to the minutes.
Article 43 The shareholders shall exercisetheir voting rights at the shareholders' meetings based on their respectivepercentage of the capital contributions unless it is otherwise prescribed bythe bylaw.
Article 44 Unless it is otherwise provided forby this Law, the discussion methods and voting procedures of the shareholders'meeting shall be provided for in the bylaw.
Aresolution made at a shareholders' meeting on revising the bylaw, increasing orreducing the registered capital, merger, split-up, dissolution or change of thecompany form shall be adopted by the shareholders representing 2 / 3 or more ofthe voting rights.
Article 45 The board of directors establishedby a limited liability company shall be composed of 3 up to 13 members unlessit is otherwise provided by Article 51 of this Law.
If alimited liability company established by 2 or more state-owned enterprises orother state-owned investors, the board of directors shall includerepresentatives of the employees of the companies. The board of directors ofany other limited liability company may also include representatives of theemployees of the company concerned. The employees' representatives who are toserve as board directors shall be democratically elected by the employees ofthe company through the general assembly of the representatives of employees, employees'assembly of the company or in any other way. The board of directors shall haveone chairman and may have one or more deputy chairmen. The appointment of thechairman and deputy chair shall be specified in the bylaw.
Article 46 The term of office of the directorsshall be provided for by the bylaw, but each term of office shall not exceed 3years. The directors may, after the expiry of their term of office, hold aconsecutive term upon re-election. If no reelection is timely carried out afterthe expiry of the term of office of the directors, or if the number of themembers of the board of directors is less than the quorum due to theresignation of some directors from the board of directors prior to the expiryof their term of office, the original directors shall, before the newly electeddirectors assume their posts, perform the powers of the directors according tothe laws, administrative regulations, as well as the bylaw.
Article 47 The board of directors shall beresponsible for the shareholders' meeting and exercise the following functions:
(1)Convening shareholders' meetings and presenting reports thereto;
(2)Implementing the resolutions made at the shareholders' meetings;
(3)Determining the company's business and investment plans;
(4)Working out the company's annual financial budget plans and final accountplans;
(5)Working out the company's profit distribution plans and loss recovery plans;
(6)Working out the company's plans on the increase or reduction of registeredcapital, as well as on the issuance of corporate bonds;
(7)Working out the company's plans on merger, split, change of the company form,or dissolution, etc.;
(8)Making decisions on the establishment of the company's internal managementdepartments;
(9)Making decisions on hiring or dismissing the company's manager and his salaryand compensation, and, according to the nomination of the manager, deciding onthe hiring or dismissal of vice manager(s) and the persons in charge of financeas well as their salaries and compensations;
(10)Working out the company's basic management system; and
(11)Other functions as specified in the bylaw.
Article 48 A meeting of the board of directorsshall be convened and presided over by the chairman of the board of directors.If the chairman of the board of directors is unable or fails to perform hisduties, it may be convened or presided over by the deputy chairman of the boardof directors. If the deputy chairman of the board of directors is unable orfails to perform his duties, it may be convened or presided over by a directorwhom is jointly recommended by half or more of the directors.
Article 49 Unless it is otherwise provided forby this Law, the discussion methods and voting procedures of the board ofdirectors shall be specified by the bylaw.
Theboard of directors shall make minutes of the decisions about the mattersdiscussed at the meetings thereof. The shareholders who attend the meetingshall affix their signatures to the minutes.
In thevoting on a resolution of the board of directors, every director shall have onevote.
Article 50 A limited liability company mayhave a manager, who shall be hired or dismissed upon decision of the board ofdirectors. The manager shall be responsible for the board of directors andshall exercise the following powers:
(1)Takingcharge of the management of the production and business operations of thecompany, organizing the implementation of the resolutions of the board ofdirectors;
(2)Organizingthe execution of the company's annual business plans and investment plans;
(3)Draftingplans on the establishment of the company's internal management departments;
(4)Draftingthe company's basic management system;
(5)Formulatingthe company's specific rules and policies;
(6)Proposingto hire or dismiss the company's vice manager(s) and the person in charge offinance;
(7)Decidingon the hiring or dismissal of the persons-in-charge other than those who shallbe decided by the board of directors; and
(8)Otherpowers conferred by the board of directors.
If thebylaw provides otherwise for the powers of managers, the bylaw shall befollowed. The manager attends the meetings of the board of directors as anon-voting representative.
Article 51 For a limited liability companywith a relatively small number of shareholders or for a relatively smalllimited liability company, it may have an acting director and no board ofdirectors. The acting director may concurrently hold the post of the company'smanger.
Thepowers of the acting director shall be specified in the bylaw.
Article 52 A limited liability company may setup a board of supervisors, which shall be composed of at least 3 persons. For alimited liability company in which there is a relatively small number ofshareholders or which is relatively small in scale, it may have 1 or 2supervisors and does not have to establish a board of supervisors. The board ofsupervisors shall include shareholders' representatives and representatives ofthe employees' of the company at an appropriate ratio to be specificallyprescribed in the bylaw. The employees' representatives who are to serve asmembers of the board of supervisors shall be democratically elected by theemployees of the company through the assembly of the employees'representatives, or employees' assembly or by any other means. The board ofsupervisors shall have one chairman, who shall be elected by half or more ofall the supervisors. The chairman of the board of supervisors shall convene andpreside over the meetings of the board of supervisors. If the chairman ofsupervisors is unable or fails to perform his duties, the supervisorrecommended by half or more of the supervisors shall convene and preside overthe meetings of the board of supervisors.
