Company Law of the People's Republic of China(3)(4)

Company Law of the People's Republic of China (3)

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  Article  46  The  board of directors shall be responsible to



the meeting of shareholders and exercises the following powers:



  1.  To   call   meetings  of shareholders and  report  work



to the meetings of shareholders.



   2.   To   execute   the   resolutions  passed  by  the



meetings of shareholders.



 3. To decide on the operation and investment plans.



  4.  To   formulate  the company's annual  financial budget



and final accounts.



   5.  To  formulate  the  profit  distribution  and  losses



recovery



plans.



   6.   To   formulate  plans  for  increasing  or decreasing



registered capital of the company.



  7.  To  draft  plans for merger, division, change of corporate



form and dissolution of the company.



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



  9.  To   appoint  or dismiss manager (general manager) of



the company  (hereinafter  referred  to  as "manager"),  appoint



or dismiss  deputy  managers   and  financial  officers of the



company according  to  the recommendation by the manager and decide



on their



remuneration.



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



  Article  47  The  term of office for the chairman of the board



of



   directors   shall   be  provided  for in the articles  of



association, in  case   that  each term of the office shall not be



longer  than three  years.   The  chairman  of the board of



directors  may be re-elected upon the expiration of the term to serve



another term.



  Before   the  term  of office of a director expires, the



meeting of  shareholders   shall   not  dismiss him (her) from



his  (her) posts without justifiable reasons.



  Article  48  The meetings of the board of directors shall be



called



  and   presided  over by the chairman of the board of directors.



If the  chairman  of the board of directors is unable to perform his



(her) duty  due to special reasons, a vice-chairman of the board of



directors or  a  director designated by the chairman of the board



of directors shall  call and  preside over the meetings. A meeting



of the board of directors  may be called upon the motion by at least



one-third of the



directors.



  Article  49  The  method of discussion and the procedures of



voting



  at  the  meeting of the board of directors shall be provided for



in the articles of association except otherwise provided for in this



law.



  In  concerning  a  meeting of the board of directors, a notice



shall be given to the directors concerned 10 days before the meeting is



held.



  The  board  of  directors shall keep minutes of meetings made



on the matters discussed and being signed by the directors present.



  Article  50  A  limited  liability  company  shall have  a



manager, subject  to  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  operations



and



  management  of  the  company and organize the implementation



of the decisions of the board of directors.



  2. Implementation of the annual operation and investment plans of



the



 company.



 3. Formulate the internal organizational setup plan.



 4. Formulate the basic management system of the company.



 5. Formulate specific rules and regulations of the company.



  6. Propose  the  appointment  or dismissal of deputy  managers



and



 financial officers of the company.



  7. Appoint  or  dismiss  management  officers  other  than



those



 required to be appointed or dismissed by the board of directors.



  8.  Other  powers  conferred 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  51  If a limited liability company with a small  number



of



  shareholders  and  a  small  scale of operation, it may have



one sole executive  director instead of the board of directors.



The executive director may concurrently serve as the manager of



the



company.



  The   powers   and   functions of the  managing  director



shall be  defined  in  the articles of association pursuant to the



provisions of Article 46 of this law.



   If   a   limited  liability  company has no  board  of



directors, the managing director shall be the legal representative.



  Article  52  A  limited  liability  company with a relatively



large scale  of  operation shall have a supervisory committee made up



of  not less than three members and a convenor elected among the



members.



    The    supervisory    committee    shall    include



representatives of shareholders and a certain proportion of workers'



representatives. The  specific  proportion shall be specified in



the articles of



association.



  The  workers'  representatives to  the supervisory committee



shall be elected by workers through democratic process.



  A   limited   liability  company with a  relatively  small



number of  shareholders  and  of a small operation scale may have



one to two supervisors.



  Director,   manager  and  financial  officer of  a company



shall not concurrently serve as supervisors.



  Article  53  The term of office of a supervisor is three  years,



upon



  the  expiration  of the term, a supervisor may be reappointed



and serve another term.



