The Company Law of the

People's Republic of China

(revised in 2005)

Contents
 Chapter I General Provisions
Chapter II Establishment and Organizational Structure of a Limited Liability Company
Section 1 Establishment
Section 2 Organizational Structure
Section 3 Special Provisions on One-person   Limited Liability Companies
Section 4 Special Provisions on Solely State-owned Companies
Chapter III Transfer of Stock Right of a Limited Liability Company
Chapter IV Establishment and Organizational Structure of a Joint Stock Limited Company
Section 1 Establishment
Section 2 Shareholders' Meeting
Section 3 Board of Directors, Managers
Section 4 Board of Supervisors
Section 5 Special Provisions on the Organizational Structure of a Listed Company
Chapter V Issuance and Transfer of Shares of a Joint Stock Limited Company
Section 1 Issuance of Shares
Section 2 Transfer of Shares
Chapter VI Qualifications and Obligations of the Directors, Supervisors and Senior Managers of a Company
Chapter VII 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 the
socialist economic order, and promoting the development of the socialist market economy
 Article 2 The term "company" as mentioned in this Law refers to a limited liability company or a joint stock company limited 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 companywith 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 decisionson 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 establishingthe 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 liquidation, it shall be admonished by the company registration authority, and its illegal proceeds shall be confiscated.
 Article 207 Where the liquidation group fails to submit a liquidation report to the company registration authority according to the provisions of the present Law, or where any important fact is concealed or there is any important omission in the liquidation report it submits, it shall be ordered by the company registration authority to make corrections.
Where any member of the liquidation group takes advantage of his power to seek unlawful benefits for himself or any of his relatives, procures any unlawful gains or misappropriates any of the properties of the company, he shall be ordered by the company registration authority to return the properties of the company with his illegal gains being confiscated, and shall be fined 1 up to 5 times of the illegal proceeds.
 Article 208 Where any institution that undertakes the evaluation or verification of assets or the verification of certificates provides any false materials, its illegal proceeds shall be confiscated by the company registration authority, and be fined 1 up to 5 times of the illegal proceeds, and may be ordered by the competent administrative department to suspend its business operation or to withdraw the qualification certificates of the directly liable persons, and cancel its business license.
Where any institution that undertakes the evaluation or verification of assets or the verification of certificates makes any important omission in the report it submits, it shall be ordered by the company registration authority to make corrections; if the circumstances are serious, it shall be fined 1 up to 5 times of the proceeds it has obtained, and may be ordered by the competent administrative department to suspend its business operation and to withdraw the qualification certificates of the directly liable persons, and cancel its business license. Where the evaluation result or proof of asset verification or certificate verification, as provided by any institution that undertakes the evaluation or verification of assets or the verification of certificates, is proved to be untrue, which has caused any loss to the creditors of the company, it shall bear the compensation liabilities within the sum which is found to be untrue, unless it can prove that it has no fault in the incurrence of the loss.
 Article 209 Where any company registration authority registers any application that does not meet the conditions as provided for in the present Law, or fails to register any application that meets the conditions as prescribed in the present Law, the directly liable person-in-charge and other directly liable persons shall be imposed upon an administrative sanction.
 Article 210 Where the superior organ of any company registration authority forces the latter to register any application that does not satisfy the conditions as prescribed in the present Law or to refuse any application that meets the conditions as provided for in the present Law, or covers up for any illegal registration, the directly liable person-in-charge and other directly liable persons shall be imposed upon an administrative sanction according to law.
 Article 211 Where anyone fails to register as a limited liability company or joint stock limited company according to law but undertakes business operation in the name of a limited liability company or joint stock limited company, or fails to register as a subsidiary of a limited liability company or joint stock limited company according to law but undertakes business operationin the name of a subsidiary of the limited liability company or joint stock limited company, it shall be ordered by the company registration authority to make corrections or be clamped down on, and may be fined not more than 100,000 Yuan.
 Article 212 Where any company fails to start its business operation six months after the establishment of it without justifiable reasons, or suspends its business operation on its own initiative for consecutively six months after it has started the business operation, its business license may be revoked by the company registration authority.
Where any registered item of any company changes, and the company fails to go through the corresponding modification formalities according to the present Law, it shall be ordered by the company registration authority to make modification registration within a time limit; if it still fails to make the registration, it shall be fined not less than 10, 000 Yuan but not more than 100, 000 Yuan.
 Article 213 Where any foreign company violates this Law by unlawfully establishing any branch within China, it shall be ordered by the company registration authority to make corrections or to close it down, and may be fined not less than 50,000 Yuan but not more than 200, 000 Yuan.
 Article 214 Where anyone commits, in the name of a company, any serious violation of law so that the security of the state or the public interests of the society is injured, the business license of the company shall be revoked.
 Article 215 Where a company violates any provision of this Law, it shall bear the corresponding civil liabilities of compensation, and shall pay the corresponding fines and pecuniary penalties; if the property thereof is not enough to pay for the compensation, it shall bear the civil liabilities first.
 Article 216 Where any company violates the present Law and any crime is constituted, it shall be subject to criminal liabilities.
Chapter XIII Supplementary Provisions
 Article 217 Definitions of the following terms:
 (1) The "senior manager" refers to the manager, vice manager, person in charge of finance of a company, and the secretary of the board of directors of a listed company as well as any other person as stimulated in the articles of association.
 (2) The "controlling shareholder" refers to a shareholder whose capital contribution occupies 5% or more of the total capital of a limited liability company, or a shareholder whose stocks occupy more than 50% of the total equity stocks of a joint stock limited company, or a shareholder whose capital contribution or proportion of stocks is less than 50% but who enjoys a voting right according to its capital contribution or the stocks it holds is large enough to impose an big impact upon the resolution of the shareholders' meeting or the shareholders' assembly.
 (3) The "actual controller" refers to anyone who is not a shareholder but is able to hold actual control of the acts of the company by means of investment relations, agreements or any other arrangements.
 (4) The "connection relationship" refers to the relationship between the controlling shareholder, actual controller, director, supervisor, or senior manager of a company and the enterprise directly or indirectly controlled thereby, and any other relationship that may lead to the transfer of any interests of the company. However, the enterprises controlled by the state do not incur a connection relationship simply because their shares are controlled by the state.
 Article 218 The limited liability companies and joint stock limited companies invested by foreign investors shall be governed by the present Law. Where there are otherwise different provisions in any law regarding foreign investment, such provisions shall prevail.
 Article 219 This Law shall go into effect on January 1, 2006. 
    Promulgated by the Standing Committee of the National People's Congress on 2005-10-27

Provisions on the

 Takeover of Domestic Enterprises by Foreign Investors

Contents

Chapter I General Provisions

Chapter II Basic Systems

Chapter III Examination, Approval and Register

Chapter IV Equity-payment-based Takeover of Domestic Companies by Foreign Investors

Section 1 Conditions for Equity-payment-based Takeover

Section 2 Application Documents and Procedures

Section 3 Special Provisions on Special-purpose Companies

Chapter V Antitrust Review

Chapter VI Supplementary Provisions

Chapter I General Provisions

Article 1 For the purposes of promoting and regulating foreign investors’ investments in China, absorbing advanced technologies and management experiences from abroad, improving the level of utilizing foreign investments, realizing the reasonable allocation of resources, ensuring employment, as well as maintaining fair competition and state economic security, these provisions are formulated in accordance with the laws and administrative regulations on foreign-funded enterprises, the Company Law and other relevant laws and administrative regulations.