Nodirector or senior manager may concurrently serve as a supervisor.
Article 53 Each term of office of thesupervisors shall be 3 years. The supervisors may, after the expiry of theirterm of office, hold a consecutive term upon reelection. If no reelection istimely carried out after the expiry of the term of office of the supervisors,or if the number of the members of the board of directors is less than thequorum due to the resignation of some directors from the board of supervisorsprior to the expiry of their term of office, the original supervisors shall,before the newly elected supervisors assume their posts, exercise the powers ofthe supervisors according to laws, administrative regulations, as well as thebylaw.
Article 54 The board of supervisors orsupervisor of a company with no board of supervisors may exercise the followingpowers:
(1)Tocheck the financial affairs of the company;
(2)Tosupervise the duty-related acts of the directors and senior managers, to putforward proposals on the removal of any director or senior manager who violatesany law, administrative regulation, the bylaw or any resolution of theshareholders' meeting;
(3)Todemand any director or senior manager to make corrections if his act hasinjured the interests of the company;
(4)Topropose to call interim shareholders' meetings, to call and preside overshareholders' meetings when the board of directors does not exercise thefunction of calling and presiding over shareholders' meetings as prescribed inthis Law;
(5)Toput forward proposals at shareholders' meetings;
(6)Toinitiate actions against directors or senior managers according to
Article 152 of this Law; and
(7)Otherduties as provided for by the bylaw.
Article 55 The supervisors may attend themeetings of the board of directors as non-voting attendees, and may raisequestions or suggestions about the meeting agenda discussed by the board ofdirectors.
If theboard of supervisors or the supervisors of the company that does not have aboard of supervisors find that the company is running abnormally, they mayconduct an investigation. Where necessary, they may hire an accounting firm tohelp them with the investigation and the related expenses shall be born by thecompany.
Article 56 The board of supervisors shall holdmeetings at least once a year. Any supervisors may propose to hold interimmeetings of the board of supervisors.
Thediscussion methods and voting procedures of the board of supervisors shall bespecified in the bylaw unless it is otherwise provided by this Law.
Aresolution of the board of supervisors shall be approved by more than half ofthe supervisors.
Theboard of supervisors shall scribe the minutes for the resolutions about theagenda and have the minutes signed by the supervisors in presence.
Article 57 The expenses necessary for theboard of supervisors or the supervisor of a company that does not have a boardof supervisors to perform their duties shall be borne by the company.
Section3 Special Provisions on One-person Limited Liability Companies
Article 58 The provisions of this Sectionshall apply to the establishment and the organizational structure of aone-person limited liability. For any matter not touched by this Section, itshall be governed by Sections 1 and 2 of this Chapter.
Theterm "one-person limited liability company" as mentioned in this Lawrefers to a limited liability company with only one natural person shareholderor legal person shareholder.
Article 59 The minimum amount of registeredcapital of a one-person limited liability company shall be RMB 100, 000 yuan.The shareholder shall, in a lump sum, pay the capital contributions as specifiedin the bylaw.
Onenatural person is allowed to establish merely an one-person limited liabilitycompany, which shall not establish any more one-person limited liabilitycompany.
Article 60 An one-person limited liabilitycompany shall, in the company registration, give a clear indication that it issolely-funded by one natural person or legal person and the same shall bespecified in the business license of the company.
Article 61 The bylaw of an one-person limitedliability company shall be formulated by the shareholder.
Article 62 An one-person limited liabilitycompany has no board of directors. When the shareholders make a decision on anyof the matters as listed in
Article 38 of this Law, he shall make it inwriting, sign it, and keep it in the company.
Article 63 An one-person limited liabilitycompany shall make a financial report by the end of every fiscal year and havethe report audited by an accounting firm.
Article 64 If the shareholder of a one-personlimited liability company is unable to prove that the property of theone-person limited liability company is independent from his own property, heshall bear joint liabilities for the debts of the company.
Section4 Special Provisions on Wholly State-owned Companies
Article 65 The provisions of this Chaptershall apply to the establishment and organizational structure of the wholly state-ownedcompanies. Any matter not covered by this Chapter shall be governed by theprovisions of Sections 1 and 2 of this Chapter.
A"wholly state-owned company" as mentioned in this Law refers to alimited liability company invested wholly by the state, for which the StateCouncil or the local people's government authorizes the state-owned assetssupervision and administration institution of the people's government at thesame level to perform the functions of the capital contributor.
Article 66 The bylaw of a wholly state-ownedcompany shall be formulated by the state-owned assets supervision andadministration institution, or shall be drafted by the board of directors andthen be submitted to the state-owned assets supervision and administrationinstitution for approval.
Article 67 Wholly state-owned companies do nothave shareholders' meetings. The state-owned assets supervision andadministration institution shall exercise the functions of the shareholders'meeting. The state-owned assets supervision and administration institution mayauthorize the company's board of directors to exercise some of the functions ofthe shareholders' meeting and decide on the important matters of the company,excluding those that must be decided by the state-owned assets supervision andadministration, such as merger, split-up, dissolution of the company, increaseor reduction of registered capital as well as the issuance of corporate bonds.For the merger, split-up, dissolution or application for bankruptcy of animportant wholly state-owned company, it shall, be subject to the examinationof the state-owned assets supervision and administration institution, and thenbe submitted to the people's government at the same level for approval.
