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. Revised for the first time on December 25, 1999 in accordance with the Decision of the Thirteenth Session of the Standing Committee of the Ninth People's Congress on Amending the Company Law of the People's Republic of China. Revised for the
second time on August 28, 2004 in accordance with the Decision of the 11th Session of the Standing Committee of the 10th National People's Congress of the People's Republic of China on Amending the Company Law of the People's Republic of China. Revised for the third time at the 18th Session of the 10th National People's Congress of the People's Republic of China
on October 27, 2005)

Contents,

Chapter I General Provisions
Chapter II Establishment and Organizational Structure of a Limited Liability Company
Chapter III Transfer of Stock Right of a Limited Liability Company
Chapter IV Establishment and Organizational Structure of a Joint Stock Limited Company
Chapter V Issuance and Transfer of Shares of a Joint Stock Limited Company
Chapter VI Qualifications and Obligations of the Directors, Supervisors and Senior Managers of a Company
Chapter VII Company Bonds
Chapter VIII Financial Affairs and Accounting of a Company
Chapter IX Merger and Split-up of a Company; Increase and Deduction of Registered Capital
Chapter X Dissolution and Liquidation of a Company
Chapter XI Branches of a Foreign Company
Chapter XII Legal Liabilities Chapter XIII Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is formulated for the purposes of regulating the organization and operation of companies, protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining thesocialist 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 established within the territory of the People's Republic of China in accordance with the provisions of this law.

Article 3 A company is an enterprise juridical person, which has independent juridical person property and enjoys the
property right of the juridical person. And it shall bear the liabilities for its debts with all its property. As for a
limited liability company, the shareholders shall be responsible for the company to the extent of the capital
contributions they have paid. As for a joint stock limited company, the shareholders shall be responsible for the company
to the extent of the shares they have 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 undertaking 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 the
general public, and bear social responsibilities.
The legitimate rights and interests of a company shall be protected by laws and may not be infringed.

Article 6 For the establishment of a company, an application for establishment and registration shall be filed with the
company registration authority. If the application meets the requirements for establishment of this Law, the company
registration authority shall register the company as a limited liability company or a joint stock limited company. If the
application fails to meet the requirements for establishment of this Law, it shall not be registered as a limited liability
company or a joint stock limited company.
If any law or administrative regulation stipulates that the
establishment of a company shall be subject to approval, the
relevant approval formalities shall be gone through prior to
the registration of the company.
The general public may consult the relevant matters on company
registration at a company registration authority, which shall
provide consulting services.
Article 7 For a lawfully established company, the company
registration authority shall issue the company business
license to it, and 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, actually paid capital, business
scope, the name of the legal representative and 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 the old business license
by a new one.
Article 8 For a limited liability company established
according to this Law, it shall indicate in its company name
the words "limited liability company" or "limited company".
For a joint stock limited company established according to
this Law, it shall indicate in its company name the words
"joint stock limited company" or "joint stock company".
Article 9 The change of a limited liability company to a
joint stock limited company shall satisfy the requirements as
prescribed in this Law for joint stock limited companies. The
change of a joint stock limited company to a limited liability
company shall meet the conditions as prescribed in this Law
for limited liability companies. Under any of the aforesaid
circumstances, 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 the locus of its main
office as its domicile.
Article 11 The company established according to this law
shall formulate its articles of association which are binding
on the company, its shareholders, directors, supervisors and
senior managers.
Article 12 The company's business scope shall be defined in
its articles of association and shall be registered according
to law. The company may change its business scope by modifying
its articles of association, but shall go through the
formalities for modifying the registration. If the business
scope of a company covers any item subject to approval
pursuant to laws or administrative regulations, the approval
shall be obtained according to law.
Article 13 The legal representative of a company shall,
according to the provisions of its articles of association, be
assumed by the chairman of the board of directors, acting
director or manager, 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 The 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 the
business license. The branch shall not enjoy the status of an
enterprise juridical person, and its civil liabilities shall
be born by its parent company.
The company may set up subsidiaries which enjoy the status of
an enterprise juridical person and shall be independently bear
civil liabilities.
Article 15 A company may invest in other enterprises.
However, it shall not become a capital contributor that shall
bear the joint liabilities for the debts of the enterprises it
invests in, unless it is otherwise provided for by any law.
Article 16 Where a company intends to invest in any other
enterprise or provide guarantee for others, it shall,
according to the provisions of its articles of association, be
decided at the meeting of the board of directors or
shareholders or shareholders' convention. If the articles of
association prescribe any limit on the total amount of
investments or guarantees, or on the amount of a single
investment or guarantee, the aforesaid total amount or amount
shall not exceed the responsive limited amount. If a company
intends to provide guarantee to a shareholder or actual
controller of the company, it shall make a resolution through
the shareholder's meeting or shareholders' convention.
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 The company shall protect the lawful rights and
interests of its employees, conclude employment contracts with
the employees, buy social insurances, strengthen labor
protection so as to realize safe production.
The company shall, in various forms, reinforce the vocational
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, conclude the collective contract with
the company with respect to the remuneration, working hours,
welfare, insurance, work safety and sanitation and other
matters.
Pursuant to the Constitution and other relevant laws, a
company shall implement democratic management in the form of
meeting of the representatives of the employees or any other
ways.
To make a decision on restructuring or any important issue
related to business operation, or to formulate any important
regulation, a company shall solicit the opinions of its labor
union, and shall solicit the opinions and proposals of the
employees through the meeting of the representatives of the
employees or in any other way.
Article 19 An organization of the Chinese Communist Party
shall, according to the Charter of the Chinese Communist
Party, be established in the company to carry out activities
of the Chinese Communist Party. And the company shall provide
necessary conditions for the activities of the Chinese
Communist Party.

Article 20 The shareholders of a company shall comply with
the laws, administrative regulations and articles of
association, and shall exercise the shareholder's rights
according to 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 juridical
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 subject to compensation.
Where any of the shareholders of a company evades the payment
of its debts by abusing the independent status of juridical
person or the shareholder's limited liabilities, and thus
seriously damages the interests of any creditor, it shall bear
joint liabilities for the debts of the company.