Article 2 The phrase “takeover of a domestic enterprise by a foreign investor” as mentioned in the present provisions means that the foreign investor purchases by agreement the equities of the shareholders of a domestic non-foreign-funded enterprise (hereinafter referred to as “domestic company”) or subscribes to the increased capital of a domestic company, and thus changes the domestic company into a foreign-funded enterprise (hereinafter referred to as “share right takeover”); or, a foreign investor establishes a foreign-funded enterprise, and through which it purchases by agreement the assets of a domestic enterprise and operates its assets, or, a foreign investor purchases by agreement the assets of a domestic enterprise, and then invest such assets to establish a foreign-funded enterprise and operate the assets (hereinafter referred to as “asset takeover”).

Article 3 To take over a domestic enterprise, a foreign investor shall abide by the laws, administrative regulations, and rules of China, comply with the principles of fairness, reasonableness, making compensation for equal value, as well as good faith, and shall not cause excessive centralization, exclude or limit competition, or disturb the social economic order, or damage the public benefits, or result in any loss to the state-owned assets.

Article 4 To take over a domestic enterprise, a foreign investor shall satisfy the requirements of the laws, administrative regulations, and rules of China concerning the qualifications of investors, and shall comply with the policies on the industry, land, environmental protection, etc.

For the industries where solely foreign-owned operation is not permitted by the “Catalog of Industries for the Guidance of Foreign Investment”, the takeover shall not lead to the consequence of a foreign investor’s holding all the equity rights of the enterprise; for the industries where it is required for a Chinese party to control or relatively control the shares, the Chinese party shall, after an enterprise in such industries is taken over, still control or relatively control the shares of the enterprise; for the industries where foreign investors are prohibited from operation, no foreign investor shall take over any enterprise in such industries.

The business scope of any enterprise invested by the domestic enterprise prior to the takeover shall meet the requirements in the industrial policies on foreign investments. If it does not, adjustment shall be made.

Article 5 If the takeover of a domestic enterprise by a foreign investor involves the transfer of state-owned property rights of the enterprise and management of state-owned property rights of listed companies, the relevant provisions on the management of state-owned assets shall be followed.

Article 6 Where a foreign investor intends to establish a foreign-funded enterprise by merging a domestic enterprise, it shall, in accordance with these Provisions, be subject to the approval of the examination and approval organ and modify the registration or go through the establishment registration in the registration administrative organ.

If the enterprise to be taken over is a domestic listed company, it shall, pursuant to the Measures for the Administration of Strategic Investment in Listed Companies by Foreign Investors, go through the relevant formalities in the securities regulatory institution of the State Council.

Article 7 All parties concerned to the takeover of a domestic enterprise by a foreign investor shall pay taxes under Chinese tax laws and accept the supervision of the tax organs.

Article 8 All parties concerned to the takeover of a domestic enterprise by a foreign investor shall abide by the laws and administrative regulations of China on the administration of foreign exchange. They shall timely go through the approval, register, archival filing and modification formalities in the foreign exchange control organs.

Chapter II Basic System

Article 9 For a foreign-funded enterprise established after takeover by a foreign investor, if the foreign investor’s proportion of investments exceeds 25% of the registered capital of this enterprise, this enterprise shall be entitled to enjoy the treatments to foreign-funded enterprises.

For a foreign-funded enterprise established after takeover by a foreign investor, if the foreign investor’s proportion of investments is less than 25% of the registered capital of this enterprise, this enterprise shall not enjoy the treatments to foreign-funded enterprises unless it is otherwise provided for by any law or administrative regulation. It shall follow the relevant provisions on borrowing foreign loans by non-foreign-funded enterprises when it borrows foreign loans. The examination and approval organ shall issue to it a Foreign-funded Enterprise Approval Certificate (hereinafter referred to as the Approval Certificate”) with the remark “The proportion of foreign investments is less than 25%”. The registration administrative organ and the foreign exchange control organ shall respectively issue to it a Foreign-funded Enterprise Business License and a Foreign Exchange Register Certificate with the remark “The proportion of foreign investments is less than 25%”.

Where a domestic company, enterprise or natural person takes over a domestic affiliated company in the name of an overseas company it lawfully established or controls, the foreign-funded enterprise so established shall not enjoy the treatments to foreign-funded enterprises, except that this overseas company subscribes to the increased capital of the domestic company or that it increases the capital of the enterprise established after takeover and the proportion of the capital increase exceeds 25% of the registered capital of the enterprise so established. For a foreign-funded enterprise established in either of the forms as mentioned in this paragraph, if the proportion of investments made by a foreign investor, who is not its actual controller, exceeds the 25% of its registered capital, it shall be entitled to enjoy the treatments to foreign-funded enterprises.

The treatments to a foreign-funded enterprise which is established after a foreign investor takes over a domestic listed company shall be governed by the relevant provisions of the state.

Article 10 The term “examination and approval organ” as mentioned in these Provisions refers to the Ministry of Commerce of the People’s Republic of China (hereinafter referred to as the MOFCOM) or the provincial commerce administrative departments (hereinafter referred to as the provincial examination and approval organs”). The term “registration administrative organ” refers to the State Administration for Industry and Commerce (hereinafter referred to as the SAIC) or its authorized local administrations for industry and commerce. The term “foreign exchange control organ” refers to the State Administration of Foreign Exchange (hereinafter referred to as the SAFE) or its branches.

Under the provisions of laws, administrative regulations, and rules, if a foreign-funded enterprise established after takeover falls within any special category or sector of foreign-funded enterprises which are subject to the examination and approval of the Ministry of Commerce (hereinafter referred to as the MOFCOM), the provincial examination and approval organ shall forward the application materials to the MOFCOM for examination and approval. The MOFCOM shall make a decision of approval or disapproval in pursuance of law.

Article 11 Where a domestic company, enterprise or natural person intends to take over its domestic affiliated company in the name of a company which it lawfully established or controls, it shall be subject to the examination and approval of the MOFCOM.

The parties concerned shall not dodge the aforesaid requirements by making investments within China through the foreign-funded enterprise, or by other ways.

