Adopted at the fifth meeting of the Standing Committee of the Eighth National People's Congress on 1993 year 12 month 29 day, amended and revised multiple times, secondly revised at the seventh meeting of the Standing Committee of the Fourteenth National People's Congress on 2023 year 12 month 29 day, and effective from 2024 year 7 month 1 day.
1. Company Type
Limited Liability Company
Established by more than 1 but less than 50 shareholders, with liability limited to the subscribed capital contribution.
Inc.
1 to 200 promoters; shareholders bear liability limited to their subscribed shares.
II. Registered Capital and Capital Contribution
Limited Liability Company
- • Registered capital equals the total amount of capital contributions subscribed by all shareholders, which must be fully paid within five years from the company's establishment date.
- • Shareholders may contribute capital in the form of currency, physical assets, intellectual property rights, land use rights, equity, or claims.
- • Shareholders who fail to make their capital contributions in full and on time shall pay the full amount owed and bear liability for damages.
Inc.
- • Registered capital equals the total share capital of issued shares.
- • Promoters shall pay the full subscription amount for their shares prior to the company's incorporation.
- • Can issue par value or no-par value shares
3. Organizational Structure
Shareholders' Meeting
Shareholders' Meeting: The company's highest authority, composed of all shareholders, responsible for making major decisions.
Board of Directors
Limited liability company with 3 or more shareholders, executes shareholder meeting resolutions and determines the business plan.
Supervisory Board
3 or more members, with at least 1/3 being employee representatives; oversees directors and senior executives.
Note: Companies with a small scale or few shareholders may forgo a board of directors (appointing one director) and a board of supervisors (appointing one supervisor, or omitting the role entirely with unanimous shareholder consent). An audit committee may be established in place of the board of supervisors.
IV. Legal Representative
The legal representative of the company shall be a director or manager authorized to conduct the company's business, as stipulated in the articles of association. Civil acts performed by the legal representative in the company's name shall legally bind the company. Any restrictions on the legal representative's authority imposed by the articles of association or shareholders' resolution shall not affect a bona fide counterparty.
V. Equity Transfer
- • Shareholders of a limited liability company may transfer all or part of their equity interests among themselves.
- • Transfer to non-shareholders: other shareholders have the right of first refusal under equal conditions.
- • Transfer of subscribed but not-yet-due equity: The transferee assumes the obligation to make the contribution.
- • Shares of a joint-stock limited company may be transferred in accordance with the law; the articles of association may impose restrictions.
VI. Corporate Finance and Accounting
- • Prepare financial reports at the end of each fiscal year and have them audited by a certified public accounting firm.
- • Allocate 10% of after-tax profits to the statutory reserve (no further allocation required once it reaches 50% of registered capital).
- • Limited liability companies distribute profits in proportion to paid-in capital contributions, unless otherwise agreed by all shareholders.
- • Profits shall be distributed among shareholders of a joint-stock limited company in proportion to their shareholdings, unless otherwise provided in the articles of association.
VII. Merger, Division, and Capital Reduction
- • Merger: All rights and obligations of the merging parties shall be assumed by the surviving or newly established company.
- • Separation: The companies formed after separation shall jointly and severally bear the debts incurred prior to the separation.
- • Capital reduction: Reduce proportionally, prepare a balance sheet and asset inventory, and notify and announce to creditors.
- • Capital Increase: Limited liability company shareholders have the right of first refusal to subscribe for additional capital, unless otherwise agreed by all shareholders.
VIII. Dissolution and Liquidation
Grounds for Company Dissolution:
- • The term of business stipulated in the Articles of Association has expired, or a dissolution event has occurred.
- • Shareholder Resolution to Dissolve
- • Dissolution required due to merger or division
- • Business license revoked, or ordered to close down or be revoked in accordance with the law
- • Dissolved by the People's Court in accordance with the law
Directors are obligated to form a liquidation committee within 15 days of the occurrence of dissolution grounds.
Regulatory Document Attachment
Company Law of the People's Republic of China (PDF)