Article 21 Neither the controlling shareholder, nor the
actual controller, any of the directors, supervisors or senior
managers of the company may injure the interests of the
company by taking advantage of its connection relationship.
Anyone who has caused any loss to the company due to violation
of the preceding paragraph shall be subject to compensation.
Article 22 The resolution of the shareholders' convention,
shareholders' meeting or board of directors of the company
that has violated any law or administrative regulation shall
be null and void.
Where the procedures for convoking and the voting form of a
shareholders' convention or shareholders' meeting or meeting
of the board of directors, violate any law, administrative
regulation or the articles of association, or the resolution
is in violation of the articles of association of the company,
the shareholders may, within 60 days as of the day when the
resolution is made, request the people's court to revoke it.
If the shareholders initiate a lawsuit according to the
preceding paragraph, the people's court shall, in light of the
request of the company, demand the shareholders to provide
corresponding guarantee.
Where a company has, in light of the resolution of the
shareholders' convention, shareholders' meeting or meeting of
the board of directors, completed the modification
registration, and 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 satisfy the following conditions:
(1) The number of shareholders accords with the quorum;
(2) The amount of capital contributions paid by the shareholders reaches the statutory minimum amount of the
registered capital;
(3) The articles of association are worked out jointly by shareholders;
(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 not more than 50 shareholders that have made capital
contributions.
Article 25 A limited liability company shall state the
following items in its articles of association:
(1) the name and domicile of the company;
(2) the business scope of the company;
(3) the 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) the legal representative of the company;
(8) other matters deemed necessary by shareholders. The
shareholders should affix their signatures or seals on the
articles of association of the company.
Article 26 The registered capital of a limited liability
company shall be the total amount of the capital contributions
subscribed to by all the shareholders that have registered in
the company registration authority. The amount of the initial
capital contributions made by all shareholders shall be not
less than 20% of the registered capital, nor less than the
statutory minimum amount of registered capital, and the margin
shall be paid off by the shareholders within 2 years as of the
day when the company is established; as for an investment
company, it may be paid off within 5 years. The minimum amount
of registered capital of a limited liability company shall be
RMB 30, 000 Yuan. If any law or administrative regulation
prescribes a relatively higher minimum amount of registered
capital of a limited liability company, the provisions of that
law or administrative regulation shall be followed.
Article 27 A shareholder may make capital contributions in
currency, 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 law,
excluding the properties that shall not be treated as capital
contributions according to 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
regulation prescribes the value assessment, such law or
administrative regulation shall be followed.
The amount of the capital contributions in currency paid by
all the shareholders shall be not less than 30% of the
registered capital of the limited liability company.
Article 28 Every shareholder shall make full payment for the
capital contribution it has subscribed to according to the
articles of association. If a shareholder makes his/its
capital contribution in currency, he shall deposit the full
amount of such currency capital contribution into a temporary
bank account opened for the limited liability company. If the
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/its capital contribution as
specified in the preceding paragraph, it shall not only make
full payment to the company but also bear the liabilities for
breach of the contract to the shareholders who have make full
payment of capital contributions on schedule.
Article 29 The capital contributions made by shareholders
shall be checked by a lawfully established capital
verification institution, which shall issue a certification.
Article 30 After the initial capital contributions made by
the shareholders for the first time have been checked by a
lawfully established capital verification institution, the
representative designated by all the shareholders or the agent
entrusted by all the shareholders shall apply for
establishment and registration with a company registration
application, the articles of association, capital verification
and other documents to the company registration authority.
Article 31 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 provided for in the articles of association of the
company, the balance shall be supplemented by the shareholder
who has offered them, and the other shareholders of the
company who have established the company shall bear joint
liabilities.
Article 32 After the establishment of a limited liability
company, every shareholder shall be issued with 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 registered capital of the company;
(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 33 A limited liability company shall prepare a
register of shareholders, which shall specify the following:
(1) the name of every shareholder and his/its domicile
thereof;
(2) the amount of capital contribution made by every
shareholder;
(3) the serial number of every capital contribution
certificate. The shareholders recorded in the register of
shareholders may, in light of the register of shareholders,
claim to and exercise the shareholder's rights. A company
shall register every shareholder's name and the amount of its
capital contribution in the company registration authority.
Where any of the registered items is changed, it shall handle
the modification of 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 34 The shareholder shall be entitled to consult and
copy the articles of association, records of the shareholders'
meetings, resolutions of the meetings of the board of
directors, resolutions of the meetings of the board of
supervisors, as well as financial reports.
The shareholder may request to consult the accounting books of
the company. Where a shareholder requests to consult the
accounting books of the company, it shall submit to the
company a written request which shall state its motives. If
the company, pursuant to any justifiable reason, considers
that the shareholder's request to consult the accounting books
for any improper purpose may damage the legitimate interests
of the company, it may reject the request of the shareholder,
and shall, within in 15 days after the shareholder submits a
written request, give it a written reply which shall include
an explanation. If the company rejects the request of any
shareholder to consult the accounting books, the shareholder
may plead the people's court to demand the company to approve
consultation.
Article 35 The shareholders shall distribute dividends in
light of the percentages of capital contributions actually
made by them, unless all shareholders agree that the dividends
are not distributed on the percentages of capital
contributions. Where the company is to increase its capital,
its shareholders have the preemptive right to contribute to
the increased amount on the basis of the same percentages of
the old capital contributions they have made, unless all
shareholders agree that they will not contribute to the
increased amount of capital on the basis of the percentages of
the old capital contributions they have made.
Article 36 After the establishment of a company, no
shareholder may illegally take away the contribution capital.
Section 2 Organizational Structure
Article 37 The shareholders' meeting of a limited liability
company shall comprise all the shareholders. It shall be the
authority of the company, and shall exercise its authorities
according to this Law.
Article 38 The shareholders' meeting shall exercise the
following authorities:
(1) determining the company's operation guidelines and
investment plans;
(2) electing and changing the director and supervisors
assumed by non-representatives of the employees, and
determining the matters concerning their remuneration;
(3) deliberating and approving the reports of the board of
directors;
(4) deliberating and approving the 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 profit distribution plans and
loss recovery plans of the company;
(7) making resolutions on the increase or decrease of the
company's registered capital;
(8) making resolutions on the issuance of corporate bonds;
(9) adopting resolutions on the assignment, split-up, change
of company form, dissolution, liquidation of the company;
(10) revising the articles of association of the company;
(11) other functions as specified in the articles of
association. Where any of the matters as listed in the
preceding paragraph is consented by all the shareholders it in
writing, it is not required to convene a shareholders'
meeting. A decision may be made directly with the signatures
or seals of all the shareholders.
Article 39 The shareholders' meeting shall be convened and
presided over by the shareholder who has made the largest
percentage of capital contributions and shall exercise its
authorities according to this Law.
Article 40 The shareholders' meetings shall be classified
into regular meetings and temporary meetings. The regular
meetings shall be timely held in pursuance with the articles
of association. Where a temporary 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, a temporary meeting
shall be held.
Article 41 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 does not 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 does not perform his duties, the meetings shall be
presided over by a director jointly recommended by half or
more of the directors. Where a limited liability company has
not set up the 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
does not perform 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
shareholder representing 1 / 10 or more of the voting rights
may convene and preside over such meetings on his/its own
initiative.
Article 42 Every shareholder shall be notified 15 days before
a shareholders' meeting is held, unless it is otherwise
prescribed by the articles of association or it is otherwise
stipulated by all the shareholders. A shareholders' meeting
shall make records for the decisions on the matters discussed
at the meeting. The shareholders who attend the meeting shall
affix their signatures to the records.
Article 43 The shareholders shall exercise their voting
rights at the shareholders' meetings on the basis of their
respective percentage of the capital contributions, unless it
is otherwise stipulated by the articles of association.
Article 44 The discussion methods and voting procedures of
the shareholders' meeting shall be prescribed in the articles
of association, unless it is otherwise provided for by this
Law. A resolution made at a shareholders' meeting on amending
the articles of association, 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 45 The board of directors established by a limited
liability company shall comprise 3 up to 13 members, unless it
is otherwise provided for in Article 51 of this Law. If a
limited liability company established by 2 or more
state-funded enterprises or other state-funded investors, the
board of directors shall comprise the representatives of
employees of this company. The board of directors of any other
limited liability company may also comprise the
representatives of employees of the company concerned. The
employees' representatives who are to serve as the board of
directors shall be democratically elected by the employees of
the company through the general meeting of the representatives
of employees, employees' meeting of the company or in any
other way. The board of directors shall have one board
chairman and may have one or more deputy chairman. The
appointment of the chairman and deputy chairman shall be
prescribed in the articles of association.
Article 46 The terms of office of the directors shall be
provided for in the articles of association, 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, exercise the authorities of the
directors according to laws, administrative regulations as
well as the articles of association.
Article 47 The board of directors shall be responsible for
the shareholders' meeting and exercise the following
authorities:
(1) convening shareholders' meetings and reporting the status
on work thereto;
(2) carrying out the resolutions made at the shareholders'
meetings;
(3) determining the operation plans 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
decrease of registered capital, as well as on the issuance of
corporate bonds;
(7) working out the company's plans on merger, split-up,
change of the company form, dissolution, and 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 remuneration, and, according to the nomination
of the manager, deciding on the hiring or dismissing of vice
manager(s) and the person in charge of finance as well as
their remuneration;
(10) working out the company's basic management system; and
(11) other functions as prescribed in the articles of
association.
Article 48 The 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 does not perform his duties, the meeting 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 does not perform his duties, the meeting may be
convened or presided over by a director jointly recommended by
half or more of the directors.
Article 49 The discussion methods and voting procedures of
the board of directors shall be prescribed by the articles of
association, unless it is otherwise provided for by this Law.
The board of directors shall make records of the decisions on
the matters discussed at the meetings thereof. The
shareholders who attend the meeting shall affix their
signatures to the records.
In the voting on a resolution of the board of directors, one
person shall have one vote.
Article 50 A limited liability company may have a manager who
shall be hired or dismissed upon the decision of the board of
directors. The manager shall be responsible for the board of
directors and shall exercise the following authorities:
(1) taking charge of the management of the production and
business operations of the company, and organizing to
implement the resolutions of the board of directors;
(2) organizing the execution of the company's annual
operational 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 concrete bylaws;
(6) proposing to hire or dismiss the company's vice
manager(s) and person(s) in charge of finance;
(7) deciding on the hiring or dismissing of the
persons-in-charge other than those who shall be decided by the
board of directors; and
(8) other authorities conferred by the board of directors.
If the articles of association prescribe otherwise the
authorities of managers, the provisions in the articles of
association shall be followed. The manager attends the
meetings of the board of directors as a non-voting delegate.
Article 51 As for a limited liability company with relatively
less shareholders or 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 authorities of the acting director shall be prescribed in
the articles of association.
Article 52 A limited liability company may set up a board of
supervisors, which shall comprise at least 3 persons. A
limited liability company, which has relatively less
shareholders or is relatively small in scale, may have 1 or 2
supervisors, and does not have to establish a board of
supervisors. The board of supervisors shall include
representatives of shareholders and representatives of the
employees of the company at an appropriate ratio which shall
be specifically stimulated in the articles of association. 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 meeting of the employees'
representatives or employees' meeting, 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 the
board of supervisors is unable to or does not 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 work as a
supervisor.
Article 53 Every 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 re-election. If no
reelection is timely carried out after the expiry of the term
of office of the supervisors, or 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 authorities of the supervisors
according to laws, administrative regulations as well as the
articles of association.
Article 54 The board of supervisors or supervisor of a
company with no board of supervisors may exercise the
following authorities:
(1) checking the financial affairs of the company;
(2) supervising the duty-related acts of the directors and
senior managers, and bringing forward proposals on the removal
of any director or senior manager who violates any law,
administrative regulation, the articles of association or any
resolution of the shareholders' meeting;
(3) demanding any director or senior manager to make
corrections if his act has injured the interests of the
company;
(4) proposing to convening temporary shareholders' meetings,
and convening and presiding over shareholders' meetings when
the board of directors does not exercise the functions of
convening and presiding over the shareholders' meetings as
prescribed in this Law;
(5) bringing forward proposals at shareholders' meetings;
(6) initiating actions against directors or senior managers
according to Article 152 of this Law; and
(7) other duties as prescribed by the articles of
association.
Article 55 The supervisors may attend the meetings of the
board of directors as non-voting delegates, and may raise
questions or suggestions on the matters to be decided by the
board of directors.
If the board of supervisors or supervisor of the company with
no board of directors finds that the company is running
abnormally, it (he) may make investigations. Where necessary,
it (he) may hire an accounting firm to help it (him) with the
relevant expenses being born by the company.
Article 56 The board of supervisors shall hold meetings at
least once a year. The supervisors may propose to hold
temporary meetings of the board of supervisors.
The discussion methods and voting procedures of the board of
supervisors shall be prescribed in the articles of
association, unless it is otherwise stimulated in this Law.
The resolution of the board of supervisors shall be adopted by
half or more of the supervisors. The board of supervisors
shall make records for the resolutions on the matter it
discusses, which shall be signed by the supervisors in
presence.
Article 57 The expenses necessary for the board of
supervisors or the supervisor of a company with no board of
supervisors to perform its (his) duties shall be borne by the
company.
Section 3 Special Provisions on One-person Limited Liability
Companies
Article 58 The provisions of this Section shall apply to the
establishment and organizational structure of a one-person
limited liability. As for any matter not prescribed in this
Section, it shall be subject to the provisions of 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 a juridical person
shareholder.
Article 59 The minimum amount of registered capital of a
one-person limited liability company shall be RMB 100, 000
Yuan. The shareholder shall, in a lump sum, pay the capital
contribution as specified in the articles of association.
One natural person is allowed to establish merely one
one-person limited liability company which shall not set up
any further one-person limited liability company.
Article 60 A one-person limited liability company shall, in
the company registration, give a clear indication that it is
solely-funded by one natural person or one juridical person,
and the same shall be specified in the business license of the
company.
Article 61 The articles of association of a one-person
limited liability company shall be formulated by the
shareholders.
Article 62 A one-person limited liability company may not set
up the board of directors. When the shareholders make a
decision on any of the matters as listed in Article 38 of this
Law, they shall make it in written form, and preserve it in
the company after signed by the shareholders.
Article 63 A one-person limited liability company shall make
a financial statement at the end of every fiscal year, which
shall be subject to the audit by an accounting firm.
Article 64 If the shareholder of a one-person limited
liability company is unable to prove that the property of the
one-person limited liability company is independent from his
own property, he shall bear joint liabilities for the debts of
the company.
Section 4 Special Provisions on Solely State-funded Companies
Article 65 The provisions of this Chapter shall apply to the
establishment and organizational structure of the solely
state-owned companies. Any matter not prescribed by this
Chapter shall be subject to the provisions of Sections 1 and 2
of this Chapter.
The term "solely state-owned company" as mentioned in this law
refers to a limited liability company established through
investment solely by the state, for which the State Council or
the local people's government authorizes the state-owned
assets supervision and administration institution of the
people's government at the same level to perform the functions
of the capital contributors.
Article 66 The articles of association of a solely
state-owned company shall be formulated by the state-owned
assets supervision and administration institution, or shall be
drafted by the board of directors and then be reported to the
state-owned assets supervision and administration institution
for approval.
Article 67 A solely state-owned company shall not set up the
shareholders' meeting, and the functions of the shareholders'
meeting shall be exercised by the state-owned assets
supervision and administration institution. The state-owned
assets supervision and administration institution may
authorize the board of directors of the company to exercise
some of the functions of the shareholders' meeting and decide
on important matters of the company, excluding those that must
be decided by the state-owned assets supervision and
administration such as merger, split-up, dissolution of the
company, increase or decrease of registered capital as well as
the issuance of corporate bonds. The merger, split-up,
dissolution or application for bankruptcy of an important
solely state-owned company shall be subject to the examination
of the state-owned assets supervision and administration
institution, and then be reported to the people's government
at the same level for approval. The term "important solely
state-owned company" as mentioned in the preceding paragraph
shall be determined according to the provisions of the State
Council.
Article 68 A solely state-owned company shall establish the
board of directors, which shall exercise its functions
according to Articles 47 and 67 of this Law. Every term of
office of the directors shall not exceed 3 years. The board of
directors shall comprise representatives of the employees. And
the members of the board of directors shall be designated by
the state-owned assets supervision and administration
institution, but of whom the representatives of the employees
shall be elected through the meeting of the representatives of
the employees of the company. The board of directors shall
have one chairman and may have a deputy chairman. The chairman
and deputy chairman shall be designated by the state-owned
assets supervision and administration institution from the
members of the board of directors.
Article 69 A solely state-owned company shall have a manager,
who shall be hired or dismissed by the board of directors and
exercise his authorities according to Article 50 of this Law.
Upon consent of the state-owned assets supervision and
administration institution, the members of the board of
directors may concurrently hold the post of manager.
Article 70 None of the chairman, deputy chairman, directors
and senior managers of a solely state-owned company may
concurrently hold a post in any other limited liability
company, joint stock limited company or any other economic
organization, unless it is permitted by the state-owned assets
supervision and administration institution.

