Company Law of the People's Republic of China(5)(6)

Company Law of the People's Republic of China (5)

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  Article  86  Securities  administration of  the State Council



shall



  approve   the   application   on  public   offer  which



meets the  conditions  prescribed  in this law. If the application



does  not comply with the conditions prescribed in this law, no



approval is



granted.



  If,  after  approval  is given, the application is found not to



meet the  conditions  prescribed by this law, the approval shall be



revoked. If  shares  have  not been offered, the offer will not be



carried  out.  If  shares   have  already  been  offered, the



subscribers  may  demand the promoters to refund their payments for



shares with interests at the bank's deposit rate of the same term.



  Article  87   The prospectus should have the  articles  of



association



 attached and define the followings:



 1. Number of shares subscribed to by promoters;



 2. Par value and issue price of each share;



 3. Total number of non-registered shares issued;



 4. Rights and obligations of subscribers;



  5. The  time  limit for the public offer and the notification



that



  subscribers  may  revoke their subscription to share if the



offer is under-subscribed at the close of the offer.



  Article  88  The  promoters  shall  publish  prospectus  and



prepare



  application  forms  during  public offers. In the application



forms, the  items  listed  in the preceding article should be set



out  and the  subscribers  shall  fill  in the number of shares



subscribed  to total  amount  of  payment, address and sign or



seal  the  forms. Subscribers  shall  make  payment  for  the



shares  they  have



subscribed.



  Article  89  Public  offers of shares shall be  underwritten



by



  securities   institution   established   according  to  law



and an underwriting agreement shall be entered.



  Article  90  In a public offer of shares the promoters  shall



enter



 into an agreement with the receiving banker.



  The  receiving  banker  shall receive and hold as agent the



payments for shares  according to the provisions of the agreement,



produce receipts  to  subscribers  who have made the payments and



shall  be obliged   to produce evidence of receipt of payments



to relevant



departments.



  Article  91  After  full  payments  have been made to the



share  issued,   an    authorized   investment  verification



organization mustverify   the investments  and  issue investment



verification certificate.  The promoters shall convene a meeting for



founding the company  within  30 days. The meeting shall be attended



by all share



subscribers.



  If   the  shares  issued  are not fully subscribed after the



closing date  as prescribed in the prospectus or the promoters fail



to  call the  meeting  for  founding the company within 30 days,



subscribers  of shares  may  demand return of the payments for



the shares,  plus interests at the bank's rate for deposits of the



same term.



  Article  92  Promoters shall notify all the subscribers or  make



an



  announcement  of  the  date  of  the establishment meeting 15



days before the  meeting  should be held. The meeting shall be



held only  if  subscribers  representing over half of the total



shares are



present.



 The establishment meeting shall exercise the following powers:



  1.  To examine the report on the preparation for the establishment



of the company submitted by the promoters;



 2. To adopt the articles of association;



 3. To elect directors of the baord;



 4. To elect the supervisory committee;



 5. To examine the expenses on the establishment of the company;



  6.  To examine and verify the valuation of property which is used



by the promoters as their payments for shares; and



  7.  To make a resolution of not setting up the company in the case



of the  occurrence  of  force  majeure  or  substantial  changes



to operating  conditions  that will affect the establishment  of



the



company.



  A  resolution  on  matters listed in the preceding paragraph



requires the  approval  of  the  subscribers with half or more of



the  voting rights present at the meeting.



  Article  93  Promoters and subscribers may not withdraw  their



share



   capital   after   making   payments  for  shares  they



subscribed, or  making  their  contribution of capital as payment



for  shares, except  where  the  shares  have  not been fully



subscribed  within the  offer  period,   the  promoters  fail



to  convene   the establishment   meeting  within  the  period



specified,  or  the establishment meeting has decided not to set up



the company.



  Article  94  The board of directors should apply for registration



on



  the  establishment  of  the  company within  30  days  of



the conclusion  of  the  establishment  meeting  together with



the following documents:



 1. Document of approval issued by the department in charge;



 2. Mintues of the establishment meeting;



 3. Articles of association of the company;



  4. Auditor's  report  on the  financial  affairs  concerning



the



 preparations for the establishment of the company;



 5. Investment verification certificate;



  6.  Names  and addresses of the members of the board of directors



and of the supervisory committee;



 7. Name and address of the legal representative.



  Article  95  Company registration department shall decide on



whether to  give  approval  to the registration within 30 days



after  the application  is  received.  If  all the conditions



prescribed  in this law  are  met, approval shall be granted and



business license shall be issued; if  the conditions  prescribed



in this law are not met, approval shall not be granted.



