Article 115 The term of office of the directors is specified¹ in the company's articles of association， provided， however， that each term may not be longer than three years. At the end of a director's term， the director may serve another term if re-elected.

　　The shareholders³' general meeting shall not without reason remove a director from office before the expire of that director's term.

　　Article 116 Meetings of the board of directors are convened⁴ at least twice a year. Notice of each meeting shall be given to all directors ten days before the meeting.

　　For convening⁵ an interim⁶ meeting of the board of directors， the board of directors may provide for a different method of giving notice and notice period.

　　Article 117 Meetings of the board of directors shall be held only if half or more of the directors are present. Resolutions of the board of directors require the approval of more than half of all directors.

　　Article 118 The directors shall attend the meetings of the board of directors in person. If a director is unable to attend a meeting for any reason， he may appoint another director by a written power of attomey to attend the meeting on his behalf. The power of attorney shall set out the scope of the authorization⁷.

　　The board of directors shall keep minutes of resolutions on matters discussed at the meetings. The minutes are signed by the directors present at the meeting and the person who recorded the minutes.

　　The directors shall be responsible for the resolutions of the board of directors. If a resolution of the board of directors violates the law， administrative⁸ regulations or the company's articles of association and this results in the company sustaining serious losses， the directors participating in the resolution are liable to compensate¹⁰ the company.

　　However， if it can be proven that a director expressly objected to the resolution when the resolution was voted on， and that such objections were recorded in the minutes of the meeting， such director may be free of liability.

　　Article 119 A company limited by shares has a manager appointed and dismissed by the board of directors. The manager is responsible to the board of directors and exercises the following powers：

　　（1） to be in charge of the company's production， operation and management and organize the implementation¹¹ of the resolutions of the board of directors；

　　（2） to organize the implementation of the company's annual business plan and investment plan；

　　（3） to propose plans for the putting in place of the company's internal management structure；

　　（4） to propose the company's basic management system；

　　（5） to formulate¹² specific rules and regulations for the company；

　　（6） to propose the appointment or dismissal of the company's deputy manager and financial officers；

　　（7） to appoint or dismiss management personnel other than those required to be appointed or dismissed by the board of directors； and

　　（8） other powers conferred by the company's articles of association and the board of directors.

　　The manager is present at meetings of the board of directors.

　　Article 120 The board of directors may， as required， authorize¹³ the chairman of the board of directors to exercise part of the powers of the board of directors during the period when the board of directors is not in session.

　　Article 121 When considering and deciding on the wages， welfare and production safety of staff and workers and labour protection， labour insurance and other issues involving the personal interests of staff and workers， the company shall first solicit¹⁴ and consider the opinions and proposals of the company's trade union and the staff and workers， and shall invite representatives from the company's trade union and the staff and workers to attend the relevant meetings.

　　Article 122 When considering and deciding on major issues relating to the company's production and operation and formulating¹⁵ important rules and regulations， the company shall solicit and consider the opinions and proposals of the company's trade union and the staff and workers.

　　Article 123 The directors and manager shall abide¹⁶ by the company's articles of association， faithfully execute their official duties， and protect the company's interests. They shall not exploit their position and power in the company to advance their own private interests.

　　The provisions of Article 57 to Article 63 of this Law on persons not eligible¹⁸ for the positions of director and manager and on the obligations and duties of the directors and manager are applicable to the directors and manager of a company limited by shares.

　　Section 4 Board of Supervisors²⁰

　　Article 124 A company limited by shares has a board of supervisors made up of not less than three members. The board of supervisors shall choose a convener from among its members.

　　The board of supervisors is made up of representatives of the shareholders and a reasonable proportion of representatives of the company's staff and workers， the specific proportion to be provided for in the company's articles of association. Representatives of the staff and workers on the board of supervisors are chosen by the company's staff and workers by democratic election.

　　The directors， manager and financial officers shall not act concurrently²¹ as supervisors.

　　Article 125 The term of office of the supervisors is three years. At the end of a supervisor¹⁹'s term， the supervisor may serve another term if re-elected.

　　Article 126 The board of supervisors exercises the following powers：

　　（1）to inspect the company's financial situation；

　　（2）to exercise supervision²² over the acts of the directors and manager carried out while performing their corporate²³ functions which violate laws， regulations or the company's articles of association；

　　（3） to demand remedies from a director or manager when the acts of such director or manager are harmful to the company's interests；

　　（4）to propose the convening of an interim shareholders' general meeting； and

　　（5） other powers specified in the company's articles of association.

　　Supervisors are present at meetings of the board of directors.

　　Article 127 The discussion methods and voting procedures of the board of supervisors are specified in the company's articles of association.

　　Article 128 The supervisors shall faithfully execute their supervisory duties in accordance with laws， administrative regulations and the company's articles of association.

　　The provisions of Articles 57 to Article 59 and Articles 62 to Article 63 of this Law on persons not eligible for the position of supervisor and on the obligations and duties of supervisors are applicable to supervisors of a company limited by shares.

　　Chapter 4 Issue and Transfer of Shares by A Company Limited by Shares

　　Section 1 Issue of Shares

　　Article 129 The capital of a company limited by shares is divided into shares. Each share is of equal value.

