Chinese School - Company Law of the People's Republic of China (revised in 2005)

BIZCHINA / Company laws

Company Law of the People's Republic of China (revised in 2005)

Updated: 2006-04-17 10:09

Article 72 All or some of the stock rights of the shareholders of a
limited liability company may be transferred between the shareholders.
Where a shareholder intends to transfer his/its stock rights to any
non-shareholder, he/it shall be subject to the approval of more than half
of the other shareholders. The shareholder shall notify the other
shareholders in written form of the matters on the transfer of stock
rights for their approval. If any of the other shareholders fails to give
it a reply within 30 days after the receipt of the written notice, it
shall be deemed to have agreed to the transfer. If half or more of the
other shareholders disagree to the transfer, the shareholders who
disagree to the transfer shall purchase the stock rights to be
transferred. If they refuse to purchase these stock rights, they shall be
deemed to have agreed to the transfer. Under the same conditions, the
other shareholders have a preemptive right to purchase the stock rights
to be transferred upon their approval. If two or more shareholders claim
the preemptive rights, they shall determine their respective percentage
of purchase through negotiation. If they fail to reach an agreement
during the negotiation, they shall exercise the preemptive rights on the
basis of their respective percentage of capital contributions. Unless it
is otherwise provided for of the transfer of stock rights in the articles
of association, the articles of association shall be followed.

Article 73 When the people's court transfers the stock rights of a
shareholder in light of the mandatory enforcement procedures as provided
for in laws, it shall notify the company and all the shareholders, and
the other shareholders have a preemptive right under the same conditions.
If any of the other shareholders fails to exercise their preemptive
rights within 20 days after he/it receives the notice of the court, it
shall be deemed to have waived his/its preemptive right.

Article 74 After a company transfers its stock rights according to
Articles 72 and 73 of this Law, it shall cancel the capital contribution
certificate of the former shareholder, issue a capital contribution
certificate to the new shareholder and modify the record on the
shareholders and their capital contributions in the articles of
association and the register of shareholders. And no voting of the
shareholders' meeting is needed for the modification of the articles of
association.

Article 75 Under any of the following circumstances, a shareholder, who
votes against the resolution of the shareholders' meeting, may request
the company to purchase its stock rights at a reasonable price:
(1) The company has not distributed any profit to the shareholders for 5
consecutive years, though it has made profits for five consecutive years
and meets the profit distribution conditions as prescribed in this Law;
(2) The merger, split-up, or transfer of the main properties of the
company is undertaken;
(3) When the business term as prescribed in the articles of association
expires or other reasons for dissolution as stipulated in the articles of
association occur, the shareholders' meeting makes the company continue
existing by adopting a resolution on modifying the articles of
association.
Within 60 days after the resolution is adopted at the shareholders'
meeting, if the shareholder and the company fail to reach an agreement on
the purchase of stock rights, the shareholder may file a lawsuit to the
people's court within 90 days after the resolution is adopted at the
shareholders' meeting.

Article 76 After the death of a natural person shareholder, his lawful
inheritor may inherit the shareholder's qualifications, unless it is
otherwise prescribed by the articles of association.

Chapter IV Establishment and Organizational Structure of a Joint Stock
Limited Company

Section 1 Establishment

Article 77 The establishment of a joint stock limited company shall meet
the following conditions:
(1) The number of initiators meets the quorum;
(2) The capital stock subscribed for and raised by the initiators
reaches the minimum amount of the statutory capital;
(3) The issuance of shares and the preparatory work accord with the
provisions of the law;
(4) The articles of association are formulated by the initiators, and
are adopted at the establishment meeting if the company is to be launched
by stock floatation;
(5) The company has a name, and its organizational structure accords
with that of a joint stock limited company
(6) The company has a domicile.

Article 78 A joint stock limited company may be established by ways of
promotion or stock floatation. The establishment of a company by
promotion means that the initiators establish a company by subscribing
for all of the shares that should be issued by the company. The
establishment of a company by stock floatation means that the initiators
establish a company by subscribing for some of the shares that should be
issued by the company and offering the remaining shares to the general
public or to particular objects for subscription.

Article 79 To establish a joint stock limited company, there shall be not
less than 2 but not more than 200 initiators, of whom half or more shall
have a domicile within the territory of China.

Article 80 The initiators of a joint stock limited company shall
undertake the preparatory work of the company. They shall conclude an
agreement of initiators to clarify their respective rights and
obligations during the course of establishingthe company.

Article 81 Where a joint stock limited company is established by
promotion, its registered capital shall be the total capital stock
subscribed for by all the initiators as registered in the company
registration authority. The minimum amount of initial capital
contributions to be made by all initiators shall be not less than 20% of
the total registered capital, and the remaining amount shall be paid off
by the initiators within 2 years as of the day when the company is
established, while for an investment company, the remaining amount may be
paid off within 5 years. Before the registered capital is paid off, no
stock may be offered to others for subscription.
Where a joint stock limited company is established by stock floatation,
its registered capital shall be the total actually paid capital stock as
registered in the company registration authority. The minimum amount of
the registered capital of a joint stock limited company shall be RMB 5
million Yuan. If any law or administrative regulation prescribes a
relatively higher minimum amount of registered capital, such provision
shall be followed.

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