Decree of the Ministry of Finance
No.41 Under the provisions of the Reply of the State Council concerning the General Rules on Enterprise Finance and Enterprise Accounting December 4, 2006 General Rules on Enterprise Finance Article 1 With a view to strengthening the financial management of enterprises, regulating the financial behaviors of the enterprises, protecting Article 2 Except for financial enterprises, the state-owned enterprises and state holding enterprises set up within the territory of the People’s Other enterprises shall implement the present General Rules by reference. Article 3 The state-owned enterprises and state holding enterprises (hereinafter referred to as enterprises) shall determine their internal The financial management of an enterprise shall consist such financial behaviors as raising funds rationally, operating assets effectively, Article 4 The Ministry of Finance shall be responsible for instituting the rules and regulations on enterprise finance. The financial departments of all levels (hereinafter referred to as competent authorities of finance collectively) shall enhance guiding, (1) supervising the implementation of the rules and regulations concerning enterprise finance, directing the enterprises to set up and (2) instituting the financial policies that facilitate the reform and development of the enterprises, setting up and perfecting the financial (3) setting up and perfecting the enterprise auditing system of annual financial report so as to examine the quality of the annual financial (4) assessing enterprise finance, monitoring the operation status of enterprise finance; (5) researching and drafting the systems on the distribution of state-owned capital gains and the operation budget of state-owned capital; (6) taking part in the examination and approval of the important reform and restructuring schemes of the enterprises invested by the people’s (7) offering necessary assistance and services in accordance with the demands of enterprise financial management. Article 5 Such enterprise investors as the people’s governments of all levels and their departments and organs, enterprise legal persons, other Article 6 An enterprise shall pay taxes under law. In case the financial treatment of the enterprise does not accord with any provision of Article 7 With regard to an enterprise invested by the people’s government or any of its departments and organs, its financial relationship Chapter II Enterprise Financial Management System Article 8 An enterprise shall perform such a financial management system as being clear in capital ownership, unambiguous in financial relationship An enterprise shall set up effective management grades of internal financial. An enterprise group company may determine its internal Article 9 An enterprise shall set up a decision-making system of finance and clarify the decision-making rules, procedures, power limits and An enterprise shall set up a withdrawal system for financial decision-making. With respect to the financial decision-making items Article 10 An enterprise shall set up a financial risk control system, specify the management rights and liabilities of the operators, investors Article 11 An enterprise shall set up a budget management system of finance to implement all-around budgetary management on financial activities Article 12 The financial management duties of an investor mainly involve: (1) examining and approving the internal financial management system, financial strategy, financial plan and financial budget of the enterprise; (2) determining material financial items such as fund-raising, investment, guarantee, donation, reorganization, remuneration for operators (3) determining the hiring or firing of intermediary organs such as accounting firms or property assessment institutions and so on; (4) supervising and assessing the financial affairs of the operators; and (5) dispatching or recommending chief financial officers to exclusively-funded or holding enterprises under the related provisions. An investor shall fulfill the financial management duties through the shareholders’ meeting, board of directors or other internal Article 13 The financial management duties of an operator mainly involve: (1) studying out enterprise internal financial management rules, financial strategies, financial plans, preparing financial budgets; (2) organizing the implementation of such financial schemes as fund-raising, investment, guarantee, donation, reorganization and profit (3) carrying out the provisions of the state on employees’ remunerations and labor protection, paying social insurance premium and public (4) organizing financial forecasting and financial analysis, carrying out financial control; (5) preparing and providing enterprise financial report so as to reflect the financial information and the related situation faithfully (6) coordinating with the related organs in carrying out such work as auditing, evaluation and financial supervision and so on. Chapter III Fund Raising Article 14 An enterprise may accept the capital contribution made by an investor in the form of monetary, real object, intangible assets, stock In case an enterprise accepts the capital contribution of an investor in the form of non-monetary assets, if there is any stipulation In case an enterprise accepts the capital contribution by an investor in the form of