Theterm "important wholly state-owned company" as mentioned in thepreceding paragraph shall be determined according to the provisions of theState Council.
Article 68 A wholly state-owned company shallestablish a board of directors, which shall exercise its functions according to
Articles 47 and 67 of this Law. Each term ofoffice of the directors shall not exceed 3 years. The board of directors shallinclude representatives of the employees. The members of the board of directorsshall be appointed by the state-owned assets supervision and administrationinstitution, but of whom the representatives of the employees shall be electedthrough the assembly of the representatives of the employees of the company.The board of directors shall have one chairman and may have deputy chairmen.The chairman and deputy chairmen shall be designated by the state-owned assetssupervision and administration institution from the members of the board ofdirectors.
Article 69 A wholly state-owned company shallhave a manager, whom shall be hired or dismissed by the board of directors. Themanager shall exercise his powers according to
Article 50 of this Law. Upon consent of thestate-owned assets supervision and administration institution, the members ofthe board of directors may concurrently hold the post of manager.
Article 70 None of the chairman, deputychairmen, directors and senior managers of a wholly state-owned company mayconcurrently take up a post in any other limited liability company, joint stocklimited company or any other economic organization unless it is so consented bythe state-owned assets supervision and administration institution.
Article 71 The board supervisors of a whollystate-owned company shall be composed of at least 5 members, of whom theemployees' representatives shall account for no less than 1/3, the specificpercentage shall be specified by the bylaw.
Themembers of the board of supervisors shall be appointed by the state-ownedassets supervision and administration institution, however, the employeerepresentative members of the board of supervisors shall be elected by theassembly of the employee representatives of the company. The chairman of the boardof supervisors shall be designated by the state-owned assets supervision andadministration institution from the members of the board of supervisors. Theboard of supervisions shall exercise the functions as mentioned in
Article 54 (1) through (3) of this Law andthose provided for by the State Council.
ChapterIII Transfer of Stock Right of A Limited Liability Company
Article 72 All or some of the stock rights ofthe shareholders of a limited liability company may be transferred among theshareholders.
Wherea shareholder intends to transfer his/its stock rights to any one other thanthe shareholders, he shall obtain the consent from more than half of the othershareholders. The shareholder shall give the other shareholders a writtennotice about the matters related to the transfer of stock rights for theirconsent. If any of the other shareholders fails to give it a reply within 30days after it receives a written notice, it shall be deemed to have consentedto the transfer. If half or more of the other shareholders disagree to thetransfer, the shareholders who disagree to the transfer shall purchase thestock rights to be transferred. If they refuse to purchase these stock rights,they shall be deemed to have consented to the transfer. Under the same conditions,the other shareholders have a preemptive right to purchase the stock rights tobe transferred upon their consent. If two or more shareholders claim thepreemptive right, they shall determine their respective purchase percentagethrough negotiation. If they fail to reach an agreement during the negotiation,they shall exercise the preemptive right on the basis of their respectivepercentage of capital contributions.
Unlessit is otherwise provided for the transfer of stock rights in the bylaw, thebylaw shall be followed.
Article 73 When the people's court transfersthe stock rights of a shareholder pursuant to the mandatory enforcementprocedure as provided in laws, the court shall notify the company and all theshareholders that the other shareholders have a preemptive right under the sameconditions. If any of the other shareholders fails to exercise the preemptiveright within 20 days after he/it receives the notice of the court, it shall bedeemed to have waived his preemptive right.
Article 74 After a company transfers its stockrights according to
Articles 72 and 73 of this Law, it shall cancelthe capital contribution certificate of the former shareholder, issue a capitalcontribution certificate to the new shareholder and modify the shareholders andtheir capital contributions in the bylaw and the registry of shareholders. Novoting of the shareholders' meeting is needed for the modification of the bylawregarding the transfer of stock rights.
Article 75 Under any of the followingcircumstances, a shareholder, who votes against the resolution of theshareholders' meeting, may request the company to purchase its stock rights ata reasonable price:
(1)Thecompany that has made profits for five consecutive years has failed todistribute any dividends to the shareholders for 5 consecutive years andconforms to the profit distribution conditions as prescribed in this Law;
(2)Thecompany is going to merge with others, to be split up, or transfer the majorproperties of the company to others;
(3)Whenthe business term as specified in the bylaw expires or other reasons fordissolution as prescribed in the bylaw occur, the shareholders' meeting makesthe company exist continuously by adopting a resolution to modify the bylaw.
Within60 days after the resolution is adopted at the shareholders' meeting, if theshareholder and the company fails to reach an agreement on the purchase ofstock rights, the shareholder may initiate a lawsuit in the people's courtwithin 90 days after the resolution is adopted at the shareholders' meeting.
Article 76 After the death of a natural-personshareholder, his lawful inheritor may inherit the shareholder's qualificationsunless it is otherwise provided for by the bylaw.
