Company Law of the People's Republic of China (2018 Amendment)

Company Law of the People's Republic of China (2018 Amendment) Company Law of the People's Republic of China (Adopted at the Fifth Session of the Standing Committee of the Eighth National People's Congress on December 29, 1993; amended for the first time in accordance with the Decision on Amending the Company Law of the People's Republic of China adopted at the 13 th Session of the Standing Committee of the Ninth National People's Congress on December 25, 1999; amended for the second time in accordance with the Decision on Amending the Company Law of the People's Republic of China adopted at the 11th Session of the Standing Committee of the Tenth National People's Congress on August 28, 2004; Revised at 18 th Session of the Standing Committee of the Tenth National People's Congress on October 27, 2005; and amended for the third time in accordance with the Decision on Amending Seven Laws Including the Marine Environment Protection Law of the People's Republic of China adopted at the Sixth Session of the Standing Committee of the 12 th National People's Congress on December 28, 2013; and amended for the fourth time in accordance with the Decision of the Standing Committee of the National People's Congress on Amending the Company Law of the People's Republic of China (2018) adopted at the Sixth Session of the Standing Committee of the 13th National People's Congress on October 26, 2018.) Contents Chapter I General Provisions Chapter II Establishment and Organizational Structure of A Limited Liability Company Section 1 Establishment Section 2 Organizational structure Section 3 Special Provisions on One-person Limited Liability Companies Section 4 Special Provisions on Wholly State-owned Companies Chapter III Transfer of Stock Right of A Limited Liability Company Chapter IV Establishment and Organizational Structure of A Joint Stock Limited Company Section 1 Establishment Section 2 Shareholders' Assembly Section 3 Board of Directors, Managers Section 4 Board of Supervisors Section 5 Special Provisions on the Organizational Structure of A Listed Company Chapter V Issuance and Transfer of Shares of A Joint Stock Limited Company Section 1 Issuance of Shares Section 2 Transfer of Shares Chapter VI Qualifications and Obligations of the Directors, Supervisors and Senior Managers of A Company Chapter VII Corporate Bonds Chapter VIII Financial Affairs and Accounting of A Company Chapter IX Merger and Split-up of Company; Increase and Deduction of Registered Capital Chapter X Dissolution and Liquidation of A Company Chapter XI Branches of Foreign Companies Chapter XII Legal Liabilities Chapter XIII Supplementary Provisions Chapter I General Provisions Article 1 This Law is enacted for the purposes of regulating the organization and operation of companies, protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining the socialist economic order, and promoting the development of the socialist market economy Article 2 The term "company" as mentioned in this Law refers to a limited liability company or a joint stock company limited set up within the territory of the People's Republic of China according to the provisions of this Law. Article 3 A company is an enterprise legal person, which has independent legal person property and enjoys the right to legal person property. It shall bear the liabilities for its debts with all its property. For a limited liability company, a shareholder shall be liable for the company to the extent of the capital contributions it has paid. For a joint stock limited company, a shareholder shall be liable for the company to the extent of the shares it has subscribed to. Article 4 The shareholders of a company shall be entitled to enjoy the capital proceeds, participate in making important decisions, choose managers and enjoy other rights. Article 5 When conducting business operations, a company shall comply with the laws and administrative regulations, social morality, and business morality. It shall act in good faith, accept the supervision of the government and general public, and bear social responsibilities. The legitimate rights and interests of a company shall be protected by laws and may not be trespassed. Article 6 To establish a company, an application for establishment registration shall be filed with the company registration authority. If the application meets the establishment requirements of this Law, the company registration authority shall register the company as a limited liability company or joint stock limited company. If the application does not meet the establishment requirements of this Law, it shall not be registered as a limited liability company or joint stock limited company. If any law or administrative regulation provides that the establishment of a company shall be subject to approval, and relevant approval formalities shall be gone through prior to the registration of the company. The general public may go to a company registration authority to search and consult the registration information filed by a company and the authority shall provide the research services for the public. Article 7 For a lawfully established company, the company registration authority shall issue a company business license to the company. The date of issuance of the company business license shall be the date of establishment of the company. The company business license shall state the name, domicile, registered capital, business scope, legal representative, etc. If any of the items as stated in the business license is changed, the company