　　Shares in a company take the form of share certificates. A share certificate signed and issued by the company is an evidence that the share is held by the shareholder².

　　Article 130 The issue of shares is public， fair and impartial²⁴. Shares of the same class must have the same rights and benefits.

　　For shares certificates issued at the same time， each share shall have the same issue terms and price. The share price for each share purchased by any organization or individual must be the same.

　　Article 131 The share certificate issue price may be equal to or greater than the par⁹ value， but may not be less than the par value.

　　Share certificates with an issue price above par value shall be approved by the securities administration departments of the State Council.

　　The premium²⁵ obtained from the issue of share certificates above par value is allocated²⁷ to the company's capital common reserve fund.

　　Specific regulations governing the issue of share certificates at a premium are separately issued by the State Council.

　　Article 132 Share certificates take the form of paper certificates or such other form as specified by the securities administration departments of the State Council.

　　The following items shall be set out on a share certificate：

　　（1） the company's name；

　　（2） the company's registration²⁸ and establishment date；

　　（3） the class of the share certificate， the par value and the number of shares represented by the share certificate； and

　　（4） the number of the share certificate；

　　The share certificate is signed by the chairman of the board of directors and sealed by the company.

　　Share certificates of promoters shall bear the notation²⁹ “promoter's share certificate”。

　　Article 133 Shares issued to promoters， state-authorized³⁰ investment organizations and legal persons shall be in the form of registered share certificates， shall bear the name of such promoter， state-authorized investment organizations or legal person， and may not carry a different account name or be registered in the name of an agent.

　　Shares issued to the general public may be in the form of registered share certificates and also may be in the form of bearer share certificates.

　　Article 134 A company issuing registered share certificates shall prepare a register of shareholders setting out the following：

　　（1） the name and address of the shareholders；

　　（2） the number of shares held by each shareholder；

　　（3） the number（s） of the share certificate（s） held by each shareholder， and

　　（4） the date on which each shareholder acquired its shares.

　　A company issuing bearer share certificates shall record the number of such share certificates issued， their numbers and dates of issue.

　　Article 135 The State Council may separately issue regulations governing the issue of classes of share certificates not covered by this Law.

　　Article 136 A company limited by shares formally delivers share certificates to its shareholders immediately upon its registration and establishment. No share certificates shall be delivered prior to the registration and establishment of the company.

　　Article 137 A company issuing new shares shall meet the following conditions：

　　（1） the previous issue of shares has been fully¹⁷ subscribed³² and at least one year have elapsed since that issue；

　　（2）the company has been continuously profitable for the last three years and is able to make dividend³³ payments to its shareholders；

　　（3） there has been no false reporting in the company's financial and accounting³⁴ documents during the last three years； and

　　（4） the projected profit rate of the company equals or exceeds the rate of interest on bank deposits for the same term.

　　A company which uses a given year's profits to issue new shares is not subject to clause （2） above.

　　Article 138 In order for a company to issue new shares， resolutions shall be passed on the following matters at a meeting of the shareholders：

　　（1） the class and quantity of the new shares；

　　（2） the issue price of the new shares； and

　　（3） the commencement and closing dates of the new share issue；

　　（4） the class and quantity of shares to be issued to existing shareholders.

　　Article 139 Once the shareholders at a shareholders' meeting have passed a resolution to issue new shares， the board of directors shall apply to the apply to the authorized department of the State Council or to the provincial³⁵ level people's government for approval. Public offers shall require the approval of the securities administration departments of the State Council.

　　Article 140 Upon receiving approval to issue new shares in a public offer， the company shall publish a prospectus³⁶ for the new shares and its financial statements with their detailed³⁷ schedules， and prepare a share subscription³⁸ application.

　　A public offer of new shares shall be underwritten by a legally established securities institution and an underwriting agreement shall be executed.

　　Article 141 A company issuing new shares may determine its pricing plans in the light of the company's continuous profitability and the increase in the value of its property.

　　Article 142 After a company issuing new shares has fully collected the payments for shares， the company shall change its registration with the company registration authority and issue a public notice.

　　Section 2 Transfer of Shares

　　Article 143 A shareholder may transfer his shares in accordance with the law.

　　Article 144 A shareholder's transfer of its shares must be carried out through a legally established stock exchange.

　　Article 145 Registered share certificates are transferred by means of endorsement³⁹ or by other means as stipulated⁴⁰ by law or by administrative regulations.

　　Upon the transfer of registered share certificates， the company records the name and address of the transferee in the register of shareholders.

　　Pursuant to the previous paragraph， no changes in the register of shareholders shall be made within 30 days before the convening of the shareholders' general meeting or within 5 days before the record date for the issue of dividends⁴¹.

　　Article 146 A transfer of bearer share certificates is effective upon delivery of the share certificates to the transferee through a legally established stock exchange.

　　Article 147 Shares of a company held by a promoter of that company shall not be transferred for three years after the company's establishment.

　　Directors， supervisors and the manager of a company shall report to that company all the shares that they hold in the company， and shall not transfer them during their term of office.

　　Article 148 A state-authorized investment institution may transfer the shares it holds in accordance with the law and may also purchase the shares held by other shareholders. The approval limits and the regulatory regime for such share transfers and purchases are separately determined⁴² by law or by administrative regulations.