ChapterIV Establishment and Organizational structure of A Joint Stock Limited Company
Article 77 The establishment of a joint stocklimited company shall satisfy the following conditions:
(1)Thenumber of promoters meets the quorum requirement;
(2)Thecapital stock subscribed to by the promoters and raised by stock floatationreaches the minimum amount of the statutory capital;
(3)Theissuance of shares and the preparatory work conform to the provisions of laws;
(4)Thebylaw is formulated by the promoters, and is adopted at the establishmentmeeting if the company is to be launched by stock floatation;
(5)Thecompany has a name and its organizational structure complies with that of ajoint stock limited company
(6)Thecompany has a domicile.
Article 78 A joint stock limited company maybe established by the way of promotion or stock floatation.
Theestablishment of a company by promotion means that the promoters establish acompany by subscribing to all of the shares that should be issued by thecompany.
Theestablishment of a company by stock floatation means that the promotersestablish a company by subscribing to some of the shares that should be issuedby the company and offering the remaining shares to the general public or to agroup of specified people for subscription.
Article 79 To establish a joint stock limitedcompany, there shall not be less than 2 but not more than 200 promoters, ofwhom half or more shall have a domicile within the territory of China.
Article 80 The promoters of a joint stocklimited company shall undertake the preparatory work of the company.
Theyshall conclude a promoter's agreement to clarify their respective rights andobligations during the course of establishing the company.
Article 81 Where a joint stock limited companyis established by promotion, its registered capital shall be the total capitalstocks subscribed by all the promoters with the company registration authority.The minimum amount of initial capital contributions to be made by all promotersshall be not less than 20% of the total registered capital, the remainingamount shall be paid by the promoters within 2 years from the day when thecompany is established, while for an investment company, the remaining amountmay be paid within 5 years. Before the registered capital is paid, no stock maybe offered to others for subscription.
Wherea joint stock limited company is established by stock floatation, itsregistered capital shall be the total actually paid capital stocks registeredwith the company registration authority. The minimum amount of the registeredcapital of a joint stock limited company shall be RMB 5 million yuan. If anylaw or administrative regulation provides a relatively higher minimum amount ofregistered capital, such provision shall be followed.
Article 82 The bylaw of a joint stock limitedcompany shall specify the following matters:
(1)Thename and address of the company;
(2)Thebusiness scope of the company;
(3)Theform of company establishment;
(4)Totalshares, par value of each share, and the amount of registered capital of thecompany;
(5)Thename of each promoter, the shares it has subscribed to, as well as the form anddate of capital contributions;
(6)Thecomposition, powers, term of office, and rules of procedure of the board ofdirectors;
(7)Thelegal representative of the company;
(8)Thecomposition, powers, term of office, and rules of procedure of the supervisoryboard;
(9)Themethod for profit distribution of the company;
(10)Thereasons for dissolution of the company and liquidation methods;
(11)Themethods for issuing notices or public announcements of the company; and
(12)Othermatters deemed necessary by the meetings of shareholders' assembly.
Article 83 The form of capital contributionsof promoters shall be governed by the provisions of
Article 27 of this Law.
Article 84 When establishing a joint stockcompany limited by promotion, the promoters shall subscribe, in writing, to thefull amount of shares provided in the bylaw. In the case of paying the capitalcontributions at one time, the promoters shall make the payment in a lump sum;in the case of paying the capital contributions by installments, the promotersshall make the down payment immediately. In the case of making capitalcontributions in non-monetary properties, the promoters shall go through theprocedures for the transfer of property rights according to laws.
If anyof the promoters fails to make capital contributions by following theprovisions of the preceding paragraph, it shall bear the liabilities for breachof contract under the stipulations in the promoter's agreement.
Afterthe promoters have made their down payment, they should elect the board ofdirectors and board of supervisors. The board of directors shall file a registrationapplication with the company registration authority and submit thereto thebylaw, the capital verification certification as issued by a lawfullyestablished capital verification institution, as well as other documents asprovided for by the laws and administrative regulations.
Article 85 For a joint stock limited companyestablished by stock flotation, the shares subscribed by the promoters shallnot be less than 35 % of the total shares. However, if it is otherwise providedfor by any law or administrative regulation, such law or administrativeregulation shall prevail.
Article 86 For the public offer shares, thepromoters shall publish a prospectus and prepare share subscription forms. Theshare subscription form shall contain the items listed in
Article 87, and a subscriber shall fill in thenumber and amount of shares he subscribes to and his domicile, and shall affixhis signature or seal thereto. A subscriber shall pay the shares according tothe number of shares he has subscribed to.
Article 87 The prospectus shall be accompaniedby the bylaw formulated by the promoters and shall state the following:
(1)Thenumber of shares subscribed to by the promoters;
(2)Thepar value and issuing price of each share;
(3)Thetotal number of unregistered stocks issued;
(4)Thepurposes for the fund raising;
(5)Therights and obligations of the subscribers; and
(6)Thebeginning and ending dates for the public offering and a statement to indicatethat the subscribers may revoke their subscriptions if the offered stocks cannotbe fully subscribed at the closing time of the public offering.
Article 88 The public offer shares shall beunderwritten by a lawfully established securities company and an underwritingagreement shall be concluded.
Article 89 For the public offer shares, thepromoters shall sign an agreement with the bank receiving the funds to purchasethe shares.
Thereceiving bank shall receive and hold as agent the payments for sharesaccording to the agreement, produce receipts to subscribers who have made thepayments, and shall be obliged to produce evidence of receipt of payments tothe relevant departments.