intangible assets such as trademark right, copyright, Article 15 In case an enterprise raises funds through absorbing direct investment or issuing shares, etc. under law, it shall draw out a fund-raising An enterprise shall trust, under law, a legal capital verification institution to verify the raised capital and issue a report on Article 16 An enterprise shall carry out the related capital management systems of the state and, within 30 days as of approval of industrial With regard to the paid-in capital raised by the enterprise, during its persistent operation, the investors may transfer or reduce Except it is otherwise prescribed in the Company Law of the People’s Republic of China or any other related law or administrative Article 17 In case capital actually paid by the investors exceeds the registered capital (including stock premiums), an enterprise shall manage After being deliberated and determined by the investors, the capital reserves may be converted into capital. In case it is provisioned Article 18 The surplus reserves that are withdrawn by an enterprise from its after-tax profits include legal and discretional accumulation funds, Article 19 In case an enterprise enhances the paid-in capital or converts the reversed capital or surplus reserves into paid-in capital, the Article 20 The various kinds of financial funds obtained by an enterprise shall be dealt with according to the different circumstances as follows: (1) where the fund is directly invested or injected by the state, the national capital or state-owned capital reserve shall be increased (2) where the fund is an investment subsidy, the capital reserve or the paid-in capital shall be increased. If the state has provisioned (3) where the fund is a loan of discounted interest or a special subsidy, it shall be dealt with as an income of the enterprise. (4) where the fund is a reloan of the government or a refundable subsidy, it shall be dealt with as a liability of the enterprise. (5) where the fund is for making up loss, relieving loss or other purposes, it shall be dealt with as an income of the enterprise. Article 21 In case an enterprise raises debt funds under law in forms of loans, issuing bonds or financial leases and so on, it shall define In case an enterprise raises funds for a fixed asset investment project, it shall comply with the industrial policies of the state, When raising fund, an enterprise shall assess and use the fund under the related provisions, undertake the contract in good faith Chapter IV Assets Operation Article 22 An enterprise shall determine a reasonable assets structure and conduct a dynamic management on the assets structure according to Article 23 An enterprise shall set up an internal fund allocation control system, clarify the conditions, power limits and procedures of fund With regard to overseas payment or allocation of funds, the related provisions of the state on foreign exchange control shall be applicable. An enterprise group may adopt a concentrated and unified management on its internal funds, but shall comply with the related provisions Article 24 An enterprise shall set up a financial examination system on contract and clarify the operational flow and power limits of examination An enterprise shall enhance the management of the receivables, evaluate the credit risks of the clients, track the clients’ performance Article 25 An enterprise shall set up and perfect the inventory management system, standardize the procedures of examination and approval and An enterprise may select suppliers or carry out bulk purchase in a tender offerings manner. Article 26 An enterprise shall set up a system on the purchase and construction, use and treatment of fixed assets. An enterprise, when selects and determines the method for the depreciation of fixed assets by itself, may consult an intermediary An enterprise shall, when purchases or constructs fixed assets or makes materially technical renovations, conduct a study of feasibility, After a project under construction is delivered for use, an enterprise shall perform the final accounts of the completed project within Article 27 An enterprise shall, when making an overseas investment, conform to the provisions of the related laws, administrative regulations As for an overseas investment, an enterprise shall conclude a contract thereon in written form so as to clarify the rights and interests When making an overseas investment, an enterprise shall acquire the approval of the investors and comply with the related provisions Article 28 With regard to the intangible assets gained by an enterprise by means of self-creation, purchase or the investment acceptance and In case any intangible asset is transferred, leased, pledged, authorized for operation or chained operation, or overseas investment Article 29 When provides guarantee to the outsiders, an enterprise shall comply with the laws, administrative regulations and the related provisions, When makes a donation, an enterprise shall conform to the related laws, administrative regulations and provisions on financial affairs, Article 30 An enterprise shall, when undertaking such businesses as futures, options, securities and foreign exchange transactions or entrusting Article 31 An enterprise shall, when undertaking any agency business, strictly perform the contract, set up separate accounts to manage the