Article 71 The board of supervisors of a solely state-owned
company shall comprise at least 5 persons, of whom the
employees' representatives shall account for not less than
1/3, and the concrete percentage shall be specified in the
articles of association.
The members of the board of supervisors shall be appointed by
the state-owned assets supervision and administration
institution, however, of whom the employees' representatives
shall be elected through the meeting of representatives of the
employees of the company. The chairman of the board of
supervisors shall be appointed by the state-owned assets
supervision and administration institution from the members of
the board of supervisors. The board of supervisions shall
exercise the functions as mentioned in Article 54 (1) through
(3) of this Law and those prescribed by the State Council.

Chapter III Transfer of Stock Rights of a Limited Liability Company

Article 72 All or some of the stock rights of the shareholders of a limited liability company may be transferred
between the shareholders.
Where a shareholder intends to transfer his/its stock rights to any non-shareholder, he/it shall be subject to the approval
of more than half of the other shareholders. The shareholder shall notify the other shareholders in written form of the
matters on the transfer of stock rights for their approval. If any of the other shareholders fails to give it a reply within
30 days after the receipt of the written notice, it shall be deemed to have agreed to the transfer. If half or more of the
other shareholders disagree to the transfer, the shareholders who disagree to the transfer shall purchase the stock rights
to be transferred. If they refuse to purchase these stock rights, they shall be deemed to have agreed to the transfer.
Under the same conditions, the other shareholders have a preemptive right to purchase the stock rights to be
transferred upon their approval. If two or more shareholders claim the preemptive rights, they shall determine their
respective percentage of purchase through negotiation. If they fail to reach an agreement during the negotiation, they shall
exercise the preemptive rights on the basis of their respective percentage of capital contributions. Unless it is
otherwise provided for of the transfer of stock rights in the
articles of association, the articles of association shall be
followed.
Article 73 When the people's court transfers the stock rights
of a shareholder in light of the mandatory enforcement
procedures as provided for in laws, it shall notify the
company and all the shareholders, and the other shareholders
have a preemptive right under the same conditions. If any of
the other shareholders fails to exercise their preemptive
rights within 20 days after he/it receives the notice of the
court, it shall be deemed to have waived his/its preemptive
right.
Article 74 After a company transfers its stock rights
according to Articles 72 and 73 of this Law, it shall cancel
the capital contribution certificate of the former
shareholder, issue a capital contribution certificate to the
new shareholder and modify the record on the shareholders and
their capital contributions in the articles of association and
the register of shareholders. And no voting of the
shareholders' meeting is needed for the modification of the
articles of association.
Article 75 Under any of the following circumstances, a
shareholder, who votes against the resolution of the
shareholders' meeting, may request the company to purchase its
stock rights at a reasonable price:
(1) The company has not distributed any profit to the
shareholders for 5 consecutive years, though it has made
profits for five consecutive years and meets the profit
distribution conditions as prescribed in this Law;
(2) The merger, split-up, or transfer of the main properties
of the company is undertaken;
(3) When the business term as prescribed in the articles of
association expires or other reasons for dissolution as
stipulated in the articles of association occur, the
shareholders' meeting makes the company continue existing by
adopting a resolution on modifying the articles of
association.
Within 60 days after the resolution is adopted at the
shareholders' meeting, if the shareholder and the company fail
to reach an agreement on the purchase of stock rights, the
shareholder may file a lawsuit to the people's court within 90
days after the resolution is adopted at the shareholders'
meeting.
Article 76 After the death of a natural person shareholder,
his lawful inheritor may inherit the shareholder's
qualifications, unless it is otherwise prescribed by the
articles of association.

Chapter IV Establishment and Organizational Structure of a
Joint Stock Limited Company Section 1 Establishment
Article 77 The establishment of a joint stock limited company
shall meet the following conditions:
(1) The number of initiators meets the quorum;
(2) The capital stock subscribed for and raised by the
initiators reaches the minimum amount of the statutory
capital;
(3) The issuance of shares and the preparatory work accord
with the provisions of the law;
(4) The articles of association are formulated by the
initiators, and are adopted at the establishment meeting if
the company is to be launched by stock floatation;
(5) The company has a name, and its organizational structure
accords with that of a joint stock limited company
(6) The company has a domicile.Article 78 A joint stock limited company may be established
　

by ways of promotion or stock floatation. The establishment of
a company by promotion means that the initiators establish a
company by subscribing for all of the shares that should be
issued by the company. The establishment of a company by stock
floatation means that the initiators establish a company by
subscribing for some of the shares that should be issued by
the company and offering the remaining shares to the general
public or to particular objects for subscription.

Article 79 To establish a joint stock limited company, there
shall be not less than 2 but not more than 200 initiators, of
whom half or more shall have a domicile within the territory
of China.Article 80 The initiators of a joint stock limited company
　

shall undertake the preparatory work of the company. They
shall conclude an agreement of initiators to clarify their
respective rights and obligations during the course of
establishing the company.

