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Sole Proprietorship Enterprise Law
(Adopted by the 11th Session of the Standing Committee of the 9th National People's Congress)
Chapter One: General Provisions
Article 1 With a view to regulate the activities of sole proprietorship enterprises, to protect the lawful rights and
interests of sole proprietors and creditors of sole proprietorship enterprises, to safeguard the social and economic order, and to promote the development of socialist market economy, this Law is formulated in accordance with the Constitution.
Article 2 For purposes of this Law, a sole proprietorship enterprise means a business entity established within China
with its capital contributed by one individual and its assets owned personally by the sole proprietor, who assumes unlimited liability to the extent of his personal assets.
Article 3 A sole proprietorship enterprise's main place of business shall be its domicile.
Article 4 In conducting business activities, a sole proprietorship enterprise shall abide by law and administrative regulations, as well as the principle of good faith and may not harm the public interests.
A sole proprietorship enterprise shall fulfill its obligation to pay tax in accordance with the law.
Article 5 The state shall protect the property and other lawful rights and interests of a sole proprietorship enterprise in accordance with the law.
Article 6 A sole proprietorship enterprise shall hire workers in accordance with the law. The lawful rights and interests of
its workers are protected by law. The workers of the sole proprietorship enterprise shall establish a labor union in
accordance with the law, and the labor union shall conduct its activities in accordance with the law.
Article 7 A member of the Chinese Communist Party in a sole proprietorship enterprise shall conduct his activities in
accordance with the Charter of the Chinese Communist Party. Chapter Two: Establishment of Sole Proprietorship Enterprise
Article 8 For the establishment of a sole proprietorship enterprise, the following conditions shall be met:
(i) The sole proprietor is a natural person;
(ii) There is a lawful enterprise name;
(iii) There is capital contribution declared by the sole proprietor;
(iv) There is a permanent place and the necessary conditions for production and operation;
(v) There are necessary personnel.
Article 9 In establishing a sole proprietorship enterprise,
the sole proprietor or the agent appointed thereby shall
submit such documents as an application for the establishment
of a sole proprietorship enterprise, proof of identity of the
sole proprietor, proof of use of the place for production and
operation, etc. to the registration authority of the place
where the sole proprietorship enterprise will be located.
Where an agent is appointed to apply for the establishment of
the sole proprietorship enterprise, the power of attorney
issued by the sole proprietor and the legal identity of the
agent shall be presented.
A sole proprietorship enterprise may not engage in any
business prohibited by law or administrative regulations;
where the sole proprietorship enterprise intends to engage in
any business which requires approval by the relevant
authority, the approval document issued by the relevant
authority shall be presented at the time of applying for
establishment registration.
Article 10 The application form for the establishment of a
sole proprietorship enterprise shall set forth the following:
(i) name and domicile of the enterprise;
(ii) name and residence of the sole proprietor;
(iii) the amount and form of capital contribution;
(iv) the scope of business.
Article 11 The name of a sole proprietorship enterprise shall
be consistent with its form of liability and its type of
business.
Article 12 Within fifteen days of its receipt of the
application documents, the registration authority shall
register the sole proprietorship enterprise and issue a
business license thereto if the documents comply with the
requirements set forth herein, or deny registration and issue
a written response stating the reason for denial.
Article 13 The date of issuance of the business license for a
sole proprietorship enterprise shall be the date of its
establishment.
Prior to issuance of a business license for sole
proprietorship enterprise, the sole proprietor may not engage
in any business in the name of the sole proprietorship
enterprise.
Article 14 In establishing a branch of a sole proprietorship
enterprise, the sole proprietor or an agent appointed thereby
shall submit an application for registration to the
registration authority of the place where the branch will be
located, and the branch shall be issued a business license.
Upon approval and registration of the branch, its registration
certificate shall be filed with the registration authority
having jurisdiction over the sole proprietorship enterprise to
which such branch belongs.
The civil liabilities of the branch shall be borne by the sole
proprietorship enterprise establishing such branch.
Article 15 Where during its existence, a sole proprietorship
enterprise undergoes a change which affects a registered item,
an application for registration amendment shall be submitted
to the registration authority in accordance with the law
within fifteen days of the decision to make such change.
Chapter Three: Sole Proprietor and Management of the Sole
Proprietor Enterprise's Affairs
Article 16 A person who is prohibited from engaging in any
for-profit activity may not apply for the establishment of a
sole proprietorship enterprise as a sole proprietor.
Article 17 A sole proprietor has lawful title to the assets of
the sole proprietorship enterprise, and any related right may
be assigned or inherited in accordance with the law.
Article 18 Where at the time of application for establishment,
the sole proprietor expressly declares any property jointly
owned by his family as capital contribution, he shall assume
unlimited liability to the extent of such joint property in
accordance with the law.