shall modify the registration and the company registration authority shall replace its old business license by a new one. Article 8 A limited liability company established according to this Law shall include the words of "limited liability company" or "limited company" in its name. A joint stock 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 be changed into a joint stock limited company shall satisfy the requirements as prescribed in this Law for joint stock limited companies. A joint stock limited company to be changed into a limited liability company shall conform to the conditions as prescribed in this Law for limited liability companies. In either of the aforesaid cases, the creditor's rights and debts of the company prior to the change shall be succeeded by the company after the change. Article 10 A company shall regard its main office as its domicile. Article 11 A company established according to this Law shall formulate its bylaw that are binding on the company, its shareholders, directors, supervisors and senior managers. Article 12 A company's business scope shall be defined in its bylaw and shall be registered according to law. The company may change its business scope by modifying its bylaw, but it shall go through the formalities for modifying the registration. If the business scope a company covers any item subject to approval pursuant to any law or administrative regulation, approval shall be obtained according to the law. Article 13 The legal representative of a company shall, be assumed by the chairman of the board of directors, acting director or manager according to the company's bylaw and shall be registered according to law. If the legal representative of the company is changed, the company shall go through the formalities for modifying the registration. Article 14 A company may set up branches. To set up a branch, the company shall file a registration application with the company registration authority and shall obtain a business license. A branch shall not enjoy the status of an enterprise legal person and its civil liabilities shall be born by its parent company. A company may set up subsidiaries which enjoy the status of an enterprise legal person and shall be independently responsible for their own civil liabilities. Article 15 A company may invest in other enterprises. However, unless it is otherwise provided for by any law, it shall not become a capital contributor that shall bear several and joint liabilities for the debts of the enterprises in which it invests. Article 16 Where a company intends to invest in any other enterprise or provide guaranty for others, the company shall make a resolution through the board of directors, shareholders' meeting or shareholders' assembly according to its bylaw. If the bylaw prescribe any limit on the total amount of investments or guaranties, or on the amount of a single investment or guaranty, the aforesaid total amount or amount shall not exceed the limited amount. If a company intends to provide guaranty to a shareholder or actual controller of the company, it shall make a resolution through the shareholder's meeting or shareholders' assembly. The shareholder as mentioned in the preceding paragraph or the shareholder dominated by the actual controller as mentioned in the preceding paragraph shall not participate in voting on the matter as mentioned in the preceding paragraph. Such matter requires the affirmative votes of more than half of the other shareholders attending the meeting. Article 17 Every company shall protect the lawful rights and interests of its employees, sign employment contracts with its employees, buy social insurances, and strengthen labor protection so as to ensure work safety. Every company shall, in various forms, intensify the professional education and in-service training of its employees so as to improve their personal quality. Article 18 The employees of a company shall, according to the Labor Union Law of the People's Republic of China , organize a labor union, which shall carry out union activities and safeguard the lawful rights and interests of the employees. The company shall provide necessary conditions for its labor union to carry out activities. The labor union shall, on behalf of the employees, sign collective contracts with the company with respect to the remuneration, working hours, welfare, insurance, work safety and sanitation, and other matters. In accordance with the Constitution and other relevant laws, a company shall adopt democratic management in the form of assembly of the representatives of the employees or any other ways. To make a decision on restructuring or any important issue relating to business operations, or to formulate any important bylaw, a company shall solicit the opinions of its labor union, and shall solicit the opinions and proposals of the employees through the assembly of the representatives of the employees or in any other way. Article 19 The Chinese Communist Party may, according to the Constitution of the Chinese Communist Party , establish its branches in companies to carry out activities of the Chinese Communist Party. The company shall provide necessary conditions to facilitate the activities of the Party. Article 20 The shareholders of a company shall abide by the laws, administrative regulations and bylaw and shall exercise the shareholder's rights under the law. None of them may injure any of the interests of the company or of other shareholders by abusing the shareholder's rights, or injure the interests of any creditor of the company by abusing the independent status of