Article 81 Where a joint stock limited company is established
by promotion, its registered capital shall be the total
capital stock subscribed for by all the initiators as
registered in the company registration authority. The minimum
amount of initial capital contributions to be made by all
initiators shall be not less than 20% of the total registered
capital, and the remaining amount shall be paid off by the
initiators within 2 years as of the day when the company is
established, while for an investment company, the remaining
amount may be paid off within 5 years. Before the registered
capital is paid off, no stock may be offered to others for
subscription.
Where a joint stock limited company is established by stock
floatation, its registered capital shall be the total actually
paid capital stock as registered in the company registration
authority. The minimum amount of the registered capital of a
joint stock limited company shall be RMB 5 million Yuan. If
any law or administrative regulation prescribes a relatively
higher minimum amount of registered capital, such provision
shall be followed.
Article 82 The articles of association of a joint stock
limited company shall specify the following matters:
(1) the name and domicile of the company;
(2) the business scope of the company;
(3) the form of company establishment;
(4) total shares, value of each share, and the amount of
registered capital of the company;
(5) the name of every initiator, the shares it has subscribed
for, as well as the form and date of capital contributions;
(6) the composition, authorities, term of office, and rules
of procedure of the board of directors,
(7) the legal representative of the company;
(8) the composition, authorities, term of office, and rules
of procedure of the board of supervisors;
(9) the methods for profit distribution of the company;
(10) the reasons for dissolution of the company and
liquidation methods;
(11) the methods for issuing notices or public announcements
of the company; and
(12) other matters deemed necessary by the meetings of
shareholders.
Article 83 The form of capital contributions of initiators
shall be subject to the provisions in Article 27 of this Law.
Article 84 When establishing a joint stock limited company by
promotion, the initiators shall subscribe, in writing, for the
full amount of shares prescribed in the articles of
association. In the case of paying the capital contributions
at one time, the initiators shall make the payment in a lump
sum; in the case of paying the capital contributions by
installments, the initiators shall make the down payment
immediately. In the case of making capital contributions in
non-monetary properties, the initiators shall go through the
procedures for the transfer of property rights according to
law.
If any of the initiators fails to make capital contributions
by following the provisions of the preceding paragraph, it
shall bear the liabilities for breach of contract according to
the stipulations in the initiators agreement. After the
initiators have made their down payment, they should elect the
board of directors and the board of supervisors. The board of
directors shall file a registration application with the
company registration authority and submit thereto the articles
of association, the capital verification certification as
issued by a lawfully established capital verification
institution, as well as other documents as stimulated by the
laws and administrative regulations.
Article 85 For a joint stock limited company established by
stock flotation, the shares subscribed for by the initiators
shall not be less than 35 % of the total shares. However, if
it is otherwise provided for by any law or administrative
regulation, such law or administrative regulation shall
prevail.
Article 86 When raising shares in the public, the initiators
shall publish a prospectus and prepare share subscription
forms. The share subscription form shall involve the items
listed in Article 87, and a subscriber shall fill in the
number and amount of shares he subscribes for and his
domicile, and shall affix his signature or seal thereto. The
subscriber shall pay the shares pursuant to the number of
shares he has subscribed for.
Article 87 The prospectus shall be accompanied by the
articles of association formulated by the initiators and shall
state the following:
(1) the number of shares subscribed for by the initiators;
(2) the value and issuing price of each share;
(3) the total number of unregistered stocks issued;
(4) the purposes of the funds raised;
(5) the rights and obligations of the subscribers; and
(6) the beginning and ending dates for the public offer and a
statement that the subscribers may revoke their subscriptions
if the offer is under-subscribed at the close of the offer.
Article 88 The public offer shares shall be underwritten by a
lawfully established securities company, and an underwriting
agreement shall be concluded.
Article 89 As for the public offer shares, the initiators
shall sign an agreement with the receiving bank.
The receiving bank shall receive and hold as an agent the
payments for shares in light of the agreement, issue receipts
to subscribers who have made the payments and be obliged to
issue evidence of receipt of payments to the relevant
departments.
Article 90 After the full payment for the public offer
shares, they shall be verified by a lawfully established
capital verification institution, and a certification shall be
issued thereby. The initiators shall hold a company
establishment meeting within 30 days, which shall comprise the
subscribers. If the public offer shares are not fully
subscribed for at the expiration of the time limit prescribed
in the prospectus, or the initiators fail to hold an
establishment meeting within 30 days after the full payment
for the public offer shares, the subscribers may demand the
initiators to make repayments for the public offer shares plus
an interest calculated at the bank deposit interest rate for
the same period.
Article 91 The initiators shall notify every subscriber of
the date of the establishment meeting or make a public
announcement on the meeting 15 days in advance. The
establishment meeting may not be held, unless subscribers
representing at least half of the shares appear. The
establishment meeting shall exercise the following
authorities:
(1) deliberating the report on the pre-establishment
activities prepared by the sponsors;
(2) adopting the articles of association;
(3) electing members of the board of directors;
(4) electing members of the board of supervisors;
(5) checking the expenses incurred for the establishment of
the company;
(6) checking the value of the assets contributed by the
initiators in lieu of pecuniary payment for the shares;
(7) Where any force majeure or major change of the operation
conditions directly affect the establishment of the company,
the resolution not to establish the company may be adopted. A
resolution adopted at the establishment meeting on any of the
matters as mentioned in the previous paragraph requires
affirmative votes by subscribers representing more than half
of the votes of those attending the meeting.
Article 92 The initiators and subscribers shall not withdraw
their share capital after making payments for the shares they
have subscribed for or after making capital contributions by
using non-monetary properties, unless the public offer shares
have not been fully subscribed within the time limit, the
initiators fail to convene the establishment meeting within
the time limit or the establishment meeting has decided not to
set up the company.
Article 93 The board of directors shall, within 30 days after
the establishment meeting ends, file an application for
registration with the company registration authority and
submit the following documents to it:
(1) a company registration application;
(2) the records of the establishment meeting;
(3) the articles of association;
(4) a capital verification certification;
(5) the appointment documents and identity certificates of
the legal representative, directors and supervisors;
(6) the certifications for the juridical person or natural
person status of the initiators; and
(7) the certification on the domicile of the company. As for
a joint stock limited company established by stock floatation
that makes public stock offers, in additions to the
aforementioned documents, it shall submit to the company
registration authority the approval document issued by the
securities regulatory institution of the State Council.
Article 94 After the establishment of a joint stock limited
company, if any of the initiators fails to make full payment
for the capital contributions as provided for in the articles
of association, it shall make up the arrears, and the other
initiators shall bear joint liabilities. After the
establishment of a joint stock limited company, if it is found
that the actual value of the non-monetary properties used as
capital contributions for the establishment of the company is
obviously lower than that as prescribed in the articles of
association, the initiator who has made the capital
contribution shall make up the balance, and the other
initiators shall bear joint liabilities.
Article 95 The initiators of a joint stock limited company
shall bear the following responsibilities:
(1) In the case of failure to establish the company, bearing
joint liabilities for the debts and expenses resulted from the
pre-establishment activities;
(2) In the case of failure to establish the company, bearing
joint liabilities for refunding the paid-in capital as well as
the interests thereof computed at the bank interest rate for
the same period; and
(3) If the company's interest is injured in the course of its
establishment due to the negligence of the initiators, being
liable for making compensations to the company.
Article 96 Where a limited liability company is changed into
a joint stock limited company, the total amount of the paid-in
capital shall be not less than the total amount of the net
assets. Where a limited liability company is changed into a
joint stock limited company, the public offer stocks issued
for the purpose of increasing the capital shall comply with
the law.
Article 97 A joint stock limited company shall prepare and
keep in the company the articles of association, register of
the shareholders, counterfoil of corporate bonds, records of
the shareholders' meetings, records of the meetings of the
board of directors, records of the meetings of the board of
supervisors, and financial reports.
Article 98 The shareholders shall be entitled to refer to the
articles of association, register of the shareholders,
counterfoil of corporate bonds, records of the shareholders'
meeting meetings, records of the meetings of the board of
directors, records of the meetings of the board of supervisors
and financial reports, and may bring forward proposals or
raise questions about the business operation of the company.
Section 2 Shareholders' Meeting
Article 99 The shareholders' meeting of a joint stock limited
company shall comprise all the shareholders. It is the
company's organ of power, which shall exercise its authorities
according to law.
Article 100 The provisions regarding the authorities of the
shareholders' meeting of a limited liability company as
prescribed in the first paragraph of Article 38 of this law
shall apply to the shareholders' meeting of a joint stock
limited company.
Article 101 An annual session of the shareholders' meeting
shall be held each year. Under any of the following
circumstances, a temporary shareholders' meeting shall be held
within 2 months:
(1) The number of directors is less than two-thirds of the
number of directors as required by this law or the number of
directors as prescribed in the articles of association;
(2) The un-recovered losses of the company reach one-third of
the total pain-in capital;
(3) At the request of the shareholders separately or
aggregately holding 10% or more of the company's shares;
(4) The board of directors deems it necessary;
(5) At the request of the board of supervisors; and
(6) Other circumstances as prescribed in the articles of
association.
Article 102 A session of the shareholders' meeting shall be
convened by the board of directors and be 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.
If the board of directors or the acting director is unable or
fails to fulfill the obligation of convening the meetings of
the shareholders' meeting, the board of supervisors shall
convene and preside over such meetings. If the board of
supervisors does not convene or preside over such meetings,
the shareholders separately or aggregately holding 1/10 or
more of the shares may convene and preside over such meetings
on their own initiative.
Article 103 As for a shareholders' meeting to be held, a
notice shall be given to every shareholder 20 days in advance,
which shall state the time and place of the meeting as well as
the matters to be deliberated at the meeting. As for a
temporary meeting of the shareholders' meeting, a notice shall
be given to every shareholder 15 days in advance. As for the
issue of unregistered stocks, the time and place of the
meeting as well as the matters to be deliberated at the
meeting shall be announced 30 days in advance.
The shareholders separately or aggregately holding 3% or more
of the shares of the company may put forward a written
temporary proposal to the board of directors 10 days before a
shareholders' meeting is held. The board of directors may
notify other shareholders within 2 days and submit the
temporary proposal to the meeting of the shareholders' meeting
for deliberation. The contents of a temporary proposal shall
fall within the scope to be decided by the shareholders'
meeting, and the temporary proposal shall have a clear topic
for discussion and matters to be decided. The shareholders'
meeting shall not make any decision on any matter not listed
in the notice as mentioned in the preceding two paragraphs. If
the holders of unregistered stocks attend the shareholders'
meeting, they shall have their stocks preserved in the company
during the period from 5 days before the meeting is held to
the day when the shareholders' meeting is closed.
Article 104 When a shareholder attends the shareholders'
meeting, he shall have one voting right for each share he
holds. However, the company has no voting right for its own
shares it holds. When any resolution is to be made by the
shareholders' meeting, it shall be adopted by shareholders
representing more than half of the voting rights of the
shareholders in presence. However, when the shareholders'
meeting makes a decision to modify the articles of association
or to increase or reduce the registered capital, or a
resolution about the merger, split-up, dissolution or change
of the company form, the resolution shall be adopted by
shareholders representing 2/3 or more of the voting rights of
the shareholders in presence.