  The   date  of the issue of the business license shall be the



date of  establishment   of  the  company.  After the  company



has been established, it should make a public announcement.



  After  the  establishment of the company through public offer



of shares,  a   report  on  the offer should be submitted  to



the securities administration of the State Council for the record.



  Article  96  When a branch or branches to be set up at the  same



time



   of   the  establishment  of  the  joint  stock  company



limited, application  shall  be  made for the registration of the



branch  or branches and business license(s) should be obtained.



  If  the  branch(es)  is  set  up after the establishment of the



joint  stock  company  limited, the legal representative of  the



company shall apply  for the registration of the branch(es) and



obtain business



license(s).



  Article  97   Promoters  of a company  shall  have  the



following



 liabilities:



  1.  To  be  jointly  liable for the debts and expenses arising



from actions  to  establish  the company if the company  fails



to be



established;



  2. To  be  jointly liable to refund payments of subscribers for



the



  shares,   plus  interests  at the bank's rate for deposits of



the same term; and



 3. To be liable to compensate the company for damage  the company



   caused   by   negligence  of  promoters in  the  process



of establishing the company.



  Article  98  A limited liability company to be reorganized into



a joint  stock  company limited should conform to the conditions



as  prescribed  in  this  law  and  go through the procedures



prescribed by this law.



  Article  99  When a limited liability company has been approved



to be  reorganized  into  a  joint stock company limited, the



total shares  converted should be equal to the value of the net assets



of  the former  company.  If a limited liability company needs to



increase  its capital through  a public offer after it has been



approved  for converting into a joint  stock  company  limited,



provisions  of their law converning public offers must be abided by.



  Article  100  After  being  converted  into  a  joint stock



company limited  according  to  law,  the  creditor's rights and



indebtedness of  the original  limited liability company shall be



assumed by the joint stock company limited converted into.



  Article 101  A  joint stock company limited shall safekeep in



the



  company   a   copy   of the articles of  association,  the



list of  shareholders,   minutes  of meetings of shareholders and



financial and accounting statements.



 SECTION TWO SHAREHOLDERS' MEETING



  Article 102  A joint stock company limited shall have meeting



of



  shareholder,  which  is  authorized  by the company to exercise



its powers according to this law.



  Article 103   The  meeting  of shareholders  shall  exercise



the



 following powers:



  1.  To decide upon the operational policies and investment plans



of the company.



  2.  To elect and replace directors and decide on matters relating



to the remunerations of directors.



  3. To  elect and replace supervisors who are the representatives



of



   shareholders   and   decide   on  matters  relating  to



remunerations of supervisors.



 4. To examine and approve reports by the board of directors.



  5. To  examine  and approve reports by supervisory  committee



or



 individual supervisors.



  6.  To  examine  and  approve  the company's proposed annual



financial budget and final accounts.



  7. To examine and approve the company's profit distribution  plan



and



 plan for recovery of losses.



  8. To  pass  resolutions  on the increase  or  decrease  of



registered



 capital.



 9. To pass resolutions on the issuing of bonds.



   10.To    pass   resolutions   on   merger,   division,



dissolution and  liquidation  and other matters.11. To amend the



articles of association of the company.



  Article 104   The  meeting of the shareholders shall hold an



annual



  meeting  every  year.  An interim meeting of shareholder shall



be held within two months in one of the following cases:



  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 specified in the articles of association;



  2.  The  uncovered losses of the company capital reach one-third



of the total share capital;



  3.  Upon  request  by  the shareholders holding 10% or more



of the company's total share capital;



 4. The board of directors deems it necessary; and



 5. Upon request by the supervisory committee.



  Article  105  The  meeting of shareholders shall be convened by



the board of directors according to the provisions of this law



and presided  over  by  the  chairman of the board. In the absence



of the chairman  of  the board due to special reasons, the meeting



shall be presided  over by a vice-chairman of the board or  a



director  designated   by  the  chairman.  If  a  meeting  of



shareholders is to be convened, a  notice  should  be served to



all shareholders 30 days before the meeting stating matters to be



discussed  in  the meeting. An  interim  meeting of shareholders



shall not take resolutions on matters not specified in the notice.



  When   bearer's  shares are issued, a public announcement shall



be made  on   the matters listed in the preceding paragraph 45



days before the meeting.



   If   holders  of  bearer's  shares attend the shareholder's



meeting, they  should  have their shares deposited with the company



from 5 days prior to the meeting to the end of the meeting.



