Order of the President of the People’s Republic of China
No. 42
The Companies Law of the People’s Republic of China has been revised and adopted at the 18th Meeting of the Standing Committee
of the Tenth National People’s Congress of the People’s Republic of China on October 27, 2005, and its revised version is hereby
promulgated and shall go into effect as of January 1, 2006.
Hu Jintao
President of the People’s Republic of China
October 27, 2005
(Adopted at the 5th Meeting of the Standing Committee of the Eighth National People’s Congress on December 29, 1993; amended for
the first time in accordance with the Decision on Revision of the Company Law of the People’s Republic of China made at the 13th
Meeting of the Standing Committee of the Ninth National People’s Congress on December 25, 1999; amended for the second time in
accordance with the Decision on Revision of the Company Law of the People’s Republic of China made at the 11th Meeting of the Standing
Committee of the Tenth National People’s Congress on August 28, 2004; and revised at the 18th Meeting of the Standing Committee
of the Tenth National People’s Congress on October 27, 2005)
Contents
Chapter I General Provisions
Chapter II Incorporation and Organizational Structure of a Company with Limited Liability
Section 1 Incorporation
Section 2 Organizational Structure
Section 3 Special Provisions on One-person Companies with Limited Liability
Section 4 Special Provisions on Wholly Stated-owned Companies
Chapter III Equity Transfer of Companies with Limited Liability
Chapter IV Incorporation and Organizational Structure of a Company Limited by Shares
Section 1 Incorporation
Section 2 Shareholders General Assembly
Section 3 Board of Directors, and the Manager
Section 4 Board of Supervisors
Section 5 Special Provisions on Organizational Structure of Listed Companies
Chapter V Issue and Transfer of Shares of Companies Limited by Shares
Section 1 Issue of Shares
Section 2 Transfer of Shares
Chapter VI Qualifications and Obligations of Directors, Supervisors and Senior Managers of Companies
Chapter VII Corporate Bonds
Chapter VIII Financial Affairs and Accounting of Companies
Chapter IX Merger and Division of Companies, Increase and Reduction of Capital
Chapter X Dissolution and Liquidation of Companies
Chapter XI Branches of Foreign Companies
Chapter XII Legal Responsibility
Chapter XIII Supplementary Provisions
Chapter I General Provisions
Article 1 This Law is enacted in order to standardize the organization and behavior of companies, to protect the legitimate rights
and interests of companies, shareholders and creditors, to maintain the socio-economic order and to promote the development of the
socialist market economy.
Article 2 For the purposes of this Law, the term company refers to a company with limited liability or a company limited by shares
incorporated within the territory of the People’s Republic of China in accordance with this Law.
Article 3 A company is an enterprise legal person, which has independent property of a legal person and enjoys the property rights
of a legal person. The company shall be liable for its debts to the extent of its entire property.
Shareholders of a company with limited liability shall assume liability towards the company to the extent of the capital contributions
subscribed respectively by them; and the shareholders of a company limited by shares shall assume liability towards the company to
the extent of the shares subscribed respectively by them.
Article 4 The shareholders of a company shall, in accordance with law, enjoy such rights as benefiting from the assets of the company,
participation in making major decisions and selection of managerial personnel.
Article 5 In its operational activities, a company shall abide by laws and administrative regulations, observe social morals and
commercial ethics, persist in honesty and good faith, accept supervision by the government and the public, and assume social responsibility.
The legitimate rights and interests of companies shall be protected by law, and shall be inviolable.
Article 6 Where an entity intends to incorporate a company, it shall, in accordance with law, apply to a company registration authority
for registration of such incorporation. Where the conditions for incorporation provided for by this Law are met, the company registration
authority shall have the company registered as a company with limited liability or a company limited by shares; and where the said
conditions are not met, the company shall not be registered as one with limited liability or as one limited by shares.
Where laws or administrative regulations provide that approval is required for incorporation of a company, the procedures of approval
shall be completed according to law prior to registration of the company.
The public may apply to the company registration authority for inquiry about the items registered by a company, and the authority
shall provide services for such inquiry.
Article 7 The company registration authority shall issue a business license to a company incorporated according to law. The date
on which the business license is issued shall be the date on which a company is incorporated.
In the business license of a company shall clearly be stated such items as the name, domicile, registered capital, actually received
capital, scope of business and name of the legal representative of the company.