　　Article 149 A company shall not purchase the company's own share certificates， except in order to decrease its capital by canceling its shares or when it merges⁴⁴ with another company that holds its shares.

　　Within ten days following the purchase of the company's own share certificates pursuant to the terms of the preceding paragraph， a company shall， in accordance with applicable law and administrative regulations， cancel that portion of its shares， change its registration and issue a public notice.

　　A company shall not accept the company's own share certificates as collateral⁴⁵.

　　Article 150 In the event registered share certificates are stolen， lost or destroyed， the shareholder may， pursuant to the procedures for public invitation to assert claims contained in the Code of Civil Procedure， request the people's court to declare the share certificates invalid⁴⁶.

　　After the share certificates are declared invalid by the people's court， the shareholder may， pursuant to the procedures for public invitation to assert claims， apply to the company to have share certificates re-issued.

　　Section 3 Listed Companies

　　Article 151 A listed company referred to in this Law means a company limited by shares whose issued shares are approved for trading on a stock exchange by the State Council or its authorized securities administration departments.

　　Article 152 A company limited by shares shall meet the following requirements before applying for its shares to be listed on a stock exchange：

　　（1） the securities administration departments of the State Council have approved the company's stock being issued to the public；

　　（2） the company's total share capital is not less than RMB 50，000，000；

　　（3） the company has been in operation for over three years and has been profitable in each of the last three years； if an original state-owned enterprise has been converted and the company established according to the law， or the company has been reorganized and established after the effective date of this Law with a large-or medium-sized state-owned enterprise as its main promoter， the three year periods may be calculated continuously；

　　（4） the number of shareholders each holding shares of a par value totaling at least RMB 1，000 is not less than one thousand； the company's shares already issued to the public account for over 25% of the company's total shares； if the company's total share capital exceeds RMB 400，000，000， company shares already issued to the public account for over 15% of the company's total shares；

　　（5） during the last three years， the company has not committed any significant acts in violation⁴⁷ of the law and the company's financial statements have not contained any false statements； and

　　（6） such other conditions as may be specified by the State Council.

　　Article 153 A company limited by shares applying to have its shares listed for trading shall file an application for approval with the State Council or its authorized securities administration departments and submit relevant documents in accordance with applicable laws and administrative regulations.

　　The State Council or its authorized securities administration departments grant approval to those listing applications which meet the requirements specified in this Law and deny approval to those listing applications which do not meet the requirements specified in this Law.

　　A company which has been granted approval for listing must publish a share listing report and keep its application documents on file in a designated place for public inspection⁴⁸.

　　Article 154 Shares of a company which has been approved for listing shall trade on a stock exchange in accordance with applicable laws and administrative regulations.

　　Article 155 If granted approval by the securities administration departments of the State Council， shares of a company may be listed abroad， The specific means are stipulated by special regulations issued by the State Council.

　　Article 156 Pursuant to laws and administrative regulations， a listed company shall periodically make public its financial and operational conditions. A listed company shall publish its financial statements once every six months in each fiscal⁴⁹ year.

　　Article 157 A listed company in one of the following situations shall have its listing temporarily suspended upon determination by the securities administration departments of the State Council：

　　（1） the company's total share capital， share distribution， or other circumstances have changed such that the company no longer meets the listing requirements；

　　（2） the company does not make public its financial condition as required by the regulations， or its financial statements contain false statements；

　　（3） the company commits a significant violation of law； and

　　（4） the company has had a loss in each of the three previous years.

　　Article 158 A listed company in the situation described in clause （2） or clause （3） of the preceding article which upon investigation⁵⁰ is found to have caused serious consequences， or a listed company which is in the situation described in clause （1） or clause （4） of the same article and is unable to eliminate it within a limited time， does not meet the listing requirements， its listing shall be terminated upon decision by the securities administration departments of the State Council.

　　If a company resolves to dissolve itself， or if a company is legally ordered to close down by the responsible administrative department， or if a company is declared to be bankrupt， the company shall have its listing terminated upon decision by the securities administration departments of the State Council.

　　Chapter 5 Corporate Bonds

　　Article 159 A company limited by shares， a wholly state-owned company and a limited liability company established with the investment by two or more state-owned enterprises or two or more state-owned investment entities⁵¹， in order to raise funds for production and operations， may issue corporate bonds in accordance with this Law.

　　Article 160 “Corporate bonds” as used in this Law mean valuable securities issued by a company in accordance with legally specified procedures and pursuant to which the company covenants⁵² to repay principal and interest within a certain period of time.

　　Article 161 The issue of corporate bonds shall be subject to the following conditions：

　　（1） the net assets of a company limited by shares are not less than RMB 30，000，000， and the net assets of a limited liability company are not less than RMB 60，000， 000；

　　（2） the aggregate⁵³ amount of bonds of the company does not exceed forty per cent of the net assets of the company；

　　（3） the average distributable profits over the previous three years is sufficient to defray one year's interest payments on the company's bonds；

　　（4） the funds raised are used in a manner consistent with state industrial policy；

　　（5） the interest rate payable⁵⁴ on the corporate bonds does not exceed the levels set by the State Council； and

　　（6） such other conditions as may be provided for by the State Council.