 Article 106 Every share has a vote at the shareholders' meeting.



  The  resolution  at  the  shareholders' meeting must be adopted



with half  or  more  of  the voting rights held by shareholders



present  at   the  meeting.  Resolutions on merger, division or



dissolution  of the company shall be adopted with two-thirds or



more of the voting rights held by shareholders present at the meeting.



  Article 107  The  resolution  on amendment to  the  articles



of



  association  shall  be  adopted  with  two-thirds  or more of



voting rights held by the shareholders present at the meeting.



  Article 108  Shareholder  may  appoint approxies  to  attend



the



  shareholders'  meeting.  A proxy should submit to the company



a power  of  attorney  from the shareholder and exercise his(her)



voting rights within the terms of reference.



  Article 109  Minutes of the decisions made in matters discussed by



the



   shareholders'   meeting  shall  be  kept  and  signed  by



the directors  present  at  the  meeting. The minutes of the



meeting shall  be  kept  together  with the list of shareholders



present and powers of attorney of proxies present.



  Article 110  Shareholders have the rights to examine the articles



of



   association,   minutes   of  meetings of shareholders  and



financial and  accounting  statements  and put forward proposals or



enquiries in respect to the operation of the company.



  Article 111  If the resolutions of a meeting of shareholders  or



the



  board  of  directors have violated  the  law, administrative



decrees  or   encroached   upon   the  legitimate  rights  of



shareholders,  the shareholders concerned have the rights to sue at



the people's courts, to demand  that such acts of violation or



infringement be stopped.



 



Company Law of the People's Republic of China (6)

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  SECTION THREE BOARD OF DIRECTORS; MANAGER



  Article 112  A  joint stock company limited shall have a board



of



 directors with five to 19 members.



   The   board  of  directors shall be responsible  to  the



meetings of shareholders and exercise the following powers:



  1.  To  convene  meetings of shareholders and report work to



the



meeting.



  2. To  carry  out  the resolutions passed  by  the  meetings



of



 shareholders.



 3. To decide on the operational and investment plans.



  4. To  formulate  the  company's annual  financial budget and



final



 accounts.



  5. To formulate plans for profit distribution and recovery of



losses.



   6.  To  formulate  plans  for  increasing  or  decreasing



registered capital of the company and the plan for issuing bonds.



  7.  To  draft  plans for merger, division, or dissolution of



the



company.



 8. To decide on the organizational setup of the company.



  9. To  appoint  or replace manager (general  manager) of the



company



   (hereinafter  referred  to  as  "manager"),  appoint  or



replace deputy  managers   and  financial officers of the company



according to   the  recommendation  by  the  manager and decide



on their



remunerations.



 10. To formulate the basic management systems of the company.



  Article  113  The board of directors shall have a chairman and



one or  two  vice-chairmen. The chairman and vice-chairmen shall be



elected by majority vote of directors.



  Article 114  The  chairman  of the board shall  be  exercise



the



 following powers;



  1.  To  preside  over the meeting of shareholders and convene



and preside over the meetings of the board of directors;



  2. To  examine the implementation of the resolutions adopted  by



the



 board of directors;



 3. To sign on shares and bonds issued by the company.



  Vice-chairmen  of  the board shall assist the chairman of the



board in  his(her)  work.  If  the  chairman  of the board is



unable  to perform  his(her)  duties,  he(she) shall designate a



vice-chairman to act in his(her) behalf.



  Article 115  The  term of office for the chairman of the board



of



   directors   shall  be  provided  for in the articles of



association, but each  term  of  office shall not exceed three



years.  The chairman  of   the  board  of  directors may serve



another  term  of office  upon reelection after expiration of the



former term.



  The  shareholders  meeting  may  not without reason remove a



director from office before the term of office of the director expires.



  Article 116  The meeting of the board of directors shall be  held



at



  least  twice  a year. All the directors shall be notified of



the meeting 10 days before the meeting.



  For   an  interim  meeting, the method of notification and



the time limited for the notification may be formulated separately.



  Article 117  A meeting of the board of directors shall be  held



only



  if  half  of  the  directors present and resolutions to the



board require the approval of more than half of all directors.



  Article 118  The  directors shall attend the meeting of board



of



  directors  in  person.  If a director is unable to attend a



meeting for  some  reasons, he(she) may appoint another director by



a written power  of  attorney  to attend the meeting on his(her)



behalf.  The power  of attorney shall set out the scope of the



authorization.



  The   board   of  directors shall keep minutes of  meetings



on the decisions  on matters discussed and the directors present



at the  meetings  and the person who records the minutes shall sign



the minutes of meetings.



