CHAPTER SIX FINANCIAL AFFAIRS AND ACCORDING OF A COMPANY

　　Article 174 A company shall establish its financial and accounting system according to law and administrative decrees and provisions of the financial department in charge under the State Council.

　　Article 175 A company shall produce a financial and accounting report at the end of each fiscal year, which is subject to examination and verification according to law.

　　A financial and accounting statement shall include the following accounting statements and schedules:

　　1. Balance sheets;

　　2. Profit and loss statement;

　　3 .Statement of financial changes;

　　4. Statement of financial situation;and

　　5. Statement of profit distribution.

　　Article 176 A limited liability company shall, according to the provisions of the articles of association, submit the financial and accounting statements to shareholders within the prescribed time limit.

　　A joint stock company limited shall deposit its financial and accounting statements at the company for inspection by shareholders at least 20 days prior to the general meeting of shareholders.

　　A joint stock company limited established by public offers must make public its financial and accounting statements.

　　Article 177 When distributing each year's after-tax profits, a company shall set aside 10 percent of the profits for the company's statutory reserve funds and 5 to 10 percent as the company's statutory public welfare funds. It may not set aside common reserve funds if the aggregate balance of the funds has already accounted for over 50 percent of the company's registered capital.

　　If the aggregate balance of the company's common reserve funds are not enough to make up for the losses sustained by the company of the previous year, current year profits shall be used to make up for the losses before allocations are set aside for the statutory common reserve funds and public welfare funds according to the provisions of the preceding paragraph.

　　Subject to a resolution of meeting of shareholders, after the company has set aside funds from after-tax profits for the statutory common reserve funds, the company may set aside funds for a discretionary common reserve funds.

　　The remaining profits after the losses have been made up for and statutory common reverve funds and public welfare funds have been drawn shall be distributed to shareholders according to the proportion of their capital constribution as in the case of a limited liability company and according to the number of shares held by shareholders as in the case of a joint stock company limited.

　　If the meeting of shareholders or board of directors has distributed the profits before the losses are made up for and the statutory common reserve funds and public welfare funds are drawn in violation of the provisions of the preceding paragraph, the profits distributed must be returned to the company.

　　Article 178 In accordance with this law, the premium obtained by a joint stock company limited by issuing shares at a price exceeding par value, and any other income designated for the capital deserve funds by the regulations of the responsible financial department of the State Council shall be allocated to the company's capital common reverse fund.

　　Article 179 The company's common reserve funds shall be used to make up for the losses of the company, expand its production and operations or as additional capital of the company.

　　When a joint stock company limited converts its common reserve funds into capital upon the resolution of shareholder's meeting, it shall either distribute new shares in proportion to the number of shares held by sharesholders or increase the par value of the shares, provided, however, that when the statutory common reserve funds are converted to capital, the balance of the common reserve fund may not fall below 25 percent of the registered capital.

　　Article 180 The statutory common welfare fund of a company is used for the collective welfare of the company's staff and workers.

　　Article 181 A company may not keep accounting books and records other than those provided for by law.

　　The assets of a company shall not be deposited in accounts opened in the name of any individual person.