(Effective Date:1997.06.01–Ineffective Date:)
CHAPTER I GENERAL PROVISIONS CHAPTER II ESTABLISHMENT CHAPTER III SETUP AND TRANSFER OF STOCK RIGHT CHAPTER IV ORGANIZATION CHAPTER Article 1 (Purpose) With a view to standardizing the organization and conduct of joint-stock cooperative enterprises and to promoting their development, Article 2 (Scope of Application) The present Procedures shall apply to the joint-stock cooperative enterprises established in Shanghai. Article 3 (Definition of Joint-stock Cooperative Enterprise) The joint-stock cooperative enterprise specified in the present Procedures refers to the corporate entity of which the corporate property Article 4 (Rights and Obligations of Enterprise) The joint-stock cooperative enterprise shall enjoy the entire corporate property right formed through the investment of shareholders, The joint-stock cooperative enterprise shall, according to law, practice autonomy in operation, and assume sole responsibility for Article 5 (Articles of Association of an Enterprise) To establish a joint-stock cooperative enterprise, Articles of Association shall be formulated in accordance with the present Procedures. The scope of operation of the joint-stock cooperative enterprise shall be defined by the Articles of Association, and shall be registered Article 6 (Use of Enterprise Name) If a joint-stock cooperative enterprise names itself a company, the words “cooperative company” shall be included in its name. Article 7 (Principles of Operational Management and Administrative Management) The joint-stock cooperative enterprise shall implement the principle of separating enterprise operational management and social administrative The right of operational management of the joint-stock cooperative enterprise shall be exercised, pursuant to the present Procedures The economic, social and other governmental administration for the joint-stock cooperative enterprise shall be under the charge of The tax payable by the joint-stock cooperative enterprise shall be levied and administered by the department in the district or county
Article 8 (Conditions for Establishment) The establishment of a joint-stock cooperative enterprise shall meet the following conditions: 1. Having a certain number of shareholders; 2. Having the minimum amount of registered capital; 3. Having the Articles of Association jointly formulated by the shareholders; 4. Having a name for the enterprise and a standard organizational structure; 5. Having the fixed premise for production and operation and the necessary conditions for production or operation. Article 9 (Number of Shareholders) The number of employee shareholders in a joint-stock cooperative enterprise shall not less than eight. The number of non-shareholding employees on the job shall not exceed 10% of the total number of employees on the job in enterprise. Article 10 (Modes of Establishment) The establishment of the joint-stock cooperative enterprise shall be of two types, namely promotional type and economic restructuring The establishment under promotion refers to the establishment of joint- stock cooperative enterprise by more than two promoters in The establishment through economic restructuring refers to the transformation of an existing enterprise into a joint-stock cooperative Article 11 (Contents of the Articles of Association) The Article of Association of the joint-stock cooperative enterprise shall clearly state the following items: 1. Name and address of the enterprise; 2. Type of the enterprise; 3. Scope of operations; 4. Registered capital; 5. Mode and limit of the capital contributed by shareholders; 6. Names of the shareholders; 7. Rights and obligations of the shareholders and non-shareholder employees on the job; 8. Conditions and procedures for acquisition and transfer of shares; 9. Organizational structure of the enterprise and its process of formation, functions and powers, and rules of procedure; 10. Production procedures of the enterprise’s legal representative, his/her term and authority of office; 11. Financial management system and way of distributing profits; 12. Matters concerning dissolution of the enterprise and way of liquidation; 13. Procedure on amending the Articles of Association; 14. Other matters the shareholders consider necessary to stipulate. Article 12 (Registered Capital) The amount of the registered capital of a joint-stock cooperative enterprise shall be commensurate with its scope of operations, and Article 13 (Modes of Capital Contribution) The shareholders may contribute capital in cash, in kind and also in industrial property right, non-patented technology, or land-use The amount of capital contributed in the form of industrial property right and non-patented technology at appraised value shall not Article 14 (Special provisions on Establishment of Joint-stock Cooperative Enterprise Through Economic Restructuring) If a state-owned enterprise is transformed into a joint-stock cooperative enterprise, the state-owned assets or the collective assets The rate of the fee for holding the assets in possession shall be set by the state-owned assets administration department or the collective Article 15 (Procedure for Establishment Through Economic Restructuring) The establishment of a joint-stock cooperative enterprise established through economic restructuring shall be subject to the consent Article 16 (Examination and Approval of Establishment Through Economic Restructuring) The commission, office, or bureau concerned at the municipal level or its authorized holding (group) company or group company shall The department designated by the district (county) people’s government shall be responsible for the examination and approval of the Article 17 (Documents to Be Submitted for Establishment Registration) When going through the procedures for establishment registration, the joint-stock cooperative enterprise shall submit to the enterprise 1. Application; 2. Documents of examination and approval for establishment through economic restructuring; 3. Articles of Association; 4. Report on assets verification; 5. Names and addresses of shareholders; 6. Certificate of appointment and ID of legal representative; 7. Other documents provided by laws, regulations and rules. Article 18 (Registration of Enterprise) The enterprise registration organ shall, within 30 days after receipt of the application for establishment registration of the joint-stock If the registration is approved, the enterprise registration organ shall issue a business license to the enterprise.