Article 105 For the important matters such as company transfer, being assignee of any important asset or providing
guarantee for any other person, which shall be decided through the shareholders' meeting under this Law and the articles of
association, the board of directors shall timely call a shareholders' meeting for voting.

Article 106 When the shareholders' meeting elects directors
or supervisors, it may, according to the articles of
association or resolution of the shareholders' meeting, adopt
a cumulative voting system. The term "cumulative voting
system" as mentioned in this Law refers to a system of voting
by shareholders for the election of directors or supervisors
at a session of the shareholders' meeting in which the
shareholder can multiply his voting rights by the number of
candidates and vote them all for one candidate for director or
supervisor.

Article 107 A shareholder may entrust an agent to attend a
shareholders' meeting. The agent shall present a power of
attorney issued by the shareholder to the company, and shall
exercise his voting rights within the authorization scope.

Article 108 The shareholders' meeting shall prepare records
regarding the decisions on the matters discussed by it. The
chairman of the meeting and the directors in presence shall
affix their signatures to the records, which shall be
preserved together with the book of signatures of the
shareholders in presence as well as the power of attorney
thereof.

Section 3 The Board of Directors and Manager

Article 109 A joint stock limited company shall set up a
board of directors, which shall comprise 5-19 persons.
The board of directors may include representatives of the
company's employees. The representatives of the employees who
serve as board directors shall be democratically elected
through the meeting of the representatives of the employees,
meeting of employees or otherwise.
The provisions in Article 46 of this Law on the term of office
of the directors of a limited liability company shall apply to
that of the director of a joint stock limited company. The
provisions in Article 47 of this Law on the functions of the
board of directors of a limited liability company shall apply
to that of the board of directors of a joint stock limited
company.
Article 110 The board of directors shall have one chairman,
and may have a deputy chairman. The chairman and deputy
chairmen shall be elected by more than half of all the
directors. The chairman of the board of directors shall
convene and preside over the meetings of the board of
directors and examine the implementation of the resolutions of
the board of directors. The deputy chairman shall assist the
chairman to work. If the chairman is unable or fails to
perform his duties, the deputy chairman shall perform such
duties. If the deputy chairman of the board of directors is
unable or fails to perform his duties, the director who is
jointly recommended by half or more of the directors shall
perform such duties.

Article 111 The board of directors shall convene at least two
meetings every year, and shall notice all directors and
supervisors 10 days before it holds a meeting. The
shareholders representing 1/10 or more of the voting rights,
or 1/3 of the directors, or the board of supervisors may bring
forward a proposal on holding a temporary meeting of the board
of directors. The chairman of the board of directors shall,
within 10 days after he receives such a proposal, convene and
preside over a meeting of the board of directors. If the board
of directors holds a temporary meeting, it may separately
decide the method and time limit for the notification on
convening meetings of the board of directors.

Article 112 No meeting of the board of directors may be held,
unless more than half of the directors are present. When the
board of directors makes a resolution, it shall be adopted by
more than half of all the directors.
As for the voting on a resolution of the board of directors, a
director shall have one vote only.
Article 113 The directors shall attend in person the meetings
of the board of directors. Where any director is unable to
attend the meeting for a certain reason, he may, by issuing a
written power of attorney, entrust another director to attend
the meeting on his behalf, and the scope of authorization
shall be stated in the power of attorney.
The board of directors shall prepare records regarding the
resolutions on the matters discussed at the meeting, which
shall be signed by the directors in presence. The directors
shall be responsible for the resolutions of the board of
directors. In case a resolution of the board of directors is
in violation of laws, administrative regulations, articles of
association or resolutions of the shareholders' meetings and
causes any serious loss to the company, the directors who
participate in adopting the resolution shall make
compensation. However, if a director is proven to have
expressed his objection to the voting on such resolution and
his objection was recorded in the records, then the director
may be exempted from liabilities.
Article 114 A joint stock limited company may have a manager,
who shall be hired or dismissed by the board of directors.
The provisions of Article 50 of this Law on the authorities of
the manager of a limited liability company shall apply to that
of the manager of a joint stock limited company.

Article 115 The board of directors of a company may decide to
appoint a member of the board of directors to concurrently
take the post of the manager.

Article 116 No company may, directly or via its subsidiary,
lend money to any of its directors, supervisors or senior
managers.

Article 117 A company shall regularly disclose to its
shareholders the information about remunerations obtained by
the directors, supervisors and senior managers from the
company. Section 4 the Board of Supervisors
Article 118 A joint stock limited company shall set up a
board of supervisors, which shall comprise at least 3 persons.
The board of supervisors shall include representatives of
shareholders and an appropriate percentage of representatives
of the company's employees. The percentage of the
representatives of employees shall account for not less than
1/3 of all the supervisors, but the concrete percentage shall
be specified in the articles of association. The
representatives of employees who serve as members of the board
of supervisors shall be democratically elected through the
meeting of representatives of the company's employees,
shareholders' meeting or by other means. The board of
supervisors shall have one chairman, and may have a deputy
chairman. The chairman and deputy chairman shall elected by
more than half 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 the
board of supervisors is unable or fails to perform his duties,
the deputy chairman of the board of supervisors shall convene
and preside over the meeting of the board of supervisors. If
the deputy chairman of the board of supervisors is unable or
fails to perform the duties, the supervisor jointly
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 act as a
supervisor.
The provisions of Article 53 of this Law on the term of office
of the supervisors of a limited liability company shall apply
to that of the supervisors of a joint stock limited company.
Article 119 The provisions of Articles 54 and 55 of this Law
on the functions of a limited liability company shall apply to
that of the board of supervisors of a joint stock limited
company. The expenses necessary for the board of supervisors
to exercise its authorities shall be borne by the company.
Article 120 The board of supervisors shall hold at least one
meeting every 6 months. The supervisors may propose to convene
temporary meetings of the board of supervisors. The discussion
methods and voting procedures of the board of supervisors
shall be prescribed in the articles of association, unless it
is otherwise provided for by this Law.
The board of supervisors shall prepare records for the
decisions on the matters discussed at the meeting, which shall
be signed by the supervisors in presence.
Section 5 Special Provisions on the Organizational Structure
of a Listed Company
Article 121 The term "listed company" as mentioned in this
Law refers to the joint stock limited companies whose stocks
are listed and traded in a stock exchange.
Article 122 Where a listed company purchases or sells any
important assets, or provides a guarantee of which the amount
exceeds 30% of its total assets, a resolution shall be made by
the shareholders' meeting and adopted by shareholders
representing 2/3 of the voting rights of the shareholders in
presence.
Article 123 A listed company shall have independent
directors. And the concrete measures shall be formulated by
the State Council.
Article 124 A listed company may have a secretary of the
board of directors, who shall be responsible for the
preparation of the sessions of shareholders' meeting and
meetings of the board of directors, preservation of documents,
management of the company's stock rights, information
disclosure, and etc.

Article 125 Where any of the directors has any relationship
with the enterprise involved in the matter to be discussed at
the meeting of the board of directors, he shall not vote on
this resolution, nor may he vote on behalf of any other
person. The meeting of the board of directors shall not be
held unless more than half of the unrelated directors are
present at the meeting. A resolution of the board of directors
shall be adopted by more than half of the unrelated directors.
If the number of unrelated directors in presence is less than
3 persons, the matter shall be submitted to the shareholders'
meeting of the listed company for deliberation.

Chapter V Issuance and Transfer of Shares of a Joint Stock Limited Company Section 1 Issuance of Shares

Article 126 The capital of a joint stock limited company shall be divided into shares, and all the shares shall be of
equal value.
The shares of the company are represented with stocks. A stock is a certificate issued by the company to certify the share
held by a shareholder.