  Article  54 The supervisory committee or individual supervisors of



a



 company exercise the following powers:



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



  2. To  supervise  the  law and regulation violating  acts  or



the



   articles   of  association  of  directors  and manager  in



performing their duties;



  3. To request directors or manager to remedy their acts whenever



such



 acts harm the interests of the company;



 4. To propose the convening of an interim shareholders' meeting; and



  5. To  exercise other powers as provided for in the  articles



of



  association.Supervisors  shall  attend  the  meeting  of the



board of directors as non-voting members.



   Article   55  Whenever  considering  and  deciding  on



wages, welfares,  production  safety  of  the staff and workers



and  labor protection   and  labor  insurance  and other issues



converning  the personal  interests  of  the  staff and workers,



opinions of the trade union  and  the  workers of the  company



should first  of all be solicited  and  representatives of the



trade  union  or  workers should be invited  as  observers  to



meetings concerned.



  Article  56  Opinions  and suggestions of the  trade union



and  workers  of  the  company should also be solicited when



considering and deciding on  major  issues concerning the operation



of  the company and  when major rules and regulation are formulated



for the company.



  Article  57  The  following persons may not  serve  as  the



director,



 supervisor or manager of a company:



 1. persons without or with restricted civil capacity;



  2.  persons   who   have   committed  the  offences  of



corruption,



   bribery,   infringement   of  property, misappropriation of



property or  sabotaging  the social economic order, and have been



sentenced to  criminal  penalties, where less than five years have



elapsed since the date of completion of the sentence; or persons



who have been deprived of  their political rights due to criminal



offense, where less  than five years have elapsed since the date of



the completion of



this



 deprivation;



  3. persons who are former directors, factory directors of managers



of a  company or enterprise which has become bankrupt and been



liquidated as  a  result of mismanagement and are personally liable



of bankruptcy of  such  company  or enterprise, where less than



three years  have elapsed  since  the date of completion of the



bankruptcy and liquidation of the company or enterprise.



  4. persons  who  were  legal representatives  of  a  company



or



  enterprise   which   had  its business licence  revoked  due



to a  violation   of the law and who are personally liable, where



less than  three   years  have  been elapsed  since  the date



of the revocation of the business licence;



 5. persons who have a relatively large amount of debts  due  and



 outstanding.



  The  election or appointment for directors, supervisors or manager



of a  company  shall become invalid if not in comformity with



the preceding provisions.



  Article  58  Civil servants of the State are not allowed to serve



as



 directors, supervisors or managers of companies.



  Article  59  Directors, supervisors and manager of a company



shall



   abide  by  the  articles  of  association,  perform  their



duties faithfully,  and safeguard the interests of the company. They



are not allowed  to  exploit their positions and powers in the



company for personal gains.



  Directors,  supervisors  or  manager of a company  are not



allowed to exploit  their position to accept bribes or other illegal



income or wrongfully take over the company property.



  Article  60  Directors or manager of a company are not  allowed



to



 misappropriate the funds of the company or loan such funds to others.



  Directors  or  manager  of a company are not allowed to deposit



the assets  of  the  company  in their own  or  other personal



bank



accounts.



  Directors  or  manager  of a company shall not provide assets



of the  company  as guarantee for the debts owed by shareholders



of the company or by others.



  Article  61  Directors or manager of a company shall not  engage



on



  their  own  behalf or on behalf of others in any businesses that



are the  same   of  that  of the company or activities that are



harmful  to their  own   company.  The proceeds from any such



businesses or activities shall belong to the company.



   A   director   or  a manager shall not enter  into  any



contracts  or  transactions   with  the company except otherwise



provided for  in the  articles  of  association  or  with  the



consent  of the meeting of association or with the consent of meeting



of shareholders.



  Article  62  A director, a supervisor, or a manager of a company



shall



  not  divulge  secrets  of the company except according to law or



with the consent of the meeting of shareholders.



  Article  63  Where a director, a supervisor, or a manager of



a company  violates   the   law,  administrative  decrees,  or



the company's  articles   of  association  in  performing  his



(her) official corporate  duties resulting in harm of the company,



such director,  supervisor,  or  manager is liable for compensation



for the



damage.