Article 90 After full payments have been madefor the public offer shares, they shall be verified by a lawfully establishedcapital verification institution and a certification shall be issued thereby.The promoters shall hold a company establishment meeting within 30 days, whichshall be composed of the subscribers. If the public offer shares are not fullysubscribed to at the expiration of the time limit prescribed in the prospectus,or if the promoters fail to hold an establishment meeting within 30 days afterfull payment for the public offer shares is made, the subscribers may demandthe promoters to make repayments for the public offer shares plus an interestcalculated at the bank deposit interest rate for the same period.
Article 91 The promoters shall notify eachsubscriber of the date of the establishment meeting or make a publicannouncement about the meeting 15 days in advance. The establishment meetingmay not be held unless subscribers representing at least half of the sharesappear. The establishment meeting shall exercise the following powers:
(1)Deliberating the report on the pre-establishment activities prepared by the sponsors;
(2)Adopting the bylaw;
(3)Electingmembers of the board of directors;
(4)Electingmembers of the board of supervisors;
(5)Verifyingexpenses incurred for the establishment of the company;
(6)Verifying the value of the assets contributed by the promoters in lieu ofpecuniary payment for the shares;
(7)Wherethe force majeure or a material change of the operational conditions makes theestablishment of a company impossible, the promoters may decide not toestablish the company.
Aresolution adopted at the establishment meeting on any of the matters asmentioned in the previous paragraph requires affirmative votes by subscribersrepresenting more than half of the votes of those attending the meeting.
Article 92 The promoters and subscribers shallnot withdraw their share capital after making payments for the shares they havesubscribed to or after making capital contributions by using non-monetaryproperties, unless the public offer shares have not been fully subscribedwithin the time limit, the promoters fail to convene the establishment meetingwithin the time limit, or the establishment meeting has decided not to set upthe company.
Article 93 The board of directors shall,within 30 days after the establishment meeting ends, file a registrationapplication with the company registration authority and submit thereto the followingdocuments:
(1)Acompany registration application;
(2)Theminutes of the establishment meeting;
(4)Acapital verification certification;
(5)Theappointment documents and identity certificates of the legal representative,directors, supervisors;
(6)Thepromoters' certifications of the legal person or the identifications of naturalpersons, and
(7)Thecertification for the domicile of the company.
For ajoint stock limited company established by stock floatation that makes publicstock offerings, besides the aforementioned documents, it shall submit to thecompany registration authority the approval documents issued by the securitiesregulatory institution of the State Council.
Article 94 After the establishment of a jointstock limited company, if any of the promoters fail to make full payments forthe capital contributions as stipulated in the bylaw, they shall make up thearrears and the other promoters shall bear several and joint liabilities.
Afterthe establishment of a joint stock limited company, if it is found that theactual value of the non-monetary properties used as capital contributions forthe establishment of the company is obviously lower than as the value stipulatedin the bylaw, the promoter who made such a capital contribution shall make upthe difference and the other promoters shall bear several and jointliabilities.
Article 95 The promoters of a joint stocklimited company shall bear the following liabilities:
(1) Inthe event of failure to establish the company, being jointly and severallyliable for the debts and expenses incurred from the activities related to thecompany establishment;
(2) Inthe event of failure to establish the company, being jointly and severallyliable for refunding the subscribers with their paid capital plus the interestscalculated according to the bank interest rate for the same period of time; and
(3) Ifthe company's interest is injured in the course of its establishment due to thenegligence of the promoters, being liable for making compensations to thecompany.
Article 96 Where a limited liability companyis changed into a joint stock limited company, the total amount of the paidcapital shall not be less than the total amount of the net assets. Where alimited liability company is changed into a joint stock limited company, thepublic offer stocks issued for the purpose of increasing the capital shallcomply with the law.
Article 97 A joint stock limited company shallmake and keep the bylaw, the register of the shareholders, the stubs ofcorporate bonds, the minutes of the shareholders' assembly meetings, theminutes of the meetings of the board of directors, the minutes of the meetingsof the board of supervisors, and the financial reports in the company.
Article 98 The shareholders shall be entitledto review the bylaw, the register of the shareholders, the stubs of corporatebonds, the minutes of the shareholders' assembly meetings, the minutes of themeetings of the board of directors, the minutes of the meetings of the board ofsupervisors, and the financial reports, and may put forward proposals or raisequestions about the business operations of the company.
Section2 Shareholders' Assembly
Article 99 The shareholders' assembly of ajoint stock limited company shall be composed of all the shareholders. It isthe company's organ of power, which shall exercise its powers according to thislaw.
Article 100 The provisions regarding thepowers of the shareholders' assembly of a limited liability company asprescribed in the first paragraph of
Article 38 of this Law shall apply to theshareholders' assembly of a joint stock limited company.
Article 101 An annual session of theshareholders' assembly shall be held each year. Under any of the followingcircumstances, an interim shareholders' assembly session shall be held within 2months:
(1)The number of directors is less than two-thirds of the number of directors asrequired by this Law or the number of directors as specified in the bylaw;
(2)The un-recovered losses of the company reach one-third of the total pain-incapital;
(3) Atthe request of the shareholders separately or aggregately holding 10% or moreof the company's shares;
(4)The board of directors deems it necessary;
(5) Atthe request of the board of supervisors; and
(6)Other circumstances as specified in the bylaw.
