SECTION TWO ORGANIZATIONAL SETUP

　　Article 37 The meeting of shareholders of a limited liability company shall be made up of all shareholders. The meeting of shareholders shall be the authoritative organization of the company and exercises its powers according to this law.

　　Article 38 The meeting of shareholders shall exercise the following powers:

　　1. To decide upon the operation policies and investment plans of the company.

　　2. To elect and replace directors and decide on matters relating to remuneration to directors.

　　3. To elect and replace the supervisors who are the representatives of shareholders and decide on the payment to supervisors.

　　4. To examine and approve the reports by the board of directors.

　　5. To examine and approve the reports by the supervisory committee or individual supervisors.

　　6. To examine and approve the annual financial and budget plan and financial accounting plan of the company.

　　7. To examine and approve the plans for company's profit distribution and losses recovery.

　　8. To pass resolutions on the increase or decrease of registered capital.

　　9. To pass resolutions on the issue of bonds.

　　10. To pass resolutions on the transfer of investment by shareholders to people other than shareholders.

　　11. To pass resolutions on issues as merger, division, change in corporate form, dissolution and liquidation and other affairs of the company.

　　12. To revise the articles of association of the company. Article 39 Methods of discussion and voting procedures of the meeting of shareholders shall be provided for in the articles of association except otherwise provided for by this law.

　　The resolution on the increase or decrease of registered capital, division, merger, dissolution or change of corporate form of the company must be agreed by shareholders representing two-thirds of the voting rights.

　　Article 40 A company may revise its articles of association. The resolution on the revision of the articles of association must be agreed by shareholders representing over two-thirds of the voting rights.

　　Article 41 In a meeting of shareholders, the voting rights shall be exercised in proportion to the amount of investment made by shareholders.

　　Article 42 The first meeting of the shareholders shall be convened and presided over by the shareholder whose capital contribution is the largest. Such shareholder shall exercise its rights according to the provisions of this law.

　　Article 43 Meetings of shareholders shall be divided into regular meetings and irregular meetings.

　　Regular meetings shall be called according to the provisions of the articles of association of the company. Irregular meetings may be called upon the motion by shareholders who represent over one-fourth of the voting rights or by over one-third of the directors or supervisors.

　　If a limited liability company has a board of directors, the meeting of shareholders shall be called by the board of directors and presided over by the chairman of the board of directors. If the chairman of the board of directors is unable to perform the duty due to special reasons, the meetings shall be presided over by a vice-chairman of the board of directors or a director designated by the chairman of the board of directors.

　　Article 44 If a meeting of shareholders is to be held, notice shall be given to all the shareholders 15 days before the meeting is held. The meeting of shareholders shall keep minutes on matters discussed and to be signed by shareholders present.

　　Article 45 The board of directors of a limited liability company shall be made up of 3 to 13 persons.

　　For a board of directors established by at least two State owned enterprises or by at least two State owned investment entities, members of its board of directors should include representatives of workers, who are to be elected by the workers through democratic processes.

　　A board of directors shall have a chairman and may have one to two vice-chairmen. The method of election of the chairman and vice- chairmen of the board of directors shall be provided for in the articles of association of the company.

　　The chairman of the board of directors is the legal representative of the company.

　　Article 46 The board of directors shall be responsible to the meeting of shareholders and exercises the following powers:

　　1. To call meetings of shareholders and report work to the meetings of shareholders.

　　2. To execute the resolutions passed by the meetings of shareholders.

　　3. To decide on the operation and investment plans.

　　4. To formulate the company's annual financial budget and final accounts.

　　5. To formulate the profit distribution and losses recovery plans.

　　6. To formulate plans for increasing or decreasing registered capital of the company.

　　7. To draft plans for merger, division, change of corporate form and dissolution of the company.

　　8. To decide on the organizational setup of the company.

　　9. To appoint or dismiss manager (general manager) of the company (hereinafter referred to as "manager"), appoint or dismiss deputy managers and financial officers of the company according to the recommendation by the manager and decide on their remuneration.

　　10. To formulate the basic management systems of the company.

　　Article 47 The term of office for the chairman of the board of directors shall be provided for in the articles of association, in case that each term of the office shall not be longer than three years. The chairman of the board of directors may be re-elected upon the expiration of the term to serve another term.

　　Before the term of office of a director expires, the meeting of shareholders shall not dismiss him (her) from his (her) posts without justifiable reasons.

　　Article 48 The meetings of the board of directors shall be called and presided over by the chairman of the board of directors. If the chairman of the board of directors is unable to perform his (her) duty due to special reasons, a vice-chairman of the board of directors or a director designated by the chairman of the board of directors shall call and preside over the meetings. A meeting of the board of directors may be called upon the motion by at least one-third of the directors.

　　Article 49 The method of discussion and the procedures of voting at the meeting of the board of directors shall be provided for in the articles of association except otherwise provided for in this law. In concerning a meeting of the board of directors, a notice shall be given to the directors concerned 10 days before the meeting is held.

　　The board of directors shall keep minutes of meetings made on the matters discussed and being signed by the directors present.

