|Civil & commercial law
• What amendments have been made regarding Enforcement about Civil Proceedings Law of the People's Republic of China?
• What amendments have been made regarding re-hearing aboutCivil Proceedings Law of The People’s Republic Of China?
• What is the amendment on fines aboutCivil Proceedings • Law of The People’s Republic Of China?
• When was China's most recent Company Law issued and when did it take into effect?
• How do China's Company Law and related Chinese laws and regulations affect foreign-invested companies?
• What are the minimum registered capital requirements for both companies limited by shares and LLCs?
• What types of assets meet capital requirements?
• Are there any special regulations concerning the registered capital of foreign-invested companies?
• What industries are included in the encouraged catalogue?
• What industries are included in the restricted catalogue?
• What industries are included in the eliminated catalogue?
• What about the industries that fall outside these three catalogues?
• What is a five-year plan?
• What does this plan entail?
• What is the new limited partnership system?
• What is the new special general partnership?
• Can legal persons participate in the partnership?
• Can partnership enterprise go bankrupt?
• Does partnership enterprise need to pay income tax?
• How does the law prevent the issue of illegally raising funds?
What amendments have been made regarding Enforcement about Civil Proceedings Law of the People's Republic of China?
There are 6 amendments. They are as follows:
(1) the courts’ power of detention in respect of failing to act as ordered has been increased;
(2) the time limit for filing applications for enforcement has been standardized and extended to 2 years;
(3) the time for mandatory enforcement has been advanced;
(4) heavier penalties will be imposed for failing to comply with legal documents;
(5) the party’s and interested party’s power of monitoring the enforcement is now specified by the statutory provisions; and
(6) courts in charge of enforcement have been restructured.
What amendments have been made regarding re-hearing aboutCivil Proceedings Law of The People’s Republic Of China?
(1) petitions for rehearing shall be filed with the court at an upper tier;
(2) conditions allowing applications for re-hearing have been further specified and increased from 5 to 10;
(3) the time limit for applications for re-hearing has been extended so that a party shall have the right to filean application for re-hearing two years after the original judgment or other judicial documents have been reversed or amended or the trial judge(s) has / have been found to be taking bribes, abusing their power or making unlawful decisions, provided that the party files the application within three months after he knows or should have known of the changes in the aforesaid circumstances; and
(4) counter-appeals brought by the People’s Procuratorate may be filed with a court at a lower tier.
What is the amendment on fines aboutCivil Proceedings Law of The People’s Republic Of China?
Fines to be imposed on individuals and organizations have increased from RMB1,000 and RMB1,000 – RMB30,000 to RMB10,000 and RMB10,000 – RMB300,000 respectively.
When was China's most recent Company Law issued and when did it take into effect?
On 27 October 2005 at the 18th session of the Standing Committee of the 10th National People's Congress, China's top legislature adopted the Draft of the Amendment of the Corporate Law. It came into effect on 1 January 2006.
How do China's Company Law and related Chinese laws and regulations affect foreign-invested companies?
Foreign investors looking to incorporate in China should comply with Chinese laws and regulations specific to foreign-invested companies. They will also be subject to the Corporate Law; however, there is no clear stipulation in the regulations specific to foreign-invested companies.
What are the minimum registered capital requirements for both companies limited by shares and LLCs?
For companies limited by shares, the minimum registered capital has been cut by 50% to RMB 5 million (approx. USD 625,000).
- For LLCs, the minimum registered capital for all types of business has been slashed across the board to a unified level of RMB 30,000 (approx. USD 3,750).
- The threshold requirement for registered capital is also subject to specific laws and regulations that may set higher thresholds for different industries. For example, insurance companies must have a minimum registered capital of RMB 200 million.
What types of assets meet capital requirements?
Any non-cash asset, including intellectual property that can be monetarily valued and legally transferred can be counted towards the minimum capital requirement. Cash contributions shall not be less than 30 percent of a company’s registered capital.
Are there any special regulations concerning the registered capital of foreign-invested companies?
Foreign invested enterprises are allowed to contribute their registered capital by installments, provided that: (i) the first installment of no less than 15% of the total registered capital is paid within 90 days upon establishment; and (ii) the
Remainder is paid within one to three years depending on the amount of registered capital.
What role do the articles of association play under China’s Company Law?
The articles of association are given greater importance under the 2006 law, as compared to previous versions of the law.
What industries are included in the encouraged catalogue?
The encouraged catalogue mainly includes key technologies, equipment and products that may promote the economic and social development of Beijing, are beneficial to energy conservation, environmental protection and industrial structure optimization and upgrading, and need to be encouraged and supported by policies. The catalogue covers 26 industries and several technologies including coal, power, fuel, natural gas, steel, automobiles, construction, information industry, environmental protection, resources conservation and multiple utilization.
What industries are included in the restricted catalogue?
The restricted catalogue mainly includes productivity, processing and products which require modification or are prohibited on the ground of failing to meet the Beijing standards, requirements for admission to the industry or relevant provisions, or hinder the modification of the industry in Beijing. This catalogue covers 16 industries including coal, electricity, fuel, the information industry, construction materials, pharmaceuticals and textiles.
What industries are included in the eliminated catalogue?