Article 12 Where a foreign investor intends to obtain the actual controlling power of a domestic enterprise it plans to take over, and if any important industry is concerned, or if it has an impact on or may have an impact on the national economic security, or it will lead to the transfer of the actual controlling power of a domestic enterprise which holds a famous trademark or China Time-honored Brand, the parties concerned shall file an application with the MOFCOM.

If the parties concerned fail to do so, but its takeover has had or may have a serious impact on the national economic security, the MOFCOM may, jointly with the relevant departments, demand the parties concerned to terminate the transaction or transfer the relevant equities / assets or take other effective measures to eliminate the takeover’s impact on the national economic security.

Article 13 For an equity-based takeover by a foreign investor, the foreign-funded enterprise established after takeover shall succeed to the credits and debts of the domestic company it takes over.

For an asset-based takeover by a foreign investor, the domestic enterprise which sells its assets shall undertake its former credits and debts.

The foreign investor, the domestic enterprise to be taken over, the creditors and other parties concerned may enter into a separate agreement on the disposal of the credits and debts of the domestic enterprise to be taken over, provided that this agreement shall not impair the interests of any third party or public interests. An agreement on the disposal of credits and debts shall be submitted to the examination and approval organ.

A domestic enterprise to sell assets shall, not later than 15 days before the investor submits the application documents to the examination and approval organ, send a notice to the creditors and shall publish an announcement on a provincial newspaper or above, which is circulated nationwide.

Article 14 The parties to a takeover shall determine the transaction price on the basis of the assessment result of the equities to be transferred or of the assets to be sold, which is given by an asset assessment institution. The parties to a takeover may agree on an asset assessment institution lawfully established within China. A common international assessment method shall be adopted for the asset assessment. It is prohibited to divert any capital abroad in any disguised form by transferring any equities or selling assets at a price which is obviously lower than the assessment result.

The takeover of a domestic enterprise by a foreign investor, which may cause the modification of any equity formed by investments to state-owned assets or transfer of the property right of state-owned assets, shall satisfy the relevant provisions on the management of state-owned assets.

Article 15 The parties to a takeover shall state whether there is a connected relationship between the parties to the takeover. If both parties belong to a same actual controller, the parties shall disclose their actual controller to the examination and approval organ and make an explanation about whether the purpose of takeover and the assessment result conform to the fair value of the market. The parties shall not dodge the aforesaid requirements by trust, holding shares on behalf of others, or by other means.

Article 16 To establish a foreign-funded enterprise by taking over a domestic enterprise, a foreign investor shall, within 3 months from the date of issuance of business license to the foreign-funded enterprise, pay all the considerations to the shareholders who transfer the equities or to the domestic enterprise which sells the assets. In the case of any particular circumstance under which it is necessary to extend the time limit, the foreign investor shall, upon the approval of the examination and approval organ, pay 60% or more of the consideration within 6 months as of the date of issuance of the business license to the foreign-funded enterprise, and pay off the balance of consideration within one year, and distribute the proceeds according to the proportion of investments it has actually contributed.

Where a domestic company subscribes to the increased capital of a domestic company, the shareholders of the limited liability company or of the domestic joint stock limited company established by way of promotion shall pay at least 20% of the newly increased registered capital when the company applies for a business license for foreign-funded enterprise. The time to pay the other newly increased registered capital shall be in line with the Company Law, the laws on foreign investments and the Regulation on the Administration of Company Registration. If it is provided for in any other law or administrative regulation, such law or administrative regulation shall prevail. Where a joint stock limited company increase the registered capital by issuing new stocks, the shareholders shall subscribe to the new stocks in accordance with the relevant provisions on the payment for shares in the establishment of a joint stock limited company.

Where a foreign investor carries out an asset takeover, it shall stipulate the time limit for contribution of investments in the contract and articles of association of the foreign-funded enterprise to be established. Where the foreign investor establishes a foreign-funded enterprise, and through which purchases the assets of a domestic enterprise and operates such assets, it shall contribute the investments equivalent to the consideration of the assets within the time limit for payment of consideration as provided for in Paragraph 1 of the present Article. As for the remaining investments, the time limit for contribution shall satisfy the relevant provisions on the capital contribution for the establishment of foreign-funded enterprise.

Where a foreign investor establishes a foreign-funded enterprise by merging a domestic enterprise, if its investment proportion is less than 25 % of the registered capital of the enterprise and if it plans to make investments in cash, it shall make full contribution within 3 months from the day when a business license is issued to the foreign-funded enterprise; if it plans to make investments in kind or industrial property, it shall make full contribution within 6 months from the day when a business license is issued to the foreign-funded enterprise.

Article 17 The means of payment for the consideration shall conform to the relevant laws and administrative regulations of the state. If the foreign investor uses the Renminbi assets it lawfully owns as a means of payment, it shall obtain the approval of the department of foreign exchange control. If the foreign investor uses the shares over which it has the right of disposition, it shall comply with Article 4 of these Provisions.

Article 18 After a foreign investor purchases the equities of a domestic company by agreement, and the domestic company has been modified into a foreign-funded enterprise, the foreign-funded enterprise’s registered capital shall be the registered capital of the original domestic company, and the proportion of investments contributed by the foreign investor shall be the proportion of the purchased equities in the original registered capital.

Where a foreign investor subscribes to the capital increase of a domestic limited liability company, the registered capital of a foreign-funded enterprise established after the takeover shall be the summation of the registered capital of the former domestic company and the amount of capital increase. As to the foreign investor and other shareholders of the former domestic company it takes over, their respective proportion of capital contributions to the foreign-funded enterprise shall be determined on the basis of the assessment of the assets of the domestic company.

Where a foreign investor subscribes the capital increase of a domestic joint stock limited company, the registered capital shall be determined under the Company Law.

Article 19 For an equity-based takeover by a foreign investor, the upper limits on the total investments to the foreign-funded enterprise after takeover shall be determined according to the following rates, unless the state provides otherwise:

(1)If the registered capital is less than US$ 2.1 million, the total investments shall not exceed 10/7 of the registered capital;

(2)If the registered capital is not less than US$ 2.1 million but not more than US$ 5 million, the total investments shall not exceed two times the registered capital;

(3) If the registered capital is not less than US$ 5 million but not more than US$ 12 million, the total investments shall not exceed 2.5 times the registered capital; and

(4)If the registered capital is more than US$ 12 million, the total investments shall not exceed 3 times the registered capital.

Article 20 For an asset-based takeover, the foreign investor shall, according to the transaction price for the purchased assets and the actual production and operation scale, determine the total investments to the foreign-funded enterprise to be established. The proportion between the registered capital and total investments of the foreign-funded enterprise to be established shall conform to the relevant provisions.

