Company Law of the People's Republic of China (7)(8)

Company Law of the People's Republic of China (7)

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   SECTION TWO TRANSFER OF SHARES



  Article 143  A shareholder may transfer his (her) shares according



to



 law.



  Article 144  The  transfer of shares shall  be conducted in



legally



 established stock exchanges.



  Article 145  Registered share certificates shall be transferred by



way



   of  endorsement  or  other  forms provided for  by  law



and administrative decrees.



   After    the   registered   share   certificates   are



transferred, the company shall record the names or both the names and



addresses of the transferees in the list of shareholders.



  No   changes   in  the registration of shareholders  shall



be made  pursuant   to  previous  paragraph  30 days before the



convening of  the  meeting of shareholders or five days before the



record date for the issue of dividends.



  Article 146  The transfer of bearer shares shall come into effect



upon



  the  delivery  of  the share certificates by  shareholders



to the transferre(s) at the stock exchanges.



  Article  147  The  promoters'  shares  may not be transferred



within three  years  starting  from the date  of  establishment



of the



company.



   Directors,  supervisors  and managers of the company shall



declare to  the  company  the  quantity of shares they hold and



the  shares concerned  may  not  be  transferred  during  the



terms  of their



offices.



  Article 148  State authorized investment institutions may transfer



the



  shares  they  hold according to law and may also purchase shares



held  by   other   shareholders.  The  approval  limits  and



management regulatory  regions   for  such transfers shall  be



provided for separately by law or administrative decrees.



  Article 149  A joint stock company limited may not buy shares



issued



  by  itself,  except in order to decrease  its  capital  by



cancelling its shares or when it merges with other companies that hold



its shares.



  After  purchasing   shares   issued  by  itself  according



to the  provisions  of  the  preceding paragraph, a company shall



cancel that  portion of its shares, change its registration and make



a notice to  the public according to law and administrative decrees



within ten



days.



   A   company   may   not   accept   its  own  share



certificates as collateral.



  Article 150  In cases of shares being stolen, lost of  destroyed,



the



  shareholder  concerned  may  request  the people's  court to



declare the  shares  invalid  pursuant to procedures for  public



invitation  to assert  claims contained in the  Code  of  Civil



Procedures.



  After  the  people's court declares the shares invalid according



to the prescribed  procedure, the shareholder concerned may apply



for re-issue of the share certificates with the company.



 SECTION THREE LISTED COMPANIES



  Article 151  The term "listed companies" used in this law  refers



to



  companies  whose  shares  have  been approved for trading at



stock exchanges  by   the   State  Council  or   by   the



securities administration department authorized by the State Council.



  Article 152  In applying for its shares to be listed, a  joint



stock



 company limited shall meet the following requirements:



   1.   Securities  administration  departments  of the  State



Council have approved the company's stock being issued to the public;



  2.  The  total  share  capital of the company shall be no less



than RMB50 million;



  3.  The  company  has opened business for at least three years



and has  been  profitable  over  the  last  three  years.  For



companies reorganized  from  an  original  State-owned enterprise



according  to law  or  newly established with the major promoters



being the large or  medium-sized  State owned enterprises after



this law comes into effect, the three year period can be calculated



continuously;



  4.  Number  of  shareholders  who  each holds shares of a par



value totally  at  least RMB1,000 shall be no less than one thousand



and the shares  of  the  company  already  issued to the public



account for more   than  25  percent of the total shares. For



companies whose share  capital  has exceeded RMB400 million, the



shares already issued  to the public shall account for no less than



15 percent of the total shares of the company;



   5.   The  company  has  not committed any significant  law



violating acts  and  there are no false records in the financial



statements over last three years;



 6. Other requirements as prescribed by the State Council.



  Article  153  For  listing  its  shares to public for trade, a



joint stock  company  limited  shall get the approval of the State



Council  or of   a  securities  administration  department  of



the   State Council   by  submitting    relevant   documents



prescribed  by law   and administrative decrees.