Article 32 An enterprise shall set up a reserve management system for asset loss or depreciation. The standards for preparing the asset loss With regard to the assets whose loss or depreciation reserve has been prepared, the enterprise shall determine and implement the responsibility Article 33 An enterprise shall, as for the asset losses it has suffered, verify the losses timely, investigate and clarify the responsibility, The asset losses checked in the reorganization of the enterprise shall, upon approval, be offset with the undistributed profits, surplus Article 34 An enterprise shall, when sells, pledges, replaces, discards or disposes its assets in any other way, comply with the related provisions Article 35 In case an enterprise conducts any affiliated transaction, such transaction shall be priced and settled as a transaction between Chapter V Cost Control Article 36 An enterprise shall set up a cost control system, enhance the restriction of cost budget, advance the measures for quality cost control, Article 37 An enterprise shall carry out centralized, level-by-level management of the expenditure, and budget control therefore, and shall Article 38 The expenses that are necessary for the technological research and development and the projects of transforming scientific and technological An enterprise group meeting the conditions provisioned by the state may make centralized utilization of the research and development Article 39 As for the expenses that are necessary for an enterprise to carry out safe and clean production, pollution treatment, prevention Article 40 In case an enterprise has incurred such expenses as sales discounts, allowances and the payment for necessary commissions, brokerages, With regard to the commissions, insurance premiums or freight charges collected or paid by an enterprise for carrying out import-export In case an enterprise pays any money to an individual or a non-business entity, it shall perform the formalities of payment and internal Article 41 An enterprise may carry out different compensation measures for the operators and core technical personnel from those for the other Article 42 An enterprise shall pay remunerations to its employees under the labor contract and the related provisions of the state and pay group An operator may prepare money of a certain amount out of its wages plan so as to reward the employees that have made significant contribution Article 43 An enterprise shall pay basic medical, basic pension, unemployment, working injury and other social insurance premiums for its employees, With respect to an enterprise that has already undertaken the basic medical insurance or/and pension insurance, if it has continuous Article 44 Such financial affairs of an enterprise as the payment of public accumulation fund for housing and the monetized distribution of The expense for staff training shall be withdrawn at the proportion provisioned by the state, and shall be specially used for the Labor union expenses shall be withdrawn at the proportion as provisioned by the state and appropriated to the labor union. Article 45 An enterprise shall pay administrative undertaking charges, governmental funds and the expenses for using or occupying state-owned The enterprises are enpost_titled to refuse to pay all kinds of apportions, charges and fund-raisings without legal basis or beyond the Article 46 An enterprise may not bare the following expenses that belong to individual payment: (1) expenses on entertainment, body-building, tourism, serving, shopping or donating and so on; (2) expenses on purchasing commercial insurances, securities, stock equities or collections and so on; (3) expenses on the penalty or compensation and so on caused by individual act; (4) expenses on purchasing residential house or paying realty management fees and so on; and (5) other expenses that shall be assumed by an individual. Chapter VI Income Distribution Article 47 All the incomes gained by any investor, operator or any other employee of an enterprise from the performance of duties of the enterprise An enterprise shall set up a management system for selling price, define the pricing of its products and services and clarify the Article 48 An enterprise shall sell its equity investment according to the stipulated procedures and methods. The bottom price for the sale The income gained by a listed company from the deduction of state-owned shares it holds shall be dealt with under the provisions of Article 49 The annual operating losses that an enterprise suffered shall be fetched up under the provisions of the laws on taxation. In case Article 50 Except that it is otherwise stipulated by any laws or administrative regulations, the annual net profit of an enterprise shall be (1) to fetch up the losses of the previous year; (2) to withdraw 10% of the legal accumulation fund, and it is allowed to stop withdrawing the legal accumulation fund if its progressive (3) to withdraw discretional accumulation fund, and the proportion shall be decided by the investors; and (4) to distribute profits to the investor. The profits not distributed in the previous year shall be merged into those of this year and A state-owned enterprise may withdraw the discretional and legal accumulation funds in combination. The shares repurchased by a joint
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