BIZCHINA / Company laws
Company Law of the People's Republic of China (revised in 2005)
Updated: 2006-04-17 10:09
Article 201 Where any initiator or shareholder unlawfully take away its
capital contribution after the company is established, he shall be
ordered by the company registration authority to make corrections, and
shall be fined not less than 5% but not more than 15% of the capital
contribution he has unlawfully taken away.
Article 202 Any company which has established another account books apart
from the legally prescribed account books and violates of the present Law
shall be ordered by the treasury department of the people's government at
the county level or above to make corrections, and shall be fined not
less than 50,000 Yuan but not more than 500, 000 Yuan.
Article 203 Where a company makes any false records or conceals any
important fact in such materials as financial and accounting statements
submitted to the relevant departments in charge, the relevant department
in charge shall impose a fine of not more than 30, 000 Yuan but not more
than 300, 000 Yuan upon the directly liable persons in charge and other
directly liable persons.
Article 204 Where a company fails to draw legal accumulation funds
according to the present Law, it shall be ordered by the treasury
department of the people's government at the county level or above to
make up the amount it is due, and may be fined up to 200, 000 Yuan.
Article 205 Where any company fails to inform its creditors by notice or
by public announcement during the process of merger, split, reducing its
registered capital or liquidation, it shall be ordered by the company
registration authority to make corrections, and may be fined not less
than 10, 000 Yuan but not more than 100, 000 Yuan.
Where, during the process of liquidation, any company hides any of its
properties or makes any false record in its balance sheet or property
checklist, or distributes any of the company's properties before clearing
off its debts, it shall be ordered by the company registration authority
to make corrections, and may be fined not less than 5% but not more than
10% of the value of the company properties it has hidden or distributed
prior to the clearing of company debts, and the directly liable
person-in-charge as well other directly liable persons may be fined not
less than 10, 000 Yuan but not more than100, 000 Yuan.
Article 206 Where, during the process of liquidation, any company
undertakes any business activity which has nothing to do with the
liquidation, it shall be admonished by the company registration
authority, and its illegal proceeds shall be confiscated.
Article 207 Where the liquidation group fails to submit a liquidation
report to the company registration authority according to the provisions
of the present Law, or where any important fact is concealed or there is
any important omission in the liquidation report it submits, it shall be
ordered by the company registration authority to make corrections.
Where any member of the liquidation group takes advantage of his power to
seek unlawful benefits for himself or any of his relatives, procures any
unlawful gains or misappropriates any of the properties of the company,
he shall be ordered by the company registration authority to return the
properties of the company with his illegal gains being confiscated, and
shall be fined 1 up to 5 times of the illegal proceeds.
Article 208 Where any institution that undertakes the evaluation or
verification of assets or the verification of certificates provides any
false materials, its illegal proceeds shall be confiscated by the company
registration authority, and be fined 1 up to 5 times of the illegal
proceeds, and may be ordered by the competent administrative department
to suspend its business operation or to withdraw the qualification
certificates of the directly liable persons, and cancel its business
license.
Where any institution that undertakes the evaluation or verification of
assets or the verification of certificates makes any important omission
in the report it submits, it shall be ordered by the company registration
authority to make corrections; if the circumstances are serious, it shall
be fined 1 up to 5 times of the proceeds it has obtained, and may be
ordered by the competent administrative department to suspend its
business operation and to withdraw the qualification certificates of the
directly liable persons, and cancel its business license. Where the
evaluation result or proof of asset verification or certificate
verification, as provided by any institution that undertakes the
evaluation or verification of assets or the verification of certificates,
is proved to be untrue, which has caused any loss to the creditors of the
company, it shall bear the compensation liabilities within the sum which
is found to be untrue, unless it can prove that it has no fault in the
incurrence of the loss.
Article 209 Where any company registration authority registers any
application that does not meet the conditions as provided for in the
present Law, or fails to register any application that meets the
conditions as prescribed in the present Law, the directly liable
person-in-charge and other directly liable persons shall be imposed upon
an administrative sanction.
Article 210 Where the superior organ of any company registration
authority forces the latter to register any application that does not
satisfy the conditions as prescribed in the present Law or to refuse any
application that meets the conditions as provided for in the present Law,
or covers up for any illegal registration, the directly liable
person-in-charge and other directly liable persons shall be imposed upon
an administrative sanction according to law.
Article 211 Where anyone fails to register as a limited liability company
or joint stock limited company according to law but undertakes business
operation in the name of a limited liability company or joint stock
limited company, or fails to register as a subsidiary of a limited
liability company or joint stock limited company according to law but
undertakes business operation in the name of a subsidiary of the limited
liability company or joint stock limited company, it shall be ordered by
the company registration authority to make corrections or be clamped down
on, and may be fined not more than 100,000 Yuan.
Article 212 Where any company fails to start its business operation six
months after the establishment of it without justifiable reasons, or
suspends its business operation on its own initiative for consecutively
six months after it has started the business operation, its business
license may be revoked by the company registration authority.
Where any registered item of any company changes, and the company fails
to go through the corresponding modification formalities according to the
present Law, it shall be ordered by the company registration authority to
make modification registration within a time limit; if it still fails to
make the registration, it shall be fined not less than 10, 000 Yuan but
not more than 100, 000 Yuan.
Article 213 Where any foreign company violates this Law by unlawfully
establishing any branch within China, it shall be ordered by the company
registration authority to make corrections or to close it down, and may
be fined not less than 50,000 Yuan but not more than 200, 000 Yuan.
Article 214 Where anyone commits, in the name of a company, any serious
violation of law so that the security of the state or the public
interests of the society is injured, the business license of the company
shall be revoked.
Article 215 Where a company violates any provision of this Law, it shall
bear the corresponding civil liabilities of compensation, and shall pay
the corresponding fines and pecuniary penalties; if the property thereof
is not enough to pay for the compensation, it shall bear the civil
liabilities first.
Article 216 Where any company violates the present Law and any crime is
constituted, it shall be subject to criminal liabilities.
Chapter XIII Supplementary Provisions
Article 217 Definitions of the following terms:
(1) The "senior manager" refers to the manager, vice manager, person in
charge of finance of a company, and the secretary of the board of
directors of a listed company as well as any other person as stimulated
in the articles of association.
(2) The "controlling shareholder" refers to a shareholder whose capital
contribution occupies 5% or more of the total capital of a limited
liability company, or a shareholder whose stocks occupy more than 50% of
the total equity stocks of a joint stock limited company, or a
shareholder whose capital contribution or proportion of stocks is less
than 50% but who enjoys a voting right according to its capital
contribution or the stocks it holds is large enough to impose an big
impact upon the resolution of the shareholders' meeting or the
shareholders' assembly.
(3) The "actual controller" refers to anyone who is not a shareholder
but is able to hold actual control of the acts of the company by means of
investment relations, agreements or any other arrangements.
(4) The "connection relationship" refers to the relationship between the
controlling shareholder, actual controller, director, supervisor, or
senior manager of a company and the enterprise directly or indirectly
controlled thereby, and any other relationship that may lead to the
transfer of any interests of the company. However, the enterprises
controlled by the state do not incur a connection relationship simply
because their shares are controlled by the state.
Article 218 The limited liability companies and joint stock limited
companies invested by foreign investors shall be governed by the present
Law. Where there are otherwise different provisions in any law regarding
foreign investment, such provisions shall prevail.
Article 219 This Law shall go into effect on January 1, 2006.
Promulgated by the Standing Committee of the National People's Congress
on 2005-10-27
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