    The     State    Council   or   its   authorized



securities administration  department   shall  grant approval to



the  listing applications which  meet all the requirements specified



in this law or deny  approval to   those listing  applications



which  do  not meet  such requirements.



  After  the approval has been obtained, a company shall publish



a share  listing  report and keep its application documents at



a designated place for public inspection.



  Article 154  The shares of listed companies approved shall be



traded



 according to law and administrative decrees.



  Article  155  With  the approval of the  a  State  Council



authorized



   securities    administration    department,   a   joint



stock company limited   may  have  its stocks  listed  abroad.



The special regulations there of shall be formulated by the State



Council.



  Article 156  A  listed  company must periodically make public



its



  financial   and   operational   condition   according  to



law and  administrative decrees and publish the financial statements



once every six months in each fiscal year.



  Article  157  The securities administration department authorized



by the  State Council may decide to temporarily suspend the listing



of a company under the following circumstances:



   1.  The   total   share   capital,  share  distribution



or other  circumstances  have  changed such that the company no



longer meets the listing requirements.



   2.   The  company  does  not make public  its  financial



condition as required  by the regulations or false entries have been



found  in its financial statements.



 3. The company has committed significant law violation acts.



  4. The  company has sustained losses in each of the last three



years.



  Article 158  A  securities administration  department  of the



State



  Council   may  decide  to terminate the listing of a company



if the company  is  found to have committed one of the cases listed



in  items  2  and  3  of the preceding article with serious



consequences or  has committed  one of the cases listed in items 1



and 4 of  the preceding articles  and is unable to correct within a



limited time so as to lose the conditions for listing.



  The  securities  administration department of the State Council



may decide to  terminate  the listing of a company if the company



has decided  to  dissolve  itself  or has been ordered by the



responsible  administrative departments to close down or declared



bankrupt.



 CHAPTER FIVE CORPORATE BONDS



  Article 159  A  joint stock company limited  or  a  limited



liability



  company   established   with   investment  by  a   solely



State owned  company  or by two or more State owned enterprises or



by more than  two State  owned investment institutions may issue



corporate  bonds  in  order  to raise funds for production or



operations according to this law.



  Article 160  The term "corporate bond" used in this law refers to



the



   valuable  securities  issued  by  a  company  according  to



legally prescribed  procedures   and  pursuant  to  which  the



company convenants  to repay  principal and interest  within  a



certain period of time.



  Article 161  In  issuing corporate bonds, a company shall meet



the



 following requirements:



  1.  The  net  assets  of  the company shall be no less than



RMB30 million in case of a joint stock company and no less than



RMB60 million in case of a limited liability company.



  2.  The  aggregate  amount of bonds issued  does not exceed



40 percent of the total net assets of the company.



  3.  The  average  distributable profits over the last three



years are  sufficient   to  defray  one year's interest payment



on  the company bonds.



  4.  The  use  of funds raised conforms to the industrial policy



of the State.



  5.  The  interest  rate payable on the corporate bonds shall



not exceed the levels set by the State Council.



 6. Other requirements prescribed by the State Council.



  The  funds  raised  by issuing corporate bonds must be used



for the  purposes  approved by the authorized authorities and shall



not be used to cover losses or for non-production expenditure.



  Article 162  A  company may not reissue corporate bonds under



the



 following circumstances:



  1.  The  corporate  bonds  issued at the previous time have not



been fully subscribed;



  2.  The  company has defaulted on previously issued corporate



bonds or  other  indebetedness,  or  is  late  in the payment of



principal or interest, and such situation is still continuing.



  Article 163   When  a  joint stock company  limited  or  a



limited



  liability  company  proposes  to issue corporate bonds, its



board of  directors   shall  draft  a  plan for approval by



meeting of shareholders.



   When  a  solely  State  owned  company proposes to  issue



corporate bonds,  the  decision  is  subject  to the investment



organization  or department authorized by the State.



  After   the   resolution  or  decision is  made  according



to the  preceding  paragraphs,  the company shall apply for approval



with the securities administration department of the State Council.