Where the items stated in the business license of a company are altered, the company shall have the alterations registered according
to law, and the company registration authority shall renew its business license.
Article 8 A company with limited liability incorporated according to this Law shall have the words “company with limited liability”
or “limited company” indicated in its name.
A company limited by shares incorporated according to this Law shall have the words “company limited by shares” or “company
by shares” indicated in its name.
Article 9 Where a company with limited liability is to be changed into a company limited by shares, it shall meet the conditions
of a company limited by shares provided for by this Law. Where a company limited by shares is to be changed into a company with limited
liability, it shall meet the conditions of a company with limited liability provided for by this Law.
Where a company with limited liability is changed into a company limited by shares, or a company limited by shares is changed into
a company with limited liability, the rights of credit and the debts of the company prior to the change shall be inherited by the
company after the change.
Article 10 The domicile of a company shall be the place where its main administrative organization is located.
Article 11 Articles of association shall be formulated according to law when a company is incorporated. The articles of association
of a company shall have binding force on the company, its shareholders, directors, supervisors and senior managers.
Article 12 The business scope of a company shall be defined in the company’s articles of association, and shall be registered
according to law. A company may revise its articles of association and alter its scope of business, but shall have such revision
and alteration registered.
The items within the scope of business of a company that are subject to approval as provided for by laws and administrative regulations
shall be submitted for approval according to law.
Article 13 The chairman of the board of directors, the executive director or the manager shall, in accordance with the provisions
of a company’s articles of association, serve as the legal representative of the company, which shall be registered according to
law. Where the legal representative of a company is replaced, the company shall have such replacement registered.
Article 14 A company may establish branches. Where a company intends to establish a branch, it shall apply for registration to
the company registration authority, in order to obtain a business license for the branch. However, such a branch shall not possess
the status of a legal person, and its civil liabilities shall be borne by the company.
A company may establish subsidiaries, which shall possess the status of legal persons, and shall independently bear civil liabilities
according to law.
Article 15 A company may invest in other enterprises; however, it shall not become the investor that assumes joint and several
liability for the debts of the enterprises in which it invests, except where otherwise provided for by law.
Article 16 Where a company intends to invest in another enterprise or provide guarantee for another entity, the matter shall, in
accordance with the provisions of the company’s articles of association, be subject to a resolution adopted by the board of directors
or the shareholders assembly or the shareholders general assembly; and where norms for the gross amount of investments or guarantees
and for the amount of a single investment or guarantee are specified in the company’s articles of association, such norms shall
not be exceeded.
Where a company intends to provide a guarantee for its shareholder or its actual controller, the matter shall be subject to a resolution
adopted by its shareholders assembly or shareholders general assembly.
The shareholder specified in the preceding paragraph or the shareholder dominated by the actual controller specified in the preceding
paragraph shall not participate in the vote on the matter specified in the preceding paragraph. The resolution on such matter shall
be adopted if it is voted for by other shareholders present at the meeting who hold more than half of the voting rights.
Article 17 Companies shall protect the lawful rights and interests of their staff and workers, sign labor contracts with them according
to law, participate in social insurance, and improve occupational protection so as to achieve safety in production.
Companies shall, in various forms, improve vocational education and on-the-job training among their staff and workers so as to enhance
their quality.
Article 18 The staff and workers of a company shall, in accordance with the Trade Union Law of the People’s Republic of China,
organize a trade union to carry out trade union activities and protect the lawful rights and interests of the staff and workers.
The company shall provide the trade union of the company with the conditions necessary for carrying out its activities. The trade
union of a company shall represent the staff and workers to sign with the company collective contracts on such items as the payment
for work done, working hours, welfare and insurance benefits as well as occupational safety and health of the staff and workers according
to law.
Companies shall, through the conference of the representatives of the staff and workers or other forms, carry out democratic management
in accordance with the provisions of the Constitution and relevant laws.
When a company discusses to make decisions on structural reform or on major issues in business operation, or formulate important
rules and regulations, it shall listen to the opinions of the trade union, and shall listen to the opinions and proposals of the
staff and workers through the conference of the representatives of staff and workers or other forms.
Article 19 In companies, Communist Party organizations shall, in accordance with the provisions of the Constitution of the Communist
Party of China, be set up to carry out activities of the Party. Companies shall provide the necessary conditions for the Party organizations
to carry out their activities.