Article 127 The issuance of shares shall comply with the
principle of fairness and impartiality, and the shares of the
same class shall have the same rights and benefits. The stocks
issued at the same time shall be equal in price and shall be
subject to the same conditions. The price of each share
purchased by any organization or individual shall be the same.
Article 128 The stocks may be issued at a price equal to or
above the par value, but not below the par value.
Article 129 The stocks shall be in paper form or in other
forms prescribed by the securities
regulatory institution of the State Council. A stock shall
state the following major items:
(1) the company name;
(2) the date of establishment of the company;
(3) the class and par value of the stock, as well as the
number of shares it represents; and
(4) the serial number of the stock.
The stock shall bear the signature of the legal representative
and the seal of the company.
The stocks held by the initiators shall be marked with the
words "initiators' stocks".
Article 130 The stocks issued by a company may be registered
stocks or unregistered stocks. The stocks issued to initiators
or juridical persons shall be registered stocks, which shall
state the names of such initiators or juridical persons, and
shall not be registered in any other person's name or the name
of any representative.
Article 131 A company that issues registered stocks shall
prepare a register of shareholders, which shall state the
following:
(1) the name and domicile of every shareholder;
(2) the number of shares held by each shareholder;
(3) the serial numbers of the stocks held by every
shareholder; and
(4) the date on which every shareholder acquired his shares.
A company issuing unregistered stocks shall record the amount,
serial numbers and issuance date of the stocks.
Article 133 After a joint stock limited company is
established, it shall formally deliver the stocks to the
shareholders. No company may deliver any stock to the
shareholders prior to its establishment.
Article 134 Where a company intends to issue new stocks, it
shall, under its articles of association, make a resolution on
the following matters through the shareholders' meeting or the
board of directors:
(1) the class and amount of new stocks;
(2) the issuing price of the new stocks;
(3) the beginning and ending dates for the issuance of the
new stocks; and
(4) the class and amount of the new stocks to be issued to
the original shareholders.
Article 135 When a company publicly issues new stocks upon
approval of the securities regulatory institution of the State
Council, it shall publish a new stock prospectus and its
financial reports, and shall make a stock subscription form.
The provisions of Articles 88 and 89 of this Law shall apply
to the public offering of new stocks of a company.
Article 136 When a company issues new stocks, it may make a
pricing plan in light of its business operation and financial
status.
Article 137 After a company raises enough capital, it shall
go through the modification registration in the company
registration authority, and make an public announcement.
Section 2 Transfer of Shares
Article 138 The shares held by the stockholders may be
transferred according to law.
Article 139 Where a stockholder intends to transfer its
shares, it shall transfer its shares in a lawfully established
stock exchange or by any other means as prescribed by the
State Council.
Article 140 The transfer of a registered stock shall be
effected by the stockholder's endorsement or by any other
means stipulated by relevant laws or administrative
regulations. After the transfer, the company shall record the
name and domicile of the transferee in the register of
shareholders. Within 20 days before a meeting of shareholders
is held, or within 5 days prior to the benchmark date decided
by the company for the distribution of dividends, no
modification registration may be made to the register of
shareholders as mentioned in the preceding paragraph. However,
if any law otherwise provides for the modification
registration of the register of shareholders of listed
companies, the latter shall prevail.
Article 141 The transfer of an unregistered stock becomes
valid as soon as the stockholder delivers the stock to the
transferee.
Article 142 The shares of a company held by the initiators of
this company shall not be transferred within 1 year as of the
day of establishment of the company. The shares issued before
the company publicly issues shares shall not be transferred
within 1 year as of the day when the stocks of the company get
listed and are traded in a stock exchange. The directors,
supervisors and senior managers of the company shall declare
to the company the shares held by them and the changes
thereof. During the term of office, the shares transferred by
any of them each year shall not exceed 25% of the total shares
of the company he holds. The shares of the company held by the
aforesaid persons shall not be transferred within 1 year as of
the day when the stocks of the company get listed and are
traded in a stock exchange. After any of the aforesaid persons
is removed from his post, he shall not transfer the shares of
the company he holds. The articles of association may have
other restrictions on the transfer of shares held by the
directors, supervisors and senior managers.
Article 143 A company shall not purchase its own shares,
except for any of the following circumstances:
(1) to decrease the registered capital of the company;
(2) to merge with another company holding shares of this
company;
(3) to award the employees of this company with shares; or
(4) It is requested by any shareholder to purchase his shares
because this shareholder raises objections to the company's
resolution on merger or split-up made at a session of the
meeting of shareholders. Where a company needs to purchase its
own shares for any of the reasons as mentioned in Items (1)
through (3) of the preceding paragraph, it shall be subject to
a resolution of the shareholders' meeting. After the company
purchases its own shares according to the provisions of the
preceding paragraph, it shall, under the circumstance as
mentioned in Item (1) , write them off within 10 days after
the purchase; while under the circumstance as mentioned either
in Item (2) or (4) , shall transfer them or write them off
within 6 months.
The shares purchased by the company according to Item (3) of
the preceding paragraph shall not exceed 5% of the total
shares already issued by this company. The funds used for the
share acquisition shall be paid from the aftertax profits of
the company. The shares purchased by the company shall be
transferred to the employees within 1 year. No company may
accept any subject matter taking the stocks of this company as
a pledge.
Article 144 In case any registered stocks are stolen, lost or
destroyed, the shareholder may request the people's court to
declare these stocks invalid in light of the public notice
procedure prescribed in the Civil Procedural Law of the
People's Republic of China. After the people's court has
invalidated these stocks, the shareholder may file an
application to the company for issuance of new stocks.
Article 145 The stocks of a listed company shall get listed
and traded according to relevant laws, administrative
regulations, as well as the dealing rules of the stock
exchange.
Article 146 A listed company shall, in light of laws and
administrative regulations, publicize its financial status,
business operation and important lawsuits, and shall publish
its financial reports once every six months in each fiscal
year.

Chapter VI Qualifications and Obligations of the Directors,
Supervisors and Senior Managers of a Company
Article 147 Anyone who is under any of the following
circumstances shall not take the post of a director,
supervisor or senior manager of a company:
(1) Being without or with limited capacity of civil conduct;
(2) He has been sentenced to any criminal penalty due to an
offence of corruption, bribery, encroachment of property,
misappropriation of property or disrupting the economic order
of the socialist market economy and 5 years have not passed
since the completion date of the execution of the penalty; or
he has ever been deprived of his political rights due to any
crime and 3 years have not passed since the completion date of
the execution of the penalty;
(3) Where he was a former director, factory director or
manager of a company or enterprise which was bankrupt and
liquidated, and was personally liable for the bankruptcy of
such company or enterprise, three years have not passed since
the date of completion of the bankruptcy and liquidation of
the company or enterprise;
(4) Where he was the legal representative of a company or
enterprise, and the business license of this company or
enterprise was revoked and this company or enterprise was
ordered to close due to violation of the law, and he is
personally liable for the revocation, three years have not
passed since the date of the revocation of the business
license thereof;
(5) He has a relatively large amount of debt which is due but
uncleared.
In case a company elects or appoints any director or
supervisor, or hires any senior manager by violating the
provisions in the preceding paragraph, the election,
appointment or hiring shall be invalidated. In case any
director, supervisor or senior manager, during his term of
office, is under any of the circumstances as mentioned in the
preceding paragraph, the company shall dismiss him from his
post.
Article 148 The directors, supervisors and senior managers
shall comply with laws, administrative regulations and the
articles of association. They shall bear the obligations of
fidelity and diligence to the company. No director, supervisor
or senior manager may take any bribe or other illegal gains by
taking the advantage of his authorities, or encroach on the
properties of the company.
Article 149 No director or senior manager may have any of the
following acts:
(1) Misappropriating funds of the company;
(2) Depositing the company's funds into an account in his own
name or in any other individual's name;
(3) Without the consent of the shareholders' meeting,
shareholders' assembly or board of directors, loaning the
company's fund to others or providing any guaranty to any
other person by using the company's property as in violation
of the articles of association;
(4) Signing a contract or trading with this company by
violating the articles of association or without the consent
of the shareholders' meeting or shareholders' assembly;
(5) Without the consent of the shareholders' meeting or
shareholders' assembly, seeking business opportunities for
himself or any other person by taking advantages of his
authorities, or operating for himself or for any other person
any like business of the company he works for;
(6) Taking commissions on the transactions between others and
this company into his own pocket;
(7) Disclosing the company's secrets without permit;
(8) Other acts that are inconsistent with the obligation of
fidelity to the company. The income of any director or senior
manager from any act in violation of the preceding paragraph
shall belong to the company.
Article 150 Where any director, supervisor or senior manager
violates laws, administrative regulations or the articles of
association during the course of performing his duties, if any
loss is caused to the company, he shall make compensation.
Article 151 If the shareholder's meeting or shareholders'
meeting demands a director, supervisor or senior manager to
attend the meeting as a non-voting delegate, he shall do so
and shall answer the shareholders' inquiries.
The directors and senior managers shall faithfully offer
relevant information and materials to the board of supervisors
or the supervisor of the limited liability company with no
board of supervisors, and none of them may obstruct the board
of supervisors or supervisor from exercising its (his)
authorities.
Article 152 Where a director or senior manager is under the
circumstance as stated in Article 150 of this Law, the
shareholder(s) of the limited liability company or joint stock
limited company separately or aggregately holding 1% or more
of the total shares of the company may require the board of
supervisors or the supervisor of the limited liability company
with no board of supervisors in writing to file a lawsuit in
the people's court. If the supervisor is under the
circumstance as stated in Article 150 of this Law, the
aforesaid shareholder(s) may require the board of directors or
the acting director of the limited liability company with no
board of directors to in writing lodge a lawsuit in the
people's court.
If the board of supervisors, or supervisor of a limited
liability company with no board of supervisors, or the board
of directors or the acting director refuses to lodge a lawsuit
after it (he) receives a written request as mentioned in the
preceding paragraph, or if it or he fails to file a lawsuit
within 30 days after it receives the request, or if, in an
emergency, the failure to lodge a lawsuit immediately will
cause unrecoverable damages to the interests of the company,
the shareholder(s) as listed in the preceding paragraph may,
on their own behalf, directly lodge a lawsuit in the people's
court.
In case the legitimate rights and interests of a company are
impaired and losses are caused to the company, the
shareholders as mentioned in the preceding paragraph may
initiate a lawsuit in the people's court in light of the
provisions of the preceding two paragraphs.
Article 153 If any director or senior manager damages the
shareholders' interests by violating any law, administrative
regulation or the articles of association, the shareholders
may lodge a lawsuit in the people's court.