legal person or the shareholder's limited liabilities. Where any of the shareholders of a company causes any loss to the company or to other shareholders by abusing the shareholder's rights, it shall be liable for compensation. Where any of the shareholders of a company evades the payment of its debts by abusing the independent status of legal person or the shareholder's limited liabilities, if it seriously injures the interests of any creditor, it shall bear several and joint liabilities for the debts of the company. Article 21 Neither the controlling shareholder, nor the actual controller, nor any of the directors, supervisors or senior management of the company may injure the interests of the company by taking advantage of its connection relationship. Anyone who causes any loss to the company due to violating the preceding paragraph shall be liable for the compensation. Article 22 A resolution of the shareholders' meeting, shareholders' assembly or board of directors of the company that is in violation of any law or administrative regulation shall be null and void. If the procedures for calling a shareholders' meeting or shareholders' assembly, or meeting of the board of directors, or the voting form, is in violation of any law, administrative regulation or the bylaw, or if a resolution is in violation of the bylaw of the company, the shareholders may, within 60 days from the day when the resolution is made, request the people's court to revoke it. If the shareholders initiate a lawsuit under the preceding paragraph, the people's court shall, at the request of the company, demand the shareholders to provide corresponding guaranty. Where a company has, according to the resolution of the shareholders' meeting, shareholders' assembly or meeting of the board of directors, completed the modification registration, if the people's court declares the resolution null and void or revoke the resolution, the company shall file an application with the company registration authority for revoking the modification registration. Chapter II Establishment and Organizational structure of A Limited Liability Company Section 1 Establishment Article 23 The establishment of a limited liability company shall meet the following conditions: (1)The number of shareholders constitutes the quorum; (2)The amount of capital contributions subscribed for by all its shareholders is in compliance with the company bylaws; (3)The shareholders jointly work out the bylaw; (4)The company has a name and its organizational structure complies with that of a limited liability company; and (5)The company has a domicile. Article 24 A limited liability company shall be established by no more than 50 shareholders that make capital contributions. Article 25 A limited liability company shall state the following items: (1)The name and domicile of the company; (2) Business Scope of the company; (3)Registered capital of the company; (4)Names of shareholders; (5) Forms, amount and date of capital contributions made by shareholders; (6)The organizations of the company and its formation, their functions and rules of procedure; (7)Legal representative of the company; (8)Other matters deemed necessary by shareholders. The shareholders should affix their signatures or seals to the bylaw of the company. Article 26 The registered capital of a limited liability company shall be the amount of capital contributions subscribed for by all its shareholders as registered with the company registration authority. Where any law or administrative regulation or any decision of the State Council provides otherwise for the paid-in registered capital or the minimum amount of registered capital of a limited liability company, such provisions shall prevail. Article 27 A shareholder may make capital contributions in cash, in kind, or intellectual property right, land use right, or other non-monetary properties that may be assessed on the basis of currency and may be transferred according to the law, excluding the properties that shall not be treated as capital contributions under any law or administrative regulation. The value of the non-monetary properties as capital contributions shall be assessed and verified, which shall not be over-valued or under-valued. If any law or administrative regulations provides for the value assessment, such law or administrative regulation shall be followed. Article 28 Each shareholder shall make full payment for the capital contributions he has subscribed to according to the bylaw. If a shareholder makes his capital contribution in cash, he shall deposit the full amount of such cash capital contribution into a temporary bank account opened for the limited liability company. If any capital contributions are made in non-monetary properties, the appropriate transfer procedures for the property rights therein shall be followed according to law. Where a shareholder fails to make his capital contribution as specified in the preceding paragraph, he shall not only make full payment to the company but also bear the liabilities for breach of contract to the shareholders who have make full payment of capital contributions on schedule. Article 29 After the amount of capital contributions stated in the company bylaws has been fully subscribed for, the representative designated or the agent authorized by all the shareholders shall submit a company registration application, the company bylaws, and other documents to the company registration authority to apply for incorporation registration. Article 30 After the establishment of a limited liability company, if the actual value