Chapter III Examination, Approval and Registration

Article 21 For an equity-based takeover, a foreign investor shall, pursuant to the total investments of the foreign-funded enterprise to be established after the takeover, the type of the enterprise and the industry it engages in, submit the following documents to the competent examination and approval organ in accordance with the laws, administrative regulations, and rules on the establishment of foreign-funded enterprises:

(1) A resolution of the shareholders of the domestic limited liability company or of the domestic joint stock limited company on the full consent to the equity-based takeover or asset-based takeover by the foreign investor;

(2)An application for the establishment of the foreign-funded enterprise;

(3)An contract and the articles of association of the foreign-funded enterprise to be established after takeover;

(4) An agreement on the foreign investor’s acquisition of equities of shareholders of the domestic company or on the foreign investor’s subscription of the capital increase of domestic companies;

(5) The previous-year financial audit report of the domestic company taken over;

(6)The certification documents for the identity, registration and credit standing of the investor that have been notarized and certified according to law;

(7)The descriptions about the enterprises invested by the domestic enterprise taken over;

(8) The (duplicates) of the business licenses of the domestic company taken over and enterprises it invests in;

(9) The proposal on the settlement of employees domestic enterprise taken over;

(10) The documents to be submitted as required by Articles 13 through 15 of the present provisions.

If the business scope, scale, obtainment of land use right of a foreign-funded enterprise established after takeover are subject to the license of the relevant government departments, the relevant licensing documents shall be submitted along with the documents as listed in the preceding Paragraph.

Article 22 An equity purchase agreement, or domestic company capital increase agreement shall be governed by Chinese law and shall contain the following contents:

(1)The status of each party to the agreement, including The status of each party to the agreement, including the name and domicile of each party, the name, position and nationality of each legal representative;

(2)The proportion of price of the equities purchased or capital increase subscribed;

(3)The time period of the agreement, and the method of execution thereof;

(4)The rights and obligations of each party to the agreement;

(5)The liabilities for breach of contract, and settlement of disputes; and

(6)The time and place for the conclusion of agreement.

Article 23 For an asset-based takeover, the foreign investor shall, pursuant to the total investments of the foreign-funded enterprise to be established after the takeover, the type of the enterprise and the industry it engages in, submit the following documents to the competent examination and approval organ in accordance with the laws, administrative regulations, and rules on the establishment of foreign-funded enterprises:

(1)A resolution of the property right holders or power authority of the domestic enterprise on the consent to the sale of assets;

(2)An application for the establishment of a foreign-funded enterprise;

(3)A contract and the articles of association of the foreign-funded enterprise to be established;

(4)An asset purchase agreement signed by the foreign-funded enterprise to be established and the domestic enterprise, or by the foreign investor and the domestic enterprise;

(5)The articles of association and the business license (duplicate) of the domestic enterprise it has taken over;

(6)The notice of the domestic enterprise taken over, certifications of the creditors announced, and statement about whether the creditors have raised any objections;

(7) )The certification documents for the identity, registration and credit standing of the investor that have been notarized and certified according to law;

(8)The proposal on the settlement of employees of the domestic enterprise that is taken over; and

(9)The documents as required by Articles 13 through 15 if these Provisions.

If the business scope, scale, obtainment of land use right of a foreign-funded enterprise establishment after takeover involve licensing of the relevant government departments, the relevant licensing documents shall be submitted along with the documents as listed in the preceding Paragraph.

Where a foreign investor purchases the assets of a domestic enterprise by agreement and invests such assets in establishing a foreign-funded enterprise, it shall not, prior to the establishment of the foreign-funded enterprise, carry out any business activities with such assets.

Article 24 The agreement on the purchase of assets shall be governed by Chinese law and shall contain the following main contents:

(1) The status of each party to the agreement, including the name and domicile of each party, the name, position and nationality of each legal representative;

(2)A list of the assets to be purchased and the price thereof;

(3)The time period and method for the execution of the agreement;

(4) The rights and obligations of each party to the agreement;

(5) The liabilities for breach of contract, and settlement of disputes;

(6)The time and place for the conclusion of the agreement.

Article 25 Where a foreign investor intends to establish a foreign-funded enterprise by taking over a domestic enterprise, unless it is otherwise provided for in these Provisions, the examination and approval organ shall, within 30 days after the examination and approval organ receives the complete set of documents as required, it shall make a decision of approval or disapproval. If it decides to make a decision of approval, the examination and approval organ shall issue to the foreign investor an approval certificate.

For a foreign investor which intends to purchase the equities of a domestic company by agreement, if the examination and approval organ makes a decision of approval, it shall simultaneously send a copy of the relevant approval documents to the foreign exchange control departments of the places where the equity transferor and the domestic company are located, respectively. The foreign exchange control department of the place where the equity transferor is located shall handle the foreign exchange registration for equity-transfer-based foreign investments, which indicates that the consideration to the foreign investor’s equity takeover has been fully paid.

Article 26 For an asset-based takeover, the foreign investor shall, within 30 days after it receives the approval document, apply to the registration administrative organ for establishment registration so as to fetch a foreign-funded enterprise business license.

For an equity-based takeover by a foreign investor, the domestic company taken over shall apply to the original registration administrative organ for modifying its registration in accordance with these Provisions. If the original registration administrative organ has registration jurisdiction, it shall, within 10 days after it receives the application documents, transfer these application documents to the competent registration administrative organ and simultaneously accompany them by the registration files of the domestic company. When the domestic company taken over applies for modifying the registration, it shall submit the following documents and shall be responsible for their genuineness and validity:

(1)An application for modifying registration;

(2)An agreement on the purchase of equities of the domestic company or on the subscription of increased capital of a domestic company by a foreign investor;

(3)The post-revision articles of association or revisions to the original articles of association, and the foreign-funded enterprise contract which shall be submitted in pursuance of law;

(4)The foreign-funded enterprise approval document;

(5)The certification for the qualifications of the foreign investor as the subject, or the identity certification of the foreign investor as a natural person;

(6) The post-revision name list of the members of the board of directors, the documents which state the name and domicile of the newly increased directors, and the documents on the appointment of the newly increased directors;

(7)Other relevant documents and certificates as required by the State Administration for Industry and Commerce.

The investor shall, within 30 days after it receives a foreign-funded enterprise business license, go through the registration formalities in the tax, customs, land administration and foreign exchange administration departments.

Chapter IV Equity-payment-based Takeover of Domestic Companies by Foreign Investors

Section 1 Conditions for Equity-payment-based Takeover

Article 27 The term “equity-payment-based takeover of a domestic enterprise by a foreign investor” means that the shareholders of an overseas company purchase the equities of a domestic company by paying the equities of the overseas company it holds, or that an overseas company purchases the increased capital of a domestic company by paying its increased shares.

Article 28 The term “overseas company” as mentioned in this Chapter shall be a lawfully established company, there is a sound system of company law in its registration place, and the company and its management level have no record of punishment by the regulatory institution within recent 3 years. Except for special-purpose companies as mentioned in Section 3 of this Chapter, an overseas company shall be a listed company and there shall be a sound securities dealing system in the place where it gets listed.

