关键词：Securities

1. 

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

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

Updated: 2006-04-18 08:56

(Adopted at the 6th Meeting of the Standing Committee of the 9th National People's Congress on December 29, 1998, revised at the 18th Meeting of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on October 27, 2005 according to the Decision on Revising the Securities Law of the People's Republic of China as made at the 11th meeting of the Standing Committee of the 10th People's Congress on August 28, 2004)

Contents

Chapter I General Provisions
Chapter II Issuance of Securities
Chapter III Transaction of Securities
Section I General Provisions
Section II Listing of Securities
Section III On-going Disclosure of Information
Section IV Prohibited Trading Acts
Chapter IV Acquisition of Listed Companies
Chapter V Stock Exchanges
Chapter VI Securities Companies
Chapter VII Securities Registration and Clearing Institutions
Chapter VIII Securities Trading Service Institutions
Chapter IX Securities Industrial Association
Chapter X Security Regulatory Bodies
Chapter XI Legal Liabilities
Chapter XII Supplementary Articles


Chapter I General Provisions

Article 1 The present Law is formulated for the purpose of regulating the issuance and transaction of securities, protecting the lawful rights and interests of investors, safeguarding the economic order and public interests of the society and promoting the growth of the socialist market economy.

Article 2 The present Law shall be applied to the issuance and transaction of stocks, corporate bonds as well as any other securities as lawfully recognized by the State Council within the territory of the People's Republic of China. Where there is no such provision in the present Law, the provisions of the Corporation Law of the People's Republic of China and other relevant laws and administrative regulations shall be applied. Any listed trading of government bonds and share of securities investment funds shall be governed by the present Law. Where there is any special provision in any other law or administrative regulation, the special provision shall prevail. The measures for the administration of issuance and transaction of securities derivatives shall be prescribed by the State Council according to the principles of the present Law.

Article 3 The issuance and transaction of securities shall adhere to the principles of openness, fairness and impartiality.

Article 4 The parties involved in any issuance or transaction of securities shall have equal legal status and shall persist in the principles of free will, compensation and integrity and creditworthy.

Article 5 The issuance and transaction of securities shall observe laws and administrative regulations. No fraud, insider trading or manipulation of the securities market may be permitted.

Article 6 The divided operation and management shall be adopted by the industries of securities, banking, trust as well as insurance. The securities companies and the business organs of banks, trust and insurance shall be established separately, unless otherwise provided for by the state.

Article 7 The securities regulatory authority under the State Council shall adopt a centralized and unified supervision and administration of the national securities market. The securities regulatory authority under the State Council may, in light of the relevant requirements, establish dispatched offices, which shall perform their duties and functions of supervision and administration upon the authorization.

Article 8 Under the centralized and unified supervision and administration of the state regarding the issuance and transaction of securities, a securities industrial association shall be lawfully established, which shall adopt the self-regulating administration.

Article 9 The auditing organ of the state shall carry out auditing supervision of stock exchanges, securities companies, securities registration and clearing institutions and securities regulatory bodies.

Chapter II Issuance of Securities

Article 10 A public issuance of securities shall satisfy the requirements of the relevant laws and administrative regulations and shall be reported to the securities regulatory authority under the State Council or a department upon authorization by the State Council for examination and approval according to law. Without any examination and approval according to law, no entity or individual may make a public issuance of any securities. It shall be deemed as a public issuance upon the occurrence of any of the following circumstances:
(1) Making a public issuance of securities to non-specified objects;
(2) Making a public issuance of securities to accumulatively more than 200 specified objects; or
(3) Making a public issuance as prescribed by any law or administrative regulation. For any securities that are not issued in a public manner, the means of advertising, public inducement or public issuance in any disguised form may not be adopted thereto.

Article 11 An issuer that files an application for public issuance of stocks or convertible corporate bonds by means of underwriting according to law or for public issuance of any other securities, to which a recommendation system is applied, as is prescribed by laws and administrative regulations, shall employ an institution with the qualification of recommendation as its recommendation party. A recommendation party shall abide by operational rules and industrial norms and, on the basis of the principles of being honesty, creditworthy, diligent and accountable, carry out a prudent examination of application documents and information disclosure materials of its issuers as well as supervise and urge its issuers to operate in a regulative manner. The qualification of the recommendation party as well as the relevant measures for administration shall be formulated by the securities regulatory authority under the State Council.

Article 12 A public offer of stocks for establishing a stock-limited company shall satisfy the requirements as prescribed in the Corporation Law of the People's Republic of China as well as any other requirements as prescribed by the securities regulatory authority under the State Council, which have been approved by the State Council. An application for public offer of stocks as well as the following documents shall be reported to the securities regulatory authority under the State Council:
(1) The constitution of the company;
(2) The promoter's agreement;
(3) The name or title of the promoter, the amount of shares as subscribed by the promoter, the category of contributed capital as well as the capital verification certification;
(4) The prospectus;
(5) The name and address of the bank that receives the funds as generated from the issuance of stocks on the behalf of the company; and
(6) The name of the underwriting organization as well as the relevant agreements. In case a recommendation party shall be employed, as prescribed by the present Law, the Recommendation Letter of Issuance as produced by the recommendation party shall be submitted as well. In case the establishment of a company shall be reported for approval, as prescribed by laws and administrative regulations, the relevant approval documents shall be submitted as well.

Article 13 An initial public offer (IPO) of stocks of a company shall satisfy the following requirements:
(1) Having a complete and well-operated organization;
(2) Having the capability of making profits successively and a sound financial status;
(3) Having no false record in its financial statements over the latest 3 years and having no other major irregularity; and
(4) Meeting any other requirements as prescribed by the securities regulatory authority under the State Council, which has been approved by the State Council. A listed company that makes any initial non-public offer of stocks shall satisfy the requirements as prescribed by the securities regulatory authority under the State Council, which have been approved by the State Council and shall be reported to the securities regulatory authority under the State Council for examination and approval.

Article 14 A company that makes an IPO of stocks shall apply for public offer of stocks as well as the following documents to the securities regulatory authority under the State Council:
(1) The business license of the company;
(2) The constitution of the company;
(3) The resolution of the general assemble of shareholders;
(4) The prospectus;
(5) The financial statements;
(6) The name and address of the bank that receives the funds as generated from the public offer of stocks on the behalf of the company; and
(7) The name of the underwriting institution as well as the relevant agreements. In case a recommendation party shall be employed, as prescribed by the present Law, the Recommendation Letter of Issuance as produced by the recommendation party shall be submitted as well.

Updated: 2006-04-18 08:56

Article 15 The funds as raised through public offer of stocks as made by a company shall be used according to the purpose as prescribed in the prospectus. Any alteration of the use of funds as prescribed in the prospectus shall be subject to a resolution of the general assembly of shareholders. In case a company fails to correct any unlawful alteration of its use of funds or where any alteration of its use of funds fails to be adopted by the general assembly of shareholders, the relevant company may not make any IPO of stocks. In the foregoing circumstance, a listed company may not make any non-public offer of stocks.

Article 16 A public issuance of corporate bonds shall satisfy the following requirements:
(1) The net asset of a stock-limited company being no less than RMB 30 million yuan and the net asset of a limited-liability company being no less than RMB 60 million yuan;
(2) The accumulated bond balance constituting no more than 40 % of the net asset of a company;
(3) The average distributable profits over the latest 3 years being sufficient to pay the 1-year interests of corporate bonds;
(4) The investment of raised funds complying with the industrial policies of the state;
(5) The yield rate of bonds not surpassing the level of interest rate as qualified by the State Council; and
(6) Meeting any other requirements as prescribed by the State Council. The funds as raised through public issuance of corporate bonds shall be used for the purpose as verified and may not be used for covering any deficit or non-production expenditure. The public issuance of convertible corporate bonds as made by a listed company may not only meet the requirements as provided for in paragraph 1 herein but also meet the requirements of the present Law on public offer of stocks, and shall be reported to the securities regulatory authority under the State Council for examination and approval.

Article 17 With regard to an application for public issuance of corporate bonds, the following documents shall be reported to the department as authorized by the State Council or the securities regulatory authority under the State Council:
(1) The business license of the company;
(2) The constitution of the company;
(3) The procedures for issuing corporate bonds;
(4) An assent appraisal report and an asset verification report; and
(5) Any other document as prescribed by the department as authorized by the State Council or by the securities regulatory authority under the State Council. In case a recommendation party shall be employed, as prescribed by the present Law, the Recommendation Letter of Issuance as produced by the recommendation party shall be submitted as well.

Article 18 In any of the following circumstances, no more public issuance of corporate bonds may be carried out:
(1) Where the corporate bonds as issued in the previous public issuance haven't been fully subscribed;
(2) Where a company has any default on corporate bonds as publicly issued or on any other liabilities, or postpones the payment of the relevant principal plus interests, and such situation is still continuing; or
(3) Where a company violates the present Law by altering the use of funds as raised through public issuance of corporate bonds.

Article 19 The formats and reporting ways of application documents as reported by an issuer for examination and approval of securities issuance according to law shall be prescribed by the legally competent organ or department in charge of examination and approval.

Article 20 The application documents for securities issuance as reported by an issuer to the securities regulatory authority under the State Council or the department as authorized by the State Council shall be authentic, accurate and integrate. A securities trading service institution and its staff that produces the relevant documents for securities issuance shall strictly perform its/his statutory duties and functions and guarantee the authenticity, accuracy and integrity of the documents as produced thereby.

Article 21 Where an issuer files an application for an IPO of stocks, it shall, upon submitting the application documents, disclose the relevant application documents in advance according to the provisions of the securities regulatory authority under the State Council.

Article 22 The securities regulatory authority under the State Council shall establish an issuance examination committee, which shall examine the applications for stock issuance according to law. The issuance examination committee shall be composed of the professionals from the securities regulatory authority under the State Council and other relevant experts from outside the said authority, adopt the means of voting for the determination of applications for stock issuance and set forth the opinions on examination. The specific formulation measures, tenure of members as well as work procedures of the issuance examination committee shall be formulated by the securities regulatory authority under the State Council.

Article 23 The securities regulatory authority under the State Council shall take charge of the examination and approval of applications for stock issuance in light of the statutory requirements. The procedures for examination and approval shall be publicized and shall be subject to supervision according to law. The personnel participating in the examination and verification of stock issuance may not have any interest relationship with an issuance applicant, may not directly or indirectly accept any present of the issuance applicant, may not hold any stock as verified for issuance and may not have any private contact with an issuance applicant. The department as authorized by the State Council shall conduct the examination and approval of applications for issuance of corporate bonds by referring to the preceding 2 paragraphs herein.

Article 24 The securities regulatory authority under the State Council or the department as authorized by the State Council shall, within 3 months as of acceptance of an application for securities issuance, make an decision on approval or disapproval according to the statutory requirements and procedures, whereby the time for an issuer to supplement or correct its application documents for issuance according to the relevant requirements may not be calculated within the aforesaid term for examination and approval. In the event of disapproval, an explanation shall be given in writing.

Article 25 Where an application for securities issuance has been approved, the relevant issuer shall, in accordance with the provisions of the relevant laws and administrative regulations, announce the relevant financing documents of public issuance before publicly issuing any securities and shall make the aforesaid documents available for public reference in designated places. Before the information of securities issuance is publicized according to law, no insider may publicize or indulge the relevant information. An issuer may not issue any securities before an announcement of the relevant financial documents of public issuance.


Article 26 The securities regulatory authority under the State council or the department as authorized by the State Council shall, where finding any decision on approving securities issuance fails to comply with the relevant statutory requirements and procedures and if the relevant securities haven't been issued, revoke the decision on approval and terminate the issuance. As to any securities that have been issued but haven't been listed, the relevant decision on approval for issuance shall be revoked. The relevant issuer shall, according to the issuing price plus interests as calculated at the bank deposit rate for the corresponding period of time, return the funds to securities holders. A recommendation party shall bear the joint and several liabilities together with the relevant issuer, except for one who is able to prove his exemption of fault. Where any controlling shareholder or actual controller has any fault, he shall bear the joint and several liabilities together with the relevant issuer,

Article 27 After a legal offer of stocks, an issuer shall be liable for any alteration of its operation or its profits by itself. The investment risk as incurred therefrom shall be borne by investors by themselves.

Article 28 Where an issuer issues any securities to any non-specified object and if the said securities shall be underwritten by a securities company, as is provided for by laws and administrative regulations, the issuer shall conclude an underwriting agreement with a securities company. The forms of "sale by proxy" and "exclusive sale" shall be adopted for the underwriting operation of securities. The term "sale by proxy" refers to an underwriting form, whereby a securities company sells securities as a proxy of the relevant issuer and, upon the conclusion of the underwriting period, returns all the securities unsold to the relevant issuer. The term "exclusive sale" refers to an underwriting form, whereby a securities company purchases all of the securities of an issuer according to the agreement there between or purchases all of the residing unsold securities by itself upon the conclusion of the underwriting period.

Article 29 An issuer that makes public issuance of securities has the right to select a securities company for underwriting according to law at its own will. A securities company may not canvass any securities underwriting business by any unjust competition means.

Article 30 Where a securities company underwrites any securities, it shall reach an agreement with the relevant issuer on sale by proxy or exclusive sale, which shall indicate the following items:
(1) The name, domicile as well as the name of the legal representative of the parties concerned;
(2) The classes, quantity, amount as well as issuing prices of the securities under sale by proxy or exclusive sale;
(3) The term of sale by proxy or exclusive sale as well as the start-stop date;
(4) The means and date of payment for sale by proxy or exclusive sale;
(5) The expenses for and settlement methods of sale by proxy or exclusive sale;
(6) The liabilities of breach; and
(7) Any other matter as prescribed by the securities regulatory authority under the State Council.

Article 31 A securities company that is engaged in the underwriting of securities shall carry out verification on the authenticity, accuracy and integrity of the financing documents of public issuance. Where any false record, misleading statement or major omission is found, no sales activity may be carried out. Where any securities have been sold out under the foregoing circumstances, the relevant sales activity shall be immediately terminated and measures for correction shall be taken.

Article 32 Where the total face value of securities as issued to non-specified objects is beyond RMB 50 million yuan, the said securities shall be underwritten by an underwriting syndicate. An underwriting syndicate shall be composed of securities companies acting as principal underwriters and participant underwriters.

Article 33 The term for sale by proxy or exclusive sale may not exceed 90 days at the most. A securities company shall, within the term of sale by proxy or exclusive sale, guarantee the priority of the relevant subscribers in purchasing securities under sale by proxy or exclusive sale. A securities company may not reserve in advance any securities under sale by proxy thereby or purchase in advance and sustain any securities under exclusive sale thereby.

Article 34 Where any stock is issued at a premium, the issuing price thereof shall be agreed on through negotiation of the relevant issuer and the securities company that is engaged in underwriting.

Article 35 As to a public offer of stocks through sale by proxy, when the term of sale by proxy expires and if the quantity of stocks fails to reach 70 % of the planned quantity in a public offer, it shall be deemed as a failure. The relevant issuer shall return the issuing price plus interests as calculated at the bank deposit rate for the contemporary period of time to the subscribers of stocks.

Article 36 In a public offer of stocks, when the term for sale by proxy or exclusive sale expires, an issuer shall report the information on stock issuance to the securities regulatory authority under the State Council for archival purpose within the prescribed time.

Chapter III Transaction of Securities

Section I General Provisions

Article 37 The securities as purchased and sold by any party who is involved in any securities transaction shall be the securities that have been legally issued and delivered. No securities that have been illegally issued may be purchased or sold.

Article 38 All stocks, corporate bonds or any other securities that have been legally issued, where there are any restrictive provisions of laws on the term of transfer thereof, may not be purchased or sold within the restrictive term.

Article 39 All stocks, corporate bonds or any other securities that have been publicly issued according to law shall be listed in a stock exchange as legally established or in any other places for securities transaction as approved by the State Council.


Article 40 The means of public and centralized transaction or any other means as approval by the securities regulatory authority under the State Council shall be adopted for listed trading of securities in stock exchanges.

Article 41 The securities as purchased or sold by the parties involved in securities transaction may be in paper form or in any other form as approved by the securities regulatory authority under the State Council.

Article 42 The securities transaction shall be carried out in the form of spot goods as well as any other form as prescribed by the State Council.

Article 43 The practitioners in stock exchanges, securities companies as well as securities registration and clearing institutions, the functionary of securities regulatory bodies as well as any other personnel who have been prohibited by laws and administrative regulations from engaging in any stock transaction shall, within their tenures or the relevant statutory term, not hold or purchase or sold any stock directly or in any assumed name or in a name of any other person, nor may they accept any stocks from any other person as a present. Anyone, when becoming any person as prescribed in the preceding paragraph herein, shall transfer the stocks he has held according to law.

Article 44 The stock exchanges, securities companies as well as securities registration and clearing institutions shall keep secret for the accounts as opened for their clients according to law.

Article 45 A securities trading service institution and the relevant personnel that produce such documents as auditing reports, asset appraisal reports or legal opinions for stock issuance may not purchase or sell any of the aforesaid stocks within the underwriting term of stocks or within 6 months as of the expiration of the underwriting term of stocks.
Except for the provisions as prescribed in the preceding paragraph herein, a securities trading service institutions and the relevant personnel that produce such documents as auditing reports, asset appraisal reports or legal opinions for listed companies may not purchase or sell any of the aforesaid stocks within the period from the day when an entrustment of a listed company is accepted to the day when the aforesaid documents are publicized.

Article 46 The charge for securities transaction shall be reasonable. The charging items, standards as well as methods shall be publicized. The charging items, standards and administrative measures of securities transaction shall be uniformly formulated by the relevant administrative department under the State Council.

Article 47 Where any director, supervisor and senior manager of a listed company or any shareholder who holds more than 5% of the shares of a listed company, sells the stocks of the company as held within 6 months after purchase, or purchases any stock as sold within 6 months thereafter, the proceeds generated therefrom shall be incorporated into the profits of the relevant company. The board of directors of the company shall withdraw the proceeds. However, where a securities company holds more than 5% of the shares of a listed company, which are the residing stocks after sale by proxy as purchased thereby, the sale of the foregoing stocks may not be limited by a term of 6 months. Where the board of directors of a company fails to implement the provisions as prescribed in the preceding paragraph herein, the shareholders concerned have the right to require the board of directors to implement them within 30 days. Where the board of directors of a company fails to implement them within the aforesaid term, the shareholders have the right to directly file a litigation with the people's court in their own names for the interests of the company. Where the board of directors of a company fail to implement the provisions as prescribed in paragraph 1herein, the directors in charge shall bear the joint and several liabilities according to law.

Section II Listing of Securities

Article 48 An application for the listing of any securities shall be filed with a stock exchange and shall be subject to the examination and approval of the stock exchange according to law and a listing agreement shall be reached by both parties. The stock exchanges shall, according to the decision of the department as authorized by the State Council, arrange the listing of government bonds.

Article 49 As for an application for the listing of any stocks, convertible corporate bonds or any other securities, to which a recommendation system is applied, as prescribed by laws and administrative regulations, an institution with the qualification of recommendation shall be employed as the recommendation party. The provisions of paragraphs 2 and 3 of Article 11 of the present Law shall be applied to the recommendation party of listing.