   Directors   shall   bear   the   responsibilities   for



the resolutions  adopted   at   the   meeting  of the baord



of directors.   If   the  resolutions   adopted  at  the board



meeting have   violated   the   law,  administrative  decrees,



or   the articles   of  association   and incurred  serious



losses  to the company,  the  directors  that participate  in



the  resolution are  liable  to  compensate  the company.  But



if  a director can be  proven  expressly  objecting   to  the



resolutions  and  that the objection  had  been recorded in the



minutes  of meetings, the director per se may be exempt from the



responsibilities.



  Article 119  A  joint stock company limited  shall  have  a



manager,



  subject  to  the  appointment or dismissal by the board of



directors. The  manager  shall  be  responsible to the board of



directors and exercise the following powers:



  1.  To  be  in  charge of the company's  production  and



operation and  organize  the  implementation  of the decisions of



the  board of directors.



   2.   To   organize   the  implementation of  the  annual



operational and investment plans of the company.



 3. To draft the internal organizational setup plan.



 4. To draft the basic management system of the company.



 5. To formulate specific rules and regulations of the company.



  6.  To  propose  the appointment or dismissal  of  deputy



managers and financial officers.



  7.  To  appoint  or  dismiss  management personnel other than



those whose  appointment  or  dismissal  shall  be decided upon



by the board of directors.



  8.  Other  powers  granted by the articles of association and



the board of  directors.The  manager  shall attend the meeting of



the board of directors as a non-voting member.



  Article 120  The board of directors may authorize its chairman



to



  exercise  part  of  the powers of the board when the meeting of



the board is not in session.



  Article 121  In considering the wages, welfare of the workers and



safe



  production,  labor  protection  and  labor  insurance  and



other  issues  concerning  the  personal interests of staff and



workers,  the company  should  first of all solicit and consider



opinions  of the trade   union  and   the   workers  of the



company  and  invite representatives  of  the trade union or



workers  to  attend the relevant meetings as observes.



  Article  122  In  considering  and  deciding  on  major



issues



  concerning  the  operation  of  the  company and in formulating



major rules  and  regulations,  the  company should solicit  and



consider opinions and suggestions of the trade union or workers of the



company.



  Article 123  Directors  and manager of a company shall abide by



the



   provisions  of  the  articles  of  association,  faithfully



perform their  duties, protect the interests of the company and



may not exploit their positions and powers to seek personal gains.



  The   provisions  of  Article  57 through Article  63  on



persons not  eligible   for  serving  as directors and managers



and  about the  obligations  and  liabilities of directors and



managers  also apply  to directors and managers of joint stock



companies limited.



 SECTION FOUR SUPERVISORY COMMITTEE



  Article 124   A  joint  stock company  limited  shall  have



a



  supervisory  committee  made up of at least three persons with



one of them to be elected as the convener.



   The    supervisory    committee   is  made   up   of



representatives of  shareholders  and  an appropriate proportion of



representatives  of staff  and  workers. The specific proportion



of  workers  shall  be  provided  for  in  the articles of



association. The representatives of workers  shall be elected by



workers through democratic processes.



  Directors,   the   manager  and  financial  officers  shall



not serve concurrently as supervisors.



  Article 125  The term of office of a supervisor is three years.



The



   supervisor   may  be  re-elected  to  serve  another  term



upon expiration of the term.



  Article  126  The  supervisory  committee  or  individual



supervisors



 exercise the following powers:



 1. To check up on the financial affairs of the company;



  2. To  supervise  over  acts  of  directors  and  manager



while



  performing  their duties which violate laws, regulations  or



articles of association of the company;



  3. To request remedies from directors or manager for their acts



which



 have made harm to the interests of the company;



  4. To  propose  the convening of interim meetings of the board



of



 directors;



  5. To  exercise  other powers provided for in  the  articles



of



 association.



  Supervisors  shall attend the meeting of the board of directors



as non- voting members.



  Article  127  The discussion methods and the procedures of voting



at the meeting of the supervisory committee shall be provided for



in the articles of association



  Article 128  Supervisors shall faithfully perform their duties



of



   supervision   according  to law, administrative decrees and



articles of association.



  The  conditions  listed in Article 57 through Article 59 and



Article 62 and Article 63 of this law on persons not eligible for the



position of  supervisors  and  on the obligations and duties  of



supervisors also apply to supervisors of joint  stock  companies



limited.