  Article 164  The  scale of an issue of corporate bonds  shall



be



  determined   by  the  State Council. In granting an approval



by the securities  administration  department of the State Council



to issue  corporate bonds, it must ensure that scale of issue is



not exceed that set by the State Council.



   The  securities  administration  department  of  the  State



Council  shall   grant   approval  if  an  application  for



issuing  bonds conforms   to  provisions  of this law and deny



the approval if the provisions are not met.



  If   an  approval  previously been granted for an application



has been  found  not  to conform to the requirements of this law,



the approval  shall  be  revoked. If the corporate bonds have not



been issued,  the  issuing  shall  not  be carried out. If the



corporate bonds  have   been in  the process of issuing, the



company  in  question   shall   return  the   payment  to



subscribers  plus  the interests calculated on bank deposits rates



for the same term.



  Article  165   In  applying  for issuing  bonds  with  the



securities



  administration  department  of  the  State  Council, a company



shall submit the following documents:



 1. Certificate of registration of the company;



 2. Articles of association of the company;



 3. Corporate bonds offer procedures;



 4. Asset appraisal report and capital verification report.



  Article 166  After the bond issue applciation has been approved,



a



 company shall make public the procedures for bond offer.



 The procedures shall have the following matters set out:



 1. Name of the company;



 2. Total amount of bonds and face value of the bonds;



 3. Bond's interest rate;



 4. Period and method for payment of principal and interests;



 5. Starting and closing date of the issue;



 6. Net assets of the company;



  7.  Total  amount of corporate bonds having been issued but not



yet due; and



 8. Underwriters of the bonds.



  Article  167  In  issuing bonds, the bond shall bear the name,



face value,  interest  rate, and time of repayment, the signature



of the chairman of the board of directors and seal of the company.



  Article 168  Corporate bonds may be divided into registered bonds



and



 bearer bonds.



   Article   169   The  issuing  company  shall  keep  a



corporate bonds registered.



  For   issuing  registered  bonds,  the bond register shall



have the following items set out:



 1. Names or both names and addresses of the bondholders;



   2.  Date   of   issue  and serial  numbers  of  bonds



acquired by bondholders;



  3.  Total   amount  of  bonds issued, the face value of



the bonds,  interest   rate   of  the bonds, payment  dates



of principal  and interests, and method of payment; and



 4. Date of issue of the bonds.



  In  issuing  bearer  bonds, the bond register shall set out



the total  amount  of bonds, interest rate, payment time and method,



date of issue and serial numbers.



  Article 170  Corporate  bonds  can be  transferred.  Transfer



of



   corporate    bonds   shall   be  made   at  legally



established securities exchanges.



  When   transfer,   prices  of  corporate  bonds  shall  be



agreed upon between transferers and transferees.



 Article 171  Registered  bonds shall  be  transferred  by  the



  bondholders   through  endoresement  or other ways provided for



by law and administrative decrees.



   After   registered   bonds   are   transferred,   the



company shall  register   the   names  or  both the names  and



addresses of  the transferes in the bond register.



   The   transfer   of   bearer  bonds   shall   become



effective after  delivery   of the bonds to the transferees by the



bondholders at the legally establishment securities exchanges.



  Article 172  Subject to resolutions a meeting of shareholders, of



a



  listed  company  may  issue corporate bonds convertible into



shares  and  specify   the   conversion  procedures  in  the



corporate  bond offer procedures.



  The   issuing  of  convertible bonds is subject to the approval



of  the  securities  administration  department  of  the  State



Council. For  issuing  convertible corporate bonds, a listed company



shall meet the requirements  for  issuing stocks apart from  the



conditions for issuing common corporate bonds.



   Corporate    bonds   convertible   into   shares  shall



be marked  "convertible  bonds"  and  the amount of such bonds



issued shall  be recorded in the bond register.



  Article  173  In  issuing  convertible bonds, a listed company



shall issue  share  certificates  to  bondholders  in accordance



with  its conversion  procedures,  but  the  bondholders  have



the  option whether or not to convert.