Article 50 A stock-limited company that files an application for the listing of its stocks shall satisfy the following requirements:
(1) The stocks shall have been subject to the examination and approval of the securities regulatory authority under the State Council and shall have been publicly issued;
(2) The total amount of capital stock shall be no less than RMB 30 million yuan;
(3) The shares as publicly issued shall reach more than 25 % of the total amount of corporate shares; where the total amount of capital stock of a company exceeds RMB 0.4 billion yuan, the shares as publicly issued shall be no less than 10% thereof; and
(4) The company may not have any major irregularity over the latest years and there is no false record in its financial statements. A stock exchange may prescribe the requirements of listing that are more strict than those as prescribed in the preceding paragraph herein, which shall be reported to the securities regulatory authority under the State Council for approval.

Article 51 The state encourages the listing of corporate stocks that comply with the relevant industrial policies and fulfill the relevant requirements of listing.

Article 52 With regard to an application for the listing of stocks, the following documents shall be reported to a stock exchange:
(1) The listing report;
(2) The resolution of the general assembly of shareholders regarding the application for the listing of stocks;
(3) The constitution of the company;
(4) The business license of the company;
(5) The financial statements of the company for the latest years as audited by an accounting firm according to law;
(6) The legal opinions as well as the Recommendation Letter of Listing;
(7) The latest prospectus; and
(8) Any other document as prescribed by the listing rules of the stock exchange.

Article 53 Where an application for the listing of stocks has been subject to the examination and approval of a stock exchange, the relevant company that has reached a listing agreement thereon shall announce the relevant documents for stock listing within the prescribed period and shall make the said documents available for public reference in designated places.

Article 54 A company that has reached a listing agreement may not only announce the documents as prescribed in the preceding Article herein but also announce the following items:
(1) The date when the stocks have been approved to be listed in a stock exchange;
(2) The name list of the top 10 shareholders who hold the largest number of shares in the company as well as the amount of stocks as held thereby;
(3) The actual controller of the company; and
(4) The names of the directors, supervisors and senior managers of the company as well as the relevant information on the stocks and bonds of the company as held thereby.

Article 55 Where a listed company is in any of the following circumstances, the stock exchange shall decide to suspend the listing of its stocks:
(1) Where the total amount of capital stock or share distribution of the company changes and thus, fails to meet the requirements of listing;
(2) Where the company fails to publicize its financial status according to the relevant provisions or has any false record in its financial statements, which may mislead the investors;
(3) Where the company has any major irregularity;
(4) Where the company has been operating at a loss for the latest 3 consecutive year; or
(5) Under any other circumstance as prescribed in the listing rules of the stock exchange.

Article 56 Where a listed company is in any of the following circumstances, the stock exchange shall decide to terminate the listing of its stocks:
(1) Where the total amount of capital stock or share distribution of the company changes and thus, fails to meet the requirements of listing, and where the company fails again to meet the requirements of listing within the period as prescribed by the stock exchange;
(2) Where the company fails to publicize its financial status according to the relevant provisions or has any false record in its financial statements, and refuses to make any correction;
(3) Where the company has been operating at a loss for the latest 3 consecutive years and fails to gain profits in the year thereafter;
(4) Where the company is dissolved or is announce bankruptcy; or
(5) Under any other circumstance as prescribed in the listing rules of the stock exchange.

Article 57 A company shall, when applying for the listing of corporate bonds, fulfill the following requirements:
(1) The term of corporate bonds shall be more than 1 year;
(2) The amount of corporate bonds to be actually issued shall be no less than RMB 50 million yuan; and
(3) The company shall meet the statutory requirements for the issuance of corporate bonds when applying for the listing of its bonds.

Article 58 A company shall, when filing an application for the listing of its corporate bonds, report the following documents to a stock exchange:
(1) The listing report;
(2) The resolution as adopted by the board of directors regarding the application for listing;
(3) The constitution of the company;
(4) The business license of the company;
(5) The measures for financing through the issuance of corporate bonds;
(6) The amount of corporate bonds to be actually issued; and
(7) Any other document as prescribed in the listing rules of the stock exchange. With regard to an application for the listing of convertible corporate bonds, the Recommendation Letter of Listing as produced by the relevant recommendation party shall be reported.

Article 59 Where an application for the listing of corporate bonds has been subject to the examination and approval of the stock exchange, the company that has reached a listing agreement thereon shall, within the prescribed period, announce its report on the listing of its corporate bonds as well as the relevant documents and make its application documents available for public reference in designated places.

Article 60 After any corporate bonds are listed, where the relevant company is in any of the following circumstances, the stock exchange may decide to suspend the listing of its corporate bonds:
(1) Where the company has any major irregularity;
(2) Where the company has any major change and thus fails to meet the requirements for the listing of corporate bonds;
(3) Where the funds as raised through the issuance of corporate bonds fail to be used according to the purpose as verified;
(4) Where the company fails to perform its obligations according to the measures for financing through the issuance of corporate bonds; or
(5) Where the company has been operating at a loss for the latest 2 consecutive years.

Article 61 Where a company is in any of the circumstances as described in item (1) or (4) of the preceding Article herein and the consequences as incurred therefrom have been verified to be serious, or where a company is under any of the circumstances as described in any of item (2), (3), or (5) of the preceding Article herein and fails to eliminate the relevant consequence within a specified time limit, the stock exchange shall decide to terminate the listing of corporate bonds of the company. In case a company is dissolved or declared bankrupt, the stock exchange shall terminate the listing of corporate bonds thereof.

Article 62 Any company, which is dissatisfied with a decision of a stock exchange on disapproving, suspending or terminating its listing, may file an application for a review with the review organ established by the stock exchange.

Section III On-going Information Disclosure

Article 63 The information as disclosed by issuers and listed companies according to law shall be authentic, accurate and integrate and may not have any false record, misleading statement or major omission.

Article 64 As for the stocks that have been publicly issued upon the verification of the securities regulatory authority under the State Council or for the corporate bonds that have been publicly issued upon the verification of the department as authorized by the State Council according to law, the prospectus or the measures for financing through the issuance of corporate bonds shall be announced. In an IPO of stocks or corporate bonds, the relevant financial statements shall be announced as well.

Article 65 A company whose shares or bonds have been listed for trading shall, within two months as of the end of the first half of each accounting year, submit to the securities regulatory authority under the State Council and the stock exchange a midterm report indicating the following contents and announce it:
(1) The financial statements and business situation of the company;
(2) The major litigation involving the company;
(3) The particulars of any change concerning the shares or corporate bonds thereof as already issued;
(4) The important matters as submitted to the general assembly of shareholders for deliberation; and
(5) Any other matter as prescribed by the securities regulatory authority under the State Council.

Article 66 A listed company whose shares or bonds have been listed for trading shall, within four months as of the end of each accounting year, submit to the securities regulatory authority under the State Council and the stock exchange an annual report indicating the following contents, and announce it:
(1) A brief account of the company's general situation;
(2) The financial statement and business situation of the company;
(3) A brief introduction to the directors, supervisors, and senior managers of the company well as the information regarding their shareholdings;
(4) The information on shares and corporate bonds as already issued, including the name list of the top 10 shareholders who hold the largest numbers of shares in the company as well as the amount of shares as held thereby;
(5) The actual controller of the company; and
(6) Any other matter as prescribed by the securities regulatory authority under the State Council.

Article 67 In the event of a major event that may considerably affect the trading price of a listed company's shares and that is not yet known to the investors, the listed company shall immediately submit a temporary report regarding the said major event to the securities regulatory authority under the State Council and the stock exchange and make an announcement to the general public as well, in which the cause, present situation and possible legal consequence of the event shall be indicated: The term "major event" as mentioned in the preceding paragraph herein refers to the following circumstances:
(1) A major change in the business guidelines or business scope of the company;
(2) A decision of the company on any major investment or major asset purchase;
(3) An important contract as concluded by the company, which may have an important effect on the assets, liabilities, rights, interests or business achievements of the company;
(4) Any incurrence of a major debt in the company or default on an overdue major debt;
(5) Any incurrence of a major deficit or a major loss in the company;
(6) A major change in the external conditions for the business operation of the company;
(7) A change concerning directors, no less than one-third of supervisors or managers of the company;
(8) A considerable change in the holdings of shareholders or actual controllers who each hold or control no less than 5% of the company's shares;
(9) A decision of the company on capital decrease, merger, division, dissolution, or application for bankruptcy;
(10) Any major litigation involving the company, or where the resolution of the general assembly of shareholders or the board of directors have been cancelled or announced invalid;
(11) Where the company is involved in any crime, which has been filed as a case as well as investigated into by the judicial organ or where any director, supervisor or senior manager of the company is subject to compulsory measures as rendered by the judicial organ; or
(12) Any other matter as prescribed by the securities regulatory authority under the State Council.

Article 68 The directors and senor managers of a listed company shall subscribe their opinions for recognition in the periodic report of their company in written form. The board of supervisors of a listed company shall carry out an examination on the periodic report of its company as formulated by the board of directors and produce the relevant examination opinions in writing. The directors, supervisors and senior managers of a listed company shall guarantee the authenticity, accuracy and integrity of the information as disclosed by their listed company.

Article 69 Where the prospectus, measures for financing through issuance of corporate bonds, financial statement, listing report, annual report, midterm report, temporary report or any information as disclosed that has been announced by an issuer or a listed company has any false record, misleading statement or major omission, and thus incurs losses to investors in the process of securities trading, the issuer or the listed company shall be subject to the liabilities of compensation. Any director, supervisor, senior manager or any other person of the issuer or the listed company directly responsible shall be subject to the joint and several liabilities of compensation, except for anyone who is able to prove his exemption of any fault. Where any shareholder or actual controller of an issuer or a listed company has any fault, he shall be subject to the joint and several liabilities of compensation together with the relevant issuer or listed company.

Article 70 The information as prescribed by law to be disclosed shall be publicized through the media as designated by the securities regulatory authority under the State Council and shall, at the same time, be made available for public reference at the company's domicile and a stock exchange.

Article 71 The securities regulatory authority under the State Council shall carry out supervision over annual reports, midterm reports, temporary reports of listed companies as well as their announcements, over the distribution or rationing of new shares of such listed companies and over the controlling shareholders and any other obligor of information disclosure of listed companies. The securities regulatory body, stock exchange, recommendation party or securities company involving in underwriting as well as the relevant personnel thereof shall, before an announcement is made by a company according to the provisions of the relevant laws and administrative regulations, divulge any content concerned before the announcement.

Article 72 Where a stock exchange decides to suspend or terminate the listing of any securities, it shall announce the decision in a timely manner and report it to the securities regulatory authority under the State Council for archival purpose.

Section IV Prohibited Trading Acts

Article 73 Any insider who has access to any insider information of securities trading or who has unlawfully obtained any insider information is prohibited from taking advantage of the insider information as held thereby to engage in any securities trading.


Article 74 The insiders who have access to insider information of securities trading include:
(1) Directors, supervisors, and senior managers of an issuer;
(2) Shareholders who hold no less than 5% of the shares in a company as well as the directors, supervisors, and senior managers thereof, or the actual controller of a company as well as the directors, supervisors, and senior managers thereof;
(3) The holding company of an issuer as well as the directors, supervisors, and senior managers thereof;
(4) The personnel who may take advantage of their posts in their company to obtain any insider information of the company concerning the issuance and transaction of its securities;
(5) The functionary of the securities regulatory body, and other personnel who administer the issuance and transaction of securities pursuant to their statutory functions and duties;
(6) The relevant personnel of recommendation institutions, securities companies engaging in underwriting, stock exchanges, securities registration and clearing institutions and securities trading service organizations; and
(7) Any other person as prescribed by the securities regulatory authority under the State Council.

Article 75 For the purpose of the present Law, the term "insider information" refers to the information that concerns the business or finance of a company or may have a major effect on the market price of the securities thereof and that hasn't been publicized in securities trading. The following information all falls into the scope of insider information:
(1) The major events as prescribed in paragraph 2 of Article 62 of the present Law;
(2) The plan of a company concerning any distribution of dividends or increase of capital;
(3) Any major change in the company's equity structure;
(4) Any major change in guaranty of the company's obligation;
(5) Where the mortgaged, sold or discarded value of a major asset as involved in the business operation of the company exceeds 30 % of the said asset in a one-off manner;
(6) Where any act as conducted by any director, supervisor or senior manager of the company may be rendered liabilities of major damage and compensation;
(7) The relevant plan of a listed company regarding acquisition; and
(8) Any other important information that has been recognized by the securities regulatory authority under the State Council as having a marked effect on the trading prices of securities.

Article 76 Any insider who has access to insider information or has unlawfully obtained any insider information on securities trading may not purchase or sell the securities of the relevant company, or divulge such information, or advise any other person to purchase or sell such securities. Where there is any other provision of the present Law on governing the purchase of shares of a listed company by a natural person, legal person or any other organization who holds or holds with any other person not less than 5% of the company's shares by means of an agreement or any other arrangement, it shall prevail. Where any insider trading incurs any loss to investors, the actor shall be subject to the liabilities of compensation according to law.

Article 77 Anyone is prohibited from manipulating the securities market by any of the following means:
(1) Whether anyone, independently or in collusion with others, manipulates the trading price of securities or trading quantity of securities by centralizing the advantage in respect of funds, shareholding advantage or utilizing information advantage to trade jointly or continuously;
(2) Where anyone collaborates with any other person to trade securities pursuant to the time, price and method as agreed upon in advance, thereby affecting the price or quantity of the securities traded;
(3) Where anyone trades securities between the accounts under self-control, thereby affecting the price or quantity of the securities traded; or
(4) Where anyone manipulates the securities market by any other means. Where anyone incurs any loss to investors by manipulating the securities market, the actor shall be subject to the liabilities of compensation according to law.

Article 78 It is prohibited for state functionaries, practitioners of the news media as well as other relevant personnel concerned to fabricate or disseminate any false information, thereby seriously disturbing the securities market. It is prohibited for stock exchanges, securities companies, securities registration and clearing institutions, securities trading service institutions and the practitioners thereof, as well as the securities industry association, the securities regulatory body and their functionaries to make any false statement or give any misleading information in the activities of securities trading. The securities market information as disseminated by any media shall be authentic and objective. Any dissemination of misleading information is prohibited.

Article 79 It is prohibited for securities companies as well as their practitioners to commit any of the following fraudulent acts in the process of securities trading, which may injure the interests of their clients:
(1) Violating the entrustment of its client by purchasing or selling any securities on the behalf;
(2) Failing to provide a client with written confirmation of a transaction within the prescribed period of time;
(3) Misappropriating the securities as entrusted by a client for purchase or sale, or the funds in a client's account;
(4) Unlawfully purchasing or selling securities for its client without any authorization, or unlawfully purchasing or selling any securities in the name of a client;
(5) Inveigling a client into making any unnecessary purchase or sale of securities in order to obtain commissions;
(6) Making use of mass media or by any other means to provide or disseminate any false or misleading information to investors; or
(7) Having any other act that goes against the true intention as expressed by a client and damages the interests thereof. Where anyone practices any trickery and thus incurs any loss to the relevant clients, the actor shall be subject to the liabilities of compensation according to law.

Article 80 It's prohibited for any legal person to unlawfully make use of any other person's account to undertake any securities trading. It's prohibited for any legal person to lend its or any other's securities account.

Article 81 The channel for capital to go into the stock market shall be broadened according to law. It's prohibited for any unqualified capital to go into the stock market.

Article 82 It's prohibited for any person to misappropriate any public fund to trade securities.

Article 83 The state-owned enterprises and state-holding enterprises that engage in any transaction of listed stocks shall observe the relevant provisions of the state.

Article 84 When stock exchanges, securities companies, securities registration and clearing institutions, securities trading service organizations as well as their functionaries discover any prohibited activities in securities trading, they shall report such activities to the securities regulation body in time.

Section V Acquisition of Listed Companies

Article 85 An investor may purchase a listed company by means of tender offer or agreement as well as by any other legal means.

Article 86 Where an investor, through securities trading at a stock exchange, comes to hold or holds with any other person 5 % of the shares as issued by a listed company by means of agreement or any other arrangement, the investor shall, within three days as of the date when such shareholding becomes a fact, submit a written report to the securities regulatory authority under the State Council and the stock exchange, notify the relevant listed company and announce the fact to the general public. Within the aforesaid prescribed period, the investor may not purchase or sell any more shares of the listed company. In case an investor holds or holds with any other person 5% of the shares as issued by a listed company by means of agreement or any other arrangement, he shall, pursuant to the provisions of the preceding paragraph herein, make report and announcement of each 5% increase or decrease in the proportion of the issued shares of the said company he holds through securities trading at a stock exchange. Within the reporting period as well as two days after the relevant report and announcement are made, the investor may not purchase or sell any more shares of the listed company.

Article 87 The written report and announcement as made according to the provisions of the preceding Article herein shall include the following contents:
(1) The name and domicile of the shareholder;
(2) The description and amount of the shares as held; and
(3) The date on which the shareholding or any increase or decrease in the shareholding reaches the statutory percentage.

Article 88 Where an investor holds or holds with any other person 30% of the stocks as issued by a listed company by means of agreement or any other arrangement through securities trading at a stock exchange and if the purchase is continued, he shall issue a tender offer to all the shareholders of the said listed company to purchase all of or part of the shares of the listed company. It shall be stipulated in a tender offer as issued to a listed company that, where the share amount as promised to be sold by the shareholders of the target company exceeds the scheduled amount of stocks for purchase, the purchaser shall carry out the acquisition according to the relevant percentage.

Article 89 Before any tender offer is issued pursuant to the provisions in the preceding Article herein, the relevant purchaser shall submit a report on the acquisition of a listed company to the securities regulatory authority under the State Council beforehand, which shall indicate the following items:
(1) The name and domicile of the purchaser;
(2) The decision of the purchaser on acquisition;
(3) The name of the target listed company;
(4) The purpose of acquisition;
(5) The detailed description of the shares to be purchased and the amount of shares to be purchased in schedule;
(6) The term and price of the acquisition;
(7) The amount and warranty of the funds as required by the acquisition; and
(8) The proportion of the amount of shares of the target company as held by the purchaser in the total amount of shares of the target company as issued, when the report on the acquisition of the listed company is reported. A purchaser shall concurrently submit to the stock exchange a report on the acquisition of the relevant company.

Article 90 A purchaser shall, after 15 days as of the day when the report on the acquisition of a listed company is submitted pursuant to the preceding Article herein, announce its tender offer. Within the aforesaid term, where the securities regulatory authority under the State Council finds that any report in the acquisition of a listed company fails to satisfy the provisions of the relevant laws and administrative regulations, it shall notify the relevant purchaser in a timely manner. The relevant purchaser may not announce its tender offer. The term for acquisition as stipulated in a tender offer shall be not less than 30 days but not more than 60 days.

Article 91 Within the acceptance term as prescribed in a tender offer, no purchaser may revoke its tender offer. Where a purchaser requests for altering its tender offer, it shall submit a report to the securities regulatory authority under the State Council and the stock exchange in advance and announce the alteration upon the approval thereby.

Article 92 All the terms of acquisition as stipulated in a tender offer shall apply to all the shareholders of a target company.