　　The funds raised by corporate bonds shall be used for the purposes approved by the approval authority and shall not be used to cover losses or for non-productive expenditures⁵⁵.

　　Article 162 A company shall not re-issue corporate bonds under any of the following circumstances：

　　（1） the corporate bonds issued the previous time have not yet been fully subscribed；

　　（2） the company has defaulted on previously⁵⁶ issued corporate bonds or other indebtedness， or is late in the payment of principal or interest， and such situation is still continuing.

　　Article 163 When a company limited by shares or a limited liability company proposes to issue corporate bonds， its board of directors shall draft a proposal for approval by resolution at a meeting of the shareholders.

　　The issue of corporate bonds by a wholly state-owned company shall be decided⁵⁷ by the state-authorized investment organization or the state-authorized department.

　　Once a resolution or decision has been made pursuant to the preceding two paragraphs， the company shall submit an application for approval to the securities administration departments of the State Council.

　　Article 164 The scale of an issue of corporate bonds shall be determined by the State Council. Approvals by the securities administration departments of the State Council of an issue of corporate bonds shall not exceed the scale determined by the State Council.

　　The securities administration departments of the State Council shall grant approval if an application to issue corporate bonds satisfies the requirements of this Law and deny approval if an application to issue corporate bonds does not satisfy the requirements of this Law.

　　If an approval that has previously been granted for an application is found not to satisfy the requirements of this Law， the approval shall be revoked⁵⁸. With respect to corporate bonds not yet issued， the issue will not be carried out. With respect to corporate bonds already issued， the issuing company shall return the funds paid to the subscribers， together with interest calculated at the rate on bank deposits for the same term.

　　Article 165 The company shall submit the following documents when applying to the securities administration departments of the State Council for approval to issue corporate bonds：

　　（1） the company's registration certificate；

　　（2） the company's articles of association；

　　（3） corporate bond offer procedure； and

　　（4） an asset appraisal⁵⁹ report and investment verification report.

　　Article 166 Upon approval of the company's application to issue corporate bonds， the company shall make public its corporate bond offer procedure.

　　The corporate bond offer procedure shall set out the following：

　　（1） the company's name；

　　（2） the total amount and face value of the bonds；

　　（3） the bonds' interest rate；

　　（4） the periods and method for paying principal and interest；

　　（5） the commencement and closing dates of the issue；

　　（6） the net assets of the company；

　　（7） the total amount of corporate bonds already issued but not yet due； and

　　（8） the underwriter for the corporate bonds.

　　Article 167 When a company issues corporate bonds， the bonds shall show information including the company's name， the face value of the bond， the interest rate， and the date of maturity⁶⁰， and be signed by the chairman of the board of directors and sealed by the company.

　　Article 168 Corporate bonds may be either bearer or registered bonds.

　　Article 169 A company which issues corporate bonds shall keep a corporate bonds register.

　　When registered bonds are issued， the following items shall be set out in the register：

　　（1） the names and addresses of the bondholders；

　　（2） the date on which the bond was acquired by the bondholder and its number；

　　（3）the total amount of the bond， its face value， interest rate， principal and interest payment dates and method of payments； and

　　（4） the issue date.

　　When bearer bonds are issued， the register shall set out the total amount of the bonds， the interest rate， the maturity date and payment method， the date of issue and the number of the bonds.

　　Article 170 Corporate bonds may be transferred. Transfers of corporate bonds shall be carried out through a legally established stock exchange.

　　The transfer price is negotiated and agreed upon by the transferor and transferee.

　　Article 171 Registered corporate bonds are transferred by the bondholder through endorsement or by other means as stipulated by law or administrative regulations.

　　Upon the transfer of a registered corporate bond， the company records in its corporate bond register the name and address of the transferee.

　　A transfer of a bearer corporate bond becomes effective upon the delivery of the corporate bond to the transferee at a legally established stock exchange.

　　Article 172 Subject to a resolution at a general meeting of the shareholders， a listed company may issue corporate bonds convertible⁶¹ into shares of the company. The procedures for conversion⁶² are specified in the corporate bond offer procedures.

　　The issue of corporate bonds convertible into shares shall be submitted to the securities administration departments of the State Council for approval. Corporate bonds convertible into shares shall meet not only the requirements for the issue of bonds but also the requirements for the issue of shares.

　　Corporate bonds convertible into shares shall be marked “convertible corporate bonds”， and the quantity of convertible corporate bonds shall be recorded in the corporate bond register.

　　Article 173 A company which issues corporate bonds convertible into shares shall issue share certificates to bondholders in accordance with its conversion procedures， provided that the bondholder has the option whether or not to convert.

　　Chapter 6 Financial Affairs and Accounting of A Company

　　Article 174 A company shall establish its financial and accounting systems according to laws， administrative regulations and the regulations of the responsible finance department of the State Council.

　　Article 175 At the end of each fiscal year， the company shall prepare a financial statement which shall be examined and verified as provided by law.

　　The company's financial statements shall include the following accounting statements and schedules：

　　（1） balance sheet；

　　（2） profit and loss statement；

　　（3） statement of financial changes；

　　（4） explanation of financial condition； and

　　（5） profit distribution statement.

　　Article 176 A limited liability company shall present its financial statements to the shareholders in accordance with the time periods specified in the company's articles of association.