Article 20 The shareholder of a company shall observe laws, administrative regulations and the company’s articles of association,
exercise the rights of a shareholder according to law, and shall not abuse his rights to damage the interests of the company or other
shareholders; and he shall not abuse the independent status of the company as a legal person or the limited liability of shareholders
to damage the interests of the creditors of the company.
Where the shareholder of a company abuses the rights of shareholders and thus causes losses to the company or other shareholders,
he shall be liable for compensation according to law.
Where the shareholder of a company abuses the independent status of the company as a legal person or the limited liability of shareholders,
evades debts and thus seriously damages the interests of the creditors of the company, he shall assume joint and several liability
for the debts of the company.
Article 21 Proprietary shareholders, the actual controllers, directors, supervisors and senior managers of a company shall not
take advantage of their affiliated relations to damage the interests of the company.
A person who, in violation of the provisions of the preceding paragraph, causes losses to a company shall be liable for compensation.
Article 22 The resolution adopted by the shareholders assembly or the shareholders general assembly or the board of directors of
a company, which in content violates laws or administrative regulations, shall be invalid.
Where the procedures for convening the meeting of the shareholders assembly or the shareholders general assembly, or the board of
directors, or the voting formulas are against laws, administrative regulations or the articles of association of a company, or the
content of the resolution adopted is against the company’s articles of association, the shareholders may, within 60 days from the
date the resolution is adopted, request the people’s court to rescind the resolution.
Where shareholders take legal proceedings in accordance with the provisions of the preceding paragraph, the people’s court may,
upon request of the company, demand the shareholders to provide appropriate guarantee.
Where a company has registered for alteration in accordance with the resolution adopted by the shareholders assembly, the shareholders
general assembly or the board of directors, and the people’s court declares the resolution invalid or rescinds it, the company
shall apply for cancellation of the registration for such alteration.
Chapter II Incorporation and Organizational Structure of a Company with Limited Liability
Section 1 Incorporation
Article 23 The following conditions shall be met for the incorporation of a company with limited liability:
(1) The number of shareholders conforms to the statutory number;
(2) The capital contributions of the shareholders reach the statutory minimum amount of capital;
(3) The shareholders have jointly formulated the articles of association;
(4) The company has its name and has established an organizational structure in conformity with the requirements for a company with
limited liability; and
(5) The company has its own domicile.
Article 24 A company with limited liability shall be jointly invested in and incorporated by not more than 50 shareholders.
Article 25 The articles of association of a company with limited liability shall specify the following items:
(1) the name and domicile of the company;
(2) the scope of business of the company;
(3) the registered capital of the company;
(4) the names or post_titles of the shareholders;
(5) the forms of capital contributions, the amounts and dates of capital contributions made by shareholders;
(6) the bodies of the company, and the measures for their establishment, their functions and powers, as well as the rules of procedure;
(7) the legal representative of the company; and
(8) other items which the shareholders assembly deems necessary to be specified.
The shareholders shall sign their names on and affix their seals to the company’s articles of association.
Article 26 The registered capital of a company with limited liability shall be the amount of capital contributions subscribed for
by all of its shareholders, as is registered with the company registration authority. The amount of the initial capital contributions
made by all of the shareholders of the company shall be not less than 20 percent of the company’s registered capital, or not less
than the statutory minimum amount of the registered capital either, and the remainder shall be paid for in full by the shareholders
within two years from the date the company is established; and in the case of an investment company, it may pay for the remainder
in full within five years.
The minimum amount of the registered capital of a company with limited liability shall be RMB 30,000 yuan. Where a greater amount
is provided for by laws or administrative regulations, such provision shall prevail.
Article 27 A shareholder may make his capital contributions in currency or do so by contributing such non-curreny property as material
objects, intellectual property rights and land-use rights that can be evaluated in currency and can be transferred according to law,
except for the property that is not allowed to be used as capital contributions, as is provided for by laws or administrative regulations.
Non-curreny property used for capital contributions shall be evaluated and verified, and shall not be overvalued or undervalued. Where
laws or administrative regulations provide otherwise, those provisions shall prevail.
The amount of capital contributions made by all of the shareholders in currency shall not be less than 30 percent of the registered
capital of a company with limited liability.
Article 28 A shareholder shall pay, on schedule and in full, the amount of the capital contributions subscribed for in accordance
with the provisions of the articles of association of a company. Where a shareholder makes capital contributions in currency, he
shall deposit the full amount of such capital contributions in currency in the bank account opened by the company with limited liability;
and where a shareholder makes capital contributions with non-corrency property, he shall, according to law, go through the formalities
for the transfer of his property rights.