Article 102 A session of the shareholders'assembly shall be convened by the board of directors and shall be presided overby the chairman of the board of directors. If the chairman is unable or failsto perform his duties, the meetings thereof shall be presided over by thedeputy chairman of the board of directors. If the deputy chairman of the boardof directors is unable or fails to perform his duties, the meetings shall bepresided over by a director jointly recommended by half or more of the directors.
If theboard of directors or the acting director is unable or fails to fulfill theobligation of convening the meetings of the shareholders' assembly, the boardof supervisors shall convene and preside over such meetings. If the board ofsupervisors does not convene or preside over such meetings, the shareholdersseparately or aggregately holding 1/10 or more of the shares may convene andpreside over such meetings on their own initiative.
Article 103 For a shareholders' assemblymeeting to be held, a notice shall be given to each shareholder 20 days inadvance, which shall state the time and place of the meeting, and the mattersto be deliberated at the meeting. For an interim meeting of the shareholders'assembly, a notice shall be given to each shareholder 15 days in advance. Forthe issue of unregistered stocks, the time and place of the meeting and thematters to be deliberated at the meeting shall be announced 30 days in advance.
Theshareholders separately or aggregately holding 3% or more of the shares of thecompany may put forward a written interim proposal to the board of directors 10days before a shareholders' assembly is held. The board of directors may notifyother shareholders within 2 days and submit the interim proposal to the meetingof the shareholders' assembly for deliberation. The contents of an interimproposal shall fall within the scope to be decided by the shareholders'assembly, and the interim proposal shall have a clear topic for discussion andmatters to be decided.
Theshareholders' assembly shall not make any decision on any matter not listed inthe notice as mentioned in the preceding two paragraphs. If the holders ofunregistered stocks attend the shareholders' assembly, they shall have theirstocks preserved in the company during the period from 5 days before themeeting is held to the day when the shareholders' assembly is closed.
Article 104 When a shareholder attends ameeting of the shareholders' assembly, he shall have one voting right for eachshare he holds. However, the company has no voting right for its own shares itholds. When any resolution is to be made by the shareholders' assembly, itshall be adopted by shareholders representing more than half of the votingrights of the shareholders in presence. However, when the shareholders'assembly makes a decision to modify the bylaw, or to increase or reduce theregistered capital, or a resolution about the merger, split-up, dissolution orchange of the company form, such a decision shall be adopted by shareholdersrepresenting 2/3 or more of the voting rights of the shareholders in presence.
Article 105 The important matters, such as thecompany to transfer or accept any significant asset or to provide a guarantyfor any other person shall be decided by the shareholders' assembly accordingto this Law and the bylaw, the board of directors shall timely call ashareholders' assembly to vote on these matters.
Article 106 A shareholders' assembly may adopta cumulative voting system to elect the directors or supervisors according tothe bylaw or its resolutions.
Theterm "cumulative voting system" as mentioned in this Law refers to asystem of voting by shareholders for the election of directors or supervisorsat a meeting of the shareholders' assembly in which the shareholder canmultiply his voting rights by the number of candidates and vote them all forone candidate for director or supervisor.
Article 107 A shareholder may entrust an agentto attend a shareholders' assembly. The agent shall present a proxy issued bythe shareholder to the company and shall exercise his voting rights within theauthorization scope.
Article 108 The shareholders' assembly shallscribe the minutes for the decisions about the matters discussed at theassembly. The chair of the meeting and the directors in presence shall affixtheir signatures to the minutes, which shall be preserved together with thebook of signatures of the shareholders in presence as well as the power ofattorney thereof.
Section3 The Board of Directors and Manager
Article 109 A joint stock limited companyshall set up a board of directors, which shall be composed of 5-19 persons.
Theboard of directors may include representatives of the company's employees. Therepresentatives of the employees who serve as board directors shall bedemocratically elected through the assembly of the representatives of theemployees, the assembly of employees, or other methods.
Article 46 of this Law on the term of officeof the directors of a limited liability company shall apply to the director ofa joint stock limited company.
Article 47 of this Law on the functions of theboard of directors of a limited liability company shall apply to the board ofdirectors of a joint stock limited company.
Article 110 The board of directors shall haveone chairman and may have a deputy chairman. The chairman and deputy chairmenshall be elected by more than half of all the directors.
Thechairman of the board of directors shall call and preside over the meetings ofthe board of directors and check the implementation of the resolutions of theboard of directors. The deputy chairman shall assist the chairman to work. Ifthe chairman is unable or fails to perform his duties, the deputy chairmanshall perform such duties. If the deputy chairman of the board of directors isunable or fails to perform his duties, a director who is jointly recommended byhalf or more of the directors shall perform such duties.
Article 111 The board of directors shallconvene at least two meetings every year and shall give a notice to alldirectors and supervisors 10 days before it holds a meeting.
Theshareholders representing 1/10 or more of the voting rights, or 1/3 of the directors,or the board of supervisors may put forward a proposal to hold an interimmeeting of the board of directors. The chairman of the board of directorsshall, within 10 days after he receives such a proposal, call and preside overa meeting of the board of directors. If the board of directors holds an interimmeeting, it may separately decide the method and time limit for thenotification about convening meetings of the board of directors.
Article 112 No meeting of the board ofdirectors may be held unless more than half of the directors are present. Whenthe board of directors makes a resolution, it shall be adopted by more thanhalf of all the directors.