　　A company limited by shares shall deposit its financial statements at the company for inspection by the shareholders at least twenty days before the convening of the annual general meeting of shareholders.

　　A company limited by shares established by the offer method shall make public its financial statements.

　　Article 177 When distributing each year's after-tax profits， the company shall set aside ten per cent of its after-tax profits for the company's statutory common reserve fund and five per cent to ten per cent of its profits for the company's statutory common welfare fund. When the aggregate balance in the statutory common reserve fund is fifty per cent or more of the registered capital of the company， the company need not make any further allocations to that fund.

　　When the company's statutory common reserve fund is not sufficient to make up for the company's losses of the previous year， current year profits shall be used to make up for the losses before allocations are set aside for the statutory common reserve fund or the statutory common welfare fund in accordance with the previous clause.

　　Subject to a resolution of the shareholders' meeting， after the company has set aside funds from after-tax profits for the statutory common reserve fund， the company may set aside funds for a discretionary common reserve fund.

　　After the company has made up its losses and made allocations to its common reserve fund and statutory common welfare fund， the remaining profits are distributed in proportion to the shareholders' capital contributions if the company is a limited liability company and in proportion to the number of shares held by the shareholders if the company is a company limited by shares.

　　If a shareholders meeting or the board of directors violates the above provisions and profits are distributed to the shareholders before the company makes up for losses or makes allocations to the statutory common fund and the statutory common reserve welfare fund， the profits distributed in violation of the provisions must be returned to the company.

　　Article 178 In accordance with this Law， the premium a company limited by shares obtains when it issues shares at a price which exceeds par value， and any other income designated for the capital common reserve fund by the regulations of the responsible finance department of the State Council shall be allocated to the company's capital common reserve fund.

　　Article 179 The common reserve fund of a company is used to make up its losses， expand its production and operations or for conversion into additional capital of the company.

　　When the common reserve fund of a company limited by shares is converted to capital in accordance with a resolution passed at a general meeting of the shareholders， the company either distributes new shares in proportion to the shareholders， number of shares， or increases the par value of each share， provided， however， that when the statutory common reserve fund is converted to capital， the balance of the statutory common reserve fund may not fall below twenty-five percent of the registered capital.

　　Article 180 The company's statutory common welfare fund is used for the collective welfare of the company's staff and workers.

　　Article 181 A company shall not keep accounting books and records other than those provided by law.

　　The company's assets shall not be held in an account opened in the name of any individual.

　　Chapter 7 Merger⁶³ and Division of A Company

　　Article 182 A resolution to effect the merger and division of a company shall be passed at a meeting of the shareholders.

　　Article 183 The merger and division of a company limited by shares shall be approved by the authorized department of the State Council or by the provincial government.

　　Article 184 The merger of a company may take the form of either merger by absorption or merger by the establishment of a new company.

　　Where one company is absorbed by another in a merger by absorption， the absorbed company is dissolved. Where two or more companies establish a new company in a merger by re-establishment， all merged⁶⁴ parties are dissolved.

　　In the event of a merger， the merging⁶⁵ parties shall execute a merger agreement and prepare a balance sheet and an inventory⁶⁶ of property. The company shall notify its creditors⁶⁸ within ten days of the date of the company's resolution to merge⁴³ and shall publish public notices in a newspaper at least three times within thirty days of the date of the company's resolution to merge. A creditor⁶⁷ has the right within thirty days of receiving such notice from the company （or， for creditors who do not receive the notice， within ninety days of the date of the first public notice） to demand that the company repay its debts to that creditor or provide a corresponding guarantee for such debt. A company which does not repay its debts or provide corresponding guarantees for such debts shall not be merged.

　　At the time of merger， the creditors' rights and indebtedness of each of the merged parties shall be assumed by the company which survives the merger or the newly established company.

　　Article 185 When a company is divided， its property shall be split up accordingly.

　　At the time a company is divided， the company shall prepare a balance sheet and an inventory of property. The company shall notify its creditors within ten days of the date of the company's resolution to divide and shall publish public notices in a newspaper at least three times within thirty days of the date of the company's resolution to divide. A creditor has the right within thirty days of receiving such notice from the company （or， for creditors who do not receive the notice， within ninety days of the date of the first public notice） to demand that the company repay its debts to that creditor or provide a corresponding guarantee for such debt.

　　A company which does not repay its debts or provide corresponding guarantees for such debts shall not be divided.

　　Debts of the company prior to division are assumed by the post-division companies in accordance with the agreements entered into.

　　Article 186 When a company needs to reduce its registered capital， it prepares a balance sheet and an inventory of property.

　　The company shall notify its creditors within ten days of the date of the company's resolution to reduce its registered capital and shall publish public notices in a newspaper at least three times within thirty days of the date of the company's resolution to reduce its registered capital. A creditor has the right within thirty days of receiving such notice from the company （or， for creditors who do not receive notice， within ninety days of the date of the first public notice） to demand that the company repay its debts to that creditor or provide a corresponding guarantee for such debt.

　　The registered capital of a company following such capital reduction shall not be less than the minimum levels set by law.

　　Article 187 When a limited liability company increases its registered capital， the shareholders' subscription and payment of contributions for the newly increased capital are carried out in accordance with the relevant provisions of this Law governing payment of capital contributions for the establishment of a limited liability company.