　　Article 50 A limited liability company shall have a manager, subject to appointment or dismissal by the board of directors. The manager shall be responsible to the board of directors and exercise the following powers:

　　1. To be in charge of the company's production operations and management of the company and organize the implementation of the decisions of the board of directors.

　　2. Implementation of the annual operation and investment plans of the company.

　　3. Formulate the internal organizational setup plan.

　　4. Formulate the basic management system of the company.

　　5. Formulate specific rules and regulations of the company.

　　6. Propose the appointment or dismissal of deputy managers and financial officers of the company.

　　7. Appoint or dismiss management officers other than those required to be appointed or dismissed by the board of directors.

　　8. Other powers conferred by the articles of association and the board of directors.The manager shall attend the meeting of the board of directors as a non-voting member.

　　Article 51 If a limited liability company with a small number of shareholders and a small scale of operation, it may have one sole executive director instead of the board of directors. The executive director may concurrently serve as the manager of the company.

　　The powers and functions of the managing director shall be defined in the articles of association pursuant to the provisions of Article 46 of this law.

　　If a limited liability company has no board of directors, the managing director shall be the legal representative.

　　Article 52 A limited liability company with a relatively large scale of operation shall have a supervisory committee made up of not less than three members and a convenor elected among the members.

　　The supervisory committee shall include representatives of shareholders and a certain proportion of workers' representatives. The specific proportion shall be specified in the articles of association.

　　The workers' representatives to the supervisory committee shall be elected by workers through democratic process.

　　A limited liability company with a relatively small number of shareholders and of a small operation scale may have one to two supervisors.

　　Director, manager and financial officer of a company shall not concurrently serve as supervisors.

　　Article 53 The term of office of a supervisor is three years, upon the expiration of the term, a supervisor may be reappointed and serve another term.

　　Article 54 The supervisory committee or individual supervisors of a company exercise the following powers:

　　1. To check up on the financial affairs of the company;

　　2. To supervise the law and regulation violating acts or the articles of association of directors and manager in performing their duties;

　　3. To request directors or manager to remedy their acts whenever such acts harm the interests of the company;

　　4. To propose the convening of an interim shareholders' meeting; and

　　5. To exercise other powers as provided for in the articles of association.Supervisors shall attend the meeting of the board of directors as non-voting members.

　　Article 55 Whenever considering and deciding on wages, welfares, production safety of the staff and workers and labor protection and labor insurance and other issues converning the personal interests of the staff and workers, opinions of the trade union and the workers of the company should first of all be solicited and representatives of the trade union or workers should be invited as observers to meetings concerned.

　　Article 56 Opinions and suggestions of the trade union and workers of the company should also be solicited when considering and deciding on major issues concerning the operation of the company and when major rules and regulation are formulated for the company.

　　Article 57 The following persons may not serve as the director, supervisor or manager of a company:

　　1. persons without or with restricted civil capacity;

　　2. persons who have committed the offences of corruption, bribery, infringement of property, misappropriation of property or sabotaging the social economic order, and have been sentenced to criminal penalties, where less than five years have elapsed since the date of completion of the sentence; or persons who have been deprived of their political rights due to criminal offense, where less than five years have elapsed since the date of the completion of this deprivation;

　　3. persons who are former directors, factory directors of managers of a company or enterprise which has become bankrupt and been liquidated as a result of mismanagement and are personally liable of bankruptcy of such company or enterprise, where less than three years have elapsed since the date of completion of the bankruptcy and liquidation of the company or enterprise.

　　4. persons who were legal representatives of a company or enterprise which had its business licence revoked due to a violation of the law and who are personally liable, where less than three years have been elapsed since the date of the revocation of the business licence;

　　5. persons who have a relatively large amount of debts due and outstanding.

　　The election or appointment for directors, supervisors or manager of a company shall become invalid if not in comformity with the preceding provisions.

　　Article 58 Civil servants of the State are not allowed to serve as directors, supervisors or managers of companies.

　　Article 59 Directors, supervisors and manager of a company shall abide by the articles of association, perform their duties faithfully, and safeguard the interests of the company. They are not allowed to exploit their positions and powers in the company for personal gains.

　　Directors, supervisors or manager of a company are not allowed to exploit their position to accept bribes or other illegal income or wrongfully take over the company property.

　　Article 60 Directors or manager of a company are not allowed to misappropriate the funds of the company or loan such funds to others. Directors or manager of a company are not allowed to deposit the assets of the company in their own or other personal bank accounts.

　　Directors or manager of a company shall not provide assets of the company as guarantee for the debts owed by shareholders of the company or by others.

　　Article 61 Directors or manager of a company shall not engage on their own behalf or on behalf of others in any businesses that are the same of that of the company or activities that are harmful to their own company. The proceeds from any such businesses or activities shall belong to the company.

　　A director or a manager shall not enter into any contracts or transactions with the company except otherwise provided for in the articles of association or with the consent of the meeting of association or with the consent of meeting of shareholders.

　　Article 62 A director, a supervisor, or a manager of a company shall not divulge secrets of the company except according to law or with the consent of the meeting of shareholders.

　　Article 63 Where a director, a supervisor, or a manager of a company violates the law, administrative decrees, or the company's articles of association in performing his (her) official corporate duties resulting in harm of the company, such director, supervisor, or manager is liable for compensation for the damage.