CHAPTER III SETUP AND TRANSFER OF STOCK RIGHT Article 19 (Setup of Stock right) The shares of a joint-stock cooperative enterprise shall be classified into individual shares and corporate shares. The individual shares refer to the shares formed by investment of the enterprise’ employees and individual persons from outside the The corporate shares refer to the shares formed by investment from other enterprises, institutions or economic organizations with Article 20 (Exceptional Circumstances of Setup of Stock Right) When a collective enterprise is restructured into a joint-stock cooperative enterprise, the assets that are identified as collectively The procedures for the exercise of stock right of the collectively-owned shares and the distribution of profits will be stipulated Article 21 (Proportion and Limit of Shares Bought by Employee Shareholders) The total amount of shares held by the whole staff of a joint-stock cooperative enterprise shall not be less than 51% of the total In respect of the joint-stock cooperative enterprise promotional type, the limit on the shares bought by an individual employee shall In respect of the joint-stock cooperative enterprise economic restructuring type, the lowest limit on the shares bought by an individual Article 22 (Proportions of Total Amount of Shares Bought by Individual Persons and Legal Persons Outside This Enterprise) The total amount of shares held by individual persons outside the joint- stock cooperative enterprise shall not exceed 10% of the Article 23 (Limit on Shares Bought by Operator) The limit on the amount of shares held by the legal representative of a joint-stock cooperative enterprise shall be decided by the Article 24 (Certificate of Stock Rights) The joint-stock cooperative enterprise shall not issue shares, but shall issue to the shareholders the certificates of stock right, The certificate of stock rights shall clearly state the following items: 1. Enterprise name; 2. Registration date of the enterprise; 3. Registered capital of the enterprise; 4. Name of the shareholder, and the amount of capital paid-in and the date of payment; 5. Serial number and issuing date of the certificate of capital contribution. The certificate of capital contribution shall bear the seal of the joint-stock cooperative enterprise. Article 25 (Restriction on Redemption of Shares) After the establishment of a joint-stock cooperative enterprise the shareholders shall not redeem their shares, but in case the employee Article 26 (Restriction on Transfer of Shares) The shareholders of a joint-stock cooperative enterprise may transfer their shares, and the shareholders of the enterprise (including The legal representative of a joint-stock cooperative enterprise shall not transfer his/her shares during his/her term of office and Article 27 (Shareholders’ Roll) The joint-stock cooperative enterprise shall set up a shareholders’ roll and record there in the following items: 1. Names and addresses of shareholders; 2. Amounts of capital paid-in by shareholders; 3. Serial numbers of the certificates for capital contribution.
Article 28 (Shareholders’ General Meeting and Its Functions and Powers) The shareholders’ general meeting shall be the organ of authority of a joint-stock cooperative enterprise and shall exercise the following 1. To decide on the operation plan and the investment plan of the enterprise; 2. To elect or to change the legal representative or directors of the enterprise; 3. To elect or to change the supervisors who are representatives of the shareholders, and to decide on the matter concerning their 4. To discuss and approve the report of the board of directors or of the enterprise’s legal representative; 5. To discuss and approve the report of the board of supervisors; 6. To discuss and approve the annual financial budget programmer and the final accounts programmer of the enterprise; 7. To discuss and approve the profit distribution plan and the loss making-up plan of the enterprise; 8. To make resolutions on the increase or decrease in the registered capital and on the merger, split-off, bankruptcy, or dissolution 9. To revise the Articles of Association; 10. To deal with other important issues stipulated by the Articles of Association. Article 29 (Convening of Shareholders’ General Meeting) The shareholders’ general meeting shall be convened by the legal representative of a joint-stock cooperative enterprise. The enterprise’s The shareholders’ general meetings are of two kinds: regular and provisional. Both the regular and provisional shareholders’ general The provisional shareholders’ general meetings shall be convened when one of the following circumstances occurs: 1. Being requested by the shareholders holding more than 10% of the stock; 2. Being requested by more than 10% of the employee shareholders; 3. Being deemed necessary by the enterprise’s legal representative; 4. Being proposed by the board of suppressers. The shareholders shall have the right to inspect the minutes of shareholders’ general meeting. Article 30 (Voting Mode of the Shareholders’ General Meeting) Voting at the shareholders’ general meeting shall adopt the mode of combining one vote per person and one vote per share. When taking a vote on the matters covered by Article 28 (1), (2), with exception of the election and change of directors, and those When taking a vote on the matters covered by Article 28 (9), the shareholders’ general meeting shall adopt the mode of one vote per When taking a vote on the election and change of directors under Article 28 (2) and on the matters covered by Article 28 (8) in the Article 31 (Establishment of Organization) The joint-stock cooperative enterprise of comparatively large scale may set up the board of directors and the board of supervisors. The joint-stock cooperative