　　When a company limited by shares issues new shares in order to increase its registered capital， the process by which shareholders subscribe³¹ for new shares shall be carried out in accordance with the relevant provisions of this Law governing payment for shares for the establishment of a company limited by shares.

　　Article 188 When a company merges or divides and there is a change in any item in its registration， the company shall change its registration with the company registration authority in accordance with the law. When a company dissolves， the company shall cancel its registration in accordance with the law. When a new company in established， its establishment shall be registered in accordance with the law.

　　When a company increases or decreases its registered capital， the company shall carry out a change of registration with the company registration authority.

　　Chapter 8 Insolvency⁶⁹， Dissolution and Liquidation⁷⁰ of A Company

　　Article 189 In the case of a company legally declared bankrupt because it is unable to repay debts due， the people's court shall， in accordance with the provisions of relevant laws， organize the shareholders， relevant organizations and relevant professional personnel to establish a liquidation group to carry out bankruptcy⁷¹ liquidation procedures with respect to the company.

　　Article 190 A company may dissolve in any of the following situations：

　　（1） pursuant to the provisions of the company's articles of association， the term of the company has expired or one of the other events which are grounds for dissolution has occurred；

　　（2） a resolution for dissolution is passed by a shareholders' meeting； and

　　（3） dissolution is necessary due to a merger or division of the company.

　　Article 191 A liquidation group shall be set up within fifteen days of a company being dissolved pursuant to provisions （1） or （2） of the preceding article. The liquidation group of a limited liability company is made up of its shareholders. The composition of the liquidation group of a company limited by shares is determined by a general meeting of the shareholders. If a liquidation group to carry out liquidation procedures is not set up within the specified time limit， the creditors may apply to the people's court to have it designate relevant persons to form a liquidation group in order to carry out liquidation procedures. The people's court shall accept and hear such applications and timely designate the members of the liquidation group in order to carry out liquidation procedures.

　　Article 192 A company which is ordered according to law to close down for violating laws and administrative regulations shall be dissolved， and the relevant responsible authority shall organize the shareholders， relevant institutions and professional personnel to establish a liquidation group to carry out liquidation procedures.

　　Article 193 During the liquidation period， the liquidation group shall exercise the following powers：

　　（1） to check the company's property and separately prepare a balance sheet and an inventory of property；

　　（2） to send notices to creditors or notify them by public notice；

　　（3） to deal with and liquidate⁷² relevant uncompleted business matters of the company；

　　（4） to pay off outstanding taxes；

　　（5） to clear creditors' rights and indebtedness；

　　（6） to deal with the property remaining after the company's debts have been repaid； and

　　（7） to represent the company in any civil litigation proceedings⁷³.

　　Article 194 The liquidation group shall， within ten days of its establishment， send notices to creditors， and within sixty days of its establishment publish public notices in a newspaper at least three times. A creditor shall， within thirty days of receiving notice， report its creditors' rights to the liquidation group， or for creditors who do not receive notice， within ninety days of the date of the first public notice.

　　When reporting creditors' rights， the creditor shall provide and explanation of matters relevant to the creditor's rights and shall provide evidentiary materials. The liquidation group shall carry out registration of creditors' rights.

　　Article 195 After checking the company's property and preparing a balance sheet and an inventory of property， the liquidation group shall formulate a liquidation plan and present it to a meeting of the shareholders or to the relevant responsible authority for confirmation⁷⁴.

　　To the extent that the company is able to repay its debts， it shall respectively pay all liquidation expenses， wages of staff and workers， labour insurance fees and taxes owing， and shall repay the company's debts.

　　The assets of the company remaining after its debts have been repaid in accordance with the provisions of the previous clause are distributed in proportion to the shareholders capital contributions if the company is a limited liability company and in proportion to the number of shares held by the shareholders if the company is a company limited by shares.

　　During the liquidation period， a company shall not commence any new operational activities. The property of the company shall not be distributed to the shareholders until the settlement provided for in the second paragraph of this article is complete.

　　Article 196 After putting the company's property in order and preparing a balance sheet and an inventory of property in connection with liquidation of the company resulting from dissolution， the liquidation group discovers that the company's assets are insufficient⁷⁵ to repay the company's debts， the liquidation group shall immediately apply to the people's court for a bankruptcy declaration.

　　After a company is declared bankrupt by a ruling of the people's court， the liquidation group shall transfer liquidation matters to the people's court.

　　Article 197 After liquidation of the company is completed， the liquidation group shall prepare a liquidation report and present it for confirmation to a meeting of the shareholders or to the relevant responsible authority， apply to the company registration authority for cancellation⁷⁶ of the company's registration and publish by public notice of the termination of the company. Where no application is made for cancellation of the company's registration， the company's business license⁷⁷ is revoked by the company registration authority and a public notice is published.

　　Article 198 The members of a liquidation group shall faithfully attend to their duties and carry out their liquidation tasks in accordance with the law.

　　The members of a liquidation group shall not exploit their position to accept bribes⁷⁸ or other illegal income， nor shall they wrongfully take over the property of the company.

　　The members of a liquidation group who intentionally⁷⁹ or through gross negligence⁸⁰ cause losses to the company or its creditors shall be responsible for providing compensation.