Article 29 The equities of the domestic and overseas companies involved in the equity-based takeover of a domestic company by a foreign investor shall meet the following conditions:

(1)They are lawfully held by the shareholders and may be transferred in accordance with the law;

(2)There is no dispute over their ownership, they are not held in pledge and they are not subject to any other limit of right;

(3)The equities of an overseas company shall be listed publicly in an overseas lawful securities exchange market (excluding the over-counter exchange market); and

(4)The transaction price of the equities of the overseas company in the recent 1 year remains stable.

The Items (3) and (4) of the preceding Paragraph is inapplicable to the special-purpose companies as mentioned in Section 3 of this Chapter.

Article 30 For an equity-based takeover of a domestic company by a foreign investor, the overseas company or its shareholders shall hire an intermediary institution registered within China to serve as a consultant (hereinafter referred to as the “takeover consultant”). The takeover consultant shall make duteous investigations to the genuineness of the takeover application documents, the financial status of the overseas company as well as whether the takeover meets the requirements of Articles 14, 28 and 29 of these Provisions, shall make a takeover consultant report and shall put forward express professional opinions on each of the aforesaid items.

Article 31 A takeover consultant shall satisfy the following conditions:

(1)Having a good reputation and having relevant practicing experiences;

(2)Having no record of serious violation of any law or regulation; and

(3)Being capable of investigating and analyzing the legal systems of the registration place of the overseas company and the place where the overseas company is get listed, as well as the financial status of the overseas company.

Section 2 Application Documents and Procedures

Article 32 An equity-based takeover of a domestic company by a foreign investor shall be subject to the examination and approval of the MOFCOM. The domestic company shall not only submit the documents as required in Chapter III of these Provisions, but also the following documents:

(1)A statement of the changes of equities and important changes of assets of the domestic company within the recent 1 year;

(2)A takeover consultant’s report;

(3)The business opening certifications or identity certification documents of the relevant domestic and overseas companies and their shareholders;

(4)Descriptions about the equities held by the shareholders of the overseas company, and the name list of the shareholders who hold 5 % or more of the equities of the overseas company;

(5)The articles of association of the overseas company and a description about the guaranties it provides to outsiders; and

(6)The recent annual financial statements upon audit and a report on the stock dealings of the overseas company in the recent half year.

Article 33 The MOFCOM shall, within 30 days after it receives a complete set of documents, examine a takeover application. If the relevant requirements are satisfied, it shall issue to the applicant an approval document, which is given the remark that “For the equity-based takeover of a domestic company by a foreign investor, it will be valid for 6 months as of the date of issuance of a business license.”

Article 34 The overseas company shall, within 30 days after it receives an aforesaid approval document, it shall modify the registration in the registration administrative organ and the foreign exchange control organ. The registration administrative organ and the foreign exchange control organ shall respectively issue to it a foreign-funded enterprise business license and a foreign exchange register certificate which are giventhe remark that “To be valid for 8 months as of the date of issuance”.

When a domestic company goes through the registration modification formalities in the registration administrative organ, it shall, in advance, submit an equity change application, the revised articles of association, the equity transfer agreement and other documents signed by the legal representative of the domestic company, which are aimed to resume the structure of equities.

Article 35 Within 6 months as of the date of issuance of a business license, the domestic company and its shareholders shall, in regard to the matters relating to the overseas company’s equities it plans to hold, apply to the MOFCOM and the foreign exchange control organ for going through the formalities for the examination, approval and registration of investments to run an enterprise abroad .

The parties concerned shall not only submit to the MOFCOM the documents as required in the Provisions on the Examination and Approval of Investment to Run Enterprises Abroad, but also a foreign-funded enterprise approval certificate with the said remark and a foreign-funded enterprise business license with the said remark. After the MOFCOM examines and approves the overseas company’s equities to be held by the domestic company or its shareholders, it shall issue to the applicant a Chinese enterprise overseas investment approval certificate and replace the foreign-funded enterprise approval certificate with a remark by one with no remark.

After a domestic company obtains a foreign-funded enterprise approval certificate without a remark, it shall, within 30 days, apply to the registration administrative organ and the foreign exchange control organ, for replacing the foreign-funded enterprise business license and the foreign exchange register certificate with a remark by new ones with no remark.

Article 36 With 6 months as of the date of issuance of a business license, if the domestic and overseas companies fail to finish the equity modification formalities, the approval certificate with a remark and the Chinese enterprise overseas investment approval certificate shall be invalidated automatically. The registration administrative organ shall, according to the equity modification registration application documents submitted by the domestic company in advance, examine and approve the modification registration and shall make the equity structure of the domestic company resume to the state prior to the takeover of equities.

In the case of failure to acquire the shares increased by a domestic company, before the registration administrative organ examines and approves the modification registration under the preceding Paragraph, the domestic company shall, pursuant to the Company Law, reduce the registered capital correspondingly and publish an announcement on a newspaper.

If the domestic company fails to go through the relevant registration formalities according to the preceding Paragraph, the registration administrative organ shall punish it in accordance with the Regulation on the Administration of Company Registration.

Article 37 After a domestic company obtains a foreign-funded enterprise approval certificate with a remark and a foreign exchange register certificate with a remark, it shall not distribute its profits to its shareholders, nor provide a guaranty to any connected company, nor make any payment to any outsider for the capital items such as the equity transfer, capital decrease or liquidation.

Article 38 A domestic company or its shareholders may, upon the strength of approval document with no remark and the business license with no remark issued by the MOFCOM and the registration administrative organ, go through the tax modification registration in the tax organ.

Section 3 Special Provisions on Special-purpose Companies

Article 39 The term “special-purpose company” refers to an overseas company which a domestic company or natural person directly or indirectly controls for the purpose of making its actual domestic company equities get listed abroad.

The provisions of this Section shall apply to a special-purpose company, which, for the purpose of getting listed abroad, its shareholders or the special-purpose company purchase (purchases) the equities of the shareholders of a domestic company or the share increase of a domestic company by paying with the equities of the special-purpose company it holds or by paying with the share-increase of the special-purpose company.

If the parties concerned makes an overseas company, which holds any equities of a special-purpose company, serve as a subject to get listed abroad, this overseas company shall satisfy the relevant requirements for the special-purpose company as described in this Section.

Article 40 The transaction for the overseas listing of a special-purpose company shall be subject to approval of the securities regulatory institution of the State Council.

The country or region where the special-purpose company gets listed shall have sound legal and regulatory systems, and securities regulatory institution of this country or region shall have signed a memorandum of cooperation and understanding with the securities regulatory institution of the State Council of China and keep an effective cooperation in the regulatory work.

Article 41 A domestic company with its equities listed abroad as mentioned in this Section shall satisfy the following conditions:

(1)Its property right is clear. There is no dispute or potential dispute over its property right;

(2)It has a complete business system and a good sustainable operation capacity;

(3)It has a sound corporate governance structure and internal management system; and

(4)The company and its main shareholders have no record of serious violation of any law or regulation.