Article 93 In the event of an acquisition by tender offer, a purchaser shall, within the term for acquisition, not sell any share of the target company, nor shall it buy any share of the target company by any other means that hasn't been stipulated by provisions of its tender offer or that oversteps the terms as stipulated in its tender offer.

Article 94 In the event of an acquisition by agreement, a purchaser may carry out share transfer with the shareholders of the target company by means of agreement according to the provisions of the relevant laws and administrative regulations. In the case of an acquisition of a listed company by agreement, a purchaser shall, within three days after the acquisition agreement is reached, submit a written report on the acquisition agreement to the securities regulatory authority under the State Council and the stock exchange as well as announce it to the general public. No acquisition agreement may be performed before the relevant announcement.

Article 95 In the event of an acquisition by agreement, both parties to the agreement may temporarily entrust a securities registration and clearing institution to keep the stocks as transferred and deposit the relevant funds in a designated bank.

Article 96 In the event of an acquisition by agreement, where a purchaser has purchased, held or held with any other person 30% of the shares as issued by a listed company through agreement or any other arrangement and if the acquisition is continued, the purchaser shall issue an offer to all of the shareholders of the target listed company for purchasing all of or part of the company's shares, unless a tender offer is been exempted from being issued by the securities regulatory authority under the State Council. A purchaser that purchases the shares of a listed company by means of tender offer according to the provisions of the preceding paragraph herein shall abide by the provisions of Articles 89~93 of the present Law.

Article 97 Upon the expiration of a term for acquisition, where the share distribution of an target company fails to fulfill the requirements of listing, the listing of stocks of the said listed company shall be terminated by the stock exchange according to law. The shareholders that still hold the shares of the target company have the right to sell their shares pursuant to the equal terms as stipulated in the relevant tender offer. The purchaser shall make the purchase. When an acquisition is concluded, if a target company fails to meet the requirements of being a stock-limited company any more, its form of enterprise shall be altered according to law.

Article 98 In an acquisition of a listed company, the stocks of the target company as held by a purchaser may not be transferred within 12 months after the acquisition is concluded.

Article 99 When an acquisition is concluded, if the purchaser merges with the target company by dissolving the target company, the original shares of the company as dissolved shall be changed by the purchaser according to law.

Article 100 Where an acquisition is concluded, a purchaser shall, within 15 days, report the acquisition to the securities regulatory authority under the State Council and the stock exchange as well as announce it.

Article 101 The purchase of the shares of a listed company as held by an organization that has been authorized by the state for investment shall be subject to the approval of the relevant administrative departments according to the provisions of the State Council. The securities regulatory authority under the State Council shall formulate the specific measures for acquisition of listed companies in light of the principles of the present Law.

Chapter V Stock Exchanges

Article 102 For the purpose of the present Law, the term "stock exchange" refers to a legal person that provides the relevant place and facilities for concentrated securities trading, organizes and supervises the securities trading and applies a self-regulating administration. The establishment and dissolution of a stock exchange shall be subject to the decision of the State Council.

Article 103 A constitution shall be formulated for the establishment of a stock exchange. The formulation and revision of the constitution of a stock exchange shall be subject to the approval of the securities regulatory authority under the State Council.

Article 104 The words "stock exchange" shall be indicated in the name of a stock exchange. No other entity or individual may use the name of "stock exchange" or an identical name.

Article 105 The income that is at the discretion of a stock exchange, as generated from various commissions, shall first be used to guarantee the normal operation of the place and facilities of the stock exchange as well as the gradual improvement thereof. The gains as accumulated by a stock exchange that adopts a membership system shall belong to its members. The rights and interests of a stock exchange shall be jointly shared by its members. No accumulated gains of a stock exchange may be distributed to any member within the holding term.

Article 106 A stock exchange shall have a council.

Article 107 There shall be a general manager in a stock exchange, who shall be subject to the appointment and dismissal of the securities regulatory authority under the State Council.

Article 108 Anyone, under the circumstance as prescribed in Article 147 of the Corporation Law of the People's Republic of China or under any of the following circumstances, may not assume the post of person-in-charge of a stock exchange:
(1) Where a person-in-charge of a stock exchange or securities registration and clearing institution or any director, supervisor or senior manager of a securities company who has been removed from his post for his irregularity or disciplinary breach and if it has been within 5 years as of the day when he is removed from his post; or
(2) Where a professional of a law firm, accounting firm or investment consulting organization, financial advising organization, credit rating institution, asset appraisal institution or asset verification institution who has been disqualified for his irregularity or disciplinary breach and if it' has been within 5 years as of the day when he is removed from his post.

Article 109 A practitioner of a stock exchange, securities registration and clearing institution, securities trading service organization or securities company or any functionary of the state organ, who has been dismissed for his irregularity or disciplinary breach, may not be employed as a practitioner of a stock exchange.

Article 110 Only a member of a stock exchange may enter into a stock exchange to engage in the centralized trading of securities.

Article 111 An investor shall conclude an entrustment agreement with a securities company on securities trading, open an account of securities trading in a securities company and entrust the securities company to purchase or sell securities on the behalf in writing, by telephone or any other means.

Article 112 A securities company shall, based on the entrustment of its investors, declare orders and engage in the centralized trading at a stock exchange according to the rules of securities trading and shall, based on trading results, bear the relevant liabilities of settlement and delivery. A securities registration and clearing institution shall, on the basis of trading results and according to the rules of settlement and delivery, conduct settlement and delivery of securities and capital with the relevant securities company and handle the formalities of transfer registration of securities for clients of the relevant securities company.

Article 113 A stock exchange shall guarantee a fair centralized trading, announce up-to-the-minute quotations of securities trading, formulate the quotation tables of the securities market on the basis of trading days as well as announce it. Without permission of a stock exchange, no entity or individual may announce any up-to-the-minute quotations of securities trading.

Article 114 Where any normal trading of securities is disturbed by an emergency, a stock exchange may take the measures of a technical suspension of trading. In the event of an emergency of force majeure or with a view to preserving the normal order of securities trading, a stock exchange may decide a temporary speed bump. Where a stock exchange adopts the measure of a technical suspension of trading or decides a temporary speed bump, it shall report it to the securities regulatory authority under the State Council in a timely manner.

Article 115 A stock exchange shall exercise a real-time monitoring of securities trading and shall, according to the requirements of the securities regulatory authority under the State Council, report any abnormal trading thereto. A stock exchange shall carry out supervision over the information as disclosed by a listed company or the relevant obligor of information disclosure, supervise and urge it/him to disclose information in a timely and accurate manner according to law. A stock exchange may, when it requires so, restrict the trading through a securities account where there is any major abnormal trading and shall report it to the securities regulatory authority under the State Council for archival filing.

Article 116 A stock exchange shall withdraw a certain proportion of funds from the transaction fees, membership fees and seat fees as charged thereby to establish a risk fund. The risk fund shall be subject to the administration of the council of the stock exchange. The specific withdrawal proportion and use of risk fund shall be provided for by the securities regulatory authority under the State Council in collaboration with the fiscal department of the State Council.

Article 117 A stock exchange shall deposit its risk fund into a special account of its opening bank and may not unlawfully misuse it.

Article 118 A stock exchange shall, pursuant to laws and administrative regulations of securities, formulate the rules on listing, trading and membership administration as well as any other relevant rules, and shall report them to the securities regulatory authority under the State Council for approval.

Article 119 Any person-in-charge and any other practitioner of a stock exchange that has any interest relationship or any of his relatives has any interest relationship with the performance of his duties relating to securities trading shall withdraw.

Article 120 Any trading result of a transaction, which has been conducted in accordance with the trading rules as formulated according to law, may not be altered. A trader who has conducted any rule-breaking trading may not be exempted from civil liabilities. The proceeds as generated from any rule-breaking trading shall be dealt with pursuant to the relevant regulations.

Article 121 Where any staff of a stock exchange who is engaged in securities trading violates any trading rule of the stock exchange, the stock exchange shall impose him disciplinary sanctions. Under any serious circumstances, the qualification thereof shall be revoked and the violator shall be prohibited from entering into the stock exchange to engage in any securities trading.

Chapter VI Securities Companies

Article 122 The establishment of a securities company shall be subject to the examination and approval of the securities regulatory under the State Council. No entity or individual may engage in any securities business without the approval of the securities regulatory under the State Council.

Article 123 For the purpose of the present Law, the term "securities company" as mentioned in the present Law refers to a limited- liability company or stock-limited company that has been established and engages in business operation of securities according to the Corporation Law of the People's Republic of China as well as the provisions of the present Law.

Article 124 The establishment of a securities company shall fulfill the following requirements:
(1) Having a corporation constitution that meets the relevant laws and administrative regulations;
(2) The major shareholders having the ability to make profits successively, enjoying good credit standing and having no irregular or rule-breaking record over the latest 3 years, and its net asset being no less than 0.2 billion yuan.
(3) Having a registered capital that meets the provisions of the present Law;
(4) The directors, supervisors and senior managers thereof having the post-holding qualification and its practitioners having the qualification to engage in securities business;
(5) Having a complete risk management system as well as an internal control system;
(6) Having a qualified business place and facilities for operation; and
(7) Meeting any other requirement as prescribed by laws and administrative regulations as well as the provisions of the securities regulatory authority under the State Council, which have been approved by the State Council.

Article 125 A securities company may undertake some of or all the following business operations upon the approval of the securities regulatory authority under the State Council:
(1) Securities brokerage;
(2) Securities Investment consulting;
(3) Financial advising relating to activities of securities trading or securities investment;
(4) Underwriting and recommendation of securities;
(5) Self-operation of securities;
(6) Securities asset management; and
(7) Any other business operation concerning securities.

Article 126 A securities company shall indicate the words "limited-liability securities company" or "stock-limited securities company" in its name.

Article 127 Where a securities company engages in the business operation as prescribed in item (1), (2) or (3) of Article 125 of the present Law, its registered capital shall be RMB 50 million yuan at the least. Where a securities company engages in any of the business operations as prescribed in item (4), (5), (6) or (7), its registered capital shall be RMB 100 million yuan at the least; Where a securities company engages in two or more business operations as prescribed in item (4), (5), (6) or (7), its registered capital shall be 500 million yuan at the least. The registered capital of a securities company shall be the paid-in capital. The securities regulatory authority under the State Council may, according to the principals of prudent supervision and in light of the risk rating of all business operations, adjust the requirement of minimum amount of registered capital, which shall be no less than the minimum amount as prescribed in the preceding paragraph herein.

Article 128 The securities regulatory authority under the State Council shall, within 6 months as of accepting an application for establishing a securities company, carry out an examination according to the statutory requirements and procedures and on the basis of the principle of prudent supervision, make a decision on approval or disapproval and thereafter, notify the relevant applicant. In the case of disapproval, an explanation shall be given. Where an application for establishing a securities company has been approved, an applicant shall, within the prescribed period, apply for registration of establishment with the organ in charge of corporation registration and collect its business license therefrom. A securities company shall, within 15 days as of collecting its business license, file an application for the Securities Business Permit with the securities regulatory authority under the State Council. Without a Securities Business Permit, a securities company may not engage in any business operation of securities.

Article 129 Where a securities company establishes, purchases or cancels a branch, alters its business scope or registered capital, alters its shareholders or actual controllers who hold more than 5% of its stock rights, alters any important article of its constitution, has any merger or spilt-up, alters its form of corporation, suspends its business, goes through dissolution or bankruptcy, it shall be subject to the approval of the securities regulatory authority under the State Council. Where a securities company establishes, purchases a securities operation institution abroad or purchases the shares of any securities operational institution abroad, it shall be subject to the approval of the securities regulatory authority under the State Council.

Article 130 The securities regulatory authority under the State Council shall formulate provisions on the risk control indicators of a securities company such as net capital, the ratio between net capital and liabilities, the ratio between net capital and net assets, the ratio between net capital and operational scale of self-operation, underwriting and asset management, the ratio between liabilities and net asset as well as the ratio between current assets and current liabilities. A securities company may not provide any financing or guaranty for its shareholders or any related person thereof.

Article 131 The directors, supervisors and senior managers of a securities company shall be honest and integrate, have good moral grade, be familiar with the laws and administrative regulations on securities and have the ability of operation and management as required by the performance of their functions and duties, and shall have obtained the post-holding qualification as verified by the securities regulatory authority under the State Council before assuming his post. Anyone who is under any circumstance as prescribed in Article 147 of the Corporation Law of the People's Republic of China or is under any of the following circumstances may not hold the post of director, supervisor or senior manager of a securities company:
(1) Where a person-in-charge of a stock exchange or securities registration and clearing institution or a director, supervisor or senior manager of a securities company has been removed from his post for his irregularity or disciplinary breach and if it has been within 5 years as of the day when he is removed from his post; and
(2) Where a professional of a law firm, accounting firm or investment consulting organization, financial advising organization, credit rating institution, asset appraisal institution or asset verification institution has been disqualified for his irregularity or disciplinary breach and if it has been within 5 years as of the day when he is removed from his post.

Article 132 A practitioner of a stock exchange, securities registration and clearing institution, securities trading service institution or securities company or any functionary of the state organ, who has been dismissed for his irregularity or disciplinary breach, may not be employed as a practitioner of a stock exchange.

Article 133 A functionary of the state organ and any other personnel as prohibited by laws and administrative regulations from taking any job in a company on a part-time basis may not take any job in a securities company on a part-time basis.

Article 134 The state shall establish the securities investor protection fund. The securities investor protection fund shall be composed of the capital as paid by securities companies and any other capital as lawfully raised. The specific measures for financing, administration and use of the foregoing fund shall be formulated by the State Council.

Article 135 A securities company shall withdraw a trading risk reserve from its annual after-tax profits to cover any loss from securities transaction. The specific proportion for withdrawal shall be prescribed by the securities regulatory authority under the State Council.

Article 136 A securities company shall establish and improve an internal control system, adopt an effective measures of separation so as to prevent any interest conflict between the company and its clients or between different clients thereof. A securities company shall undertake its operations of securities brokerage, underwriting, self-operation and asset management in a separate manner but not in a mixed manner.

Article 137 A securities company shall undertake its self-operation in its own name and may not make use of any other person's name or in an individual's name. A securities company shall undertake its self-operation by using its own capital and funds as lawfully raised. A securities company may not lend its self-operation account to any other person.

Article 138 A securities company may enjoy its right of independent management according to law and its legal operation may not be interfered.

Article 139 The trading settlement funds of the clients of a securities company shall be deposited in a commercial bank and be managed through accounts as separately opened in the name of each client. The specific measures and implementation procedures shall be formulated by the State Council. A securities company may not incorporate any trading settlement funds or securities of its clients into its own assets. Any entity or individual is prohibited from misusing any trading settlement funds or securities of its/his clients in any form. Where a securities company goes bankruptcy or goes through liquidation. The trading settlement funds or securities of its client may not be defined as its insolvent assets or liquidation assets. Under any other circumstance as irrelevant to the liabilities of its clients or under any other circumstance as prescribed by law, the trading settlement funds or securities of its clients may not be sealed-up, frozen, deducted or enforced compulsorily.

Article 140 Where a securities company engages in any brokerage business, it shall arrange a uniformly formulated the power of attorney of securities transactions for the entrusting party. Where any other means of entrustment is adopted, the relevant entrustment records shall be made. For an entrustment of securities transaction as made by a client, whether the transaction is concluded or not, the entrustment records shall be kept in the relevant securities company within the prescribed period.

Article 141 Upon accepting an entrustment of securities transaction, a securities company shall, on the basis of the description of the securities, trading volume, method of bidding, price band, etc. as indicated in the power of attorney, undertake securities trading as an agent according to the trading rules and make trading records in a faithful manner. After a transaction is concluded, a securities company shall, according to the relevant regulations, formulate a transaction report and deliver it to the relevant clients. The statements in acheck sheet that confirms trading acts and results in securities trading shall be authentic. Such statements shall be subject to the examination of an examiner, other than the relevant transaction handler, on a transaction-by-transaction basis, so as to guarantee the consistency between the balance of securities in book account and the securities as actually held.

Article 142 Where a securities company provides any service of securities financing through securities transactions for its client, it shall meet the provisions of the State Council and shall be subject to the approval of the securities regulatory authority under the State Council.

Article 143 A securities company that engages in brokerage operation may not decide any purchase or sale of securities, class selection of securities, trading volume or trading price on the basis of full entrustment of its client.

Article 144 A securities company may not make a promise to its clients on the proceeds as generated from securities transactions or on compensating the loss as incurred from securities transactions by any means.

Article 145 A securities company and the practitioners thereof may not privately accept any entrustment of its client for securities transaction beyond its business place as established according to law.

Article 146 Where any practitioner of a securities company violates the trading rules by implementing the instructions of his securities company or taking advantage of his post in any securities trading, the relevant securities company shall bear all the liabilities as incurred therefrom.

Article 147 A securities company shall keep the materials of its clients regarding account opening, entrustment records, trading records and internal management as well as business operation in a proper manner. No one may conceal, forge, alter or damage the aforesaid materials. The term for keeping the aforesaid materials shall be no less than 20 years.

Article 148 A securities company shall, according to the relevant provisions, report the information and materials regarding operation and management such as its business operation and financial status to the securities regulatory authority under the State Council. The securities regulatory authority under the State Council has the right to require a securities company as well as the shareholders and actual controllers thereof to provide the relevant information and materials within a prescribed period. The information and materials as reported or provided by a securities company and the shareholders and actual controllers thereof to the securities regulatory authority under the State Council shall be authentic, accurate and complete.

Article 149 The securities regulatory authority under the State Council may, when believing it requires so, entrust an accounting firm or an asset appraisal institution to carry out an auditing or appraisal on the financial status, internal control as well as asset value of a securities company. The specific measures thereof shall be formulated by the securities regulatory authority under the State Council in collaboration with the relevant administrative departments.

Article 150 Where the net capital or any other indicator of risk control of a securities company fails to satisfy the relevant provisions, the securities regulatory authority under the State Council shall order it to correct in a prescribed period. Where a securities company fails to correct within the prescribed period or any act thereof has injured the sound operation of the securities company or has damaged the legitimate rights and interests of its clients, the securities regulatory authority under the State Council may take the following measures in light of different circumstances:
(1) Restricting its business operation, ordering it to suspend some business operations and stopping the approval of any new operation thereof;
(2) Stopping the approval for establishing or taking over any business branch;
(3) Restricting its distribution of dividends, restricting the payment of remunerations to or provision of welfare for its directors, supervisors or senior managers;
(4) Restricting any transfer of property or the setting of any other right to its property;
(5) Ordering it to alter its directors, supervisors and senior managers or restricting the right thereof;
(6) Ordering the controlling shareholders to transfer their stock right or restricting its shareholders from exercising the shareholders' rights; and
(7) Revoking the relevant business license. A securities company shall, upon rectification, submit a report to the securities regulatory authority under the State Council. The securities regulatory authority under the State Council shall lift the relevant measures as prescribed in the preceding paragraph herein within 3 days as of concluding the relevant examination and acceptance of a securities company that has met the requirements of risk control indicators upon examination and acceptance.