Chapter VII Corporate Bonds
Article 154 The term "corporate bonds" as mentioned in this
Law refers to the securities that are issued by a company
according to the statutory procedures with guaranteed payment
of the principal plus interest by a specified future date. To
issue corporate bonds, a company shall meet the issuance
requirements of the Securities Law of the People's Republic of
China.
Article 155 After an application for issuing corporate bonds
is approved by the department authorized by the State Council,
the company shall publish its bond issuance plan, which shall
mainly state the following items:
(1) the name of the company;
(2) the purposes of use of the corporate bonds;
(3) the total amount of corporate bonds and par value
thereof;
(4) the method for determining the interest rate of the
bonds;
(5) the time limit and method for paying the principal plus
interest;
(6) guarantee of the bonds;
(7) the issuing price of the bonds, and beginning and ending
dates of the issuance;
(8) the net assets of the company;
(9) the total amount of corporate bonds having been issued
but not yet due; and
(10) the underwriters of the corporate bonds.
Article 156 The physical bonds issued by a company shall
state the name of company, par value, interest rate, time
limit for repayment, and etc., and shall bear the signature of
the legal representative and the seal of the company.
Article 157 The corporate bonds may be registered or
unregistered bonds.
Article 158 A company shall prepare and keep the counterfoils
of corporate bonds. If the company issues registered corporate
bonds, the counterfoils thereof shall state the following
items:
(1) the names and domiciles of the bondholders;
(2) the dates on which the bondholders acquires the bonds and
the serial numbers of the bonds;
(3) the total amount of the bonds, par value, interest rate,
time limit and method for repayment of principal plus
interest; and
(4) the date on which the bonds are issued.
If the company issues unregistered corporate bonds, the
counterfoils thereof shall state the total amount of the
bonds, interest rate, time limit and method for repayment,
issuance date and serial numbers of the bonds.
Article 159 The registration and settlement institutions of
registered corporate bonds shall establish bylaws on the
registration, preservation, interest payment and acceptance of
bonds.
Article 160 The corporate bonds may be transferred. The
transfer price shall be negotiated by the transferor and
transferee.
The transfer of any corporate bonds, which gets listed and is
traded in a stock exchange, shall comply with the dealing
rules of the stock exchange.
Article 161 The transfer of registered corporate bonds shall
be effected by the bondholder's endorsement or by other
methods prescribed by the relevant laws and administrative
regulations. In the case of transfer of registered bonds, the
company shall record the name and domicile of the transferee
in the counterfoil of corporate bonds. The transfer of
unregistered corporate bonds takes effect as soon as the
bondholder delivers the bonds to the transferee.
Article 162 A listed company may, upon the resolution of the
shareholders' meeting, issue corporate bonds that may be
converted into stocks and shall work out concrete conversion
measures in the corporate bond issuance plan. To issue
corporate bonds that may be converted into stocks, the listed
company shall file an application with the securities
regulatory institution for examination and approval. The
corporate bonds that may be converted into stocks shall be
marked with the words "convertible corporate bonds", and the
number of convertible company bonds shall be specified in the
company's records of bondholders.
Article 163 Where any convertible company bonds is issued,
the company shall exchange its stocks for the bonds held by
the bondholders in the prescribed method of conversion,
provided that the bondholders have the option on whether or
not to convert their bonds.

Chapter VIII Financial Affairs and Accounting of a Company
Article 164 A company shall establish its own financial and
accounting bylaws according to laws, administrative
regulations and provisions of the treasury department of the
State Council.
Article 165 A company shall, after the end of each fiscal
year, formulate a financial report, and shall have it checked
by an accounting firm. The financial report shall be work out
according to laws, administrative regulations and provisions
of the treasury department of the State Council.
Article 166 A limited liability company shall submit the
financial report to every shareholder within the time limit as
prescribed in the articles of association. The financial
report of a joint stock limited company shall be ready for the
consultation of the shareholders at the company 20 days before
the annual meeting of the shareholders is held. A joint stock
limited company of public offer stocks shall make a public
announcement of its financial report.
Article 167 Where a company distributes its aftertax profits
of the current year, it shall draw 10 percent of the profits
as the company's statutory common reserve. The company may
stop drawing if the accumulative balance of the common reserve
has already accounted for over 50 percent of the company's
registered capital.
If the accumulative balance of the company's statutory common
reserve is not enough to make up for the losses of the company
of the previous year, the current year's profits shall first
be used for making up the losses before the statutory common
reserve is drawn therefrom according to the provisions of the
preceding paragraph. After the company draws the statutory
common reserve from the aftertax profits, it may, upon a
resolution made by the shareholders' meeting, draw a
discretionary common reserve from the aftertax profits. After
the losses have been made up and common reserves have been
drawn, a limited liability company shall distribute the
remaining profits according to Article 35 of this Law; a joint
stock limited company shall distribute the remaining profits
in light of the proportions of shares held by shareholders,
unless it is not permitted in the articles of association to
distribute profits according to the proportions of shares held
by shareholders.
If the shareholders' meeting, shareholders' assembly or board
of directors distributes the profits by violating the
provisions of the preceding paragraph before the losses are
made up and the statutory common reserves are drawn, the
profits distributed must be refunded to the company. No profit
may be distributed for the company's shares held by this
company.
Article 168 The premium of a joint stock limited company from
the issuance of stocks at a price above the par value of the
stocks, and other incomes listed in the capital accumulation
fund according to provisions of the treasury department of the
State Council shall be listed as the capital accumulation
funds of the company.
Article 169 The capital accumulation funds of the company
shall be used for making up losses, expanding the production
and business scale or increasing the registered capital of the
company. But the capital accumulation funds shall not be used
for making up the company's losses.
When the statutory common reserve is changed to capital, the
remainder of the common reserve shall not be less than 25 % of
the registered capital prior to the increase.
Article 170 Where a company plans to hire or dismiss any
accounting firm to undertake the auditing of the company, a
resolution shall be made by the shareholders' meeting or
shareholders' assembly or the board of directors according to
the provisions of the articles of association. Where the
shareholders' meeting or shareholders' assembly or the board
of directors adopts a voting on the dismissal of any
accounting firm, it shall allow the accounting firm to state
its own opinions.
Article 171 A company shall provide to the accounting firm it
hires truthful and complete accounting vouchers, account
books, financial and accounting statements and other
accounting materials, and may not refuse to do so or conceal
any of them or make any false statements.
Article 172 Except for the statutory account books, a company
shall not set up other account books.
No company asset may be deposited into any individual's
account.

Chapter IX Merger and Split-up of Company, Increase and
Deduction of Registered Capital
Article 173 The merger of a company may be effected by way of
merger or consolidation. In the case of merger, a company
absorbs any other company and the absorbed company is
dissolved; in the case of consolidation, two or more companies
combine together for the establishment of a new one, and the
existing ones are dissolved.
Article 174 As for a corporate merger, both parties to the
merger shall conclude an agreement with each other and
formulate balance sheets and checklists of properties. The
companies involved shall, within ten days as of making the
decision of merger, notify the creditors, and shall make a
public announcement on a newspaper within 30 days. The
creditors may, within 30 days as of the receipt of the notice
or within 45 days as of the issuance of the public
announcement if it fails to receive a notice, require the
company to clear off its debts or to provide corresponding
guarantees.
Article 175 In the case of a merger, the credits and debts of
the companies involved shall be succeeded by the company that
survives the merger or by the newly established company.
Article 176 As for the split-up of a company, the properties
thereof shall be divided accordingly, and balance sheets and
checklists of properties shall be worked out. The company
shall, within 10 days as of the day when the decision of
split-up is made, notice the creditors and shall make a public
announcement on a newspaper within 30 days.
Article 177 The post-split companies shall bear joint
liabilities for the debts of the former company before it is
split up, unless it is otherwise prescribed by the company and
the creditors before the split-up with regard to the clearance
of debts in written agreement.
Article 178 Where a company finds it necessary to reduce its
registered capital, it must work out balance sheets and
checklists of properties.
The company shall, within ten days as of the day when the
decision of reducing registered capital, notify the creditors
and make a public announcement on a newspaper within 30 days.
The creditors shall, within 30 days as of the receipt of a
notice or within 45 days as of the issuance of the public
announcement if it fails to receive a notice, be entitled to
require the company to clear off its debts or to provide
corresponding guarantees. The registered capital of the
company after reducing its registered capital shall not be any
lower than the bottom line requirement as provided for by law.
Article 179 Where a limited liability company increases its
registered capital, the capital contributions of the
shareholders for the increased amount shall be subject to the
relevant provisions of the present Law regarding the capital
contributions for the establishment of a limited liability
company. Where a joint stock limited company issues new stocks
for increasing its registered capital, the subscription for
new stocks by shareholders shall be subject to the relevant
provisions of the present Law regarding the payment of stock
money for the establishment of a joint stock limited company.
Article 180 Where any of the registered items is changed
during the process of merger or split-up of a company, the
company shall go through modification registration with the
company registration authority. If it is dissolved, it shall
be deregistered according to law. If any new company is
established, it shall go through the procedures for company
establishment according to law.
In the case of increasing or reducing its registered capital,
a company shall go through the modification registration with
the company registration authority according to law.