of the capital contributions in non-monetary properties is found to be apparently lower than that set forth in the bylaw of the company, the difference shall be made up by the shareholder who offered them, and the other shareholders of the company who established the company shall bear several and joint liabilities. Article 31 After the establishment of a limited liability company, each shareholder shall be issued a capital contribution 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 the day 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 32 A limited liability company shall prepare a registry of shareholders and the registry shall record the following information: (1)The names of all shareholders and their domiciles thereof; (2)The amount of capital contributions made by each shareholder; (3)The serial numbers for all capital contribution certificates. The shareholders recorded in the registry of shareholders may, pursuant to the registry of shareholders, claim to and exercise the shareholder's rights. A company shall register each shareholder's name in the company registration authority. Where any of the registered items is changed, the company shall modify the registration. If the company fails to do so, it shall not, on the basis of the unregistered or un-modified registration item, stand up to any third party. Article 33 Every shareholder shall be entitled to review and duplicate the company's bylaw, the minutes of the shareholders' meetings, the resolutions of the board of directors' meetings, the resolutions of the board of supervisors' meetings, as well as the financial reports. Every shareholder may request to review the accounting books of the company. Where a shareholder requests to review the accounting books of the company, it shall submit a written request, which shall state his motives. If the company, has the legitimate reason to believe that the shareholder's requests to review the accounting books has an improper motive and may impair the legitimate interests of the company, it may reject the request of the shareholder to review the books and shall, within in 15 days after the shareholder submits a written request, give the shareholder a written reply, which shall include an explanation. If the company reject the request of any shareholder to review the accounting books, the shareholder may plead a people's court to demand the company to open the books for his review. Article 34 Shareholders shall be distributed with the dividends based on the percentages of the capital that they actually contributed. When a company is going to increase the capital, its shareholders have the preemptive right to subscribe to the new capitals based on the same percentages of the old capital that they contributed. The exception shall be given if all shareholders agree that they will not be distributed with the dividends or have the preemptive right to subscribe to the new capitals based on the percentages of the old capital that they contributed. Article 35 After the establishment of a company, no shareholder may illegally take away the registered capital. Section 2 Organization Structure Article 36 The shareholders' meeting of a limited liability company shall be composed of all the shareholders. It is the authority of the company and shall exercise its powers according to this Law. Article 37 The shareholders' meeting shall exercise the following functions: (1) Determining the company's operational guidelines and investment plans; (2) Electing and changing the directors and supervisors assumed by non-representatives of the employees and deciding the matters relating to their salaries and compensations; (3) Deliberating and approving reports of the board of directors; (4) Deliberating and approving reports of the board of supervisors or the supervisor; (5) Deliberating and approving annual financial budget plans and final account plans of the company; (6) Deliberating and approving company profit distribution plans and loss recovery plans; (7) Making resolutions about the increase or reduction of the company's registered capital; (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 all the shareholders consent to any of the matters listed in the preceding paragraph by writing , they do not need to hold a shareholders' meeting and may made decisions and have the decisions signed and sealed by all the shareholders. Article 38 The first shareholders' meeting shall be convened and presided over by the shareholder who made the largest capital contributions, and he shall exercise his powers according to this Law. Article 39 The shareholders' meetings shall be classified into regular meetings and interim meetings. The regular meetings shall be timely held according to the bylaw. Where an interim meeting is proposed by the shareholders representing 1/10 of the voting rights or more, or by directors representing 1/3 of the voting rights or more, or by the board of supervisors, or by the supervisors of the company with no board of supervisors, an interim meeting shall be held. Article 40 Where a limited liability company has set up a board of directors. The shareholders' meetings shall be convened by the board of directors and presided over by the chairman of the board of directors. If the chairman is unable or fails to perform his duties, the meetings thereof shall be presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or fails to perform his duties, the meetings shall be presided over by a director jointly recommended by half or more of the directors. For a limited liability company with no board of