The eliminated catalogue mainly includes the backward technologies, equipment and products that fail to follow the relevant laws and regulations of the State and Beijing, seriously waste resources, pollute the environment, fail to provide safe production conditions and should be eliminated. The backward processes and equipment cover 15 industries including coal, power, fuel, natural gas, chemicals and steel, while laggard products mainly cover 11 industries including natural gas, chemicals, railway, steel, construction materials, medicine and machines.
What about the industries that fall outside these three catalogues?
The industries that fall outside these three catalogues but meet the relevant laws, regulations and policies are classified as permissible. However, their catalogue will not be listed in the Guiding Catalogues of Beijing Municipality on Industrial Structure Adjustments.
What is a five-year plan?
By summarizing the overall picture of the use of foreign investment in China during the tenth five-year period (i.e. the 2001-2005 period) and analyzing the prospective domestic and international economic environment for the eleventh five year period (i.e. the 2006-2010 period), the Plan brings forward the guidelines, strategic targets, important missions and corresponding policies on the use of foreign investment during the eleventh five-year period. The Plan provides essential guidance to those likely to be involved in foreign investment in China in the eleventh five-year period.
What does this plan entail?
According to the Plan, during the eleventh five-year period, China will shift its focus from contending with a shortage of funds and foreign exchange to introducing advanced technologies, management experience and high-caliber personnel, with the aim of significantly altering China’s focus on quantity of foreign investment to quality. It is intended that China will strive to expand the fields into which foreign investment is permitted. Previously, foreign investment has been limited to the fields of simple processing and assembling and low-level production and manufacture. China intends now to encourage foreign investment into such new fields as research and development, high-end design, and modern communications so that China might advance to become one of the world’s key manufacturing bases for high added value products and also so that China might further open up its service industries.
In addition, through the introduction of foreign advanced technologies and management skills, foreign-funded enterprises will be given chances to lead and bring along Chinese enterprises so as to improve their independent innovating ability. With these aims in mind, the Plan identifies eight major missions and lays down eight key policies on the use of foreign investment for the
eleventh five-year period.
What is the new limited partnership system?
Limited Partnerships may be established under the new law, which, on the condition that there is at least one partner willing to assume unlimited liability, allows the other partners to benefit from limited liability. In addition, the New Partnership Law specifically sets out the type of capital contribution which may be made by limited partners, including contribution in money or in kind – for example, in intellectual property rights, land use rights or other property assets. The contribution must also be recorded in the registration of the enterprise in order to protect the rights and interests of creditors.
The limited partnership system is designed to be conducive to the development of risk carrying investments by allowing the institutions or individuals with experience in management and abilities in technology research and development to combine effectively with investment institutions.
What is the new special general partnership?
The New Partnership Law contains a section entitled “Special General Partnership Enterprises”, which specifies that, subject to a general condition that partners will assume unlimited liabilities for the debts of the partnership, partners would not assume unlimited liabilities on a joint and several basis for liabilities incurred to the partnership due to reasons attributable to any other partner(s). At the same time, the New Partnership Law narrowly defines the scope of the exemption to liabilities incurred by the partnership due to other Partners’ willful misconduct or gross negligence.
In addition, to supplement the limitation on the scope of partners’ assumption of unlimited liabilities for liabilities of the partnership, the New Partnership Law has introduced a protection system for clients and third parties. It requires special general partnership enterprises to maintain a risk reserve fund and obtain malpractice insurance to cover potential risks incurred by partners.
Can legal persons participate in the partnership?
The new law expressly defines the partnership enterprise, so that legal persons may participate in partnerships. This system is intended to allow legal persons, including companies, to realize their intended target undertaking using the advantages of partnership enterprises – including a flexible form, effective cooperation, and relatively low costs. This system is also intended to be conducive to the cooperation between large size enterprises and innovative middle and small-size enterprises. Meanwhile, in order to prevent the risks that state-owned enterprises and listed companies may assume due to participating in the partnership, and to protect the national interests, public interests, and the interests of shareholders, the New Partnership Law stipulates that such institutions may not become general partners.
Can partnership enterprise go bankrupt?
The New Law permits creditors of partnership enterprises to make choices under different circumstances, namely that the creditors may apply to the people's court for bankruptcy liquidation or may demand the partners to make repayments. Where a partnership enterprise is declared bankrupt, the general partners will still bear unlimited joint and several liabilities for the debts of the partnership enterprise.
The new system ensures that all creditors are repaid in proportion, which helps the creditors’ interests. Meanwhile the act of illegal transfer of property within the year prior to the bankruptcy of the enterprise may be withdrawn, and the transferred property may be recovered, so that the bankruptcy property is increased and the creditor’s interests are
Does partnership enterprise need to pay income tax?
In order to prevent partners from evading the obligation to pay taxes by not distributing the profits of the enterprise, the New Law sets forth, “for production and business operation incomes and other incomes of a partnership enterprise, partners must pay their respective income tax in accordance with the relevant tax provisions.”
How does the law prevent the issue of illegally raising funds?
In order to prevent raising funds illegally through the limited partnership system, the New Law, by reference to the relevant provisions of the Company Law of the PRC, provides that a limited partnership enterprise must be established by not less than 2 but not more than 50 partners, unless it is otherwise provided by law.