 



Company Law of the People's Republic of China (8)

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   CHAPTER SIX FINANCIAL AFFAIRS AND ACCORDING OF A COMPANY



  Article 174  A  company  shall  establish  its  financial



and



   accounting  system  according  to law  and  administrative



decrees and  provisions  of  the  financial department in charge



under the State Council.



   Article  175  A  company  shall  produce  a financial and



accounting report  at   the  end of each fiscal year, which is



subject  to examination and verification according to law.



   A   financial   and  accounting  statement  shall  include



the following accounting statements and schedules:



 1. Balance sheets;



 2. Profit and loss statement;



 3 .Statement of financial changes;



 4. Statement of financial situation;and



 5. Statement of profit distribution.



  Article 176  A  limited liability company shall, according to



the



   provisions   of  the  articles of association, submit the



financial and  accounting  statements  to shareholders within the



prescribed time



limit.



   A   joint   stock  company  limited shall  deposit  its



financial and  accounting   statements   at  the  company  for



inspection by  shareholders   at  least  20 days prior to the



general  meeting of shareholders.



  A   joint  stock  company  limited established by public offers



must make public its financial and accounting statements.



  Article  177  When distributing each year's after-tax profits,



a company  shall   set   aside 10 percent of the  profits  for



the company's  statutory  reserve funds and 5 to 10  percent  as



the company's  statutory  public welfare funds. It may not set



aside common   reserve  funds  if  the  aggregate balance of the



funds  has already  accounted  for  over  50  percent  of the



company's registered



capital.



  If  the  aggregate balance of the company's common reserve funds



are not  enough  to  make  up  for the losses sustained by the



company  of the previous year, current year profits shall be used to



make up  for the  losses before allocations are set aside for the



statutory common reserve  funds and public welfare funds according



to the provisions of the preceding paragraph.



  Subject   to   a  resolution  of meeting  of shareholders,



after  the  company   has  set  aside funds from  after-tax



profits  for the  statutory  common reserve funds, the company may



set aside funds for a discretionary common reserve funds.



  The  remaining  profits  after the losses have been made up



for and statutory common reverve funds and public welfare funds have



been drawn shall  be  distributed to shareholders  according to



the proportion  of  their capital constribution as in the case



of  a limited  liability company  and according to the number of



shares held by shareholders  as in the case of a joint stock company



limited.



   If   the   meeting   of  shareholders  or  board  of



directors has  distributed  the  profits before the losses are made



up  for  and the  statutory  common  reserve funds and public



welfare funds are drawn  in violation  of  the provisions of the



preceding  paragraph, the profits distributed must be returned to the



company.



  Article 178  In accordance with this law, the premium obtained by



a



  joint  stock  company  limited  by  issuing  shares  at  a



price exceeding  par  value,  and  any other income  designated



for  the capital   deserve  funds  by the regulations  of  the



responsible financial  department  of the  State Council shall be



allocated to the company's capital common reverse fund.



  Article 179  The company's common reserve funds shall be used to



make



  up  for  the  losses of the company, expand its production



and operations or as additional capital of the company.



  When  a  joint  stock  company  limited converts its common



reserve funds  into  capital  upon the resolution of shareholder's



meeting,  it shall either distribute new shares in proportion to



the number of shares held by  sharesholders  or increase the par



value of  the shares,  provided, however, that when the statutory



common  reserve funds  are converted  to capital,  the balance of



the common reserve fund may not fall  below  25 percent of the



registered capital.



  Article 180  The statutory common welfare fund of a company  is



used



 for the collective welfare of the company's staff and workers.



  Article  181  A  company  may  not keep accounting books and



records other than those provided for by law.



  The  assets of a company shall not be deposited in accounts opened



in the name of any individual person.



 CHAPTER SEVEN MERGE AND DIVISION OF A COMPANY



  Article 182  The merger or division of a company is subject to



a



 resolution passed by the meeting of shareholders of the company.



  Article  183  The  merger  or  division  of  a joint stock



company  limited  must  have  the  approval of the department



authorized  by the  State Council or by the people's government



at the provincial



level.