Chapter X Dissolution and Liquidation of a Company
Article 181 A company may be dissolved under any of the
following circumstances:
(1) The term of business operation as stipulated by the
articles of association expires or any of the matters for
dissolution as stipulated in the articles of association of
the company appears;
(2) The shareholders' meeting or the shareholders' assembly
decides to dissolve it;
(3) It is necessary to be dissolved due to merger or split-up
of the company;
(4) Its business license is canceled or it is ordered to
close down or to be dissolved according to law; or
(5) The people's court decides to dissolve it according to
Article 183 of this Law.
Article 182 Where any of the circumstances as prescribed in
Article 181 (1) of this Law occurs, a company may continue to
exist by modifying its articles of association. To modifying
its articles of association according to the provisions of the
preceding paragraph, the consent of the shareholders who hold
two thirds or more of the voting rights shall be obtained if
it is a limited liability company, and the consent of two
thirds or more of the voting rights the shareholders who
attend the meeting of the shareholders shall be obtained if it
is a joint stock limited company.
Article 183 Where a company meets any serious difficulty
during its operation or management so that the interests of
the shareholders will be subject to heavy loss if it continues
to exist and it cannot be solved by any other means, the
shareholders who hold ten percent or more of the voting rights
of all the shareholders of the company may plead the people's
court to dissolve the company.
Article 184 Where any company is dissolved according to the
provisions of Article 181 (1) , (2) , (4) or (5) of this Law,
a liquidation group shall be formed, within fifteen days as of
the occurrence of the causes of dissolution, to carry out a
liquidation. The liquidation group of a limited liability
company shall comprise the shareholders, while that of a joint
stock limited company shall comprise the directors or any
other people as determined by the shareholders' meeting. Where
no liquidation group is formed within the time limit, the
creditors may plead the people's court to designate relevant
persons to form a liquidation group. The people's court shall
accept such request and form a liquidation group so as to
carry out the liquidation in a timely manner.
Article 185 The liquidation group may exercise the following
functions during the process of liquidation:
(1) liquidating the properties of the company, and producing
balance sheets and asset checklists;
(2) informing creditors by notice or public announcement;
(3) disposing and liquidating the businesses of the company
that have not been completed;
(4) clearing off the outstanding taxes and the taxes incurred
in the process of liquidation;
(5) clearing off credits and debts;
(6) disposing the residual properties; and
(7) participating in the civil proceedings of the company.
Article 186 The liquidation group shall, within ten days as
of its formation, notify the creditors, and shall make a
public announcement within 60 days on newspapers. Creditors
shall, within thirty days as of the receipt of a notice or
within 45 days as of the issuance of the public announcement
in the case of failing to receiving a notice, declare credits
against the liquidation group.
To declare credits, a creditor shall explain the relevant
matters and provide relevant evidential materials. The
liquidation group shall check in the credits, and may not
clear off any of the debts of any creditor during the period
of credit declaration.
Article 187 The liquidation group shall, after liquidating
the properties of the company and producing balance sheets and
checklists of properties, make a plan of liquidation, and
report it to the shareholders' meeting or the shareholders'
assembly or the people's court for confirmation.
The residual assets that result from paying off the
liquidation expenses, wages of employees, social insurance
premiums and legal compensation premiums, the outstanding
taxes and the debts of the company with the assets of the
company may, in the case of a limited liability company, be
distributed according to the proportions of capital
contributions of the shareholders, and in the case of a joint
stock limited company, according to the proportions of stocks
held by the shareholders. During the term of liquidation, the
company continues to exist, but may not carry out any business
operation that has nothing to do with liquidation. None of the
properties of the company may be distributed to any
shareholder before they are used for the clearing off as
stated in the preceding paragraph.
Article 188 If the liquidation group finds that the
properties of the company is not sufficient for clearing off
the debts after liquidating the properties of the company and
producing balance sheets and checklists of properties, it
shall file an application to the people's court for
bankruptcy. Once the people's court makes a judge declaring
the bankruptcy of the company, the liquidation group shall
hand over the liquidation matters to the people's court.
Article 189 After liquidation of the company is completed,
the liquidation group shall formulate a liquidation report,
which shall be submitted to the shareholders' meeting or the
shareholders' assembly or the people's court for confirmation
and shall be submitted to the company registration authority
for writing off the registration of the company. It shall also
make a public announcement on its termination.
Article 190 The members of the liquidation group shall devote
themselves to their duties and fulfill their obligations of
liquidation according to law.
None of the members of the liquidation group may take any
bribe or any other illegal proceeds by taking advantage of his
position, nor may he misappropriate any of the properties of
the company. Where any of the members of the liquidation group
causes any loss to the company or any creditor by intention or
due to gross negligence, he shall make corresponding
compensations.
Article 191 Where a company is declared bankrupt according to
law, it shall carry out a bankruptcy liquidation in accordance
with the provisions concerning bankruptcy liquidation.

Chapter XI Branches of Foreign Companies
Article 192 The term "foreign company" as mentioned in this
Law refers to a company established outside of the territory
of China according to any foreign law.
Article 193 A foreign company, which plans to establish any
branch within the territory of China, shall submit an
application with the competent authority of China, and shall
submit relevant documents such as the articles of
incorporation, the company registration certificate as issued
by the country of establishment and etc.. Upon the approval,
it shall go through registration formalities with the company
registration authority according to law and obtain a business
license.
The measures for the examination and approval of the branches
of foreign companies shall be separately formulated by the
State Council.
Article 194 Where a foreign company establishes any branch
within the territory of China, it must appoint a
representative or an agent within the territory of China to
take charge of the branch, and shall allocate to the branch
corresponding funds for the business activities it is engaged
in.
Article 195 The branch of any foreign company shall indicate
in its name the nationality and the form of liability of the
foreign company concerned.
The branch of a foreign company shall keep the articles of
corporation of the foreign company at its own place.
Article 196 The branch of a foreign company established
within the territory of China does not have the status of a
juridical person.
The foreign company shall bear civil liabilities for the
business operation of its branches undertaken within the
territory of China.
Article 197 The branches of foreign companies which are
established upon approval shall accord with the laws of China
when undertaking their business activities within the
territory of China, and may not injure the social public
interests of China, and the lawful rights and interests
thereof shall be protected by Chinese law.
Article 198 Where a foreign company relinquishes any of its
branches within the territory of China, it shall clear off the
debts thereof according to law, and shall carry out a
liquidation in accordance with the provisions of this Law on
the procedures for the liquidation of companies. Before the
debts are cleared off, it may not transfer any of the
properties of the branch out of China.

Chapter XII Legal Liabilities
Article 199 Where anyone, in violation of the provisions of
this Law, obtains the registration of a company by making a
false report of his register capital, submitting false
materials or by any other fraudulent means so as to conceal
important facts, he shall be ordered by the company
registration authority to make corrections. In the case of
making a false report of his register capital, he shall be
fined not less than 5% but not more than 15% of the fabricated
registered capital; in the case of submitting false materials
or by any other fraudulent means so as to conceal important
facts, he shall be fined not less than 5,000 Yuan but not more
than 50,000 Yuan; if the circumstances are serious, the
company registration certificate shall be revoked or the
business license shall be cancelled.
Article 200 Any of the initiators or shareholders of a
company, who makes any false capital contribution, or fails to
deliver or fails to deliver in good time the monetary or
non-monetary properties used as capital contributions, shall
be ordered by the company registration authority to make
corrections, and shall be fined not less than 5% but not more
than 15% of the sum of false capital contributions.
Article 201 Where any initiator or shareholder unlawfully
take away its capital contribution after the company is
established, he shall be ordered by the company registration
authority to make corrections, and shall be fined not less
than 5% but not more than 15% of the capital contribution he
has unlawfully taken away.
Article 202 Any company which has established another account
books apart from the legally prescribed account books and
violates of the present Law shall be ordered by the treasury
department of the people's government at the county level or
above to make corrections, and shall be fined not less than
50,000 Yuan but not more than 500, 000 Yuan.
Article 203 Where a company makes any false records or
conceals any important fact in such materials as financial and
accounting statements submitted to the relevant departments in
charge, the relevant department in charge shall impose a fine
of not more than 30, 000 Yuan but not more than 300, 000 Yuan
upon the directly liable persons in charge and other directly
liable persons.
Article 204 Where a company fails to draw legal accumulation
funds according to the present Law, it shall be ordered by the
treasury department of the people's government at the county
level or above to make up the amount it is due, and may be
fined up to 200, 000 Yuan.
Article 205 Where any company fails to inform its creditors
by notice or by public announcement during the process of
merger, split, reducing its registered capital or liquidation,
it shall be ordered by the company registration authority to
make corrections, and may be fined not less than 10, 000 Yuan
but not more than 100, 000 Yuan.
Where, during the process of liquidation, any company hides
any of its properties or makes any false record in its balance
sheet or property checklist, or distributes any of the
company's properties before clearing off its debts, it shall
be ordered by the company registration authority to make
corrections, and may be fined not less than 5% but not more
than 10% of the value of the company properties it has hidden
or distributed prior to the clearing of company debts, and the
directly liable person-in-charge as well other directly liable
persons may be fined not less than 10, 000 Yuan but not more
than100, 000 Yuan.
Article 206 Where, during the process of liquidation, any
company undertakes any business activity which has nothing to
do with the liquidati