Article 151 Where a shareholder of a securities company makes any fake capital contribution or spirits away registered capital, the securities regulatory authority under the State Council shall order him to correct within the prescribed period and may order him to transfer the stock rights of the securities company as held thereby. Before a shareholder as prescribed in the preceding paragraph herein corrects his irregularity and transfers the stock right of the securities company as held thereby according to the relevant requirements, the securities regulatory authority under the State Council may restrict the shareholders' rights thereof.

Article 152 Where any director, supervisor or senior manager of a securities company fails to fulfill his accountability in a diligent manner and thus incurs any major irregularity or rule-breaking act or major risk to his securities company, the securities regulatory authority under the State Council may revoke the post-holding qualification thereof and order his company to remove him from his post for alteration.

Article 153 Where any illegal operation of a securities company or any major risk thereof seriously disturbs the order of the securities market or injures the interests of the relevant investors, the securities regulatory authority under the State Council may take such supervisory measures as suspending its business for rectification, designating any other institution for trusteeship, take-over or cancellation.


Article 154 During a period when a securities company is ordered to suspend its business for rectification, or is designated for trusteeship, or is being taken over or liquidated, or where any major risk occurs, the following measures may be adopted to any director, supervisor, senior manager or any other person of the securities company directly responsible upon the approval of the securities regulatory authority under the State Council:
(1) Notifying the export administrative organ to prevent him from exiting the Chinese territory; and
(2) Requesting the judicial organ to prohibit him from moving, transferring his properties or disposing his properties by any other means, or setting any other right to his properties.

Chapter VII Securities Registration and Clearing Institutions

Article 155 A securities registration and clearing institution is a non-profit legal person that provides centralized registration, custody and settlement services for securities transactions. The establishment of a securities registration and clearing institution shall be subject to the approval of the securities regulatory authority under the State Council.

Article 156 The establishment of a securities registration and clearing institution shall fulfill the following requirements:
(1) Its self-owned capital shall be no less than 0.2 billion yuan;
(2) It shall have a place and facilities as required by the services of securities registration, custody and settlement;
(3) Its major managers and practitioners shall have the securities practice qualification; and
(4) It shall meet any other requirement as prescribed by the securities regulatory authority under the State Council. The words "securities registration and clearing" shall be indicated in the name of a securities registration and clearing institution.

Article 157 A securities registration and clearing institution shall perform the following functions:
(1) The establishment of securities accounts and settlement accounts;
(2) The custody and transfer of securities;
(3) The registration of roster of securities holders;
(4) The settlement and delivery for listed securities trading of a stock exchange;
(5) The distribution of securities rights and interests on the basis of the entrustment of issuers;
(6) The handling of any inquiry relating to the aforesaid business operation; and
(7) Any other business operation as approved by the securities regulatory authority under the State Council.

Article 158 A national centralized and unified operation shall be adopted for the registration and settlement of securities. The constitution and operational rules of a securities registration and clearing institution shall be formulated according to law and shall be subject to the approval of the securities regulatory authority under the State Council.

Article 159 The securities as held by the relevant holders shall be all put under the custody of a securities registration and clearing institution in a listed trading. A securities registration and clearing institution may not misuse any securities of its clients.

Article 160 A securities registration and clearing institution shall provide the roster of securities holders as well as the relevant materials to a securities issuer. A securities registration and clearing institution shall, according to the result of securities registration and settlement, affirm the fact that a securities holder holds the relevant securities and provide the relevant registration materials to a securities holder. A securities registration and clearing institution shall guarantee the authenticity, accuracy and integrity of the roster of securities holders as well as records of transfer registration and may not conceal, forge, alter or damage any of the aforesaid materials.

Article 161 A securities registration and clearing institution shall take the following measures to guarantee a sound operation of its business:
(1) Having the necessary service equipment and complete data protection measures;
(2) Having established complete management systems concerning operation, finance and security protection; and
(3) Having established a complete risk management system.

Article 162 A securities registration and clearing institution shall keep the original voucher of registration, custody and settlement as well as the relevant documents and materials in a proper manner. The term for keeping the aforesaid materials shall be no less than 20 years.

Article 163 A securities registration and clearing institution shall establish a clearing risk fund so as to pay in advance or make up any loss of the securities registration and clearing institution as incurred from default delivery, technical malfunction, operational fault or force majeure. The securities clearing risk fund shall be withdrawn from the business incomes and proceeds of a securities registration and clearing institution and may be paid by clearing participants according to a specified percentage of securities trading volume. The measures for raising and managing the securities clearing risk fund shall be formulated by the securities regulatory authority under the State Council in collaboration with the fiscal department of the State Council.

Article 164 The securities clearing risk fund shall be deposited into a special account of a designated bank and shall be subject to special management. Where a securities registration and clearing institution makes any compensation by using the securities clearing risk fund, it may recourse the payment to the relevant person as held responsible.

Article 165 An application for dissolving a securities registration and clearing institution shall be subject to the approval of the securities regulatory authority under the State Council.

Article 166 An investor who entrusts a securities company to undertake any securities trading shall apply for opening a securities account. A securities registration and clearing institution shall, according to the relevant provisions, open a securities account for an investor in his own name. An investor who applies for opening an account shall hold the legitimate certificates certifying his identity of a Chinese citizen or its qualification of a Chinese legal person, unless it is otherwise provided for by the state.


Article 167 A securities registration and clearing institution shall, when providing the netting service for a stock exchange, require the relevant clearing participant to deliver securities and funds in full amount and provide the guaranty of delivery according to the principles of delivery versus payment (DVP). Before a delivery is concluded, nobody may use the securities, funds or collaterals as involved in the delivery. Where a clearing participant fails to perform the duty of delivery according to the schedule, a securities registration and clearing institution has the right to dispose the properties as prescribed in the preceding paragraph herein according to the operational rules.

Article 168 The clearing funds and securities as collected by a securities registration and clearing institution according to the operational rules shall be deposited into a special account for settlement and delivery. The settlement and delivery that can only be applied to the securities trading as concluded according to the operational rules may not be enforced compulsorily.

Chapter VIII Securities Trading Service Institutions

Article 169 Where an investment consulting institution, financial advising institution, credit rating institution, asset appraisal institution or accounting firm engages in any securities trading service, it shall be subject to the approval of the securities regulatory authority under the State Council and the relevant administrative departments. The measures for the administration of examination and approval of the practice of securities trading services, in which an investment consulting institution, financial advising institution, credit rating institution, asset appraisal institution or accounting firm engages, shall be formulated by the securities regulatory authority under the State Council and the relevant administrative departments.

Article 170 The staff of an investment consulting institution, financial advising institution or credit rating institution who engage in securities trading service shall have the special knowledge of securities as well as work experience on securities business or securities trading service for more than 2 years. The standards for recognizing the securities practice qualification and the measures for administration thereof shall be formulated by the securities regulatory authority under the State Council.

Article 171 An investment consulting institution as well as its practitioners that engage in securities trading services may not have any of the following acts:
(1) Engaging in any securities investment as an agent on the behalf of its entrusting party;
(2) Concluding any agreement with an entrusting party on sharing the gains of securities investment or bearing the loss of securities investment;
(3) Purchasing or selling any stock of a listed company, for which the consulting institution provides services;
(4) Providing or disseminating any false or misleading information to investors through media or by any other means; or
(5) Having any other act as prohibited by any law or administrative regulation. Any institution or person that has any of the acts as prescribed in the preceding paragraph herein and thus incurs any loss to investors shall be subject to the liabilities of compensation.

Article 172 An investment consulting institution or credit rating institution that engages in securities trading services shall, according to the standards of or measures for charging as formulated by the relevant administrative department of the State Council, charge the relevant service commissions.

Article 173 Where a securities trading service institution formulates and generates any auditing report, asset appraisal report, financial advising report, credit rating report or legal opinions for the issuance, listing and trading of securities, it shall be diligent and responsible by carrying out examination and verification for the authenticity, accuracy and integrity of the contents of the documents as formulated and generated. In the case of any false record, misleading statement or major omission in the documents as formulated and generated, which incurs any loss to any other person, the relevant securities trading service institution shall bear the joint and several liabilities together with the relevant issuer and listed company, unless a securities trading service institution has the ability to prove its exemption of fault.

Chapter IX Securities Industry Association

Article 174 The securities industry association is a self-regulating organization for the securities industry and is a public organization with the status of a legal person. A securities company shall join the securities industrial association. The power organ of the securities industrial association is the general assembly of its members.

Article 175 The constitution of the securities industrial association shall be formulated by the general assembly of its members and shall be report to the securities regulatory authority under the State Council for archival purpose.

Article 176 The securities industrial association shall perform the following functions and duties:
(1) Educating and organizing its members to observe the laws and administrative regulations on securities;
(2) Safeguarding the legitimate rights and interests of its members and reporting the suggestions and requirements of its members to the securities regulatory body;
(3) Collecting and straightening out the securities information and providing services for its members;
(4) Formulating the rules that shall be observed by its members, organizing the vocational training for the practitioners of its member entities and carrying out vocational exchange between its members;
(5) Holding mediation over any dispute regarding securities operation between its members or between its members and clients;
(6) Organizing its members to make research on the development, operation and the relevant contents of the securities industry;
(7) Supervising and examining the acts of its members and, according to the relevant provisions, giving a disciplinary sanction to any member that violates any law or administrative regulation or the constitution of the association; and
(8) Performing any other function and duty as stipulated by the constitution of the industrial association.

Article 177 A council shall be established within the securities industrial association. The members of the council shall be selected through election according to the provisions of the constitution.

Chapter X Securities Regulatory Bodies

Article 178 The securities regulatory authority under the State Council shall carry out supervision and administration of the securities market according to law so as to preserve the order of the securities market and guarantee the legitimate operation thereof.


Article 179 The securities regulatory authority under the State Council shall perform the following functions and duties regarding the supervision and administration of the securities market:
(1) Formulating the relevant rules and regulations on the supervision and administration of the securities market and exercising the power of examination or verification according to law;
(2) Carrying out the supervision and administration of the issuance, listing, trading, registration, custody and settlement of securities according to law;
(3) Carrying out the supervision and administration of the securities activities of a securities issuer, listed company, stock exchange, securities company, securities registration and clearing institution, securities investment fund management company or securities trading service institution according to law;
(4) Formulating the standards for securities practice qualification and code of conduct and carrying out supervision and implementation according to law;
(5) Carrying out the supervision and examination of information disclosure regarding the issuance, listing and trading of securities;
(6) Offering guidance for and carrying out supervision of the activities of the securities industrial association according to law;
(7) Investigating into and punishing any violation of any law or administrative regulation on the supervision and administration of the securities market according to law; and
(8) Performing any other functions and duties as prescribed by any law or administrative regulation. The securities regulatory authority under the State council may establish a cooperative mechanism of supervision and administration in collaboration with the securities regulatory bodies of any other country or region and apply a trans-border supervision and administration.

Article 180 Where the securities regulatory authority under the State Council performs its duties and functions, it has the right to take the following measures:
(1) Carrying an on-the-spot examination of a securities issuer, listing company, securities company, securities investment fund management company, securities trading service company, stock exchange or securities registration and clearing institution;
(2) Making investigation and collecting evidence in a place where any suspected irregularity has happened;
(3) Consulting the parties concerned or any entity or individual relating to a case under investigation and requiring the relevant entity or person to give explanations on the matters relating to a case under investigation;
(4) Referring to and photocopying such materials as the registration of property right and the communication records relating to the case under investigation;
(5) Referring to and photocopying the securities trading records, transfer registration records, financial statements as well as any other relevant documents and materials of any entity or individual relating to a case under investigation; sealing up any document or material that may be transferred, concealed or damaged;
(6) Consulting the capital account, security account or bank account of any relevant party concerned in or any entity or individual relating to a case under investigation; in the case of any evidence certifying that any property as involved in a case such as illegal proceeds or securities has been or may be transferred or concealed or where any important evidence has been or may be concealed, forged or damaged, freezing or sealing up the foregoing properties or evidence upon the approval of the principal of the securities regulatory authority under the State Council;
(7) When investigating into any major securities irregularity such as manipulation of the securities market or insider trading, upon the approval of the principal of the securities regulatory authority under the State Council, restricting the securities transactions of the parties concerned in a case under investigation, whereby the restriction term may not exceed 15 trading days; under any complicated circumstance, the restriction term may be extended for another 15 trading day.

Article 181 Where the securities regulatory authority under the State Council performs its functions and duties of supervision or examination or investigation, the personnel in charge of supervision and examination or investigators shall be no less than 2 and shall show their legitimate certificates and the notice of supervision and examination as well as investigation. Where the personnel in charge of supervision and examination or investigation are less than 2 or fail to show their legitimate certificates and the notice of supervision and examination or investigation, an entity under examination and investigation has the right to refuse.

Article 182 The functionary of the securities regulatory authority under the State Council shall be duteous, impartial and clean, and handle matters according to law, and may not take advantage of his post to seek any unjust interests or divulge any commercial secrete of the relevant entity or individual as accessible in his performance.

Article 183 Where the securities regulatory authority under the State Council performs its functions and duties according to law, the entity or individual under examination and investigation shall coordinate with it, provide the relevant documents and materials in a faithful manner and may not refuse any legitimate requirement, obstruct the performance of duties and functions or conceal any document or material concerned.

Article 184 The regulations, rules as well as the working system of supervision and administration as formulated by the securities regulatory authority under the State Council according to law shall be publicized to the general public. The securities regulatory authority under the State Council shall, according to the results of investigation, decide the punishment on any securities irregularity, which shall be publicized to the general public.

Article 185 The securities regulatory authority under the State Council shall establish an information pooling mechanism of supervision and administration in collaboration with any other financial regulatory authority under the State Council. Where the securities regulatory authority under the State Council performs its functions and duties of supervision and examination or investigation according to law, the relevant departments shall coordinate with it.

Article 186 Where the securities regulatory authority under the State Council founds any securities irregularity as involved in a suspected crime when performing its functions and duties according to law, it shall transfer the case to the judicial organ for handling.

Article 187 The functionary of the securities regulatory authority under the State Council may not hold any post in an organization under its supervision.

Chapter XI Legal Liabilities

Article 188 Where any company unlawfully makes any public issuance of securities or does so in any disguised form without any examination and approval of the statutory organ, it shall be ordered to cease the issuance, return the funds as raised plus the deposit interests as calculated at the interest rate of the bank at the corresponding period of time and be imposed a fine of 1% up to 5% of the funds as illegally raised. A company that has been established through any unlawful public issuance of securities or through any unlawful public issuance of securities in a disguised form shall be revoked by the organ or department that performs the functions and duties of supervision and administration in collaboration with the local people's government at or above the county level. The person-in-charge or any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300,000 yuan.


Article 189 Where an issuer fails to meet the requirements of issuance and cheats for the verification for issuance by any fraudulent means, if the relevant securities haven't been issued, a fine of 300, 000 yuan up to 600, 000 yuan shall be imposed; if the relevant securities have been issued, a fine of 1% up to 5% of the illegal proceeds as unlawfully raised shall be imposed. The person-in-charge and any other person directly responsible shall be imposed a fine of 30, 000 yuan up to 300, 000 yuan. Any controlling shareholder or actual controller of an issuer that instigates any irregularity as prescribed in the preceding paragraph herein shall be subject to the punishments as prescribed in the preceding paragraph.

Article 190 Where a securities company underwrites or, as an agent, purchases or sells any securities, which have been unlawfully issued in a public manner without any examination and approval, it shall be ordered to stop its underwriting operation or purchase or sale on an agency basis. The illegal proceeds shall be confiscated and a fine of 1~5 times of its illegal proceeds shall be imposed. Where there is no illegal proceeds or its illegal proceeds is less than 300, 000 yuan, a fine of 300, 000 yuan up to 60, 000 yuan shall be imposed. Where any loss has been incurred to an investor, the securities company shall bear the joint and several liabilities of compensation together with the issuer. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30, 000 yuan up to 300, 000 yuan and the post-holding qualification or securities practice qualification thereof shall be revoked.

Article 191 Where a securities company that engages in securities underwriting is under any of the following circumstances, it shall be ordered to correct and given a warning. The illegal proceeds shall be confiscated and a fine of 30, 000 yuan up to 600, 000 yuan may be imposed concurrently. Under any serious circumstances, the relevant business licenses shall be suspended or revoked. Where any loss has been incurred to any other securities underwriting institution or investor, it shall be subject to the liabilities of compensation according to law. The person-in-charge and any other person directly responsible shall be given a warning and may be concurrently imposed a fine of 30, 000 yuan up to 300, 000 yuan. Under any serious circumstances, the post-holding qualification or securities practice qualification thereof shall be revoked:
(1) Conducting any advertising or any other publicity for recommendation, which is false or may mislead investors;
(2) Canvassing any underwriting business by any means of unjust competition; or
(3) Having any other irregularity in violation of the relevant provisions on securities underwriting.

Article 192 Where a recommendation party produces a recommendation letter with any false record, misleading statement or major omission, or fails to perform any other statutory functions and duties, it shall be ordered to correct and given a warning. Its business income shall be confiscated and a fine of 1~5 times of its business income shall be imposed. Under any serious circumstances, the relevant business license shall be suspended or revoked. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30, 000 yuan up to 300, 000 yuan. Under any serious circumstances, the post-holding qualification or securities practice qualification thereof shall be revoked.

Article 193 Where an issuer, a listed company or any other obligor of information disclosure fails to disclose information according to the relevant provisions or where there is any false record, misleading or major omission in the information as disclosed, the securities regulatory body shall order it to correct, give a warning and impose it a fine of 300, 000 yuan up to 600, 000 yuan. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300, 000 yuan. Where an issuer, a listed company or any other obligor of information disclosure fails to submit the relevant reports or where there is any false record, misleading or major omission in any report as submitted, the securities regulatory body shall order it to correct, give a warning and impose it a fine of 300, 000 yuan up to 600, 000 yuan. The person-in-charge and any other person-in-charge directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300, 000 yuan. Any controlling shareholder or actual controller of an issuer, a listed company or any other obligor of information disclosure instigates any irregularity as prescribed in the preceding 2 paragraphs herein shall be subject to the punishments as prescribed in the preceding 2 paragraphs.

Article 194 Where an issuer or a listed company unlawfully alters the use of funds as raised through public issuance of securities, it shall be ordered to correct. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300, 000 yuan. Any controlling shareholder or actual controller of an issuer or a listed company who instigates any irregularity as prescribed in the preceding paragraph herein shall be given a warning and imposed a fine of 300, 000 yuan up to 600, 000 yuan. The person-in-charge and any other person directly responsible shall be subject to the punishment according to the provisions of the preceding paragraph.

Article 195 Where a director, supervisor, senior manager of a listed company or a shareholder who holds more than 5% of the shares of a listed company violates the provisions of Article 47 of the present Law by buying or purchasing any stock of the listed company, he shall be given a warning and be concurrently imposed a fine of 30,000 yuan up to 100, 000 yuan.

Article 196 Any stock exchange as illegally established shall be banned by the people's government above the county level. Its illegal proceeds shall be confiscated and a fine of 1~5 times of its illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 100,000 yuan, a fine of 100, 000 yuan up to 500, 000 yuan shall be imposed, The person-in-charge and an other directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300,000 yuan.