directors, the shareholders' meetings shall be convened and presided over by the acting director. If the board of directors or the acting director is unable or fails to fulfill the duties of convening the shareholders' meeting, the board of supervisors or the supervisor of the company with no board of supervisors may convene and preside over such meetings. If the board of supervisors or supervisor does not convene or preside over such meetings, the shareholders representing 1 / 10 or more of the voting rights may convene and preside over such meetings on their own initiatives. Article 41 Every shareholder shall be given a notice 15 days before a shareholders' meeting is held unless it is otherwise specified by the bylaw or it is otherwise stipulated by all the shareholders. A shareholders' meeting shall make the minutes for the decisions about the matters discussed at the meeting. The shareholders who attended the meeting shall affix their signatures to the minutes. Article 42 The shareholders shall exercise their voting rights at the shareholders' meetings based on their respective percentage of the capital contributions unless it is otherwise prescribed by the bylaw. Article 43 Unless it is otherwise provided for by this Law, the discussion methods and voting procedures of the shareholders' meeting shall be provided for in the bylaw. A resolution made at a shareholders' meeting on revising the bylaw, increasing or reducing the registered capital, merger, split-up, dissolution or change of the company form shall be adopted by the shareholders representing 2 / 3 or more of the voting rights. Article 44 The board of directors established by a limited liability company shall be composed of 3 up to 13 members unless it is otherwise provided by Article 51 of this Law. If a limited liability company established by 2 or more state-owned enterprises or other state-owned investors, the board of directors shall include representatives of the employees of the companies. The board of directors of any other limited liability company may also include representatives of the employees of the company concerned. The employees' representatives who are to serve as board directors shall be democratically elected by the employees of the 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 have one chairman and may have one or more deputy chairmen. The appointment of the chairman and deputy chairman shall be specified in the bylaw. Article 45 The term of office of the directors shall be provided for by the bylaw, but each term of office shall not exceed 3 years. The directors may, after the expiry of their term of office, hold a consecutive term upon re-election. If no reelection is timely carried out after the expiry of the term of office of the directors, or if the number of the members of the board of directors is less than the quorum due to the resignation of some directors from the board of directors prior to the expiry of their term of office, the original directors shall, before the newly elected directors assume their posts, perform the powers of the directors according to the laws, administrative regulations, as well as the bylaw. Article 46 The board of directors shall be responsible 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 account plans; (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 registered capital, 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 management departments; (9) Making decisions on hiring or dismissing the company's manager and his salary and compensation, and, according to the nomination of the manager, deciding on the hiring or dismissal of vice manager(s) and the persons in charge of finance as well as their salaries and compensations; (10) Working out the company's basic management system; and (11) Other functions as specified in the bylaw. Article 47 A meeting of the board of directors shall be convened and presided over by the chairman of the board of directors. If the chairman of the board of directors is unable or fails to perform his duties, it may be convened or presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or fails to perform his duties, it may be convened or presided over by a director whom is jointly recommended by half or more of the directors. Article 48 Unless it is otherwise provided for by this Law, the discussion methods and voting procedures of the board of directors shall be specified by the bylaw. The board of directors shall make minutes of the decisions about the matters discussed at the meetings thereof. The shareholders who attend the meeting shall affix their signatures to the minutes. In the voting on a resolution of the board of directors, every director shall have one vote. Article 49 A limited liability company may have a manager, who shall be hired or dismissed upon decision of the board of directors. The manager shall be responsible for the board of directors and shall exercise the following powers: (1)Taking charge of the management of the production and business operations of the company, organizing the implementation of the resolutions of the board of directors; (2)Organizing the execution of the company's annual business plans and investment plans; (3)Drafting plans on the establishment of the company's internal management departments; (4)Drafting the company's basic management system; (5)Formulating the company's specific rules and policies; (6)Proposing to hire or dismiss the company's vice manager(s) and the person in charge of finance; (7)Deciding on the hiring or dismissal of the persons-in-charge other than those who shall be decided by