　　Chapter 9 Branches of Foreign Companies

　　Article 199 Pursuant to this Law， a foreign company may set up branches within Chinese territory， and may engage in production and operational activities.

　　Under this Law， “foreign company” means a company registered and established outside Chinese territory in accordance with the law of a foreign country.

　　Article 200 To set up a branch or branches within Chinese territory， a foreign company shall file an application with the responsible Chinese authorities， and present its company's articles of association， the company's registration certificate issued by its home country and other relevant documents. After receiving approval， the company shall register with the company registration authority as provided by law and obtains a business license.

　　The approval procedures for branches of foreign companies are separately provided for in regulations issued by the State Council.

　　Article 201 A foreign company which establishes a branch within Chinese territory shall appoint a representative or agent in charge of the branch and allocate²⁶ to the branch appropriate funds for the operational activities it is engaged in.

　　Where it is necessary to provide for a minimum amount of operational funds for branches of foreign companies， separate regulations are issued by the State Council.

　　Article 202 The branch of a foreign company shall indicate in its name the nationality of the foreign company and whether it has limited or unlimited⁸¹ liability.

　　The articles of association of the foreign company shall be available at its branches.

　　Article 203 A foreign company is a foreign legal person and its branches established within Chinese territory do not have the status of Chinese legal persons.

　　A foreign company assumes civil liability for the operational activities of its branches within Chinese territory.

　　Article 204 A branch of a foreign company established with approval and engaging in business activities within Chinese territory shall abide by the laws of China and shall not harm the social and public interests of China. Its legitimate⁸² rights and interests shall be protected by the laws of China.

　　Article 205 When a foreign company withdraws its branches from Chinese territory， it shall repay its debts according to law and carry out liquidation in accordance with the provisions of the relevant company liquidation procedures set out in this Law. Until such debts are repaid， the property of the branch shall not be transferred outside of Chinese territory.

　　Chapter 10 Legal Liabilities

　　Article 206 A company which violates this Law by falsely reporting its registered capital when registering， presenting false documentation or employing other deceptions⁸³ to conceal⁸⁴ important facts in order to obtain registration of the company shall be ordered to remedy the situation. A company that falsely reports its registered capital shall be fined at least five per cent and no more than ten per cent of the amount of the registered capital falsely reported. A company that presents false documentation or employs other deceptions to conceal important facts shall be fined at least RMB 10，000 and no more than RMB 100，000. In serious cases， the company's registration shall be canceled. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 207 A company which prepares a false prospectus， share subscription application or corporate bond offer procedure in connection with the issue of shares or corporate bonds shall be ordered to halt such issue and return all funds raised together with interest， and is fined an amount of at least one per cent and no more than five per cent of the amount of the funds illegally raised. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 208 A promoter or shareholder who does not pay cash or property in kind or does not transfer property rights， so making a false capital contribution and committing fraud against creditors and the general public， shall be ordered to remedy his wrongs and is fined at least five per cent and no more than ten per cent of the capital which he falsely contributed. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 209 A promoter or shareholder who illicitly⁸⁵ withdraws his capital contribution after the establishment of the company shall be ordered to correct his wrongs and is fined at least five per cent and no more than ten per cent of the capital contribution illicitly withdrawn⁸⁶. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 210 A company which， without having obtained approval as provided by this Law from the relevant responsible authority， arbitrarily issues shares or corporate bonds is ordered to halt such issue and return all funds raised together with interest， and shall be fined at least one per cent and no more than five per cent of the amount of the funds illegally raised. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 211 A company which violates this Law by keeping accounting books and records other than those provided for by law shall be ordered to remedy the situation and shall be fined at least RMB 10，000 and no more than RMB 100，000. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Where assets of the company are held in an account opened in the name of an individual， illegal income shall be confiscated⁸⁷ and there shall be fine of at least the same amount and less than five times the amount of the illegal income. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 212 If a company furnishes to shareholders or the general public financial statements which are false or which conceal important facts， the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility shall be fined at least RMB 10，000 and no more than RMB 100，000. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 213 If in violation of this Law， state assets are converted into shares or sold at a low price or given to individuals without compensation， the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 214 If a director， supervisor or manager exploits his position to accept bribes or other illegal income or to take property of the company wrongfully， the illegal income is confiscated， he shall be ordered to return the company's property and he is subject to sanctions by the company. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　If a director or manager misappropriates company funds or takes company funds and lends them to another， he shall be ordered to return the funds to the company， is subject to sanctions by the company， and turns over to the company all income obtained. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　When a director or manager in violation of this Law uses the company's assets to provide a guarantee for the debts of its shareholders or other individuals， he is ordered to cancel the guarantee， is responsible according to law for providing compensation， and turns over to the company all income derived⁸⁸ from the illegal provision of the guarantee. If the circumstances are serious， he shall be subject to sanctions by the company.

　　Article 215 If a director or manager in violation of this Law operates for himself or on behalf of another a business in the same line of business as the company in which he holds a position， in addition to turning over all income obtained， he shall be subject to sanctions by the company.

　　Article 216 If a company does not make allocations to its statutory common reserve fund or its statutory common welfare fund in accordance with this Law， the company shall be ordered to make up the exact amount which should have been allocated and shall be subject to a fine of at least RMB 10，000 and no more than RMB 100，000.