 



Company Law of the People's Republic of China (4)

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  SECTION THREE SOLELY STATE-OWNED COMPANIES



  Article  64  The term "solely State-owned companies" used in this



law



  refers  to the limited liability companies established solely



by State authorized investment institution or department.



   Companies   designated   by  the  State  Council   to



produce special  products or belonging to a special trade as set



should be solely State- owned.



  Article  65   The  articles of association  of  a  solely



State-owned



   company    shall   be   formulated  by   the  State



authorized investment  institution  or department in accordance with



the law or by the  board of  directors  and  be  submitted  to



the  investment institution   or  department concerned authorized



by the State for



approval.



  Article  66  A  solely State-owned company shall not set up



the



  meeting   of   shareholders   but  the  board of directors



which is  empowered by the investment organization or department



authorized by the State to exercise part of the powers and functions



of  the  meeting of  shareholder  and  decide on major matters



concerning the company. But merger,  division, dissolution or the



increase or  decrease  of capital and  issuing of bonds shall be



determined  by the investment institution or department concerned



authorized by the State.



  Article  67  The  State  authorized  investment  institution



or



  department  shall  supervise  over and manage the assets of



the  solely   State-owned   company  according  to  law  or



administrative



decrees.



  Article  68  The board of directors of a solely State-owned



company



   shall  exercise  its powers and functions according to  the



provisions of  Article  46 and Article 66 of this law. The term of



office of the board of directors shall be three years.



  The   board   of   directors  shall be made up  of  three



to nine  persons,  who  are  subject  to  the  appointment



or  replacement   by the  investment  institution  or department



authorized by   the  State according  to  the  term of office for



the  board of   directors.  Workers  in  the  company should



elect  through democratic  processes representatives to the board of



directors.



  The  board  of  directors shall have a chairman or may have



a vice-  chairmen  if necessary. The chairman and vice-chairmen of



the board  shall  be  designated  from among  the directors by



the investment institution or department authorized by the State.



  The   chairman   of  the board is the legal  representative



of the company.



  Article  69  A solely State-owned company shall have a manager



who shall be  subject to the appointment or dismissal by the board



of  directors  and   exercises  the  powers  according  to the



provisions of Article 50 of this law.



   With   the   consent   of  the  investment  institution



or department  authorized  by the State, a member of the board



may concurrently serve as the manager of the company.



  Article  70  Chairman, vice-chairmen or directors of the  board



and



  the   manager  of  a  solely  State-owned  company  may



not serve  concurrently  as officers of other limited  liability



companies, joint  stock  companies  limited  or other  business



organizations without  the consent  of the investment institution



or department authorized by the State.



  Article  71   In  transferring  the assets  of  a  solely



State-owned



   company,  the  procedures  of  examination  and approval and



transfer shall  be  completed  by the investment institution or



department authorized  by  the  State  according  to  law  or



administrative



decrees.



  Article  72  Large  solely  State-owned  companies  with



sound



   operational    and   management   system   and   in



good operational  conditions  may  be  authorized  by the State



Council to exercise rights as the owners of the assets.



  CHAPTER  THREE  ESTABLISHMENT  AND  ORGANIZATIONAL  SETUP OF



JOINT STOCK COMPANIES LIMITED



 SECTION ONE ESTABLISHMENT



  Article  73  The establishment of a joint stock company limited



shall



 meet the following conditions:



 1. The number of promoters shall meet the requirement of the law;



  2.  The  share  capital  subscribed by the promoters and public



offer meets the minimum amount of capital required by law;



  3. Issue of stocks and the related preliminary matters conform to



the



 provisions of the law;



  4.  Articles  of  association are formulated by the promoters



and adopted at the establishment meeting;



   5.  The  company  has  a  name and has established the



organizational setup that meets the requirements of a joint stock



company;



  6. The  company  has  fixed production or  operational  sites



and



 necessary conditions for production or operations.



  Article  74  A joint stock company limited may be set up by means



of



 promotion or public offer.



  By   promotion,   it  means the establishment of a  company



by the subscription  by promoters for all the shares to be issued



by the company.



  By  public  offer,  it means the establishment of the company



by the  subscription  by  the promoters of part of the shares to be



issued and a public offer of the remaining shares.