Forthe voting on a resolution of the board of directors, each director shall haveone vote only.
Article 113 The meetings of the board ofdirectors shall be attended by the directors in person. Where any director isunable to attend the meeting for a certain reason, he may, by issuing a writtenproxy, entrust another director to attend the meeting on his behalf, and theproxy shall state the scope of authorization.
Theboard of directors shall prepare minutes regarding the resolutions on thematters discussed at the meeting, which shall be signed by the directors inpresence. The directors shall be responsible for the resolutions of the boardof directors. Where a resolution of the board of directors is in violation ofany law, administrative regulation, bylaw, or resolution of the shareholders'assembly and causes any serious loss to the company, the directors whoparticipate in adopting the resolution shall make compensation. However, if adirector is proven to have expressed his objection to the vote on suchresolution and his objection was recorded in the minutes, then the director maybe exempted from liability.
Article 114 A joint stock limited company mayhave a manager whom may be hired or dismissed by the board of directors.
Article 50 of this Law on the powers of themanager of a limited liability company shall apply to the manager of a jointstock limited company.
Article 115 The board of directors of acompany may decide to appoint a member of the board of directors toconcurrently take up the post of the manager.
Article 116 No company may, directly or viaits subsidiary, lend money to any of its directors, supervisors, or seniormanagers.
Article 117 A Company shall regularly discloseto its shareholders with the information about remunerations received by thedirectors, supervisors and senior managers from the company.
Section4 Board of Supervisors
Article 118 A joint stock limited companyshall set up a board of supervisors, which shall be composed of at least 3persons.
Theboard of supervisors shall include representatives of shareholders and anappropriate percentage of representatives of the company's employees. Thepercentage of the representatives of employees shall account for no less than1/3 of all the supervisors, but the concrete percentage shall be specified inthe bylaw. The representatives of employees who serve as members of the boardof supervisors shall be democratically elected through the assembly ofrepresentatives of the company's employees, the shareholders' assembly or byother means. The board of supervisors shall have one chairman and may have a deputychairman. The chairman and deputy chairman shall elected by more than half ofall the supervisors. The chairman of the board of supervisors shall call andpreside over the meetings of the board of supervisors. If the chairman of theboard of supervisors is unable or fails to perform his duties, the deputychairman of the board of supervisors shall call and preside over the meeting ofthe board of supervisors. If the deputy chairmen of the board of supervisorsare unable or fail to perform their duties, a supervisor jointly recommended byhalf or more of the supervisors shall call and preside over the meetings of theboard of supervisors.
Nodirector or senior manager may concurrently act as a supervisor.
Article 53 of this Law on the term of officeof the supervisors of a limited liability company shall apply to thesupervisors of a joint stock limited company.
Article 119 The provisions of
Articles 54 and 55 of this Law on thefunctions of a limited liability company shall apply to the board ofsupervisors of a joint stock limited company/
Theexpenses necessary for the board of supervisors to exercise its functions shallbe borne by the company.
Article 120 The board of supervisors shallhold at least one meeting every 6 months. The supervisors may propose to callinterim meetings of the board of supervisors.
Thediscussion methods and voting procedures of the board of supervisors shall bespecified in the bylaw unless it is otherwise provided for by this Law.
Theboard of supervisors shall prepare minutes for the decisions about the mattersdiscussed at the meeting, which shall be signed by the supervisors in presence.
Section5 Special Provisions on the Organizational structure of A Listed Company
Article 121 The term "listed company"as mentioned in this Law refers to the joint stock limited companies whosestocks are listed and traded in a stock exchange.
Article 122 Where a listed company purchasesor sells any important asset, or provides guaranties that exceed 30% of thecompany's total assets within a year, such actions shall be authorized theresolutions made by the shareholders' assembly and adopted by the shareholdersrepresenting 2/3 of the voting rights of the shareholders who attend theassemblies.
Article 123 A listed company shall haveindependent directors. The concrete measures shall be formulated by the StateCouncil.
Article 124 A listed company may have asecretary of the board of directors, who shall be responsible for thepreparation of the sessions of shareholders' assembly and meetings of the boardof directors, the preservation of documents, the management of the company'sstock rights, and the information of disclosure, etc.
Article 125 Where any of the directors has anyrelationship with the enterprise involved in the matter to be decided at themeeting of the board of directors, he shall not vote on this resolution, normay he vote on behalf of any other person. The meeting of the board ofdirectors shall not be held unless more than half of the unrelated directorsare present at the meeting. A resolution of the board of directors shall beadopted by more than half of the unrelated directors. If the number ofunrelated directors in presence is less than 3 persons, the matter shall besubmitted to the shareholders' assembly of the listed company for deliberation.
ChapterV Issuance and Transfer of Shares of A Joint Stock Limited Company
Section1 Issuance of Shares
Article 126 The capital of a joint stocklimited company shall be divided into shares and all the shares shall be ofequal value.
Theshares of a company are represented by stocks. A stock is a certificate issuedby the company to certify the share held by a shareholder.
Article 127 The issuance of shares shallcomply with the principle of fairness and impartiality. The shares of the sameclass shall have the same rights and benefits. The stocks issued at the sametime shall be equal in price and shall be subject to the same conditions. Theprice of each share purchased by any organization or individual shall be thesame.
Article 128 The stocks may be issued at aprice equal to or in excess of par value, but not below par value.