  Article 184  Merger  of  a company may  be  made  by  means



of



 absorption or creation.



  Merger   by   absorption   is  a  company absorbs one  or



more other  companies  with  the  companies  being  absorbed



dissolved. Merger  by creation  is  the  unification  of  two



or  more companies   by  dissolution  of  existing  ones and



creation  of a  single  new company.



  When  merger,  a  merger agreement shall be  signed among



the parties  concerned   and   the  balance sheets and list  of



assets of   the  companies   concerned shall be compiled. The



companies concerned  shall  notify their creditors within ten days



starting  from the  date  when the merger  resolutions  of the



companies are taken  and announce  in  the newspapers at least



three times within 30  days. Creditors   have  the  right  to



demand   the  companies to  clear their  debts   or  provide



corresponding  guarantees within 30 days after  the  notifications



received  or  within 90 days starting from the  date   of  the



first  announcement  in  cases in  which notifications have  not



been received. Without  clearing  debts  or providing guarantee,



merger may not be carried out.



  The   company  after  merged or the newly created company



shall be  responsible  for  the credits and debts of the companies



involved in merger.



  Article 185  If  a  company is to  divided  into  one  or



more



 companies, its assets shall be divided accordingly.



  When  a  company  divided, it shall compile balance sheet and



list of  assets  and notify its creditors of the division within



10 days starting from  the  date when the division resolution is



taken  and announce   in  newspapers   at  least  three  times



within  30 days. Creditors  have  the  right  to  demand  the



companies  to  clear their  debts   or  provide corresponding



guarantees  within  30  days after  the  notifications received or



within  90  days starting  from the  date   of  the  first



announcement   in  cases  in   which notifications  have  not



been  received.  Without clearing  debts  or providing guarantee,



division may not be carried out.



  The   debts   of  a company before division shall be  borne



by the companies separated according to the agreement reached.



  Article 186  When  reduce its registered  capital, a company



shall



 compile its balance sheet and list of assets.



   The   company   shall   notify  its creditors  of  the



resolution for  reducing  registered capital within 10 days starting



from the date when the  resolution is taken and make an announce in



newspapers  at least  three times within 30 days. Creditors have the



right  to demand the  companies   to   clear   their   debts



or   provide corresponding guarantees  within 30 days after the



notifications received  or  within  90  days starting from the



date  of  the  first  announcement   in   cases   in  which



notifications  have  not been



received.



  The   remaining   registered   capital  shall not be  less



than the minimum set by law.



   Article  187  When  capital  accretion  by  a  limited



liability company,  the  contribution  of shareholders  shall  be



made  in accordance  with  relevant  provisions on the payment of



capital for a limited liability company as set by this law.



   When   capital   accretion   by a joint  stock  company



limited by  issuing  new  shares,  the contribution of  share



capital  by original  shareholders  shall  be  made in accordance



with  provisions  on   the  payment  of  share  capital for



establishing joint  stock company limited as set by this law.



  Article  188   After  merger or division, a company shall



change its  registration   with  the registration department in



case  of  changes  of  registered   items,  and  cancel  the



registration  in case   of  dissolution, and register for a new



company in case a new company is created.



  When  a  company increases or decreases its share capital, a



change  of  registration  shall  be  made  with  registration



department of the



company.



 CHAPTER EIGHT BANKRUPTCY, DISSOLUTION AND LIQUIDATION



  Article 189  When a company is declared bankruptcy according  to



law



  due  to insolvent of debt payment, the people's court shall



organize a  liquidation  group  composed of shareholders, relevant



departments and  specialized personnel according to the provisions of



relevant laws and conduct liquidation of the company.