Article 42 To set up a special-purpose company abroad, an overseas company shall apply to the MOFCOM for going through the examination and approval formalities. When doing so, the domestic company shall not only submit to the MOFCOM the documents as required in the Provisions on the Examination and Approval of Investment to Run Enterprises Abroad, but also the following documents:

(1)The identity certification documents on the final controller of the special-purpose company;

(2)The business plan on the overseas listing of the special-purpose company; and

(3)The assessment report made by the takeover consultant on the price of the stocks to be issued by the special-purpose company to get listed abroad in the future.

After the party who establishes or controls a special-purpose company obtains approval document for Chinese enterprise to make overseas investment, it shall apply to the foreign exchange control organ of the place where it is located for going through the formalities for the register of overseas investments.

Article 43 The total value of the stocks of a special-purpose company listed abroad shall not be lower than the value of the equities of the domestic company upon the assessment of the relevant asset assessment institution.

Article 44 Where a special-purpose company intends to take over a domestic company by equities, the domestic company shall not only submit to the MOFCOM the documents as required in Article 32 of these Provisions, but also the following documents:

(1)The approval documents and certificate for the investor to run an enterprise abroad at the time of establishment of the special-purpose company;

(2)The foreign exchange register form for the overseas investments of the special-purpose company;

(3) The identity certification documents on the final controller of the special-purpose company, or the business opening certification or articles of association of the special-purpose company;

(4)The business plan on the overseas listing of the special-purpose company; and

(5)The assessment report made by the takeover consultant on the price of the stocks to be issued by the special-purpose company to get listed abroad in the future.

If the parties concerned makes an overseas company, which holds the equities of a special-purpose company, serve as a subject to get listed abroad, the domestic company shall, apart from the aforesaid documents, submit the following documents:

(1)The business opening certification and the articles of association of the overseas company; and

(2)The arrangement of the special-purpose company and the overseas company for the transaction of the equities of the domestic company taken over, as well as the detailed descriptions of the method to convert the equities to money.

Article 45 If the MOFOCOM approves the documents as required in Article 44 of these Provisions upon preliminary examination, it shall issue a letter of in-principle approval. The domestic company shall, upon the strength of the letter of in-principle approval, submit to the securities regulatory institution of the State Council the application documents for getting listed. The securities regulatory institution of the State Council shall make a decision of approval or disapproval within 20 working days.

After the domestic company obtains an approval, it shall apply to the MOFCOM for an approval certificate. The MOFCOM shall issue to it an approval certificate with the remark “For holding equities of overseas special-purpose company, it shall be valid for 1 year as of the issuance of a business license”.

If the takeover causes the change of equities of the special-purpose company, the domestic company or natural person holding the equities of the special-purpose company shall, upon the strength of the foreign-funded enterprise approval certificate with a remark, apply to the MOFCOM for going through the formalities for the examination and approval of the change of the overseas investment to run an enterprise abroad and shall apply to the local foreign exchange control organ for modifying the foreign exchange register of overseas investments.

Article 46 The domestic company shall, within 30 days after it receives an approval document with a remark, apply to the registration administrative organ and the foreign exchange control organ for modifying the registration. The registration administrative organ and the foreign exchange control organ shall respectively issue to a foreign-funded enterprise business license and a foreign exchange register certificate with a remark “To be valid for 14 months as of the date of issuance”.

When the domestic company handles the modification registration in the registration administrative organ, it shall, in advance, submit the equity change application, the revised articles of association, the equity transfer agreement and other documents signed by the legal representative of the domestic company, which are aimed to resume the structure of equities.

Article 47 The domestic company shall, within 30 days after the special-purpose company or its connected overseas company realizes the overseas listing, report to the MOFOCOM about the information about the overseas listing and its plan on the transfer-back of the raised funds and apply for a unremarked foreign-funded enterprise approval certificate. At the same time, it shall, within 30 days after the realization of overseas listing, report to the securities regulatory institution of the State Council the information about the overseas listing and provide it with the relevant documents for archival purposes. It shall also submit to the foreign exchange control organ its plan on the transfer-back of the raised funds and execute this plan under the supervision of the foreign exchange control organ. It shall, within 30 days after it receives an unremarked approval certificate, apply to the registration administrative organ and foreign exchange control organ for replaying its foreign-funded enterprise business license and foreign exchange register certificate with a remark by a new unremarked one.

If the domestic company fails to report to the MOFCOM within the aforesaid time limit, its approval certificate with a remark shall be invalidated automatically, its equities structure will resume to the state prior to the equity-based takeover and it shall go through the formalities for modifying the registration in accordance with Article 36 of these Provisions.

Article 48 The funds of a special-purpose company raised from overseas listing shall, according to the transfer-back plan submitted to the foreign exchange control organ for archival purposes, be transferred back into China according to the existing foreign exchange control provisions. The raised funds may be transferred back into China by:

(1)providing commercial loans to the domestic company;

(2)setting up a new foreign-funded enterprise within China; and

(3)taking over a domestic enterprise.

To transfer back the funds of a special-purpose company raised overseas under the aforesaid circumstances, the relevant parties shall abide by the laws and administrative regulations on the administration of foreign investments and on foreign debts. If, as a consequence of the transfer-back of the funds a special-purpose company raised overseas, the domestic company or natural person who holds more equities of the special-purpose company or the net assets of the special-purpose company increase, the parties concerned shall faithfully disclose the relevant information and apply for examination and approval. After it finishes the examination and approval formalities, it shall go through the formalities for modifying the foreign exchange register of foreign investments and the register of overseas investments.

The profit, bonus and capital change income in a foreign currency obtained by the domestic company or natural person from the special-purpose company shall be transferred back to China within 6 months after the date of obtainment. The profit or dividends may enter into the foreign exchange account for current items or may be converted into RMB. The capital change income in a foreign currency may, upon the examination and approval of the foreign exchange control organ, be deposited in a special capital account opened for it or be converted into RMB.

Article 49 Within 1 year after the date of issuance of a business license, if the domestic company fails to obtain an unremarked approval certificate, the approval certificate with a remark shall be invalidated automatically. The domestic company shall go through the formalities for modifying the registration.

Article 50 After the special-purpose company has realized the overseas listing and the domestic company has obtained an approval certificate and a business license with no remark, if the relevant party concerned continues to take over this domestic company by paying its equities, the provisions of Sections 1 and 2 of this Chapter shall apply to this case.

Chapter V Antitrust Review

Article 51 If the takeover of a domestic company by a foreign investor is under any of the following circumstances, the investor shall report the relevant information to the MOFCOM and the State Administration for Industry and Commerce (hereinafter referred to as the SAIC):

(1)The current-year business volume of any party to the takeover in the Chinese market exceeds RMB 1.5 billion yuan;

(2)The foreign investor has accumulatively taken over more than 10 enterprises in the domestic relevant industries;

(3)The market share of any party to the takeover has reached 20% in China; and

(4)The takeover leads to the fact that the market share of the party to the takeover has reached 25% in China.