Where a shareholder fails to make capital contributions in accordance with the provisions of the preceding paragraph, in addition
to paying to the company of his portion of the capital contributions in full, he shall be liable for breach of contract towards the
shareholders who have, on schedule and in full, made their capital contributions.
Article 29 After the shareholders have made their capital contributions, such capital contributions shall be subject to capital
verification by a capital verification authority set up according to law, which shall issue capital verification certificates.
Article 30 After the initial capital contributions made by shareholders have been verified by a capital verification authority
set up according to law, a representative designated by all the shareholders or a proxy jointly entrusted by them shall submit to
the company registration authority such documents as a written application for registration of the company, the company’s articles
of association and the capital verification certificates, in order to apply for registration of the incorporation of the company.
Article 31 Where after the incorporation of a company with limited liability, it is discovered that the actual amount of the value
of the non-currency property used as capital contributions for the incorporation of the company is obviously less than the amount
of the value prescribed in the company’s articles of association, the shareholders that made such contributions shall make up the
difference; and the others who are shareholders at the time of the incorporation of the company shall bear joint and several liability
therefor.
Article 32 After a company with limited liability is incorporated, it shall issue investment certificates to its shareholders.
In an investment certificate the following items shall be specified:
(1) the name of the company;
(2) the date on which the company is incorporated;
(3) the registered capital of the company;
(4) the name or post_title of the shareholder, the amount and date of capital contributions; and
(5) the serial number of the investment certificate and the date of its verification and issue.
An investment certificate shall bear the seal of the company.
Article 33 A company with limited liability shall prepare a roster of its shareholders in which the following items shall be recorded:
(1) the names or post_titles and domiciles of the shareholders;
(2) the amounts of the capital contributions made by the shareholders; and
(3) the serial numbers of their investment certificates.
The shareholders recorded in the roster of the shareholders may claim to exercise their rights in such capacity on the basis of the
said roster.
The company shall register with a company registration authority the names or post_titles of its shareholders and the amount of their
capital contributions; and where items of registration are altered, it shall have the registration altered accordingly. Without registration
or without registration for alteration, the company shall not act against the third party.
Article 34 A shareholder shall have the right to consult and duplicate the company’s articles of association, the minutes of
the meeting of the shareholders assembly, the resolutions of the board of directors, the resolutions of the board of supervisors,
and the financial and accounting reports of the company.
A shareholder may request to consult the accounting books of the company. To do that, the shareholder shall submit a written request
to the company and explain his purposes. Where the company deems, on reasonable grounds, that it is for illegitimate purposes that
the shareholder requests to consult its accounting books, which may damage the lawful interests of the company, the company may refuse
to provide its accounting books for the shareholder to consult, and shall, within 15 days from the date the shareholder submits the
written request, give a written reply to the shareholder and state its reasons. Where the company refuses to provide its accounting
books, the shareholder may request the people’s court to demand the company to provide such books.
Article 35 Shareholders shall draw dividends in proportion to the capital contributions they made; and when a company increases
its capital, its shareholders shall have the right of first refusal to make their subscriptions in proportion to the capital contributions
they made, except where all the shareholders have agreed to draw the dividends not in proportion to their capital contributions or
to do without the right of first refusal in proportion to their capital contributions when making subscriptions.
Article 36 Once a company is incorporated, its shareholders shall not secretly withdraw their capital contributions.
Section 2 Organizational Structure
Article 37 The shareholders assembly of a company with limited liability shall be composed of all of its shareholders. The shareholders
assembly is the organ of power of the company and shall exercise its functions and powers in accordance with this Law.
Article 38 The shareholders assembly shall exercise the following functions and powers:
(1) to decide on the operational policy and investment plan of the company;
(2) to elect or replace directors and supervisors who are not representatives of the staff and workers, and to decide on matters
concerning the remuneration of the directors and supervisors;
(3) to examine and approve reports of the board of directors;
(4) to examine and approve reports of the board of supervisors or the supervisors;
(5) to examine and approve the annual financial budget plan and final accounts plan of the company;
(6) to examine and approve the company’s plans for profit distribution and for making up losses;
(7) to adopt resolutions on the increase or reduction of the registered capital of the company;
(8) to adopt resolutions on the issue of corporate bonds;
(9) to adopt resolutions on the merger, division, dissolution, liquidation or transformation of the company;
(10) to amend the articles of association of the company; and
(11) other functions and powers provided for in the company’s articles of association.