 Article 190 A company may dissolve in one of the following cases:



   1.   The   term   of   operation  prescribed  in  the



articles of  association   has  expired  or other conditions for



dissolution as provided for in the articles of association have



appeared;



  2.  A   resolution  on  dissolution has been  adopted  by



meeting of shareholders;



 3. Dissolution is necessary for merger or division of the company.



  Article 191  When a company is decided to be dissolved  according



to



   the   items   1  and  2  of the preceding  article,  a



liquidation group  shall   be  formed  within 15 days  of the



decision.  The liquidation  group   for  the  liquidation of  a



limited  liability company  shall  be formed  by shareholders and



the members of the liquidation  group  for the liquidation of a



joint stock  company limited shall be determined by the meeting



of  shareholder.  If a liquidation  group is not formed  within



the prescribed time limit, creditors  may  request the people's



court  to  designate  relevant personnel  to  form a liquidation



group to carry  out liquidation. The people's court shall accept



such  request  and  timely  designated members of the liquidation



group to conduct liquidation.



  Article 192  A company shall be dissolved if it has been  ordered



to



  close  down  for  violating the law or administrative decrees



and a liquidation group shall be formed by the department in charge.



   Article  193  The  liquidation  group  shall  exercise the



following powers during the period of liquidation:



  1.  To  carry  out clearance of the assets of the company



and compile the balance sheet and list of assets.



   2.   To   notify   creditors   or  make   a  public



announcement about liquidation;



 3. To handle the remaining businesses of the company;



 4. To pay taxes overdue;



 5. To clear credits and debts;



 6. To dispose the remaining assets after all the debts are paid off;



 7. To participate in civil proceedings on behalf of the company.



  Article 194  The liquidation group shall, within ten days  after



its



   establishment,    notify   the   creditors   and   make



a public  announcement  in newspapers at least three times within



60 days.  Creditors shall declare their credits with the liquidation



group within  30 days after the notifications received or within



90 days starting from the date of the first announcement in cases



in which notifications have not been received.



   In   declaring   credits,   creditors   shall   specify



the  relevant   matters    about    the    credits   and



provide verifications.   The liquidation group shall registered the



credits.



  Article  195  After  clearing  the  assets and compiling the



balance sheet  and  list  of assets, the liquidation group shall



formulate a liquidation  plan  and  submit  it to the meeting of



shareholders  or department in charge for confirmation.



  If  the  assets  of the company are sufficient for payment of



debts, the  assets  may  be used to pay the liquidation fee, the



wages  and labor insurance fees of workers, taxes overdue and clear



debts.



   The   remaining  assets  after  liquidation  according  to



the preceding  paragraph   can  be  distributed to  shareholders



according to   their proportion  of investment in the case of a



limited liability company  and  according  to the proportion of



shares  held  by  the shareholders  in  the case of a joint stock



company limited.



  During  the  period of liquidation, the company shall not engage



in new operating activities. The assets of the company may not



be distributed  to  shareholders  the  assets before payments be



made in accordance with provisions in second paragraph of this article.



  Article 196  If after clearance of the assets and compilation  of



the



  balance  sheet  and  list  of assets  of  a  company  to



be liquidated  due to dissolution or liquidation, the assets of



the company  are found to be insufficient for the debt payments,



the  liquidation   group   shall  immediately   apply   for



declaration of bankruptcy of the company with the people's court.



  If  the  company  has been declared bankruptcy by the people's



court, the  liquidation  group  shall  hand  over the liquidation



affairs to the people's court.



  Article  197  After  the  liquidation,  the liquidation group



shall compile  a  liquidation  report  and  submit  it to  the



meeting  of  shareholders  or  department   in  charge  for



confirmation  and to the   registration department  for canceling



registration  of  the company  and  make  a  public announcement



about  the  termination of operation  of  the company. If  the



cancellation  of  the business license   of  the  company  has



not  been  applied,  the  company registration department shall



revoke its  business license and make a public announcement on the



matter.



  Article  198  Members of a liquidation group shall be faithful



to their office and perform their duties according to law.



  Members  of  a liquidation group may not abuse their powers



to accept  bribes or other illegal income or convert property of



the company into their own.



  Members  of  a liquidation group shall be liable to compensation



for the  losses  caused  to  the liquidated company or creditor



due to their deliberate acts or serious faults.