　　Article 217 In the event of a merger， division， reduction of registered capital or liquidation， if the company does not send notice to or publish public notices for its creditors in accordance with the provisions of this Law， the company shall be ordered to remedy the situation and shall be subject to a fine of at least RMB 10， 000 and no more than RMB 100，000.

　　If at the time of liquidation， a company conceals⁸⁹ its property， makes false entries on its balance sheet or its inventory of property， or distributes the company's property before repaying its debts， the company shall be ordered to remedy the situation and shall be subject to a fine of at least one per cent and no more than five per cent of the assets concealed⁹⁰ or the debts not repaid before distribution. The personnel in charge of the matter who have direct responsibility and the other personnel with direct responsibility shall be subject to a fine of at least RMB 10，000 and no more than RMB 100，000. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 218 If a liquidation group does not file a liquidation report with the company registration authority in accordance with the provisions of this Law， or the liquidation report conceals important facts or contains significant omissions⁹¹， the wrongs shall be ordered to be remedied.

　　If a member of the liquidation group exploits his position for corrupt⁹² or improper⁹³ ends， obtains illegal income or wrongfully takes over assets belonging to the company， he shall be ordered to return the company's property， the illegally obtained income shall be confiscated， and he shall be fined at least the amount of and no more than five times the amount of the income illegally obtained. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 219 If an institution responsible for assessing， verifying， or examining and certifying⁹⁴ assets provides false documentation， its unlawful income is confiscated and it is subject to a fine of at least the amount of and no more than five times the amount of the unlawful income. The institution shall also be ordered to cease doing business， and the certification of the qualifications of the personnel directly responsible shall be revoked by the relevant responsible authority. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　If an institution responsible for assessing， verifying， or examining and certifying assets， as a result of negligence， prepares a report which contains important omissions， the institution shall be ordered to remedy the situation. If the circumstances are relatively⁹⁵ serious， it shall be subject to a fine of at least the amount of and no more than three times the amount of the income received. The institution shall also be ordered to cease doing business， and the certification of the qualifications of the personnel directly responsible shall be revoked by the relevant responsible authority.

　　Article 220 If the relevant department authorized by the State Council approves an application for the establishment of a company which does not meet the requirements of this Law or approves an application for an issue of shares which does not meet the requirements of this Law， and the circumstances are serious， the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility shall be subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 221 If the securities administration departments of the State Council grant approval for share offers， listings of shares and issues of bonds which do not meet the requirements of this Law， and the circumstances are serious， the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility are subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 222 If the company registration authority registers a company which does not meet the registration requirements of this Law， and the circumstances are serious， the personnel in charge of the matter who have direct responsibility and other personnel with direct responsibility shall be subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 223 If a higher level department orders the company registration authority to register a company which does not meet the registration requirements of this Law， or covers up an unlawful registration， the personnel in charge of the matter who have direct responsibility and such other persons with direct responsibility shall be subject to administrative sanctions in accordance with the law. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 224 A company not lawfully⁹⁶ registered as a limited liability company or a company limited by shares which falsely makes use of the title “limited liability company” or “company limited by shares” is ordered to remedy the situation or is canceled. It may also shall be subject to a fine of at least RMB 10，000 and no more than RMB 100，000. If the violation constitutes a criminal offence， criminal liability shall be investigated in accordance with the law.

　　Article 225 A company which without justification⁹⁷ fails to commence business more than six months after establishment or ceases to do business for more than six consecutive⁹⁸ months after commencing business， has its business license revoked by the company registration authority.

　　When items in a company's registration have changed， and the company fails to carry out a change of registration as required by this Law， the company shall be ordered to register such changes within a certain time period， and if the company fails to do so， it shall be subject to a fine of at least RMB 10，000 and no more than RMB 100，000.

　　Article 226 If a foreign company in violation of the provisions of this Law， arbitrarily establishes a branch or branches within Chinese territory， it shall be ordered to remedy the situation or to close down， and may shall be subject to a fine of at least RMB 10，000 and no more than RMB 100，000.

　　Article 227 If the responsible authority whose duty it is to process approvals pursuant to this Law fails to grant approval to an application which meets the requirements of this Law or the company registration authority fails to register a company whose application meets the requirements of this Law， the interested party may apply for reconsideration according to law or may bring an administrative suit.

　　Article 228 If a company which violates the provisions of this Law shall be subject to civil claims for compensation and to payment of fines and penalties， but has insufficient assets， it first assumes responsibility for payment of the civil claims.

　　Chapter 11 Supplementary⁹⁹ Articles

　　Article 229 Companies registered and established prior to the effective date of this Law pursuant to laws， administrative regulations， local regulations and pursuant to the “Standard Opinion on Limited Liability Companies” or the “Standard Opinion on Companies Limited by Shares” issued by the relevant responsible department of the State Council continue to exist. Those companies not completely satisfying the requirements of this Law shall meet the requirements of this Law within the specified time limit. Specific methods for implementation of this Law are to be set out in separate regulations issued by the State Council.

　　Article 230 This Law comes into effect on July 1， 1994.

上一篇：中华人民共和国发票管理办法实施细则 下一篇：中华人民共和国公司法（一）