CHAPTER TWO ESTABLISHMENT AND ORGANIZATIONAL SETUP OF A LIMITED LIABILITY COMPANY

　　SECTION ONE ESTABLISHMENT

　　Article 19 The establishment of a limited liability company shall be subject to the fulfillment of the following conditions:

　　1. The number of shareholders tallies with that provided for by law; 2. The investment contributed by shareholders reaches the minimum amount of capital required by law;

　　3. Shareholders participate in the formulation of articles of association;

　　4. The company has a suitable name and its organizational setup complies with that of a limited liability company.

　　5. The company has fixed production or operational site(s) and necessary conditions for production or operations.

　　Article 20 A limited liability company shall be set up by capital contributions made up by at least two and no more than 50 shareholders. Investment entities or departments authorized by the State may set up limited liability companies with sole State investment.

　　Article 21 A State-owned enterprise set up before the implementation of this law if can fulfill the condition of a limited liability company under this law may be reorganized into a solely State-owned limited liability company in the case of an investment entity with a single investor, or into a limited liability company as provided for in the first paragraph of the preceding Article in the case of an investment entity with many investors.

　　The steps and specific methods for State-owned enterprises to convert into companies shall be formulated separately by the State Council.

　　Article 22 The articles of association of a limited liability company shall specify clearly:

　　1. Name and address of the company; 2. Scope of business of the company;

　　3. Registered capital of the company;

　　4. Names of shareholders;

　　5. Rights and obligations of shareholders;

　　6. Forms and amount of investment made by shareholders;

　　7. Conditions for shareholders to transfer their investment;

　　8. The organizations of the company and the methods of establishment, their powers and functions and rules of procedures for meetings;

　　9. Legal representative of the company;

　　10.Grounds for dissolution of the company and liquidation methods; and

　　11.Other matters deemed necessary by shareholders.Shareholders should sign and seal the articles of association of the company.

　　Article 23 The registered capital is the total amount of investment paid in by all the shareholders registered with the registration department.

　　The amount of registered capital should not be less than the amount specified below:

　　1. for a company mainly engaging in production operations, RMB500,000;

　　2. for a company mainly engaging in wholesales, RMB500,000;

　　3. for a company mainly engaging in retail sales, RMB300,000;

　　4. for a company engaging in technology development, consulting and services, RMB100,000.

　　If the minimum amount of registered capital of a limited liability company of a given trade should be higher than those provided for in the preceding paragraph, it shall be determined separately by law or administrative decrees.

　　Article 24 Shareholders may make their investment in cash, in kind, in industrial property rights, in non-patented technology or land use rights must be correctly assessed and verified in value terms without any over or under-valuation. The assessment of land use rights in value shall be made according to law or administrative decrees.

　　The amount of industrial property rights or non-patented technology in value shall not exceed 20 percent of the total value of the registered capital of a limited liability company, except otherwise provided for by the State for the use of high and new technology.

　　Article 25 Shareholders shall pay in full their subscribed capital contributions as specified in the articles of association. In cases of making investment in cash, the contribution in cash should be deposited in full into a temporal account opened by the proposed limited liability company in a bank. In cases of using investment in kind, industrial property rights, non-patented technology or land use rights, the procedures for transfer of the property rights shall be completed according to law. Shareholders who fail to pay in the subscribed amount of investment as provided for in the preceding paragraph should be liable to breach of contract.

　　Article 26 After all the shareholders have paid in their investment, the investment shall be verified by a legal investment verification institution and a certificate shall be produced by the institution.

　　Article 27 After all the investment paid in by shareholders is verified, a representative designated or an agent commonly commissioned by all the shareholders shall apply for registration of establishment of the company with the registration department with an application form for registration, the articles of association, investment verification documents and other documents of the company.

　　If an examination and approval procedure is required by law or administrative decrees, the document of approval should be submitted when the applications for establishment and registration are filed.

　　The company registration department should grant registration if all the requirements provided for by this law are met and issue business licenses but if the requirements provided for by this law are not met, the registration shall be refused.

　　The date of issue of the company business license shall be the date of establishment of the limited liability company.

　　Article 28 After the establishment of a limited liability company, if the actual value of the investment in kind, industrial property rights, non-patented technology or land use rights are found to be apparently lower than the values set for in the articles of association of the company, the shortage shall be made good by the shareholder(s) concerned with the other shareholder bearing joint responsibility.

　　Article 29 If a limited liability company sets up branches at the time of its establishment, it should apply for registration to obtain business licenses for the branches.

　　If a limited liability company sets up a branch or branches after its establishment, the legal representative of the company shall apply for registration of the branch of branches to obtain business license(s).

　　Article 30 After the establishment, a limited liability company shall issue certificates of investment to shareholders.A certificate of investment should specify clearly:

　　1. Name of the company;

　　2. Date of registration of the company;

　　3. Registered capital of the company;

　　4. Names of shareholder, amount of investment paid in and the date of payment; and

　　5. Serial number and date of issue of the certificates of investment.Certificates of investment shall be affixed with the seal of the company.

　　Article 31 A limited liability company should keep a list of its shareholders with the following specified items:

　　1. Names or both names and address of shareholders;

　　2. Amount of investments paid in by the shareholders;

　　3. Serial number of the certificates of investment.

　　Article 32 Shareholders of a company have the right to review the minutes of meetings of shareholders and the financial and accounting statements of their company.

　　Article 33 Shareholder shall get dividends in proportion to the amount of investment they have made. If a company wants to increase its capital, its shareholders have the priority of subscription.

　　Article 34 Shareholders are not allowed to withdraw their investment after the registration of the company.

　　Article 35 Shareholders may transfer to each other all or part of their investment.

　　For transferring the investment to other people other than other shareholders of the company, a shareholder must get the consent of the simple majority of the shareholders. Shareholders who disapprove of the transfer should buy the shares of investment to be transferred. If they fail to buy the shares, it shall be regarded as approval of the transfer.

　　For the investment shares having been approved to be transferred, other shareholders shall have the priority for the purchase under the same conditions.

　　Article 36 After a shareholder has transferred its investment according to law, the company shall record the name(s) and address(es) of the transferee(s) and the amount of investment transferred in the list of shareholders.