When the foreign investor fails to meet the conditions as mentioned in the preceding Paragraph, but upon request of a domestic enterprise of competitive relationship, a relevant functional department or industrial association, the MOFCOM or the SAIC believes that the takeover by the foreign investor involves a huge market share, or that there are other major factors which seriously impact market competition, it may also demand the foreign investor to prepare a report.

The aforesaid merging party includes the connected enterprises of the foreign investor.

Article 52 If the takeover of a domestic company by a foreign investor is under any of the circumstances as mentioned in Article 51 and if the MOFCOM and the SAIC believe that it may lead to excessive concentration, hamper fair competition or impair the interests of the consumer, they shall, within 90 days as of the receipt of all the documents as required, either solely convene through negotiation or jointly convene the relevant departments, institutions, enterprises and other interested parties and hold a hearing, and shall make a decision of approval or disapproval in accordance with the law.

Article 53 Where an overseas takeover is under any of the following circumstances, the parties to the takeover shall, before announcing the takeover proposal or when submitting the said proposal to the competent authority in the country of its locality, submit the takeover proposal to the MOFCOM and the SAIC. The MOFCOM and the SAIC shall examine whether it will lead to excessive centralization in the domestic market, hinder domestic fair competition, or damage the domestic consumers’ benefits, and shall make a decision on whether approve the proposal or not:

(1) The overseas party to the takeover owns more than RMB 3 billion Yuan of assets inside the territory of China;

(2)The business volume of the overseas party to the takeover in the Chinese market is more than RMB 1.5 billion yuan in the current year;

(3) The market share of the overseas party to the takeover and its connected enterprises in China has reached 20%;

(4) The market share of the overseas party to the takeover and its connected enterprises in China has reached 25% due to the overseas takeover; or

(5) Due to the overseas takeover, there will be more than 15 foreign-funded enterprises in the relevant domestic industries with direct or indirect shares of the foreign-funded enterprises.

Article 54 Where a takeover is under any of the following circumstances, the parties to the takeover may apply to the MOFCOM and the SAIC for exemption of examination:

(1)The takeover may improve the conditions for fair competition in the market;

(2) A loss-making enterprise is taken over and the employment is ensured;

(3) The takeover helps the absorption of advanced technologies and management personnel and is able to improve the enterprise’s international competitiveness; or

(4) The takeover may improve the environment.

Chapter VI Supplementary Provisions

Article 55 Where an investment company established by a foreign investor within China intends to take over a domestic enterprise, it shall be governed by these Provisions.

Where a foreign investor intends to purchase the equities of a foreign-funded enterprise within China or to subscribe to the increased capital of a foreign-funded enterprise within China, it shall be governed by the existing laws and administrative regulations on foreign-funded enterprises as well as the relevant provisions on changes of equities of investors of foreign-funded enterprise; if any matter is not covered by the aforesaid laws, administrative regulations or provisions, it shall be governed by these Provisions.

Where a foreign investor intends to combine with or take over a domestic enterprise through a foreign-funded enterprise established by it within China, it shall be governed by the relevant provisions on the combination and split-up of foreign-funded enterprises and the relevant provisions on domestic investments of foreign-funded enterprise; if any matter is not covered by the aforesaid provisions, it shall be governed by these Provisions.

Where a foreign investor takes over a domestic limited liability company, if it transforms it into a joint stock limited company, or if the domestic company is a joint stock limited company, it shall be governed by the relevant provisions on the establishment of a joint stock limited company; if any matter is not covered by the aforesaid provisions, it shall be governed by these Provisions.

Article 56 For the submission of documents, an applicant or declarer shall classify the documents into different categories under these Provisions and accompany them with a list of documents. All documents required to be submitted shall be written in Chinese.

Article 57 A Chinese natural-person shareholder of a domestic company taken over by equities may, upon approval, continue to be a Chinese investor of the foreign-funded enterprise established after modification.

Article 58 If a natural-person shareholder of a domestic company changes his nationality, the enterprise nature of the company will remain unchanged.

Article 59 The functionaries of the government organs shall be duteous, shall perform their duties in pursuance of the law, shall not seek any improper benefit by taking the advantage of their positions, and shall keep confidential the commercial secrets they have access to.

Article 60 Where an investor from Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan Region intends to take over a domestic enterprise of any other region, it shall be governed by these Provisions.

Article 61 These Provisions shall come into force as of September 8, 2006.

Regulations concerning projects in foreign invested business fields

(2005)

I. Work procedure for projects in foreign invested business fields

(I) Work procedure of established local commercial authority

1. Investors planning to establish foreign invested business enterprises, investors applying for stores upon establishing foreign invested business enterprises or investors having established foreign invested business enterprises in domestic business field should respectively prepare the complete relative materials according to the article 12 and the article 13 in the decreed No.8, so as to submit the complete application document to the provincial commercial authority at the registration place of foreign invested business enterprises.

2. The provincial commercial authority at the registration place of the foreign invested enterprise should preliminarily examine stores established by foreign invested business enterprises in terms of plans, contracts and constitutions concerning city business network (foreign invested business enterprises merely submit constitutions) according to relative regulations in the decreed No.8. Regarding enterprises whose operational places are not located at the same province, autonomous region, municipality directly under the Central Government and city listed in the plan with their registration place, the provincial commercial authority at the registration place should obtain the consent of the provincial commercial authority at the operational place.

3. The provincial commercial authority conforming to clause (3) and (4) of the article 10 in the decreed No.8 or authorized by the Ministry of Commerce can approve the application document within the limit of its authority and submit to the Ministry of Commerce for filing.

4. Regarding enterprises that should be approved by the Ministry of Commerce according to regulations, the provincial commercial authority at the registration place of the foreign invested enterprise should preliminarily examine the application documents and submit them to the Ministry of Commerce for one-time approval.

(II) Work procedure in places without an established local commercial authority

1. Investors planning to establish foreign invested business enterprises, investors applying for stores upon establishing foreign invested business enterprises or investors having established foreign invested business enterprises in domestic business field should respectively prepare the complete relative materials according to the article 12 and the article 13 in the decreed No.8, so as to submit the complete application document to the provincial foreign economic and trade administrative authority at the registration place of foreign invested business enterprises.

2. Regarding enterprises whose registration place are located at the same province, autonomous region, municipality directly under the Central Government and city listed in the plan with its operational place, the provincial foreign economic and trade administrative authority at the registration place of the foreign invested enterprise should preliminarily examine and submit to the Ministry of Commerce for one-time approval upon consent of the provincial commodity currency administrative authority. Regarding enterprises whose registration place are not located at the same province, autonomous region, municipality directly under the Central Government and city listed in the plan with its operational place, the provincial foreign economic and trade administrative authority at the registration place of the foreign invested enterprise should preliminarily examine and submit to the Ministry of Commerce for one-time approval upon consent of the provincial foreign economic and trade administrative authority at the operational place (which is required to ask the commodity currency administrative authority at the same level for consent).