the board of directors; and (8)Other powers conferred by the board of directors. If the bylaw provides otherwise for the powers of managers, the bylaw shall be followed. The manager attends the meetings of the board of directors as a non-voting representative. Article 50 For a limited liability company with a relatively small number of shareholders or for a relatively small limited liability company, it may have an acting director and no board of directors. The acting director may concurrently hold the post of the company's manger. The powers of the acting director shall be specified in the bylaw. Article 51 A limited liability company may set up a board of supervisors, which shall be composed of at least 3 persons. For a limited liability company in which there is a relatively small number of shareholders or which is relatively small in scale, it may have 1 or 2 supervisors and does not have to establish a board of supervisors. The board of supervisors shall include shareholders' representatives and representatives of the employees' of the company at an appropriate ratio to be specifically prescribed in the bylaw. The employees' representatives who are to serve as members of the board of supervisors shall be democratically elected by the employees of the company through the assembly of the employees' representatives, or employees' assembly or by any other means. The board of supervisors shall have one chairman, who shall be elected by half or more of all the supervisors. The chairman of the board of supervisors shall convene and preside over the meetings of the board of supervisors. If the chairman of supervisors is unable or fails to perform his duties, the supervisor recommended by half or more of the supervisors shall convene and preside over the meetings of the board of supervisors. No director or senior manager may concurrently serve as a supervisor. Article 52 Each term of office of the supervisors shall be 3 years. The supervisors may, after the expiry of their term of office, hold a consecutive term upon reelection. If no reelection is timely carried out after the expiry of the term of office of the supervisors, or if the number of the members of the board of directors is less than the quorum due to the resignation of some directors from the board of supervisors prior to the expiry of their term of office, the original supervisors shall, before the newly elected supervisors assume their posts, exercise the powers of the supervisors according to laws, administrative regulations, as well as the bylaw. Article 53 The board of supervisors or supervisor of a company with no board of supervisors may exercise the following powers: (1)To check the financial affairs of the company; (2)To supervise the duty-related acts of the directors and senior managers, to put forward proposals on the removal of any director or senior manager who violates any law, administrative regulation, the bylaw or any resolution of the shareholders' meeting; (3)To demand any director or senior manager to make corrections if his act has injured the interests of the company; (4)To propose to call interim shareholders' meetings, to call and preside over shareholders' meetings when the board of directors does not exercise the function of calling and presiding over shareholders' meetings as prescribed in this Law; (5)To put forward proposals at shareholders' meetings; (6)To initiate actions against directors or senior managers according to Article 151 of this Law; and (7)Other duties as provided for by the bylaw. Article 54 The supervisors may attend the meetings of the board of directors as non-voting attendees, and may raise questions or suggestions about the meeting agenda discussed by the board of directors. If the board of supervisors or the supervisors of the company that does not have a board of supervisors find that the company is running abnormally, they may conduct an investigation. Where necessary, they may hire an accounting firm to help them with the investigation and the related expenses shall be born by the company. Article 55 The board of supervisors shall hold meetings at least once a year. Any supervisors may propose to hold interim meetings of the board of supervisors. The discussion methods and voting procedures of the board of supervisors shall be specified in the bylaw unless it is otherwise provided by this Law. A resolution of the board of supervisors shall be approved by more than half of the supervisors. The board of supervisors shall scribe the minutes for the resolutions about the agenda and have the minutes signed by the supervisors in presence. Article 56 The expenses necessary for the board of supervisors or the supervisor of a company that does not have a board of supervisors to perform their duties shall be borne by the company. Section 3 Special Provisions on One-person Limited Liability Companies Article 57 The provisions of this Section shall apply to the establishment and the organizational structure of a one-person limited liability. For any matter not touched by this Section, it shall be governed by Sections 1 and 2 of this Chapter. The term "one-person limited liability company" as mentioned in this Law refers to a limited liability company with only one natural person shareholder or legal person shareholder. Article 58 One natural person is allowed to establish merely an one-person limited liability company, which shall not establish any more one-person limited liability company. Article 59 An one-person limited liability company shall, in the company registration, give a clear indication that it is sol......