Article 129 The stocks shall be in paper formor in other forms prescribed by the securities regulatory institution of theState Council.
Astock shall state the following major items:
(1)The company name;
(2)The company's date of establishment;
(3)The class and par value of the stock, as well as the number of shares itrepresents; and
(4)The serial number of the stock.
Thestock shall bear the signature of the legal representative and the seal of thecompany.
Thestocks held by the promoters shall be marked with the words "promoters'stocks".
Article 130 The stocks issued by a company maybe registered stocks or unregistered stocks.
Thestocks issued to promoters or legal persons shall be registered stocks, whichshall state the names of such promoters or legal persons, and shall not be registeredin any other person's name or the names of any representative.
Article 131 A company that issues registeredstocks shall prepare a register of shareholders, which shall state thefollowing:
(1)The name and domicile of each shareholder;
(2)The number of shares held by each shareholder;
(3)The serial numbers of the stocks held by each shareholder; and
(4)The date on which each shareholder acquired his shares.
Acompany issuing unregistered stocks shall record the amount, serial numbers andissuance date of the stocks.
Article 132 For the company's issuance ofother shares not provided for in this Law, the State Council may formulateseparate provisions.
Article 133 After a joint stock limitedcompany is established, it shall formally deliver the stocks to theshareholders. No company may deliver any stock to the shareholders prior to itsestablishment.
Article 134 Where a company intends to issuenew stocks, it shall, under its bylaw, make a resolution about the followingmatters through the shareholders' assembly or board of directors:
(1)The class and amount of new stocks;
(2)The issuing price of the new stocks;
(3) Thebeginning and ending dates for the issuance of new stocks; and
(4)The class and amount of the new stocks to be issued to the originalshareholders.
Article 135 When a company publicly issues newstocks upon approval of the securities regulatory institution, it shall publisha new stock prospectus and its financial reports, and shall make a stocksubscription form.
Articles 88 and 89 of this Law shall apply tothe public offering of new stocks of a company.
Article 136 When a company issues new stocks,it may make a pricing plan according to its business operations and financialstatus.
Article 137 After a company raises enoughcapital, it shall go through modification registration in the companyregistration authority and make an public announcement.
Section2 Transfer of Shares
Article 138 The shares held by thestockholders may be transferred according to laws.
Article 139 Where a stockholder intends totransfer its shares, it shall transfer its shares in a lawfully establishedstock exchange or by any other means as prescribed by the State Council.
Article 140 Registered stocks may be assignedby their stockholders' endorsement or by any other means prescribed by therelevant laws or administrative regulations. After the assignment, the companyshall record the name and domicile of the transferee in the register ofshareholders. Within 20 days before an assembly of shareholders is held, orwithin 5 days prior to the benchmark date decided by the company for thedistribution of dividends, no modification registration may be made to theregister of shareholders as mentioned in the preceding paragraph. However, ifany law provides otherwise for the modification registration of the register ofshareholders of listed companies, the latter shall prevail.
Article 141 The transfer of an unregisteredstock takes effect as soon as the stockholder delivers the stock to thetransferee.
Article 142 The shares of a company held bythe promoters of this company shall not be transferred within 1 year after thedate of the establishment of the company. The shares issued before the companypublicly issues shares shall not be transferred within 1 year from the day whenthe stocks of the company get listed and are traded in a stock exchange.
Thedirectors, supervisors and senior managers of the company shall declare to thecompany the shares held by them and the changes thereof. During the term ofoffice, the shares transferred by any of them each year shall not exceed 25% ofthe total shares of the company he holds. The shares of the company held by theaforesaid persons shall not be transferred within 1 year from the day when thestocks of the company get listed and are traded in a stock exchange. After anyof the aforesaid persons is removed from his post, he shall not transfer theshares of the company he holds. The bylaw may have other restrictions on thetransfer of shares held by the directors, supervisors and senior managers.
Article 143 A company shall not purchase itsown shares except under any of the following circumstances:
(1) Todecrease the registered capital of the company;
(2) Tomerge another company holding shares of this company;
(3) Toaward the employees of this company with shares; or
(4) Itis requested by any shareholder to purchase his shares because this shareholderobjects to the company's resolution on merger or split-up made by the assemblyof shareholders.
Wherea company needs to purchase its own shares for any of the reasons as mentionedin Items (1) through (3) of the preceding paragraph, it shall be subject to aresolution of the shareholders' assembly. After the company purchases its ownshares pursuant to the provisions of the preceding paragraph, it shall, underthe circumstance as mentioned in Item (1), write them off within 10 days afterthe purchase; while under either circumstance as mentioned in Item (2) or (4),transfer them or write them off within 6 months.
Theshares purchased by the company according to Item (3) of the preceding paragraphshall not exceed 5% of the total shares already issued by this company. Thefund used for the share acquisition shall be paid from the after-tax profits ofthe company. The shares purchased by the company shall be transferred to theemployees within 1 year.
Nocompany may accept any subject matter taking the stocks of this company as apledge.
Article 144 Where any registered stocks arestolen, lost or destroyed, the shareholder may request the people's court todeclare these stocks invalid according to the public notice procedureprescribed in the Civil Procedural Law of the People's Republic of China. Afterthe people's court has invalidated these stocks, the shareholder may file anapplication to the company for the issuance of new stocks.