  Article  75  In  setting  up  a joint stock company limited,



there should  at  least  be five promoters with over half of them



living within the territory of China.



  For  a  joint  stock  company  limited reorganized from a



State owned enterprise,  the  number of promoters may be less than



five, but the method of public offering should be adopted.



  Article  76  The  promoters of a joint stock company limited



shall



  subscribe  to  the  shares due to them according to this law



and be responsible  for  the preparations for the establishment



of the company.



  Article  77  The  establishment  of  a joint stock company



limited shall  have  the approval of the department authorized by



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



level.



  Article  78  The  registered  capital  of  a  joint stock



company limited  shall   be   the  total  share capital which



has   been registered with the registration department and which



has  been actually  received. The  minimum  amount of registered



capital of  a joint  stock  company  limited  shall  be RMB10



million. Requirements for  the  minimum amount of the registered



capital of a joint stock company limited to be higher than  the



above  amount  are  provided  for  in  separate  laws  or



administrative decrees.



  Article  79  The  articles of association of  a joint stock



company



 limited shall define the following:



 1. Name and address of the company;



 2. Scope of business of the company;



 3. Method of establishment;



  4. Total  shares,  par value of each share  and  the  amount



of



 registered capital of the company;



 5. Names of promoters and the shares they have subscribed to;



 6. Rights and obligations of shareholders;



  7. Composition, powers, term of office and rules of procedure  of



the



 board of directors;



 8. Legal representative of the company;



  9. Composition,  powers, term of office and rules of procedure of



the



 supervisory committee;



 10.Method of distribution of profits of the company;



   11.Reasons   for   dissolution  of   the   company  and



liquidation



methods;



 12.Methods for issuing public notices or announcement; and



   13.Other    matters    deemed   necessary   by   the



meeting of shareholders.



  Article  80  Shareholders may pay in their investment in cash,



in kind, in  industrial  property rights, non-patented technology



or land   use  rights.  The  investment  in  kind, industrial



property rights,  non- patented  technology  or land use rights



must  be assessed  in  value  and  be  converted  into shares



according to their assessed  value  without  over  or  under



valuation.  The  value assessment  of land use rights shall be



handled according to law or administrative decrees.



  The  industrial  property rights or/and non-patented technology



in value  terms  shall  not  exceed 20 percent of the registered



capital of the company.



  Article  81  When reorganise a State-owned  enterprise into a



joint



   stock  company  limited,  it  is  strictly  prohibited to



under-value State-  owned   assets  for conversion into shares,



sell  them at prices  below their value, or distribute them without



compensation to



individuals.



  Article  82  When  establishing  a  joint  stock  company



limited through  promotion, the promoters shall subscribe in written



form the amount  of  shares  provided  for  in the articles of



association  in  full   payment.  In   cases   of   paying



investment   in  kind, industrial  property rights, non-patented



technology  or  land  use rights, procedures for  the transfer of



the property rights shall be completed according to law.



  After   the  promoters  all pay in their capital, they should



elect  the  board   of   directors   and   the  supervisory



committee.  The board  of directors shall apply for registration



of establishment of the  company with  the registration department



with the  document of approval  for establishment,  the articles



of association, capital verification and other documents.



  Article  83  When  establishing  a  joint  stock  company



limited  through  public  offer of shares, the amount of shares



subscribed to by promoters  shall  not less than 35 percent of the



total. The rest shall be offered to the public for subscription.



  Article  84  In public offer, an application for the offer must



be



   submitted   to  the  securities  administration  of  the



State Council, together with the following documents:



 1. Document of approval for establishing the company;



 2. Articles of association;



 3. Operating budget;



  4. Names of promoters and the number of shares by the  promoters,



the



    method    of   capital   contribution,   and   capital



verification



certificate;



 5. Prospectus;



 6. Names and addresses of the receiving bankers; and



  7.  Names  of underwriters and the relevant agreement.Promoters



shall not make  a  public  offer  without  the  approval  of



the securities administration of the State Council.



  Article  85  With the approval of the securities  administration



of



  the  State  Council,  a joint stock company limited may make



a rally  abroad.   The  specific method for the rally shall be



formulated by the State Council.