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

Updated: 2006-04-17 10:09

Article 185 The liquidation group may exercise the following functions
during the process of liquidation:
(1) liquidating the properties of the company, and producing balance
sheets and asset checklists;
(2) informing creditors by notice or public announcement;
(3) disposing and liquidating the businesses of the company that have
not been completed;
(4) clearing off the outstanding taxes and the taxes incurred in the
process of liquidation;
(5) clearing off credits and debts;
(6) disposing the residual properties; and
(7) participating in the civil proceedings of the company.

Article 186 The liquidation group shall, within ten days as of its
formation, notify the creditors, and shall make a public announcement
within 60 days on newspapers. Creditors shall, within thirty days as of
the receipt of a notice or within 45 days as of the issuance of the
public announcement in the case of failing to receiving a notice, declare
credits against the liquidation group.
To declare credits, a creditor shall explain the relevant matters and
provide relevant evidential materials. The liquidation group shall check
in the credits, and may not clear off any of the debts of any creditor
during the period of credit declaration.

Article 187 The liquidation group shall, after liquidating the properties
of the company and producing balance sheets and checklists of properties,
make a plan of liquidation, and report it to the shareholders' meeting or
the shareholders' assembly or the people's court for confirmation.
The residual assets that result from paying off the liquidation expenses,
wages of employees, social insurance premiums and legal compensation
premiums, the outstanding taxes and the debts of the company with the
assets of the company may, in the case of a limited liability company, be
distributed according to the proportions of capital contributions of the
shareholders, and in the case of a joint stock limited company, according
to the proportions of stocks held by the shareholders. During the term of
liquidation, the company continues to exist, but may not carry out any
business operation that has nothing to do with liquidation. None of the
properties of the company may be distributed to any shareholder before
they are used for the clearing off as stated in the preceding paragraph.

Article 188 If the liquidation group finds that the properties of the
company is not sufficient for clearing off the debts after liquidating
the properties of the company and producing balance sheets and checklists
of properties, it shall file an application to the people's court for
bankruptcy. Once the people's court makes a judge declaring the
bankruptcy of the company, the liquidation group shall hand over the
liquidation matters to the people's court.

Article 189 After liquidation of the company is completed, the
liquidation group shall formulate a liquidation report, which shall be
submitted to the shareholders' meeting or the shareholders' assembly or
the people's court for confirmation and shall be submitted to the company
registration authority for writing off the registration of the company.
It shall also make a public announcement on its termination.

Article 190 The members of the liquidation group shall devote themselves
to their duties and fulfill their obligations of liquidation according to
law.
None of the members of the liquidation group may take any bribe or any
other illegal proceeds by taking advantage of his position, nor may he
misappropriate any of the properties of the company. Where any of the
members of the liquidation group causes any loss to the company or any
creditor by intention or due to gross negligence, he shall make
corresponding compensations.

Article 191 Where a company is declared bankrupt according to law, it
shall carry out a bankruptcy liquidation in accordance with the
provisions concerning bankruptcy liquidation.

Chapter XI Branches of Foreign Companies

Article 192 The term "foreign company" as mentioned in this Law refers to
a company established outside of the territory of China according to any
foreign law.

Article 193 A foreign company, which plans to establish any branch within
the territory of China, shall submit an application with the competent
authority of China, and shall submit relevant documents such as the
articles of incorporation, the company registration certificate as issued
by the country of establishment and etc.. Upon the approval, it shall go
through registration formalities with the company registration authority
according to law and obtain a business license.
The measures for the examination and approval of the branches of foreign
companies shall be separately formulated by the State Council.

Article 194 Where a foreign company establishes any branch within the
territory of China, it must appoint a representative or an agent within
the territory of China to take charge of the branch, and shall allocate
to the branch corresponding funds for the business activities it is
engaged in.

Article 195 The branch of any foreign company shall indicate in its name
the nationality and the form of liability of the foreign company
concerned.
The branch of a foreign company shall keep the articles of corporation of
the foreign company at its own place.

Article 196 The branch of a foreign company established within the
territory of China does not have the status of a juridical person.
The foreign company shall bear civil liabilities for the business
operation of its branches undertaken within the territory of China.

Article 197 The branches of foreign companies which are established upon
approval shall accord with the laws of China when undertaking their
business activities within the territory of China, and may not injure the
social public interests of China, and the lawful rights and interests
thereof shall be protected by Chinese law.

Article 198 Where a foreign company relinquishes any of its branches
within the territory of China, it shall clear off the debts thereof
according to law, and shall carry out a liquidation in accordance with
the provisions of this Law on the procedures for the liquidation of
companies. Before the debts are cleared off, it may not transfer any of
the properties of the branch out of China.

Chapter XII Legal Liabilities

Article 199 Where anyone, in violation of the provisions of this Law,
obtains the registration of a company by making a false report of his
register capital, submitting false materials or by any other fraudulent
means so as to conceal important facts, he shall be ordered by the
company registration authority to make corrections. In the case of making
a false report of his register capital, he shall be fined not less than
5% but not more than 15% of the fabricated registered capital; in the
case of submitting false materials or by any other fraudulent means so as
to conceal important facts, he shall be fined not less than 5,000 Yuan
but not more than 50,000 Yuan; if the circumstances are serious, the
company registration certificate shall be revoked or the business license
shall be cancelled.

Article 200 Any of the initiators or shareholders of a company, who makes
any false capital contribution, or fails to deliver or fails to deliver
in good time the monetary or non-monetary properties used as capital
contributions, shall be ordered by the company registration authority to
make corrections, and shall be fined not less than 5% but not more than
15% of the sum of false capital contributions.

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

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