Article 19 A sole proprietor may manage the affairs of the
sole proprietorship enterprise by himself, and may also
appoint or hire another person with the capacity for civil act
to manage the sole proprietorship enterprise.
Where a sole proprietor appoints or hires another person to
manage the affairs of the sole proprietorship enterprise, he
shall conclude with the agent or employee a written contract
prescribing the entrusted affairs and the scope of authority
granted.
The agent or employee shall perform the obligations of good
faith and due care, and manage the affairs of the sole
proprietorship enterprise in accordance with the contract with
the sole proprietor.
Any restriction by the sole proprietor on the authority of the
agent or employee shall not constitutes a defense against a
third person in good faith.
Article 20 The person appointed or hired by the sole
proprietor to manage the affairs of the sole proprietorship
enterprise may not engage in any of the following conducts:
(i) demanding or accepting bribes by usurping his official
position;
(ii) converting property of the sole proprietorship enterprise
by usurping his official position or working relationship;
(iii) misappropriating funds of the sole proprietorship
enterprise by using them for his own purpose or lending them
to a third person.
(iv) depositing funds of the sole proprietorship enterprise in
his own name or in the name of any third person without
authorization;
(v) pledging assets of the sole proprietorship enterprise as
security without authorization;
(vi) engaging in any business in competition with the sole
proprietorship enterprise without consent by the sole
proprietor;
(vii) entering into any contract or conducting any transaction
with the sole proprietorship enterprise without consent by the
sole proprietor;
(viii) assigning any trademark or other intellectual property
of the sole proprietorship enterprise to a third person for
use without consent by the sole proprietor;
(ix) disclosing trade secrets of the sole proprietorship
enterprise;
(x) any other act prohibited by law or administrative
regulations.
Article 21 A sole proprietorship enterprise shall set up
accounting books and conduct accounting in accordance with the
law.
Article 22 Where a sole proprietorship enterprise employs
workers, it shall enter into labor contracts with the workers,
and ensure workplace safety and make full and timely payment
of wages.
Article 23 A sole proprietorship enterprise shall participate
in the social insurance scheme in accordance with the relevant
stipulations of the state, and shall pay social insurance
premiums for its workers.
Article 24 A sole proprietorship enterprise may apply for loan
and acquire land-use-rights in accordance with the law, and
shall enjoy other rights prescribed by law or administrative
regulations.
Article 25 No entity or individual may force a sole
proprietorship enterprise to contribute funds, goods or labor
in any manner in violation of law or administrative
regulations; a sole proprietorship enterprise is entitled to
reject any attempt forcing it to contribute funds, goods or
labor in violation of law.
Chapter Four: Dissolution and Liquidation of Sole
Proprietorship Enterprise
Article 26 A sole proprietorship enterprise shall be dissolved
in any of the following circumstances:
(i) The sole proprietor decides to dissolve the sole
proprietorship enterprise;
(ii) The sole proprietor is deceased or is declared deceased,
and there is no heir or the heir has renounced his
inheritance;
(iii) Its business license is lawfully revoked;
(iv) Any other situation prescribed by law or administrative
regulations has occurred.
Article 27 Where a sole proprietorship enterprise is to be
dissolved, the sole proprietor shall conduct liquidation
himself, or the creditors thereof may apply to the People's
Court to designate a liquidator to conduct liquidation.
Where the sole proprietor conducts liquidation himself, he
shall notify the creditors fifteen days prior to liquidation,
and where he is unable to give notice, he shall make a public
announcement. A creditor who has received such notice shall
file a claim with the sole proprietor within thirty days of
notification, and a creditor who has not received such notice
shall file a claim with the sole proprietor within sixty days
of the public announcement.
Article 28 Upon dissolution of a sole proprietorship
enterprise, the former sole proprietor shall be liable to
repay the debt incurred by the sole proprietorship enterprise
during its existence, provided that any claim not made by the
relevant creditor within five years shall be extinguished.
Article 29 Upon dissolution of a sole proprietorship
enterprise, its assets shall be paid out in the following
order of priority:
(i) wages and social insurance premiums payable;
(ii) taxes payable;
(iii) other debts.
Article 30 During liquidation, a sole proprietorship
enterprise may not engage in any business activity unrelated
to the liquidation. The sole proprietor may not transfer or
conceal the property of the sole proprietorship enterprise
prior to full payment of its debt.
Article 31 Where the assets of a sole proprietorship
enterprise are not sufficient to repay its debts in full, the
sole proprietor shall contribute his other personal assets to
cover the difference.
Article 32 Upon completion of the liquidation of a sole
proprietorship enterprise, the sole proprietor or the
liquidator designated by the People's Court shall prepare a
liquidation report, and shall conduct de-registration with the
registration authority within fifteen days.