Article 197 Any securities company that is unlawfully established or that unlawfully undertakes any securities operation without an approval shall be banned by the securities regulatory body, the illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 300,000 yuan, a fine of 300,000 yuan up to 600, 000 yuan shall be imposed, The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300,000 yuan.

Article 198 Where any personnel without a post-holding qualification or securities practice qualification is unlawfully employed in violation of the provisions of the present Law, the securities regulatory body shall order it to correct, give a warning and impose it a fine of 100,000 yuan up to 300,000 yuan. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300,000 yuan.


Article 199 Where any person who is prohibited by laws and administrative regulations from engaging in securities trading holds or purchases or sells any stock directly or in an assumed name or in a name of any other person, he shall be ordered to dispose the stocks as unlawfully held thereby according to law. The illegal proceeds shall be confiscated and a fine of no more than the equivalent value of stocks as traded shall be imposed. In the case of any functionary of the state, an administrative sanction shall be given according to law.

Article 200 Where any practitioner of a stock exchange, securities company, securities registration and clearing institution or any functionary of the securities industrial association provides any false material or conceals, forges, alters or damages any trading record for the purpose of inducing investors to purchase or sell securities, the securities practice qualification thereof shall be revoked and a fine of 30, 000 yuan up to 100, 000 yuan shall be imposed. In the case of any functionary of the state, an administrative sanction shall be given according to law.

Article 201 Where a securities trading service institution and its staffs that produce any auditing report, asset appraisal report or legal opinions for the issuance of stocks violate the provisions of Article 45 of the present Law by purchasing or selling any stock, it shall be ordered to dispose the stocks as illegally held thereby according to law. The illegal proceeds shall be confiscated and a fine of no more than the equivalent value of the stocks as traded shall be imposed.

Article 202 Where an insider who has access to insider information of securities trading or any person who has obtained any insider information purchases or sells the securities, divulges the relevant information or advises any other person to purchase or sell the securities before the information regarding the issuance or trading of securities or any other information that may have any big impact on the price of the securities is publicized, he shall be ordered to dispose the securities as illegally held thereby according to law. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 30,000 yuan, a fine of 30,000 yuan up to 600,000 yuan shall be imposed. Where an entity is involved in any insider trading, the person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300,000 yuan. Any functionary of the securities regulatory body that conducts any insider trading shall be given a heavier punishment.

Article 203 Where anyone violates the present Law by manipulating the securities market, he shall be ordered to dispose the securities as illegally held thereby according to law. The illegal proceeds shall be confiscated and a fine of a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 30, 000 yuan, a fine of 30, 000 yuan up to 300, 000 yuan shall be imposed. Where an entity manipulates the securities market, the person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 100,000 yuan up to 600, 000 yuan as well.

Article 204 Where anyone violates the relevant laws by purchasing or selling any securities during a period when any transfer of securities is prohibited, he shall be ordered to correct, given a warning and imposed a fine of no more than the equivalent value of the securities as illegally traded shall be imposed. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300, 000 yuan.

Article 205 Where a securities company violates the present Law by providing any securities financing, the illegal proceeds shall be confiscated, the relevant business license shall be suspended or revoked, and a fine of no more than the equivalent value of the funds as raised through securities financing shall be imposed. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300, 000 yuan and the relevant post-holding qualification or securities practice qualification shall be revoked.

Article 206 Where anyone violates the provisions of paragraph 1 or 3 of Article 78 of the present Law by disturbing the securities market, the securities regulatory body shall order it to correct. The illegal proceeds shall be revoked and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 30, 000 yuan, a fine of 30, 000 yuan up to 200, 000 yuan shall be imposed.

Article 207 Where anyone violates the provisions of paragraph 2 of Article 78 by making any false statement or giving any misleading information in the activities of securities trading, the securities regulatory body shall order it to correct and a fine of not less than 30,000 yuan up to 200,000 yuan shall be imposed; in the case of any state functionary, an administrative sanction shall be given according to law.

Article 208 Where any legal person violates the present Law by opening any account in any other person's name or making use of any other person's account to purchase or sell any securities, it shall be ordered to correct and be imposed a fine of 1~5 times of the illegal proceeds. Where there is no illegal proceeds or the illegal proceeds is less than 30, 000 yuan, a fine of 30, 000 yuan up to 300, 000 yuan shall be imposed. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100, 000 yuan. Where a securities company provides any securities trading account of its own or of any other person for any irregularity as prescribed in the preceding paragraph herein, not only the punishments as prescribed in the preceding paragraph shall be given accordingly, but also the post-holding qualification or securities practice qualification of the person-in-charge or any other person directly responsible shall be revoked.

Article 209 Where a securities company violates the present Law by engaging in the self-operation of securities by making use of any other's name or an individual's name, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 30, 000 yuan, a fine of 30, 000 yuan up to 200, 000 yuan shall be imposed. Under any serious circumstances, the business license of securities self-operation shall be suspended or revoked. The person-in-charge and any other person directly responsible shall be given a warning and be imposed a fine of 30,000 yuan up to 100, 000 yuan and the relevant post-holding qualification or securities practice qualification shall be revoked.

Article 210 Where a securities company purchases or sells any securities or handles any trading matter in violation of the entrustment of its clients or handles any other non-trading matter in violation of the true intension as expressed by its clients, it shall be ordered to correct and imposed a fine of 10, 000 yuan up to 100, 000 yuan. Where any loss has been incurred to its client, it shall be subject to the liabilities of compensation according to law.

Article 211 Where a securities company or securities registration and clearing institution misuses any fund or securities of its client, or unlawfully purchases or sells any securities for its client without any entrustment thereby, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 100, 000 yuan, a fine of 100, 000 yuan up to 300, 000 yuan shall be imposed. Under any serious circumstances, it shall be ordered to close or the relevant business license thereof shall be revoked. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100, 000 yuan and the relevant post-holding qualification or securities practice qualification thereof shall be revoked.

Article 212 Where a securities company undertakes any brokerage business, accepts a full entrustment of its client to purchase or sell any securities or makes any promise on the proceeds as generated from securities trading or on the compensation of any loss as incurred from securities trading, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 50, 000 yuan up to 200, 000 yuan shall be imposed. The relevant business license may be suspended or revoked. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100, 000 yuan. The relevant post-holding qualification or securities practice qualification thereof may be revoked.

Article 213 Where a purchaser fails to perform its obligations such as announcing the acquisition of a listed company, issuing a tender offer or reporting the acquisition report of a listed company or unlawfully alters its tender offer according to the present Law, it shall be ordered to correct, given a warning and imposed a fine of 100, 000 yuan up to 300, 000 yuan. Before any correction, for the stocks that constitute more than 30% of shares of the target company as held thereby or held within any other person through an agreement or any other arrangement, the voting right thereof may not be exercised. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300, 000 yuan.

Article 214 Where a purchaser or any controlling shareholder of a purchaser takes advantage of the acquisition of a listed company to injure the legitimate rights and interests of the target company as well as the shareholders thereof, it shall be ordered to correct and given a warning. Under any serious circumstances, a fine of 100, 000 yuan up to 600, 000 yuan shall be imposed. Where any loss is incurred to the target company or the shareholders thereof, it shall be subject to the liabilities of compensation according to law. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 300,000 yuan.

Article 215 Where a securities company or any of its practitioners violates the present Law by privately accepting any entrustment of purchasing or selling securities from a client, it shall be ordered to correct and given a warning. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 100, 00 yuan, a fine of 100,000 yuan up to 300,000 yuan shall be imposed.

Article 216 Where a securities company violates the relevant provisions by undertaking any transaction of unlisted securities without an approval, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed.

Article 217 Where a securities company fails to start its business within 3 months after establishment without any justifiable reason, or suspends its business for a consecutive 3 months, the organ in charge of corporation registration shall revoke the business license of the company.

Article 218 Where a securities company violates the provisions of Article 129 of the present Law by unlawfully establishing, purchasing or revoking any branch, or unlawfully going through any merge, split-up, business suspension, dissolution or bankruptcy, or establishing, purchasing a securities operation institution abroad or purchasing the shares of a securities operation institution abroad, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 100,000 yuan, a fine of 100,000 yuan up to 600,000 yuan shall be imposed. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100,000 yuan. Where a securities company violates the provisions of Article 129 of the present Law by altering the relevant items, it shall be ordered to correct and imposed a fine of 100,000 yuan up to 300,000 yuan. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of no more than 50, 000 yuan.

Article 219 Where a securities company violates the present Law by engaging in any securities operation beyond its business scope as permitted, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where there is no illegal proceeds or the illegal proceeds is less than 300, 000 yuan, a fine of 300,000 yuan up to 600,000 yuan shall be imposed. Under any serious circumstances, it shall be ordered to close down. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100,000 yuan and the relevant post-holding qualification or securities practice qualification shall be revoked.

Article 220 Where a securities company fails to carry out its securities operation of brokerage, underwriting, self-operation or asset management in a separate manner according to law but carries out its securities operation in a mixed operation, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 300, 000 yuan up to 600, 000 yuan shall be imposed. Under any serious circumstances, the relevant business license shall be revoked. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100, 000 yuan. Under any serious circumstances, the relevant post-holding qualification or securities practice qualification shall be revoked.

Article 221 Where a securities company submits any false document of certification or adopts any other fraudulent means to conceal any major fact so as to cheat for the securities business license or a securities company has any severe irregularity in the securities trading and thus, fails to meet the requirements of business operation any more, the securities regulatory body shall revoke its securities business license.

Article 222 Where a securities company or its shareholder or actual controller violates the relevant provisions by refusing to report or provide information or materials regarding its business and management to the securities regulatory body or in the case of any false record, misleading statement or major omission in the aforesaid information or materials as reported or submitted, it shall be ordered to correct, given a warning and imposed a fine of 30, 000 yuan up to 300, 000 yuan. The relevant business license of the securities company may be suspended or revoked. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of no more than 30,000 yuan and the relevant post-holding qualification or securities practice qualification shall be revoked. Where a securities company provides financing or guaranty for its shareholder or any person related to its shareholder, it shall be ordered to correct, given a warning and imposed a fine of 100, 000 yuan up to 300, 000. The person-in-charge and any other person directly responsible shall be imposed a fine of 30, 000 yuan up to 100, 000 yuan. Where a shareholder has any fault, the securities regulatory authority under the State Council may restrict his shareholders' right before he makes correction according to the relevant requirements. Where anyone refuses to correct, he may be ordered to transfer the stock right of the securities company as held thereby.

Article 223 Where a securities trading service institution fails to fulfill its accountability in a diligent manner so that any document as formulated or produced thereby has any false record, misleading statement or major omission, it shall be ordered to correct. The proceeds as generated from its business shall be confiscated. Its securities business license shall be suspended or revoked. A fine of 1~5 times of its business income shall be imposed. The person-in-charge and any other person directly responsible shall be given a warning and imposed a fine of 30,000 yuan up to 100, 000 yuan and the relevant post-holding qualification or securities practice qualification shall be revoked.

Article 224 Where anyone violates the present Law by issuing or underwriting any corporate bond, he shall be given a punishment by the department as authorized by the State Council in accordance with the relevant provisions of the present Law.

Article 225 Where a listed company, securities company, stock exchange, securities registration and clearing institution, or securities trading service institution fails to keep the relevant documents and materials according to the relevant provisions, it shall be ordered to correct, given a warning and imposed a fine of 30, 000 yuan up to 300, 000 yuan. Where any relevant document or material is concealed, forged, altered or damaged, the violator shall be given a warning and imposed a fine of 300, 000 yuan up to 600, 000 yuan.

Article 226 Where a securities registration and clearing institution is unlawfully established without any approval of the State Council, it shall be cancelled by the securities regulatory body, the illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. Where an investment consulting institution, financial advising institution, credit rating institution, asset appraisal institution or accounting firm undertakes any securities trading service without the relevant approval, it shall be ordered to correct. The illegal proceeds shall be confiscated and a fine of 1~5 times of the illegal proceeds shall be imposed. In case a securities registration and clearing institution or a securities service trading institution violates the present Law or any operational rules as formulated according to law, the securities regulatory body shall order it to correct and confiscate the illegal proceeds and impose it a fine of 1~5 times of the illegal proceeds. Where there is no illegal proceeds or the illegal proceeds is less than 100, 000 yuan, a fine of 100, 000 yuan up to 300, 000 yuan shall be imposed. Under any serious circumstances, it shall be ordered to close down or its securities business license shall be revoked.

Article 227 Where the securities regulatory authority under the State Council or the department as authorized by the State Council is in any of the following circumstances, the person-in-charge and any other person directly responsible shall be given an administrative sanction according to law:
(1) Verifying or approving an application for issuing securities or for establishing a securities company, which fails to comply with the present Law;
(2) Violating the provisions of Article 180 of the present Law by taking such measures as on-the-spot examination, investigation and evidence collection, consultation, freeze-up or seal-up;
(3) Violating the relevant provisions by giving any administrative sanction to the relevant institution or personnel; or
(4) Performing any other functions and duties in an unlawful manner.

Article 228 Where any functionary of the securities regulatory body or any member of the issuance examination committee fails to perform the duties and functions as prescribed in the present Law, misuses his power, neglects his duty, takes advantage of his post to seek any unjust interests or divulges any commercial secrete of the relevant entity or individual as accessible in his performance, he shall be subject to legal liabilities.

Article 229 A stock exchange that grants any approval to an application for securities listing that fail to meet the requirements as prescribed in the present Law shall be given a warning. Its business income shall be confiscated and a fine of 1~5 times of its business income shall be imposed. The person-in-charge and any other person directly responsible shall be imposed a fine of 30,000 yuan up to 300,000 yuan.

Article 230 Anyone that refuses or obstructs the performance of the securities regulatory body as well as its functionary on the functions and duties of supervision, examination and investigation by no means of violence or threat shall be given an administrative sanction of public security according to law.

Article 231 Where anyone violates the present Law and constitutes a crime, he shall be subject to criminal liabilities according to law.

Article 232 Where anyone violates the present Law and shall be subject to civil liabilities of compensation and payment of fines and penalties and if his properties are not sufficient to cover all the payment at the same time, he shall be first subject to civil liabilities.

Article 233 In case anyone violates the relevant laws and administrative regulations or the relevant provisions of the securities regulatory authority under the State Council and is under any serious circumstances, the securities regulatory authority under the State Council may take measures of prohibiting the relevant responsible persons from entering into the securities market. For the purpose of the present Law, the term of "prohibition from entering into the securities market" as mentioned in the preceding paragraph refers to a system, whereby a person may not undertake any securities practice or hold any post of director, supervisor or senior manager of a listed company within a prescribed term or for life.

Article 234 The fines as collected and the illegal proceeds as confiscated shall be all turned over into the State Treasury.

Article 235 Where any party concerned is dissatisfied with a decision of the securities regulatory body or a department as authorized by the State Council on punishment, it may file an application for an administrative review or file an litigation with the people's court.

Chapter XII Supplementary Articles

Article 236 The securities that have been approved for listed trading in a stock exchange according to the relevant administrative regulations before the present Law comes into force may continue to be traded according to law. The securities operation institution that has been approved for establishment in accordance with the relevant administrative regulations and the provisions of the administrative department of finance of the State Council before the present Law comes into force but fails to comply with the provisions of the present Law in a complete manner shall satisfy the requirements as prescribed by the present Law within the prescribed term. The specific measures for implementation shall be separately prescribed by the State Council.

Article 237 Where an issuer applies for verifying the public issuance of any stocks or corporate bonds, it shall pay the expenses for examination according to the relevant provisions.

Article 238 Any domestic enterprise that directly or indirectly issues any securities abroad or lists its securities abroad for trading shall be subject to the approval of the securities regulatory authority under the State Council according to the relevant provisions of the State Council.

Article 239 As for any subscription or trading of stocks of a domestic company in a foreign currency, the specific measures thereof shall be formulated by the State Council separately.

Article 240 The present Law shall be implemented as of January 1, 2006. 
Promulgated by Standing Committee of the National People's Congress on 2005-10-27

2.<<The Company Law of the Peoples Republic of China >>(revised in 2005)

Author Standing Committee of the NPC Source Law Bridge Date 2005-10-27 21:02:04 Hits 7774(Adopted at the Fifth Session of the Standing Committee of the Eighth National People's Congress on December 29, 1993. Revised for the first time on December 25, 1999 in accordance with the Decision of the Thirteenth Session of the Standing Committee of the Ninth People's Congress on Amending the Company Law of the People's Republic of China. Revised for the second time on August 28, 2004 in accordance with the Decision of the 11th Session of the Standing Committee of the 10th National People's Congress of the People's Republic of China on Amending the Company Law of the People's Republic of China. Revised for the third time at the 18th Session of the 10th National People's Congress of the People's Republic of China on October 27, 2005)

Contents:

Chapter I General Provisions
Chapter II Establishment and Organizational Structure of a Limited Liability Company
Section 1 Establishment
Section 2 Organizational Structure
Section 3 Special Provisions on One-person Limited Liability Companies
Section 4 Special Provisions on Solely State-owned Companies
Chapter III Transfer of Stock Right of a Limited Liability Company
Chapter IV Establishment and Organizational Structure of a Joint Stock Limited Company
Section 1 Establishment
Section 2 Shareholders' Meeting
Section 3 Board of Directors, Managers
Section 4 Board of Supervisors
Section 5 Special Provisions on the Organizational Structure of a Listed Company
Chapter V Issuance and Transfer of Shares of a Joint Stock Limited Company
Section 1 Issuance of Shares
Section 2 Transfer of Shares
Chapter VI Qualifications and Obligations of the Directors, Supervisors and Senior Managers of a Company
Chapter VII Company Bonds
Chapter VIII Financial Affairs and Accounting of a Company
Chapter IX Merger and Split-up of a Company; Increase and Deduction of Registered Capital
Chapter X Dissolution and Liquidation of a Company
Chapter XI Branches of a Foreign Company
Chapter XII Legal Liabilities Chapter XIII Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is formulated for the purposes of regulating the organization and operation of companies, protecting the legitimate rights and interests of companies, shareholders and creditors, maintaining the socialist economic order, and promoting the development of the socialist market economy

Article 2 The term "company" as mentioned in this Law refers to a limited liability company or a joint stock company limited established within the territory of the People's Republic of China in accordance with the provisions of this law.

Article 3 A company is an enterprise juridical person, which has independent juridical person property and enjoys the property right of the juridical person. And it shall bear the liabilities for its debts with all its property. As for a limited liability company, the shareholders shall be responsible for the company to the extent of the capital contributions they have paid. As for a joint stock limited company, the shareholders shall be responsible for the company to the extent of the shares they have subscribed to.

Article 4 The shareholders of a company shall be entitled to enjoy the capital proceeds, participate in making important decisions, choose managers and enjoy other rights.

Article 5 When undertaking business operations, a company shall comply with the laws and administrative regulations, social morality and business morality. It shall act in good faith, accept the supervision of the government and the general public, and bear social responsibilities.

The legitimate rights and interests of a company shall be protected by laws and may not be infringed.

Article 6 For the establishment of a company, an application for establishment and registration shall be filed with the company registration authority. If the application meets the requirements for establishment of this Law, the company registration authority shall register the company as a limited liability company or a joint stock limited company. If the application fails to meet the requirements for establishment of this Law, it shall not be registered as a limited liability company or a joint stock limited company.

