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Company Law of China (2018)


Type of laws Law

Issuing body National People's Congress

Promulgating date Oct 26, 2018

Effective date Oct 26, 2018

Validity status Valid

Scope of application Nationwide

Topic(s) Corporate Law/Enterprise Law

Editor(s) C. J. Observer Xinzhu Li 李欣烛

The Company Law was promulgated in 1993 and amended in 2004, 2005, 2013 and 2018 respectively. The latest revision entered into force on October 26, 2018.

There are 218 articles in total.

The key points are as follows:

1.A company shall be liable for its debts to the extent of all of its property. A shareholder of a limited liability company shall be liable for the company to the extent of the capital contribution it subscribes. A shareholder of a company limited by shares shall be liable for the company to the extent of the shares it subscribes.

2.A limited liability company shall be invested in and established by no more than 50 shareholders. For the establishment of a company limited by shares, there shall be more than two and less than 200 promoters, of which more than half shall have their domicile within the territory of China.

3.The shareholders’ meeting shall be the organ of authority of the company. A limited liability company shall have a board of directors of three to 13 members, and the board of directors shall be accountable to the shareholders’ meeting. A limited liability company may have a manager, who shall be employed or dismissed by the board of directors. A limited liability company shall have a board of supervisors, which shall have no fewer than three members.

4.The chairperson of the board, the executive director or the manager of the company shall act as the legal representative of a company pursuant to the articles of association of the company and registration formalities shall be completed according to the law. In the event of any change in the legal representative of the company, formalities shall be carried out for registration change.

5.The shareholders of a limited liability company may transfer all or part of their equity interests among them. Where a shareholder transfers its equity interests to a person other than a shareholder, it shall obtain the consent of more than half of the other shareholders. Provided all conditions are equal, the other shareholders shall have the priority purchase right for the equity interests the transfer of which has been consented by the shareholders.

6.The capital of companies limited by shares shall be divided into shares of equal amount. Each share of the same type shall carry the same rights and benefits.

7.Companies shall prepare financial and accounting reports at the end of each fiscal year. Such reports shall be audited by an accounting firm according to the law.

8.When companies distribute their after-tax profits for a given year, they shall allocate 10% of profits to their statutory common reserve. Companies shall no longer be required to make allocations to their statutory common reserve once the aggregate amount of such reserve exceeds 50% of their registered capital.

9.A company shall be dissolved due to the following reasons:

(1) when the term of operation as specified in the company’s articles of association expires or another cause of dissolution as specified in the company’s articles of association arises;

(2) where the shareholders’ meeting or general meeting resolves to dissolve the company;

(3) where dissolution is necessary as a result of the merger or division of the company;

(4) its business license has been revoked, or it is ordered to close down or to be revoked according to the law; or

(5) Where any severe difficulty occurs to the operation management of a company, in which case the interests of the shareholders may suffer heavy losses where the company continues to exist and there is no other way to solve the problem, the shareholders representing more than ten percent of the voting rights of all the shareholders of the company may file a request with the people’s court to dissolve the company.

10.Where a company is declared bankrupt according to the law, it shall be subject to insolvency liquidation according to the laws on enterprise insolvency.

11.To establish a branch in China, a foreign company shall file an application with China’s competent authority. Upon approval, it shall go through registration procedures with the company registration authority according to the law and obtain a business license.

12.A foreign company shall bear civil liabilities for the business activities carried out by its branches within the territory of China.

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