3. Provincial foreign economic and trade administrative authority conforming to clause (3) and (4) of the article 10 in the decreed No.8 or authorized by the Ministry of Commerce can approve the application document within the limit of its authority according to previous work procedures and submit to the Ministry of Commerce for filing.

4. Regarding projects that should be approved by the Ministry of Commerce according to regulations, the provincial commercial authority at the registration place of the foreign invested enterprise should preliminarily examine application documents and submit them to the Ministry of Commerce for one-time approval.

(III) Work procedure of Central Government operated enterprises

Central Government operated enterprise planning to cooperate with foreign investors to establish foreign invested business enterprises, applying for stores upon establishing foreign invested business enterprises or having established foreign invested business enterprises in domestic business field can prepare the complete related materials according to the article 12 and the article 13 in the decreed No.8 and once submit it to the Ministry of Commerce. But enterprises conforming to the clause 4 of the article 10 in the decreed No.8 can be approved by the provincial commercial authority or foreign economic and trade administrative authority according to above procedures and submit to the Ministry of Commerce for filing.

2. According to project’s contents, the Ministry of Commerce transfers the related materials to the provincial commercial authority or foreign economic and trade authority at the operational place of the enterprise for consents.

3. The Ministry of Commerce makes the one-time approval upon receiving the consent of preliminary examination.

Note: the provincial level mentioned here refers to province, autonomous region, municipality directly under the Central Government and city listed in the plan.

II. Application material of projects in foreign invested business fields

(I) Application material prepared by newly established foreign invested business enterprises

Application;

Feasibility research report jointly signed by parties in the investment;

Contracts, constitutions (foreign invested business enterprise merely submits constitutions, the same below) and its detachments;

Bank credit certificate, registration certificate (copy), legal representative certificate (copy) of parties in the investment, individual foreign investor should provide identity certificate;

Audit report of latest one year of parties in the investment issued by accountant offices (enterprise established within one year do not have to submit audit report);

Evaluation report for Chinese investor’s state owned assets planned to be invested into joint ventures and cooperative enterprises;

import and export commodity list of planned foreign invested business enterprises;

Name list of the board of directors and various directors’ power of attorney of planned foreign invested business enterprises;

Pre-approval notice of the enterprise name issued by the industrial and commercial administrative authority;

10．Land usage right certificate (copy) for the land used by the planned store and/or house renting agreement (copy), except store covering an operational area less than 3000m2;

Explanatory document issued by the commercial authority at the place establishing the store to certify projects meet requirements of city development and city business development

Any document signed by non-legal representative should be detached the letter of entrustment issued by the legal representative.

(II) Application materials for opening stores prepared by established foreign invested business enterprises

1. Application;

2. Land usage right certificate (copy) for the land used by planned stores and/or house renting agreement (copy), except stores covering an operational area less than 3000m2;

3. Capital verification report issued by legal capital verification institutions to certify the registration capital fully is handed in;

4. Explanatory document issued by the commercial authority at the place establishing the store to certify projects meet requirements of city development and city business development;

5. Approval certificate for foreign invested enterprises and their business licenses (copies);

6. Decision concerning opening store agreed by the board of directors of the foreign invested enterprises.

(III) Application materials for investment into domestic business fields prepared by established foreign invested enterprises

1. Application;

2. Bank credit certificate, registration certificate (copy) and legal representative certificate (copy) of parties in the investment, individual foreign investors should provide identity certificates;

3. Audit report of the latest year of parties in the investment issued by accountant offices (enterprises established within one year do not have to provide the audit report);

4. Pre-approval notice of enterprise name issued by the industrial and commercial administrative authority;

5. Land usage right certificate (copy) for the land used by planned stores and/or house renting agreement (copy), except stores covering an operational area less than 3000m2;

6. Explanatory document issued by the commercial authority at the place establishing the store to certify the projects meet requirements of city development and city business development；

7. Decision concerning opening store agreed by the board of directors of the foreign invested enterprises;

8. Approval certificate for foreign invested enterprises and their business licenses (copies);

9. Capital verification report issued by legal capital verification institutions to certify the registration capital is fully handed in;

10. Certificate materials for paying income tax or tax deduction or exemption of foreign invested business enterprises;

11. Constitution of the company receiving the investment;

Approval certificate for foreign invested enterprises and their business licenses (copies).

(IV) Application materials for foreign investors acquiring domestic business enterprises

1. Application;

2. Decision concerning share acquisition by foreign investors agreed by all shareholders of acquired domestic companies, or decision of the shareholder's conference concerning share acquisition by foreign investors agreed by all shareholders of acquired domestic companies;

3. Contracts, constitutions (foreign invested business enterprises merely submit constitution, the same as below) and their detachments of the foreign invested business enterprises after acquisition；

4. Bank credit certificate, registration certificate (copy), legal representative certificate (copy) of parties in the investment, individual foreign investor should provide identity certificate;

5. Agreement of acquiring domestic company’ shares or subscribing for domestic company’s capital increase signed by foreign investors;

6. Latest financial audit report of acquired domestic companies, audit report of the latest year concerning parties in the investment issued by accountant offices (enterprises established within a year do not have to submit audit report);

7. Acquired domestic companies should provide evaluation report or filing materials in case they include state owned assets;

8. Import and export commodity list of acquired enterprises;

9. Name list of the board of directors and various directors’ power of attorney of the acquired enterprises;

10. Land usage right certificate (copy) for the land used by planned stores and/or house renting agreement (copy), except stores covering an operational area less than 3000m2;

11. Explanatory document issued by the commercial authority at the place establishing the store to certify the project meet requirements of city development and city business development;

12. Explanation about conditions of the enterprises invested by acquired domestic companies;

13. Business licenses (copies) of acquired domestic companies and their invested enterprises;

14. Staff allocation plan of acquired domestic companies.

(V) Application materials for enlarging distribution and business scope prepared by non-business enterprises

1. Application;

2. Decision concerning enlarging distribution and business scope agreed by the board of directors of the foreign invested enterprises;

3. Amendment agreement of contracts and constitutions of foreign invested enterprises;

4. Import and export commodity list of foreign invested enterprises;

5. Approval certificate and business licenses (copies) of foreign invested enterprises;

6. Original contracts and constitutions (copies) of foreign invested enterprises;

7. Capital verification report issued by legal capital verification institutions to certify the registration capital fully is handed in.

III. Time limit for approving projects in foreign invested business fields

(I) Provincial commercial authority should complete the examination and approval within one month;

(II) The Ministry of Commerce should complete the examination and approval within three months.