If any law or administrative regulation stipulates that the establishment of a company shall be subject to approval, the relevant approval formalities shall be gone through prior to the registration of the company.

The general public may consult the relevant matters on company registration at a company registration authority, which shall provide consulting services.

Article 7 For a lawfully established company, the company registration authority shall issue the company business license to it, and the date of issuance of the company business license shall be the date of establishment of the company. The company business license shall state the name, domicile, registered capital, actually paid capital, business scope, the name of the legal representative and etc. If any of the items as stated in the business license is changed, the company shall modify the registration, and the company registration authority shall replace the old business license by a new one.

Article 8 For a limited liability company established according to this Law, it shall indicate in its company name the words "limited liability company" or "limited company". For a joint stock limited company established according to this Law, it shall indicate in its company name the words "joint stock limited company" or "joint stock company".

Article 9 The change of a limited liability company to a joint stock limited company shall satisfy the requirements as prescribed in this Law for joint stock limited companies. The change of a joint stock limited company to a limited liability company shall meet the conditions as prescribed in this Law for limited liability companies. Under any of the aforesaid circumstances, the creditor's rights and debts of the company prior to the change shall be succeeded by the company after the change.

Article 10 A company shall regard the locus of its main office as its domicile.

Article 11 The company established according to this law shall formulate its articles of association which are binding on the company, its shareholders, directors, supervisors and senior managers.

Article 12 The company's business scope shall be defined in its articles of association and shall be registered according to law. The company may change its business scope by modifying its articles of association, but shall go through the formalities for modifying the registration. If the business scope of a company covers any item subject to approval pursuant to laws or administrative regulations, the approval shall be obtained according to law.

Article 13 The legal representative of a company shall, according to the provisions of its articles of association, be assumed by the chairman of the board of directors, acting director or manager, and shall be registered according to law. If the legal representative of the company is changed, the company shall go through the formalities for modifying the registration.

Article 14 The company may set up branches. To set up a branch, the company shall file a registration application with the company registration authority, and shall obtain the business license. The branch shall not enjoy the status of an enterprise juridical person, and its civil liabilities shall be born by its parent company.

The company may set up subsidiaries which enjoy the status of an enterprise juridical person and shall be independently bear civil liabilities.

Article 15 A company may invest in other enterprises. However, it shall not become a capital contributor that shall bear the joint liabilities for the debts of the enterprises it invests in, unless it is otherwise provided for by any law.

Article 16 Where a company intends to invest in any other enterprise or provide guarantee for others, it shall, according to the provisions of its articles of association, be decided at the meeting of the board of directors or shareholders or shareholders' convention. If the articles of association prescribe any limit on the total amount of investments or guarantees, or on the amount of a single investment or guarantee, the aforesaid total amount or amount shall not exceed the responsive limited amount. If a company intends to provide guarantee to a shareholder or actual controller of the company, it shall make a resolution through the shareholder's meeting or shareholders' convention.

The shareholder as mentioned in the preceding paragraph or the shareholder dominated by the actual controller as mentioned in the preceding paragraph shall not participate in voting on the matter as mentioned in the preceding paragraph. Such matter requires the affirmative votes of more than half of the other shareholders attending the meeting.

Article 17 The company shall protect the lawful rights and interests of its employees, conclude employment contracts with the employees, buy social insurances, strengthen labor protection so as to realize safe production.

The company shall, in various forms, reinforce the vocational education and in-service training of its employees so as to improve their personal quality.

Article 18 The employees of a company shall, according to the Labor Union Law of the People's Republic of China, organize a labor union, which shall carry out union activities and safeguard the lawful rights and interests of the employees. The company shall provide necessary conditions for its labor union to carry out activities. The labor union shall, on behalf of the employees, conclude the collective contract with the company with respect to the remuneration, working hours, welfare, insurance, work safety and sanitation and other matters.

Pursuant to the Constitution and other relevant laws, a company shall implement democratic management in the form of meeting of the representatives of the employees or any other ways.

To make a decision on restructuring or any important issue related to business operation, or to formulate any important regulation, a company shall solicit the opinions of its labor union, and shall solicit the opinions and proposals of the employees through the meeting of the representatives of the employees or in any other way.

Article 19 An organization of the Chinese Communist Party shall, according to the Charter of the Chinese Communist Party, be established in the company to carry out activities of the Chinese Communist Party. And the company shall provide necessary conditions for the activities of the Chinese Communist Party.

Article 20 The shareholders of a company shall comply with the laws, administrative regulations and articles of association, and shall exercise the shareholder's rights according to law. None of them may injure any of the interests of the company or of other shareholders by abusing the shareholder's rights, or injure the interests of any creditor of the company by abusing the independent status of juridical person or the shareholder's limited liabilities.

Where any of the shareholders of a company causes any loss to the company or to other shareholders by abusing the shareholder's rights, it shall be subject to compensation.

Where any of the shareholders of a company evades the payment of its debts by abusing the independent status of juridical person or the shareholder's limited liabilities, and thus seriously damages the interests of any creditor, it shall bear joint liabilities for the debts of the company.

Article 21 Neither the controlling shareholder, nor the actual controller, any of the directors, supervisors or senior managers of the company may injure the interests of the company by taking advantage of its connection relationship. Anyone who has caused any loss to the company due to violation of the preceding paragraph shall be subject to compensation.

Article 22 The resolution of the shareholders' convention, shareholders' meeting or board of directors of the company that has violated any law or administrative regulation shall be null and void.

Where the procedures for convoking and the voting form of a shareholders' convention or shareholders' meeting or meeting of the board of directors, violate any law, administrative regulation or the articles of association, or the resolution is in violation of the articles of association of the company, the shareholders may, within 60 days as of the day when the resolution is made, request the people's court to revoke it.

If the shareholders initiate a lawsuit according to the preceding paragraph, the people's court shall, in light of the request of the company, demand the shareholders to provide corresponding guarantee.

Where a company has, in light of the resolution of the shareholders' convention, shareholders' meeting or meeting of the board of directors, completed the modification registration, and the people's court declares the resolution null and void or revoke the resolution, the company shall file an application with the company registration authority for revoking the modification registration.

Chapter II Establishment and Organizational Structure of a Limited Liability Company

Section 1 Establishment

Article 23 The establishment of a limited liability company shall satisfy the following conditions:
(1) The number of shareholders accords with the quorum;
(2) The amount of capital contributions paid by the shareholders reaches the statutory minimum amount of the registered capital;
(3) The articles of association are worked out jointly by shareholders;
(4) The company has a name and its organizational structure complies with that of a limited liability company; and
(5) The company has a domicile.

Article 24 A limited liability company shall be established by not more than 50 shareholders that have made capital contributions.

Article 25 A limited liability company shall state the following items in its articles of association:
(1) the name and domicile of the company;
(2) the business scope of the company;
(3) the registered capital of the company;
(4) names of shareholders;
(5) forms, amount and date of capital contributions made by shareholders;
(6) the organizations of the company and its formation, their functions and rules of procedure;
(7) the legal representative of the company;
(8) other matters deemed necessary by shareholders. The shareholders should affix their signatures or seals on the articles of association of the company.

Article 26 The registered capital of a limited liability company shall be the total amount of the capital contributions subscribed to by all the shareholders that have registered in the company registration authority. The amount of the initial capital contributions made by all shareholders shall be not less than 20% of the registered capital, nor less than the statutory minimum amount of registered capital, and the margin shall be paid off by the shareholders within 2 years as of the day when the company is established; as for an investment company, it may be paid off within 5 years. The minimum amount of registered capital of a limited liability company shall be RMB 30, 000 Yuan. If any law or administrative regulation prescribes a relatively higher minimum amount of registered capital of a limited liability company, the provisions of that law or administrative regulation shall be followed.

Article 27 A shareholder may make capital contributions in currency, in kind or intellectual property right, land use right or other non-monetary properties that may be assessed on the basis of currency and may be transferred according to law, excluding the properties that shall not be treated as capital contributions according to any law or administrative regulation.

The value of the non-monetary properties as capital contributions shall be assessed and verified, which shall not be over-valued or under-valued. If any law or administrative regulation prescribes the value assessment, such law or administrative regulation shall be followed.

The amount of the capital contributions in currency paid by all the shareholders shall be not less than 30% of the registered capital of the limited liability company.

Article 28 Every shareholder shall make full payment for the capital contribution it has subscribed to according to the articles of association. If a shareholder makes his/its capital contribution in currency, he shall deposit the full amount of such currency capital contribution into a temporary bank account opened for the limited liability company. If the capital contributions are made in non-monetary properties, the appropriate transfer procedures for the property rights therein shall be followed according to law. Where a shareholder fails to make his/its capital contribution as specified in the preceding paragraph, it shall not only make full payment to the company but also bear the liabilities for breach of the contract to the shareholders who have make full payment of capital contributions on schedule.

Article 29 The capital contributions made by shareholders shall be checked by a lawfully established capital verification institution, which shall issue a certification.

Article 30 After the initial capital contributions made by the shareholders for the first time have been checked by a lawfully established capital verification institution, the representative designated by all the shareholders or the agent entrusted by all the shareholders shall apply for establishment and registration with a company registration application, the articles of association, capital verification and other documents to the company registration authority.

Article 31 After the establishment of a limited liability company, if the actual value of the capital contributions in non-monetary properties is found to be apparently lower than that provided for in the articles of association of the company, the balance shall be supplemented by the shareholder who has offered them, and the other shareholders of the company who have established the company shall bear joint liabilities.

Article 32 After the establishment of a limited liability company, every shareholder shall be issued with a capital contribution certificate, which shall specify the following:
(1) the name of the company;
(2) the date of establishment of the company;
(3) the registered capital of the company;
(4) the name of the shareholder, the amount of his capital contribution, and the day when the capital contribution is made; and
(5) the serial number and date of issuance of the capital contribution certificate. The capital contribution certificate shall bear the seal of the company.

Article 33 A limited liability company shall prepare a register of shareholders, which shall specify the following:
(1) the name of every shareholder and his/its domicile thereof;
(2) the amount of capital contribution made by every shareholder;
(3) the serial number of every capital contribution certificate.

The shareholders recorded in the register of shareholders may, in light of the register of shareholders, claim to and exercise the shareholder's rights. A company shall register every shareholder's name and the amount of its capital contribution in the company registration authority. Where any of the registered items is changed, it shall handle the modification of the registration. If the company fails to do so, it shall not, on the basis of the unregistered or un-modified registration item, stand up to any third party.

Article 34 The shareholder shall be entitled to consult and copy the articles of association, records of the shareholders' meetings, resolutions of the meetings of the board of directors, resolutions of the meetings of the board of supervisors, as well as financial reports.

The shareholder may request to consult the accounting books of the company. Where a shareholder requests to consult the accounting books of the company, it shall submit to the company a written request which shall state its motives. If the company, pursuant to any justifiable reason, considers that the shareholder's request to consult the accounting books for any improper purpose may damage the legitimate interests of the company, it may reject the request of the shareholder, and shall, within in 15 days after the shareholder submits a written request, give it a written reply which shall include an explanation. If the company rejects the request of any shareholder to consult the accounting books, the shareholder may plead the people's court to demand the company to approve consultation.

Article 35 The shareholders shall distribute dividends in light of the percentages of capital contributions actually made by them, unless all shareholders agree that the dividends are not distributed on the percentages of capital contributions. Where the company is to increase its capital, its shareholders have the preemptive right to contribute to the increased amount on the basis of the same percentages of the old capital contributions they have made, unless all shareholders agree that they will not contribute to the increased amount of capital on the basis of the percentages of the old capital contributions they have made.

Article 36 After the establishment of a company, no shareholder may illegally take away the contribution capital.

Section 2 Organizational Structure

Article 37 The shareholders' meeting of a limited liability company shall comprise all the shareholders. It shall be the authority of the company, and shall exercise its authorities according to this Law.

Article 38 The shareholders' meeting shall exercise the following authorities:
(1) determining the company's operation guidelines and investment plans;
(2) electing and changing the director and supervisors assumed by non-representatives of the employees, and determining the matters concerning their remuneration;
(3) deliberating and approving the reports of the board of directors;
(4) deliberating and approving the reports of the board of supervisors or the supervisor;
(5) deliberating and approving annual financial budget plans and final account plans of the company;
(6) deliberating and approving profit distribution plans and loss recovery plans of the company;
(7) making resolutions on the increase or decrease of the company's registered capital;
(8) making resolutions on the issuance of corporate bonds;
(9) adopting resolutions on the assignment, split-up, change of company form, dissolution, liquidation of the company;
(10) revising the articles of association of the company;
(11) other functions as specified in the articles of association. Where any of the matters as listed in the preceding paragraph is consented by all the shareholders it in writing, it is not required to convene a shareholders' meeting. A decision may be made directly with the signatures or seals of all the shareholders.

Article 39 The shareholders' meeting shall be convened and presided over by the shareholder who has made the largest percentage of capital contributions and shall exercise its authorities according to this Law.

Article 40 The shareholders' meetings shall be classified into regular meetings and temporary meetings. The regular meetings shall be timely held in pursuance with the articles of association. Where a temporary meeting is proposed by the shareholders representing 1/10 of the voting rights or more, or by directors representing 1/3 of the voting rights or more, or by the board of supervisors, or by the supervisors of the company with no board of supervisors, a temporary meeting shall be held.

Article 41 Where a limited liability company has set up a board of directors, the shareholders' meetings shall be convened by the board of directors and presided over by the chairman of the board of directors. If the chairman is unable or does not perform his duties, the meetings thereof shall be presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or does not perform his duties, the meetings shall be presided over by a director jointly recommended by half or more of the directors. Where a limited liability company has not set up the board of directors, the shareholders' meetings shall be convened and presided over by the acting director.

If the board of directors or the acting director is unable or does not perform the duties of convening the shareholders' meeting, the board of supervisors or the supervisor of the company with no board of supervisors may convene and preside over such meetings. If the board of supervisors or supervisor does not convene or preside over such meetings, the shareholder representing 1 / 10 or more of the voting rights may convene and preside over such meetings on his/its own initiative.

Article 42 Every shareholder shall be notified 15 days before a shareholders' meeting is held, unless it is otherwise prescribed by the articles of association or it is otherwise stipulated by all the shareholders. A shareholders' meeting shall make records for the decisions on the matters discussed at the meeting. The shareholders who attend the meeting shall affix their signatures to the records.

Article 43 The shareholders shall exercise their voting rights at the shareholders' meetings on the basis of their respective percentage of the capital contributions, unless it is otherwise stipulated by the articles of association.

Article 44 The discussion methods and voting procedures of the shareholders' meeting shall be prescribed in the articles of association, unless it is otherwise provided for by this Law. A resolution made at a shareholders' meeting on amending the articles of association, increasing or reducing the registered capital, merger, split-up, dissolution or change of the company form shall be adopted by the shareholders representing 2 / 3 or more of the voting rights.

Article 45 The board of directors established by a limited liability company shall comprise 3 up to 13 members, unless it is otherwise provided for in Article 51 of this Law. If a limited liability company established by 2 or more state-funded enterprises or other state-funded investors, the board of directors shall comprise the representatives of employees of this company. The board of directors of any other limited liability company may also comprise the representatives of employees of the company concerned. The employees' representatives who are to serve as the board of directors shall be democratically elected by the employees of the company through the general meeting of the representatives of employees, employees' meeting of the company or in any other way. The board of directors shall have one board chairman and may have one or more deputy chairman. The appointment of the chairman and deputy chairman shall be prescribed in the articles of association.

Article 46 The terms of office of the directors shall be provided for in the articles of association, but each term of office shall not exceed 3 years. The directors may, after the expiry of their term of office, hold a consecutive term upon re-election. If no reelection is timely carried out after the expiry of the term of office of the directors, or if the number of the members of the board of directors is less than the quorum due to the resignation of some directors from the board of directors prior to the expiry of their term of office, the original directors shall, before the newly elected directors assume their posts, exercise the authorities of the directors according to laws, administrative regulations as well as the articles of association.

Article 47 The board of directors shall be responsible for the shareholders' meeting and exercise the following authorities:
(1) convening shareholders' meetings and reporting the status on work thereto;
(2) carrying out the resolutions made at the shareholders' meetings;
(3) determining the operation plans and investment plans;
(4) working out the company's annual financial budget plans and final account plans;
(5) working out the company's profit distribution plans and loss recovery plans;
(6) working out the company's plans on the increase or decrease of registered capital, as well as on the issuance of corporate bonds;
(7) working out the company's plans on merger, split-up, change of the company form, dissolution, and etc.;
(8) making decisions on the establishment of the company's internal management departments;
(9) making decisions on hiring or dismissing the company's manager and his remuneration, and, according to the nomination of the manager, deciding on the hiring or dismissing of vice manager(s) and the person in charge of finance as well as their remuneration;
(10) working out the company's basic management system; and
(11) other functions as prescribed in the articles of association.

Article 48 The meeting of the board of directors shall be convened and presided over by the chairman of the board of directors. If the chairman of the board of directors is unable or does not perform his duties, the meeting may be convened or presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or does not perform his duties, the meeting may be convened or presided over by a director jointly recommended by half or more of the directors.

Article 49 The discussion methods and voting procedures of the board of directors shall be prescribed by the articles of association, unless it is otherwise provided for by this Law. The board of directors shall make records of the decisions on the matters discussed at the meetings thereof. The shareholders who attend the meeting shall affix their signatures to the records.

In the voting on a resolution of the board of directors, one person shall have one vote.

Article 50 A limited liability company may have a manager who shall be hired or dismissed upon the decision of the board of directors. The manager shall be responsible for the board of directors and shall exercise the following authorities:
(1) taking charge of the management of the production and business operations of the company, and organizing to implement the resolutions of the board of directors;
(2) organizing the execution of the company's annual operational plans and investment plans;
(3) drafting plans on the establishment of the company's internal management departments;
(4) drafting the company's basic management system;
(5) formulating the company's concrete bylaws;
(6) proposing to hire or dismiss the company's vice manager(s) and person(s) in charge of finance;
(7) deciding on the hiring or dismissing of the persons-in-charge other than those who shall be decided by the board of directors; and
(8) other authorities conferred by the board of directors.

If the articles of association prescribe otherwise the authorities of managers, the provisions in the articles of association shall be followed. The manager attends the meetings of the board of directors as a non-voting delegate.

Article 51 As for a limited liability company with relatively less shareholders or a relatively small limited liability company, it may have an acting director and no board of directors. The acting director may concurrently hold the post of the company's manger.

The authorities of the acting director shall be prescribed in the articles of association.

Article 52 A limited liability company may set up a board of supervisors, which shall comprise at least 3 persons. A limited liability company, which has relatively less shareholders or is relatively small in scale, may have 1 or 2 supervisors, and does not have to establish a board of supervisors. The board of supervisors shall include representatives of shareholders and representatives of the employees of the company at an appropriate ratio which shall be specifically stimulated in the articles of association. The employees' representatives, who are to serve as members of the board of supervisors, shall be democratically elected by the employees of the company through the meeting of the employees' representatives or employees' meeting, or by any other means. The board of supervisors shall have one chairman, who shall be elected by half or more of all the supervisors. The chairman of the board of supervisors shall convene and preside over the meetings of the board of supervisors.