enterprise of comparatively small scale shall, instead of setting up the board of directors, only install Article 32 (Producing the Legal Representative) The legal representative of a joint-stock cooperative enterprise established through economic restructuring must be approved by the The mode of prodding the legal representative and treasurer of the joint-stock cooperative enterprise established under sponsorship Article 33 (Organization and Operator’s Functions and Powers) The functions and powers of the board of directors, manager and board of supervisors of a joint-stock cooperative enterprise shall The functions and powers of the board of directors, manager (factory director), board of supervisors, and executive director of a Article 34 (Duties of Directors) The directors of a joint-stock cooperative enterprise shall assume responsibility for implementing the resolutions of the board of Article 35 (Circumstances Prohibiting the Assumption of the Office of Director, Executive Director, Manager (Factory Director) and Supervisor) Any person found to be in one of the following circumstances shall not be allowed to assume the office of director, executive director, 1. With no capacity of civil act or with restricted capacity of civil act; 2. Having been convicted of the crime of graft, bribery, conversion of property, misappropriation or disrupting social economic order, 3. Having assumed the office of director, executive director, or manager (factory director) of an enterprise and having been personally 4. Having assumed the office of legal representative of an enterprise whose business license was revoked for acts in violation of 5. Failing to clear on the date due his/her personal debt which amounted to (over) three times the amount of average annual wage of The appointment of directors, executive director, manager (factory director) or supervisors produced by the joint-stock cooperative Article 36 (Prohibited Acts of Directors, Executive Director, Manager (Factory Director) and Supervisors) The directors, executive director, manager (factory director) and supervisors shall not be allowed to be engaged in operating in their Article 37 (Liability for Damages) If the directors, executive directive director, manager (factory director) or supervisors cause damage to their enterprise or its
CHAPTER V FINANCIAL ACCOUNTING SYSTEM AND DISTRIBUTION OF PROFITS Article 38 (Financial Accounting System) The joint-stock cooperative enterprise shall set up the financial accounting system in accordance with the provision of the law and Article 39 (Financial Accounting Report) The joint-stock cooperative enterprise shall prepare a financial accounting report at the end of every fiscal year and make it available Article 40 (Distribution of After-tax Profits) The after-tax profits of the joint-stock cooperative enterprise shall be distributed in the following order: 1. To Cover the loss on confiscated properties, and to pay the fines and overdue fines payable for violation of the provision of tax 2. To Make up for the loss incurred in the previous year; 3. To draw 10% of the profits for the statutory accumulation fund, but the drawing may not be made when the statutory accumulation 4. To draw 5-10% of the profits for the statutory public welfare fund; 5. To draw optional accumulation fund based on the resolution of the shareholders’ general meeting; 6. To draw bonus distribution fund. Article 41 (Use of Accumulation fund) The accumulation fund of a joint-stock cooperative enterprise shall be used for making up losses, expanding production/operation or When the statutory accumulation fund is converted into the enterprise’s capital, the remainder of the accumulation fund shall not Article 42 (Use of Public Welfare Fund) The public welfare fund of a joint-stock cooperative enterprise shall be used for the collective welfare of the employees of this Article 43 (Distribution of Bonus According to Shares) The bonus distribution fund of a joint-stock cooperative enterprise shall be distributed according to the number of shares.
CHAPTER VI MERGER, SPLIT-OFF, BANKRUPTCY, DISSOLUTION AND LIQUIDATION Article 44 (Merger or Split-off) The merger or split-off of a joint-stock cooperative enterprise shall be effected by a resolution passed by the shareholders’ general Article 45 (Bankruptcy) If a joint-stock cooperative enterprise is declared bankrupt according to law for its insolvency the people’s court shall, according Article 46 (Dissolution) A joint-stock cooperative enterprise shall be dissolved in one of the following circumstances: 1. The term of operation stipulated in its Articles of Association has expired, or other events necessitating the dissolution as stipulated 2. The shareholders general meeting has made a resolution on the dissolution of the enterprise; or 3. It has been shut down for its violation of law. Article 47 (Liquidation) If a joint-stock cooperative enterprise is dissolved according to the provisions of Article 46 in the present Procedures, it shall, Article 48 (Termination of Liquidation) On completion of the liquidation of a joint-stock cooperative enterprise, the liquidation group shall put forward a liquidation report,
CHAPTER VII SUPPLEMENTARY PROVISIONS Article 49 (Joint-stock Cooperative Enterprise to Be Treated as Collective Enterprise) The joint-stock cooperative enterprises established in accordance with the present Procedures and those established before the implementation Article 50 (Department Responsible for Interpretation in Application) Shanghai Municipal Economic Restructuring Commission shall be responsible for the interpretation of the present Procedures in their Article 51 (Date of Implementation) These present Procedures shall become effective on June 1,1997.
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