  CHAPTER  FOUR  ISSUE  AND  TRANSFER  OF STOCKS OF A JOINT



STOCK COMPANY LIMITED



 SECTION ONE ISSUE OF STOCKS



  Article 129  The capital of a joint stock company limited shall



be



 divided into shares of equal value.



  Shares  in  a  company take the form of share certificates,



which are  signed  and  issued  by the company to certify that the



shares are held by shareholders.



  Article 130   The  shares  shall be issued on the  basis  of



the



  principle  of  public,  fair  and impartial. Shares of the same



class must have the same rights and benefits.



  For  share certificates issued at the same time should be equal



in price  and  each  share  should have the same issue terms. The



price of  each share purchased by any organization or individual must



be the



same.



  Article 131  The shares may be issued in par value or above  the



par



 value, but not lower than the par value.



  Share  certificates  with  an issued price above the par value



shall get  the  approval of the securities administration department



of the State Council.



  The  premium  arising  from issue of stocks in prices above the



par value shall be allocated to the company's capital common reserve



fund.



   The   specific   regulations   governing   the   issue



of share  certificates at a premium shall be separately issued by



the State Council.



  Article 132   Share  certificates  take  the  form   of



paper



   certificates   or   other  forms  as  provided  for  by



the securities administration department of the State Council.



 The following items shall be set out in the share certificates:



 1. Name of the company;



 2. Date of registration and establishment of the company;



  3.  The  class of share certificate, the par value and number



of shares represented by the share certificate;



 4. Serial number of the share certificate.



  The  share  certificates shall be signed by the chairman of the



board of directors and sealed by the company.



   Share  certificates  of  promoters  shall  bear the notation



promoters share certificate.



 Article 133  Shares  issued  to  promoters,  State   authorized



  investment  institutions  and  legal persons shall be in the



form of  registered   share  certificates  and shall bear the



names  of such  promoters, investment institutions or legal persons



but not other names or the latter's representatives.



  The   shares   issued  to the general public may be in the



form of registered certificates or bearer certificates.



  Article 134  In issuing registered shares, the company shall keep



a list of shareholders, with the following items set out:



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



 2. Number of shares held by each shareholder;



 3. Serial number of the shares held by the shareholders;



  4. Date  for acquiring the shares by shareholders.In  issuing



bearer



  shares,  the  company shall record the number, serial numbers



and date of issue of the shares.



  Article  135   The  State Council  may  formulate  separate



regulations



 governing the issue of classes of shares not covered by this law.



  Article 136  A joint stock company limited shall official deliver



the



   share    certificates   to   shareholders   immediately



after its  registration  and establishment. No share certificates



shall  be  delivered   to  shareholders  before  the  official



establishment  of the company.



  Article 137  In issuing new shares, a joint stock company limited



must



 meet the following conditions:



  1.  The  previous issue of shares has been fully subscribed and



at least one year has elapsed since the issue;



  2.  The  company  has  been continuously  taking  profits



and paying dividends to shareholders in the last three successive years;



   3.  There  has  not  been any false reporting  in  the



financial and accounting documents of the company in last three years;



  4.  The  projected  profit rate of the company equals to or



exceeds the interest on bank deposit for the same term.



  A  company which uses profit of a given year to issue new shares



is not subject to item 2 above.



  Article 138  For issuing new shares, resolutions must be passed on



the



 following matters by the shareholders meeting:



 1. Class and quantity of the new shares to be issued;



 2. Issue price of the new shares;



 3. The starting and closing time for the issue; and



  4. Class  and  quantity of the new shares to  be issued to



existing



 shareholders.



  Article 139  After  the  meeting  of  shareholders  approved



the



   revolutions,   the   board   of directors shall  file  an



application for  approval  with  the departments authorized by the



State Council  or the  people's governments at the provincial level



for the new issue. If the new  shares  are  to be issued by means



of public  offer,  an approval  should  be  acquired from the



securities administration department of the State Council.



  Article  140  If a joint stock company limited has been approved



to make  public offer of new shares, the company must  publish



a  prospectus   for  the   new  shares  and  the  company's



financial statements   with detailed  schedules  attached  and



prepare application forms for subscription.



  The   new  shares  to be issued shall be  underwritten by



a  legally   established   securities   institution   and  an



underwriting agreement shall be executed.



  Article 141 In issuing new shares, a joint stock company limited



shall



  determine  the  pricing  plan according to the  profitability



of the company and the increase in the value of its property.



  Article  142  After  fully  collecting  the payment for shares



newly  issued,   the    company   shall   go  through  the



procedures   of  alteration    of  registration   with  the



company registration department and make a public announcement.