Chapter Five: Legal Liabilities
Article 33 Where a sole proprietor, in violation of the
provisions hereof, obtains registration for the sole
proprietorship enterprise by submitting false documents or by
other fraudulent means, he shall be ordered to rectify the
situation, and shall be fined not more than five thousand
Yuan; where the circumstance is serious, its business license
shall be concurrently revoked.
Article 34 Where the name of a sole proprietorship enterprise,
in contravention to the provisions hereof, is not consistent
with the name registered with the registration authority, the
sole proprietorship enterprise shall be ordered to rectify the
situation within a prescribed time limit, and shall be fined
not more than two thousand Yuan.
Article 35 Where a sole proprietorship enterprise alters,
rents or assigns its business license to any other person, it
shall be ordered to rectify the situation, and any resulting
illegal income shall be confiscated, and the sole
proprietorship enterprise shall be fined not more than three
thousand Yuan; where the circumstance is serious, its business
license shall be revoked.
Where a person falsifies the business license of a sole
proprietorship enterprise, he shall be ordered to cease his
business, and any illegal income shall be confiscated, and he
shall be fined not more than five thousand Yuan. Where such
act constitutes a crime, criminal liability shall be imposed
in accordance with the law.
Article 36 If a sole proprietorship enterprise fails to
commence business within six months from the time of its
establishment, or it ceases to carry out its business for more
than six consecutive months, its business license shall be
revoked.
Article 37 Where a person, in violation of the provisions
hereof, engages in any business activity in the name of a sole
proprietorship enterprise while no business license has been
issued, he shall be ordered to cease such business activity,
and he shall be fined not more than three thousand Yuan.
Where a registered item of a sole proprietorship enterprise
has changed, if amendment registration is not carried out in
accordance herewith, the sole proprietorship enterprise shall
be ordered to carry out such registration within a prescribed
time limit; where amendment registration is not carried out
within the prescribed time limit, the sole proprietorship
enterprise shall be fined not more than two thousand Yuan.
Article 38 If while conducting the affairs of the sole
proprietorship enterprise, the person appointed or hired by a
sole proprietor breaches the contract between them, thereby
causing harm to the sole proprietor, such person shall be
liable for civil damages.
Article 39 Where a sole proprietorship enterprise, in
violation hereof, violates the lawful rights and interests of
its workers, fails to ensure the safety of its workers or
fails to pay their social insurance premiums, it shall be
sanctioned in accordance with the relevant laws or
administrative regulations, and liability shall be imposed on
the relevant person.
Article 40 Where the person appointed or hired by a sole
proprietor infringes on the property interests of the sole
proprietorship enterprise, he shall be ordered to make
restitution, and where the sole proprietorship enterprise
sustains any loss as a result, he shall be liable for damages
in accordance with the law; where he has made any illegal
gain, such illegal gain shall be confiscated; where a crime is
committed, criminal liability shall be imposed.
Article 41 Where a sole proprietorship enterprise is forced to
contribute resources in the form of labor, goods, or funds in
violation of law or administrative regulations, the
responsible party shall be sanctioned in accordance with the
relevant law or administrative regulation, and liability shall
be imposed on the relevant person.
Article 42 Where before or during the liquidation of a sole
proprietorship enterprise, the sole proprietorship enterprise
or the sole proprietor conceals or transfers its/his assets in
order to evade debts, such assets shall be reclaimed in
accordance with the law and sanction shall be imposed in
accordance with the law; where such act constitutes a crime,
criminal liability shall be imposed in accordance with the
law.
Article 43 Where the sole proprietor violates the provisions
hereof, thereby incurring civil liability for damages as well
as administrative or criminal fine, if his assets are not
sufficient to pay the above amounts in full, or his assets are
to be confiscated, satisfaction of the relevant civil
liability shall have priority.
Article 44 Where the registration authority grants registration to an application for the registration of sole proprietorship enterprise which fails to meet the conditions prescribed herein, or fails to grant registration to an application for registration of sole proprietorship enterprise which meets the conditions prescribed herein, the person
direct responsible shall be assessed administrative penalties in accordance with the law. Where such act constitutes a crime, criminal liability shall be imposed in accordance with
the law.
Article 45 Where the department in charge of the registration authority compels it to grant registration to an application which fails to meet the conditions prescribed herein, or engages in cover up for an illegal registration, the person with directly responsible shall be assessed administrative penalties in accordance with the law. Where such act
constitutes a crime, criminal liability shall be imposed in accordance with the law.
Article 46 Where the registration authority fails to grant registration to an application which meets the conditions prescribed herein, or fails to issue any response after the
legally prescribed time limit has expired, the party may apply for administrative review or bring an administrative suit.
Chapter Six: Supplementary Provisions
Article 47 This Law shall not apply to a wholly foreign-owned enterprise.
Article 47 This Law shall take effect as from January 1, 2000.
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