If the chairman of the board of supervisors is unable to or does not perform his duties, the supervisor recommended by half or more of the supervisors shall convene and preside over the meetings of the board of supervisors.

No director or senior manager may concurrently work as a supervisor.

Article 53 Every term of office of the supervisors shall be 3 years. The supervisors may, after the expiry of their term of office, hold a consecutive term upon re-election. If no reelection is timely carried out after the expiry of the term of office of the supervisors, or the number of the members of the board of directors is less than the quorum due to the resignation of some directors from the board of supervisors prior to the expiry of their term of office, the original supervisors shall, before the newly elected supervisors assume their posts, exercise the authorities of the supervisors according to laws, administrative regulations as well as the articles of association.

Article 54 The board of supervisors or supervisor of a company with no board of supervisors may exercise the following authorities:
(1) checking the financial affairs of the company;
(2) supervising the duty-related acts of the directors and senior managers, and bringing forward proposals on the removal of any director or senior manager who violates any law, administrative regulation, the articles of association or any resolution of the shareholders' meeting;
(3) demanding any director or senior manager to make corrections if his act has injured the interests of the company;
(4) proposing to convening temporary shareholders' meetings, and convening and presiding over shareholders' meetings when the board of directors does not exercise the functions of convening and presiding over the shareholders' meetings as prescribed in this Law;
(5) bringing forward proposals at shareholders' meetings;
(6) initiating actions against directors or senior managers according to Article 152 of this Law; and
(7) other duties as prescribed by the articles of association.

Article 55 The supervisors may attend the meetings of the board of directors as non-voting delegates, and may raise questions or suggestions on the matters to be decided by the board of directors.

If the board of supervisors or supervisor of the company with no board of directors finds that the company is running abnormally, it (he) may make investigations. Where necessary, it (he) may hire an accounting firm to help it (him) with the relevant expenses being born by the company.

Article 56 The board of supervisors shall hold meetings at least once a year. The supervisors may propose to hold temporary meetings of the board of supervisors.

The discussion methods and voting procedures of the board of supervisors shall be prescribed in the articles of association, unless it is otherwise stimulated in this Law.

The resolution of the board of supervisors shall be adopted by half or more of the supervisors. The board of supervisors shall make records for the resolutions on the matter it discusses, which shall be signed by the supervisors in presence.

Article 57 The expenses necessary for the board of supervisors or the supervisor of a company with no board of supervisors to perform its (his) duties shall be borne by the company.

Section 3 Special Provisions on One-person Limited Liability Companies

Article 58 The provisions of this Section shall apply to the establishment and organizational structure of a one-person limited liability. As for any matter not prescribed in this Section, it shall be subject to the provisions of Sections 1 and 2 of this Chapter.

The term "one-person limited liability company" as mentioned in this Law refers to a limited liability company with only one natural person shareholder or a juridical person shareholder.

Article 59 The minimum amount of registered capital of a one-person limited liability company shall be RMB 100, 000 Yuan. The shareholder shall, in a lump sum, pay the capital contribution as specified in the articles of association.

One natural person is allowed to establish merely one one-person limited liability company which shall not set up any further one-person limited liability company.

Article 60 A one-person limited liability company shall, in the company registration, give a clear indication that it is solely-funded by one natural person or one juridical person, and the same shall be specified in the business license of the company.

Article 61 The articles of association of a one-person limited liability company shall be formulated by the shareholders.

Article 62 A one-person limited liability company may not set up the board of directors. When the shareholders make a decision on any of the matters as listed in Article 38 of this Law, they shall make it in written form, and preserve it in the company after signed by the shareholders.

Article 63 A one-person limited liability company shall make a financial statement at the end of every fiscal year, which shall be subject to the audit by an accounting firm.

Article 64 If the shareholder of a one-person limited liability company is unable to prove that the property of the one-person limited liability company is independent from his own property, he shall bear joint liabilities for the debts of the company.

Section 4 Special Provisions on Solely State-funded Companies

Article 65 The provisions of this Chapter shall apply to the establishment and organizational structure of the solely state-owned companies. Any matter not prescribed by this Chapter shall be subject to the provisions of Sections 1 and 2 of this Chapter.

The term "solely state-owned company" as mentioned in this law refers to a limited liability company established through investment solely by the state, for which the State Council or the local people's government authorizes the state-owned assets supervision and administration institution of the people's government at the same level to perform the functions of the capital contributors.

Article 66 The articles of association of a solely state-owned company shall be formulated by the state-owned assets supervision and administration institution, or shall be drafted by the board of directors and then be reported to the state-owned assets supervision and administration institution for approval.

Article 67 A solely state-owned company shall not set up the shareholders' meeting, and the functions of the shareholders' meeting shall be exercised by the state-owned assets supervision and administration institution. The state-owned assets supervision and administration institution may authorize the board of directors of the company to exercise some of the functions of the shareholders' meeting and decide on important matters of the company, excluding those that must be decided by the state-owned assets supervision and administration such as merger, split-up, dissolution of the company, increase or decrease of registered capital as well as the issuance of corporate bonds. The merger, split-up, dissolution or application for bankruptcy of an important solely state-owned company shall be subject to the examination of the state-owned assets supervision and administration institution, and then be reported to the people's government at the same level for approval. The term "important solely state-owned company" as mentioned in the preceding paragraph shall be determined according to the provisions of the State Council.

Article 68 A solely state-owned company shall establish the board of directors, which shall exercise its functions according to Articles 47 and 67 of this Law. Every term of office of the directors shall not exceed 3 years. The board of directors shall comprise representatives of the employees. And the members of the board of directors shall be designated by the state-owned assets supervision and administration institution, but of whom the representatives of the employees shall be elected through the meeting of the representatives of the employees of the company. The board of directors shall have one chairman and may have a deputy chairman. The chairman and deputy chairman shall be designated by the state-owned assets supervision and administration institution from the members of the board of directors.

Article 69 A solely state-owned company shall have a manager, who shall be hired or dismissed by the board of directors and exercise his authorities according to Article 50 of this Law. Upon consent of the state-owned assets supervision and administration institution, the members of the board of directors may concurrently hold the post of manager.

Article 70 None of the chairman, deputy chairman, directors and senior managers of a solely state-owned company may concurrently hold a post in any other limited liability company, joint stock limited company or any other economic organization, unless it is permitted by the state-owned assets supervision and administration institution.

Article 71 The board of supervisors of a solely state-owned company shall comprise at least 5 persons, of whom the employees' representatives shall account for not less than 1/3, and the concrete percentage shall be specified in the articles of association.

The members of the board of supervisors shall be appointed by the state-owned assets supervision and administration institution, however, of whom the employees' representatives shall be elected through the meeting of representatives of the employees of the company. The chairman of the board of supervisors shall be appointed by the state-owned assets supervision and administration institution from the members of the board of supervisors. The board of supervisions shall exercise the functions as mentioned in Article 54 (1) through (3) of this Law and those prescribed by the State Council.

Chapter III Transfer of Stock Rights of a Limited Liability Company

Article 72 All or some of the stock rights of the shareholders of a limited liability company may be transferred between the shareholders.

Where a shareholder intends to transfer his/its stock rights to any non-shareholder, he/it shall be subject to the approval of more than half of the other shareholders. The shareholder shall notify the other shareholders in written form of the matters on the transfer of stock rights for their approval. If any of the other shareholders fails to give it a reply within 30 days after the receipt of the written notice, it shall be deemed to have agreed to the transfer. If half or more of the other shareholders disagree to the transfer, the shareholders who disagree to the transfer shall purchase the stock rights to be transferred. If they refuse to purchase these stock rights, they shall be deemed to have agreed to the transfer. Under the same conditions, the other shareholders have a preemptive right to purchase the stock rights to be transferred upon their approval. If two or more shareholders claim the preemptive rights, they shall determine their respective percentage of purchase through negotiation. If they fail to reach an agreement during the negotiation, they shall exercise the preemptive rights on the basis of their respective percentage of capital contributions. Unless it is otherwise provided for of the transfer of stock rights in the articles of association, the articles of association shall be followed.

Article 73 When the people's court transfers the stock rights of a shareholder in light of the mandatory enforcement procedures as provided for in laws, it shall notify the company and all the shareholders, and the other shareholders have a preemptive right under the same conditions. If any of the other shareholders fails to exercise their preemptive rights within 20 days after he/it receives the notice of the court, it shall be deemed to have waived his/its preemptive right.

Article 74 After a company transfers its stock rights according to Articles 72 and 73 of this Law, it shall cancel the capital contribution certificate of the former shareholder, issue a capital contribution certificate to the new shareholder and modify the record on the shareholders and their capital contributions in the articles of association and the register of shareholders. And no voting of the shareholders' meeting is needed for the modification of the articles of association.

Article 75 Under any of the following circumstances, a shareholder, who votes against the resolution of the shareholders' meeting, may request the company to purchase its stock rights at a reasonable price:
(1) The company has not distributed any profit to the shareholders for 5 consecutive years, though it has made profits for five consecutive years and meets the profit distribution conditions as prescribed in this Law;
(2) The merger, split-up, or transfer of the main properties of the company is undertaken;
(3) When the business term as prescribed in the articles of association expires or other reasons for dissolution as stipulated in the articles of association occur, the shareholders' meeting makes the company continue existing by adopting a resolution on modifying the articles of association.

Within 60 days after the resolution is adopted at the shareholders' meeting, if the shareholder and the company fail to reach an agreement on the purchase of stock rights, the shareholder may file a lawsuit to the people's court within 90 days after the resolution is adopted at the shareholders' meeting.

Article 76 After the death of a natural person shareholder, his lawful inheritor may inherit the shareholder's qualifications, unless it is otherwise prescribed by the articles of association.

Chapter IV Establishment and Organizational Structure of a Joint Stock Limited Company

Section 1 Establishment

Article 77 The establishment of a joint stock limited company shall meet the following conditions:
(1) The number of initiators meets the quorum;
(2) The capital stock subscribed for and raised by the initiators reaches the minimum amount of the statutory capital;
(3) The issuance of shares and the preparatory work accord with the provisions of the law;
(4) The articles of association are formulated by the initiators, and are adopted at the establishment meeting if the company is to be launched by stock floatation;
(5) The company has a name, and its organizational structure accords with that of a joint stock limited company
(6) The company has a domicile.

Article 78 A joint stock limited company may be established by ways of promotion or stock floatation. The establishment of a company by promotion means that the initiators establish a company by subscribing for all of the shares that should be issued by the company. The establishment of a company by stock floatation means that the initiators establish a company by subscribing for some of the shares that should be issued by the company and offering the remaining shares to the general public or to particular objects for subscription.

Article 79 To establish a joint stock limited company, there shall be not less than 2 but not more than 200 initiators, of whom half or more shall have a domicile within the territory of China.

Article 80 The initiators of a joint stock limited company shall undertake the preparatory work of the company. They shall conclude an agreement of initiators to clarify their respective rights and obligations during the course of establishing the company.

Article 81 Where a joint stock limited company is established by promotion, its registered capital shall be the total capital stock subscribed for by all the initiators as registered in the company registration authority. The minimum amount of initial capital contributions to be made by all initiators shall be not less than 20% of the total registered capital, and the remaining amount shall be paid off by the initiators within 2 years as of the day when the company is established, while for an investment company, the remaining amount may be paid off within 5 years. Before the registered capital is paid off, no stock may be offered to others for subscription.

Where a joint stock limited company is established by stock floatation, its registered capital shall be the total actually paid capital stock as registered in the company registration authority. The minimum amount of the registered capital of a joint stock limited company shall be RMB 5 million Yuan. If any law or administrative regulation prescribes a relatively higher minimum amount of registered capital, such provision shall be followed.

Article 82 The articles of association of a joint stock limited company shall specify the following matters:
(1) the name and domicile of the company;
(2) the business scope of the company;
(3) the form of company establishment;
(4) total shares, value of each share, and the amount of registered capital of the company;
(5) the name of every initiator, the shares it has subscribed for, as well as the form and date of capital contributions;
(6) the composition, authorities, term of office, and rules of procedure of the board of directors,
(7) the legal representative of the company;
(8) the composition, authorities, term of office, and rules of procedure of the board of supervisors;
(9) the methods for profit distribution of the company;
(10) the reasons for dissolution of the company and liquidation methods;
(11) the methods for issuing notices or public announcements of the company; and
(12) other matters deemed necessary by the meetings of shareholders.

Article 83 The form of capital contributions of initiators shall be subject to the provisions in Article 27 of this Law.

Article 84 When establishing a joint stock limited company by promotion, the initiators shall subscribe, in writing, for the full amount of shares prescribed in the articles of association. In the case of paying the capital contributions at one time, the initiators shall make the payment in a lump sum; in the case of paying the capital contributions by installments, the initiators shall make the down payment immediately. In the case of making capital contributions in non-monetary properties, the initiators shall go through the procedures for the transfer of property rights according to law.

If any of the initiators fails to make capital contributions by following the provisions of the preceding paragraph, it shall bear the liabilities for breach of contract according to the stipulations in the initiators agreement. After the initiators have made their down payment, they should elect the board of directors and the board of supervisors. The board of directors shall file a registration application with the company registration authority and submit thereto the articles of association, the capital verification certification as issued by a lawfully established capital verification institution, as well as other documents as stimulated by the laws and administrative regulations.

Article 85 For a joint stock limited company established by stock flotation, the shares subscribed for by the initiators shall not be less than 35 % of the total shares. However, if it is otherwise provided for by any law or administrative regulation, such law or administrative regulation shall prevail.

Article 86 When raising shares in the public, the initiators shall publish a prospectus and prepare share subscription forms. The share subscription form shall involve the items listed in Article 87, and a subscriber shall fill in the number and amount of shares he subscribes for and his domicile, and shall affix his signature or seal thereto. The subscriber shall pay the shares pursuant to the number of shares he has subscribed for.

Article 87 The prospectus shall be accompanied by the articles of association formulated by the initiators and shall state the following:
(1) the number of shares subscribed for by the initiators;
(2) the value and issuing price of each share;
(3) the total number of unregistered stocks issued;
(4) the purposes of the funds raised;
(5) the rights and obligations of the subscribers; and
(6) the beginning and ending dates for the public offer and a statement that the subscribers may revoke their subscriptions if the offer is under-subscribed at the close of the offer.

Article 88 The public offer shares shall be underwritten by a lawfully established securities company, and an underwriting agreement shall be concluded.

Article 89 As for the public offer shares, the initiators shall sign an agreement with the receiving bank.

The receiving bank shall receive and hold as an agent the payments for shares in light of the agreement, issue receipts to subscribers who have made the payments and be obliged to issue evidence of receipt of payments to the relevant departments.

Article 90 After the full payment for the public offer shares, they shall be verified by a lawfully established capital verification institution, and a certification shall be issued thereby. The initiators shall hold a company establishment meeting within 30 days, which shall comprise the subscribers. If the public offer shares are not fully subscribed for at the expiration of the time limit prescribed in the prospectus, or the initiators fail to hold an establishment meeting within 30 days after the full payment for the public offer shares, the subscribers may demand the initiators to make repayments for the public offer shares plus an interest calculated at the bank deposit interest rate for the same period.

Article 91 The initiators shall notify every subscriber of the date of the establishment meeting or make a public announcement on the meeting 15 days in advance. The establishment meeting may not be held, unless subscribers representing at least half of the shares appear. The establishment meeting shall exercise the following authorities:
(1) deliberating the report on the pre-establishment activities prepared by the sponsors;
(2) adopting the articles of association;
(3) electing members of the board of directors;
(4) electing members of the board of supervisors;
(5) checking the expenses incurred for the establishment of the company;
(6) checking the value of the assets contributed by the initiators in lieu of pecuniary payment for the shares;
(7) Where any force majeure or major change of the operation conditions directly affect the establishment of the company, the resolution not to establish the company may be adopted. A resolution adopted at the establishment meeting on any of the matters as mentioned in the previous paragraph requires affirmative votes by subscribers representing more than half of the votes of those attending the meeting.

Article 92 The initiators and subscribers shall not withdraw their share capital after making payments for the shares they have subscribed for or after making capital contributions by using non-monetary properties, unless the public offer shares have not been fully subscribed within the time limit, the initiators fail to convene the establishment meeting within the time limit or the establishment meeting has decided not to set up the company.

Article 93 The board of directors shall, within 30 days after the establishment meeting ends, file an application for registration with the company registration authority and submit the following documents to it:
(1) a company registration application;
(2) the records of the establishment meeting;
(3) the articles of association;
(4) a capital verification certification;
(5) the appointment documents and identity certificates of the legal representative, directors and supervisors;
(6) the certifications for the juridical person or natural person status of the initiators; and
(7) the certification on the domicile of the company. As for a joint stock limited company established by stock floatation that makes public stock offers, in additions to the aforementioned documents, it shall submit to the company registration authority the approval document issued by the securities regulatory institution of the State Council.

Article 94 After the establishment of a joint stock limited company, if any of the initiators fails to make full payment for the capital contributions as provided for in the articles of association, it shall make up the arrears, and the other initiators shall bear joint liabilities. After the establishment of a joint stock limited company, if it is found that the actual value of the non-monetary properties used as capital contributions for the establishment of the company is obviously lower than that as prescribed in the articles of association, the initiator who has made the capital contribution shall make up the balance, and the other initiators shall bear joint liabilities.

Article 95 The initiators of a joint stock limited company shall bear the following responsibilities:
(1) In the case of failure to establish the company, bearing joint liabilities for the debts and expenses resulted from the pre-establishment activities;
(2) In the case of failure to establish the company, bearing joint liabilities for refunding the paid-in capital as well as the interests thereof computed at the bank interest rate for the same period; and
(3) If the company's interest is injured in the course of its establishment due to the negligence of the initiators, being liable for making compensations to the company.

Article 96 Where a limited liability company is changed into a joint stock limited company, the total amount of the paid-in capital shall be not less than the total amount of the net assets. Where a limited liability company is changed into a joint stock limited company, the public offer stocks issued for the purpose of increasing the capital shall comply with the law.

Article 97 A joint stock limited company shall prepare and keep in the company the articles of association, register of the shareholders, counterfoil of corporate bonds, records of the shareholders' meetings, records of the meetings of the board of directors, records of the meetings of the board of supervisors, and financial reports.

Article 98 The shareholders shall be entitled to refer to the articles of association, register of the shareholders, counterfoil of corporate bonds, records of the shareholders' meeting meetings, records of the meetings of the board of directors, records of the meetings of the board of supervisors and financial reports, and may bring forward proposals or raise questions about the business operation of the company.

Section 2 Shareholders' Meeting

Article 99 The shareholders' meeting of a joint stock limited company shall comprise all the shareholders. It is the company's organ of power, which shall exercise its authorities according to law.

Article 100 The provisions regarding the authorities of the shareholders' meeting of a limited liability company as prescribed in the first paragraph of Article 38 of this law shall apply to the shareholders' meeting of a joint stock limited company.