Where the shareholders express, in writing, their unanimous agreement on the matters specified in the preceding paragraph, they may
directly make a decision without convening a meeting of the shareholders assembly, and all the shareholders shall sign their names
on and affix their seals to the documents of the decision.
Article 39 The first meeting of the shareholders assembly of a company shall be convened and presided over by the shareholder who
has made the greatest capital contributions to the company, and he shall exercise the functions and powers in accordance with the
provisions of this Law.
Article 40 The meetings of the shareholders assembly shall be divided into regular meetings and interim meetings.
Regular meetings shall be convened on schedule as specified by the provisions of the company’s articles of association. An interim
meeting shall be convened when it is proposed by shareholders representing one-tenth or more of the voting rights, by one-third or
more of the directors, by the board of supervisors, or by the supervisors of a company without a board of supervisors.
Article 41 Where a board of directors is set up in a company with limited liability, the meeting of the shareholders assembly shall
be convened by the board of directors and presided over by the chairman of the board of directors; where the chairman of the board
cannot perform such function or fails to do so, the meeting shall be presided over by the vice-chairman of the board; and where the
vice-chairman cannot perform the function or fails to do so, the meeting shall be presided over by a director jointly elected by
half and more of the directors.
Where no board of directors is set up in a company with limited liability, the meeting of the shareholders assembly shall be convened
and presided over by the executive director.
Where a board of directors or the executive director cannot perform or fails to perform the duty of convening a meeting the shareholders
assembly, such a meeting shall be convened and presided over by a board of supervisors or the supervisor of a company where no board
of supervisors is set up; and where the board of supervisors or the supervisor fails to convene and preside over the meeting, the
shareholder representing one-tenth or more of the voting rights may convene and preside over such a meeting on his own.
Article 42 All the shareholders shall be notified 15 days prior to the convening of a meeting of the shareholders assembly, except
where otherwise provided for by the company’s articles of association or agreed upon by all of the shareholders.
The shareholders assembly shall keep minutes of the decisions that are made on the matters discussed at the meeting, and the shareholders
present at the meeting shall sign the minutes.
Article 43 Shareholders shall exercise their voting rights at a meeting of the shareholders assembly in proportion to their respective
capital contributions, except where otherwise provided for by the company’s articles of association.
Article 44 The modes of meeting and voting procedures of the shareholders assembly shall, in addition to what is provided for in
this Law, be stipulated by the company’s articles of association.
Resolutions made at a meeting of the shareholders assembly on amendment to the company’s articles of association, the increase
or reduction of the registered capital, or on the merger, division, dissolution or transformation of the company shall be subject
to adoption by the shareholders representing two-thirds or more of the voting rights.
Article 45 A company with limited liability shall set up a board of directors, which shall be composed of 3 to 13 members, except
where otherwise provided for by Article 51 of this Law.
The members of the board of directors of a company with limited liability that is incorporated with the investment of two or more
State-owned enterprises or two or more State-owned investment entities shall include representatives of the staff and workers of
the company; and the members of the board of directors of other companies with limited liability may include representatives of the
staff and workers of the companies. The representatives of the staff and workers on the board of directors shall be democratically
elected by the staff and workers of the company through the conference of the representatives of the staff and workers, the general
meeting of the staff and workers, or through other forms.
A board of directors shall have a chairman and may have a vice-chairman. The measures for the election of the chairman and vice-chairman
of the board shall be stipulated by the company’s articles of association.
Article 46 The term of office of a director shall be stipulated by the company’s articles of association, but each term of office
shall not exceed three years. A director may, if reelected upon expiration of his term of office, serve consecutive terms.
Where no election is conducted in time before the expiration of the term of office of a director, or the number of the directors
is less than the statutory number due to the resignation of a director within his term of office, the existing director shall, before
the director-elect takes office, continue to perform his duty as a director in accordance with the provisions of laws, administrative
regulations or the company’s articles of association.
Article 47 The board of directors shall be accountable to the shareholders assembly and exercise the following functions and powers:
(1) to convene the meeting of the shareholders assembly, and to report on its work to the board;
(2) to implement the resolutions adopted by the shareholders assembly;