Article 101 An annual session of the shareholders' meeting shall be held each year. Under any of the following circumstances, a temporary shareholders' meeting shall be held within 2 months:
(1) The number of directors is less than two-thirds of the number of directors as required by this law or the number of directors as prescribed in the articles of association;
(2) The un-recovered losses of the company reach one-third of the total pain-in capital;
(3) At the request of the shareholders separately or aggregately holding 10% or more of the company's shares;
(4) The board of directors deems it necessary;
(5) At the request of the board of supervisors; and
(6) Other circumstances as prescribed in the articles of association.

Article 102 A session of the shareholders' meeting shall be convened by the board of directors and be presided over by the chairman of the board of directors. If the chairman is unable or fails to perform his duties, the meetings thereof shall be presided over by the deputy chairman of the board of directors. If the deputy chairman of the board of directors is unable or fails to perform his duties, the meetings shall be presided over by a director jointly recommended by half or more of the directors.

If the board of directors or the acting director is unable or fails to fulfill the obligation of convening the meetings of the shareholders' meeting, the board of supervisors shall convene and preside over such meetings. If the board of supervisors does not convene or preside over such meetings, the shareholders separately or aggregately holding 1/10 or more of the shares may convene and preside over such meetings on their own initiative.

Article 103 As for a shareholders' meeting to be held, a notice shall be given to every shareholder 20 days in advance, which shall state the time and place of the meeting as well as the matters to be deliberated at the meeting. As for a temporary meeting of the shareholders' meeting, a notice shall be given to every shareholder 15 days in advance. As for the issue of unregistered stocks, the time and place of the meeting as well as the matters to be deliberated at the meeting shall be announced 30 days in advance.

The shareholders separately or aggregately holding 3% or more of the shares of the company may put forward a written temporary proposal to the board of directors 10 days before a shareholders' meeting is held. The board of directors may notify other shareholders within 2 days and submit the temporary proposal to the meeting of the shareholders' meeting for deliberation. The contents of a temporary proposal shall fall within the scope to be decided by the shareholders' meeting, and the temporary proposal shall have a clear topic for discussion and matters to be decided. The shareholders' meeting shall not make any decision on any matter not listed in the notice as mentioned in the preceding two paragraphs. If the holders of unregistered stocks attend the shareholders' meeting, they shall have their stocks preserved in the company during the period from 5 days before the meeting is held to the day when the shareholders' meeting is closed.

Article 104 When a shareholder attends the shareholders' meeting, he shall have one voting right for each share he holds. However, the company has no voting right for its own shares it holds. When any resolution is to be made by the shareholders' meeting, it shall be adopted by shareholders representing more than half of the voting rights of the shareholders in presence. However, when the shareholders' meeting makes a decision to modify the articles of association or to increase or reduce the registered capital, or a resolution about the merger, split-up, dissolution or change of the company form, the resolution shall be adopted by shareholders representing 2/3 or more of the voting rights of the shareholders in presence.

Article 105 For the important matters such as company transfer, being assignee of any important asset or providing guarantee for any other person, which shall be decided through the shareholders' meeting under this Law and the articles of association, the board of directors shall timely call a shareholders' meeting for voting.

Article 106 When the shareholders' meeting elects directors or supervisors, it may, according to the articles of association or resolution of the shareholders' meeting, adopt a cumulative voting system. The term "cumulative voting system" as mentioned in this Law refers to a system of voting by shareholders for the election of directors or supervisors at a session of the shareholders' meeting in which the shareholder can multiply his voting rights by the number of candidates and vote them all for one candidate for director or supervisor.

Article 107 A shareholder may entrust an agent to attend a shareholders' meeting. The agent shall present a power of attorney issued by the shareholder to the company, and shall exercise his voting rights within the authorization scope.

Article 108 The shareholders' meeting shall prepare records regarding the decisions on the matters discussed by it. The chairman of the meeting and the directors in presence shall affix their signatures to the records, which shall be preserved together with the book of signatures of the shareholders in presence as well as the power of attorney thereof.

Section 3 The Board of Directors and Manager

Article 109 A joint stock limited company shall set up a board of directors, which shall comprise 5-19 persons.

The board of directors may include representatives of the company's employees. The representatives of the employees who serve as board directors shall be democratically elected through the meeting of the representatives of the employees, meeting of employees or otherwise.

The provisions in Article 46 of this Law on the term of office of the directors of a limited liability company shall apply to that of the director of a joint stock limited company. The provisions in Article 47 of this Law on the functions of the board of directors of a limited liability company shall apply to that of the board of directors of a joint stock limited company.

Article 110 The board of directors shall have one chairman, and may have a deputy chairman. The chairman and deputy chairmen shall be elected by more than half of all the directors. The chairman of the board of directors shall convene and preside over the meetings of the board of directors and examine the implementation of the resolutions of the board of directors. The deputy chairman shall assist the chairman to work. If the chairman is unable or fails to perform his duties, the deputy chairman shall perform such duties. If the deputy chairman of the board of directors is unable or fails to perform his duties, the director who is jointly recommended by half or more of the directors shall perform such duties.

Article 111 The board of directors shall convene at least two meetings every year, and shall notice all directors and supervisors 10 days before it holds a meeting. The shareholders representing 1/10 or more of the voting rights, or 1/3 of the directors, or the board of supervisors may bring forward a proposal on holding a temporary meeting of the board of directors. The chairman of the board of directors shall, within 10 days after he receives such a proposal, convene and preside over a meeting of the board of directors. If the board of directors holds a temporary meeting, it may separately decide the method and time limit for the notification on convening meetings of the board of directors.

Article 112 No meeting of the board of directors may be held, unless more than half of the directors are present. When the board of directors makes a resolution, it shall be adopted by more than half of all the directors.

As for the voting on a resolution of the board of directors, a director shall have one vote only.

Article 113 The directors shall attend in person the meetings of the board of directors. Where any director is unable to attend the meeting for a certain reason, he may, by issuing a written power of attorney, entrust another director to attend the meeting on his behalf, and the scope of authorization shall be stated in the power of attorney.

The board of directors shall prepare records regarding the resolutions on the matters discussed at the meeting, which shall be signed by the directors in presence. The directors shall be responsible for the resolutions of the board of directors. In case a resolution of the board of directors is in violation of laws, administrative regulations, articles of association or resolutions of the shareholders' meetings and causes any serious loss to the company, the directors who participate in adopting the resolution shall make compensation. However, if a director is proven to have expressed his objection to the voting on such resolution and his objection was recorded in the records, then the director may be exempted from liabilities.

Article 114 A joint stock limited company may have a manager, who shall be hired or dismissed by the board of directors.

The provisions of Article 50 of this Law on the authorities of the manager of a limited liability company shall apply to that of the manager of a joint stock limited company.

Article 115 The board of directors of a company may decide to appoint a member of the board of directors to concurrently take the post of the manager.

Article 116 No company may, directly or via its subsidiary, lend money to any of its directors, supervisors or senior managers.

Article 117 A company shall regularly disclose to its shareholders the information about remunerations obtained by the directors, supervisors and senior managers from the company.

Section 4 the Board of Supervisors

Article 118 A joint stock limited company shall set up a board of supervisors, which shall comprise at least 3 persons.

The board of supervisors shall include representatives of shareholders and an appropriate percentage of representatives of the company's employees. The percentage of the representatives of employees shall account for not less than 1/3 of all the supervisors, but the concrete percentage shall be specified in the articles of association. The representatives of employees who serve as members of the board of supervisors shall be democratically elected through the meeting of representatives of the company's employees, shareholders' meeting or by other means. The board of supervisors shall have one chairman, and may have a deputy chairman. The chairman and deputy chairman shall elected by more than half of all the supervisors. The chairman of the board of supervisors shall convene and preside over the meetings of the board of supervisors. If the chairman of the board of supervisors is unable or fails to perform his duties, the deputy chairman of the board of supervisors shall convene and preside over the meeting of the board of supervisors. If the deputy chairman of the board of supervisors is unable or fails to perform the duties, the supervisor jointly recommended by half or more of the supervisors shall convene and preside over the meetings of the board of supervisors. No director or senior manager may concurrently act as a supervisor.

The provisions of Article 53 of this Law on the term of office of the supervisors of a limited liability company shall apply to that of the supervisors of a joint stock limited company.

Article 119 The provisions of Articles 54 and 55 of this Law on the functions of a limited liability company shall apply to that of the board of supervisors of a joint stock limited company. The expenses necessary for the board of supervisors to exercise its authorities shall be borne by the company.

Article 120 The board of supervisors shall hold at least one meeting every 6 months. The supervisors may propose to convene temporary meetings of the board of supervisors. The discussion methods and voting procedures of the board of supervisors shall be prescribed in the articles of association, unless it is otherwise provided for by this Law.

The board of supervisors shall prepare records for the decisions on the matters discussed at the meeting, which shall be signed by the supervisors in presence.

Section 5 Special Provisions on the Organizational Structure of a Listed Company

Article 121 The term "listed company" as mentioned in this Law refers to the joint stock limited companies whose stocks are listed and traded in a stock exchange.

Article 122 Where a listed company purchases or sells any important assets, or provides a guarantee of which the amount exceeds 30% of its total assets, a resolution shall be made by the shareholders' meeting and adopted by shareholders representing 2/3 of the voting rights of the shareholders in presence.

Article 123 A listed company shall have independent directors. And the concrete measures shall be formulated by the State Council.

Article 124 A listed company may have a secretary of the board of directors, who shall be responsible for the preparation of the sessions of shareholders' meeting and meetings of the board of directors, preservation of documents, management of the company's stock rights, information disclosure, and etc.

Article 125 Where any of the directors has any relationship with the enterprise involved in the matter to be discussed at the meeting of the board of directors, he shall not vote on this resolution, nor may he vote on behalf of any other person. The meeting of the board of directors shall not be held unless more than half of the unrelated directors are present at the meeting. A resolution of the board of directors shall be adopted by more than half of the unrelated directors. If the number of unrelated directors in presence is less than 3 persons, the matter shall be submitted to the shareholders' meeting of the listed company for deliberation.

Chapter V Issuance and Transfer of Shares of a Joint Stock Limited Company

Section 1 Issuance of Shares

Article 126 The capital of a joint stock limited company shall be divided into shares, and all the shares shall be of equal value.

The shares of the company are represented with stocks. A stock is a certificate issued by the company to certify the share held by a shareholder.

Article 127 The issuance of shares shall comply with the principle of fairness and impartiality, and the shares of the same class shall have the same rights and benefits. The stocks issued at the same time shall be equal in price and shall be subject to the same conditions. The price of each share purchased by any organization or individual shall be the same.

Article 128 The stocks may be issued at a price equal to or above the par value, but not below the par value.

Article 129 The stocks shall be in paper form or in other forms prescribed by the securities regulatory institution of the State Council. A stock shall state the following major items:
(1) the company name;
(2) the date of establishment of the company;
(3) the class and par value of the stock, as well as the number of shares it represents; and
(4) the serial number of the stock.

The stock shall bear the signature of the legal representative and the seal of the company.

The stocks held by the initiators shall be marked with the words "initiators' stocks".

Article 130 The stocks issued by a company may be registered stocks or unregistered stocks. The stocks issued to initiators or juridical persons shall be registered stocks, which shall state the names of such initiators or juridical persons, and shall not be registered in any other person's name or the name of any representative.

Article 131 A company that issues registered stocks shall prepare a register of shareholders, which shall state the following:
(1) the name and domicile of every shareholder;
(2) the number of shares held by each shareholder;
(3) the serial numbers of the stocks held by every shareholder; and
(4) the date on which every shareholder acquired his shares. A company issuing unregistered stocks shall record the amount, serial numbers and issuance date of the stocks.

Article 133 After a joint stock limited company is established, it shall formally deliver the stocks to the shareholders. No company may deliver any stock to the shareholders prior to its establishment.

Article 134 Where a company intends to issue new stocks, it shall, under its articles of association, make a resolution on the following matters through the shareholders' meeting or the board of directors:
(1) the class and amount of new stocks;
(2) the issuing price of the new stocks;
(3) the beginning and ending dates for the issuance of the new stocks; and
(4) the class and amount of the new stocks to be issued to the original shareholders.

Article 135 When a company publicly issues new stocks upon approval of the securities regulatory institution of the State Council, it shall publish a new stock prospectus and its financial reports, and shall make a stock subscription form. The provisions of Articles 88 and 89 of this Law shall apply to the public offering of new stocks of a company.

Article 136 When a company issues new stocks, it may make a pricing plan in light of its business operation and financial status.

Article 137 After a company raises enough capital, it shall go through the modification registration in the company registration authority, and make an public announcement.

Section 2 Transfer of Shares

Article 138 The shares held by the stockholders may be transferred according to law.

Article 139 Where a stockholder intends to transfer its shares, it shall transfer its shares in a lawfully established stock exchange or by any other means as prescribed by the State Council.

Article 140 The transfer of a registered stock shall be effected by the stockholder's endorsement or by any other means stipulated by relevant laws or administrative regulations. After the transfer, the company shall record the name and domicile of the transferee in the register of shareholders. Within 20 days before a meeting of shareholders is held, or within 5 days prior to the benchmark date decided by the company for the distribution of dividends, no modification registration may be made to the register of shareholders as mentioned in the preceding paragraph. However, if any law otherwise provides for the modification registration of the register of shareholders of listed companies, the latter shall prevail.

Article 141 The transfer of an unregistered stock becomes valid as soon as the stockholder delivers the stock to the transferee.

Article 142 The shares of a company held by the initiators of this company shall not be transferred within 1 year as of the day of establishment of the company. The shares issued before the company publicly issues shares shall not be transferred within 1 year as of the day when the stocks of the company get listed and are traded in a stock exchange. The directors, supervisors and senior managers of the company shall declare to the company the shares held by them and the changes thereof. During the term of office, the shares transferred by any of them each year shall not exceed 25% of the total shares of the company he holds. The shares of the company held by the aforesaid persons shall not be transferred within 1 year as of the day when the stocks of the company get listed and are traded in a stock exchange. After any of the aforesaid persons is removed from his post, he shall not transfer the shares of the company he holds. The articles of association may have other restrictions on the transfer of shares hold by the directors, supervisors and senior managers.

Article 143 A company shall not purchase its own shares, except for any of the following circumstances:
(1) to decrease the registered capital of the company;
(2) to merge with another company holding shares of this company;
(3) to award the employees of this company with shares; or
(4) It is requested by any shareholder to purchase his shares because this shareholder raises objections to the company's resolution on merger or split-up made at a session of the meeting of shareholders. Where a company needs to purchase its own shares for any of the reasons as mentioned in Items (1) through (3) of the preceding paragraph, it shall be subject to a resolution of the shareholders' meeting. After the company purchases its own shares according to the provisions of the preceding paragraph, it shall, under the circumstance as mentioned in Item (1) , write them off within 10 days after the purchase; while under the circumstance as mentioned either in Item (2) or (4) , shall transfer them or write them off within 6 months.

The shares purchased by the company according to Item (3) of the preceding paragraph shall not exceed 5% of the total shares already issued by this company. The funds used for the share acquisition shall be paid from the aftertax profits of the company. The shares purchased by the company shall be transferred to the employees within 1 year. No company may accept any subject matter taking the stocks of this company as a pledge.

Article 144 In case any registered stocks are stolen, lost or destroyed, the shareholder may request the people's court to declare these stocks invalid in light of the public notice procedure prescribed in the Civil Procedural Law of the People's Republic of China. After the people's court has invalidated these stocks, the shareholder may file an application to the company for issuance of new stocks.

Article 145 The stocks of a listed company shall get listed and traded according to relevant laws, administrative regulations, as well as the dealing rules of the stock exchange.

Article 146 A listed company shall, in light of laws and administrative regulations, publicize its financial status, business operation and important lawsuits, and shall publish its financial reports once every six months in each fiscal year.

Chapter VI Qualifications and Obligations of the Directors, Supervisors and Senior Managers of a Company

Article 147 Anyone who is under any of the following circumstances shall not take the post of a director, supervisor or senior manager of a company:
(1) Being without or with limited capacity of civil conduct;
(2) He has been sentenced to any criminal penalty due to an offence of corruption, bribery, encroachment of property, misappropriation of property or disrupting the economic order of the socialist market economy and 5 years have not passed since the completion date of the execution of the penalty; or he has ever been deprived of his political rights due to any crime and 3 years have not passed since the completion date of the execution of the penalty;
(3) Where he was a former director, factory director or manager of a company or enterprise which was bankrupt and liquidated, and was personally liable for the bankruptcy of such company or enterprise, three years have not passed since the date of completion of the bankruptcy and liquidation of the company or enterprise;
(4) Where he was the legal representative of a company or enterprise, and the business license of this company or enterprise was revoked and this company or enterprise was ordered to close due to violation of the law, and he is personally liable for the revocation, three years have not passed since the date of the revocation of the business license thereof;
(5) He has a relatively large amount of debt which is due but uncleared.

In case a company elects or appoints any director or supervisor, or hires any senior manager by violating the provisions in the preceding paragraph, the election, appointment or hiring shall be invalidated. In case any director, supervisor or senior manager, during his term of office, is under any of the circumstances as mentioned in the preceding paragraph, the company shall dismiss him from his post.

Article 148 The directors, supervisors and senior managers shall comply with laws, administrative regulations and the articles of association. They shall bear the obligations of fidelity and diligence to the company. No director, supervisor or senior manager may take any bribe or other illegal gains by taking the advantage of his authorities, or encroach on the properties of the company.

Article 149 No director or senior manager may have any of the following acts:
(1) Misappropriating funds of the company;
(2) Depositing the company's funds into an account in his own name or in any other individual's name;
(3) Without the consent of the shareholders' meeting, shareholders' assembly or board of directors, loaning the company's fund to others or providing any guaranty to any other person by using the company's property as in violation of the articles of association;
(4) Signing a contract or trading with this company by violating the articles of association or without the consent of the shareholders' meeting or shareholders' assembly;
(5) Without the consent of the shareholders' meeting or shareholders' assembly, seeking business opportunities for himself or any other person by taking advantages of his authorities, or operating for himself or for any other person any like business of the company he works for;
(6) Taking commissions on the transactions between others and this company into his own pocket;
(7) Disclosing the company's secrets without permit;
(8) Other acts that are inconsistent with the obligation of fidelity to the company. The income of any director or senior manager from any act in violation of the preceding paragraph shall belong to the company.

Article 150 Where any director, supervisor or senior manager violates laws, administrative regulations or the articles of association during the course of performing his duties, if any loss is caused to the company, he shall make compensation.

Article 151 If the shareholder's meeting or shareholders' meeting demands a director, supervisor or senior manager to attend the meeting as a non-voting delegate, he shall do so and shall answer the shareholders' inquiries.

The directors and senior managers shall faithfully offer relevant information and materials to the board of supervisors or the supervisor of the limited liability company with no board of supervisors, and none of them may obstruct the board of supervisors or supervisor from exercising its (his) authorities.

Article 152 Where a director or senior manager is under the circumstance as stated in Article 150 of this Law, the shareholder(s) of the limited liability company or joint stock limited company separately or aggregately holding 1% or more of the total shares of the company may require the board of supervisors or the supervisor of the limited liability company with no board of supervisors in writing to file a lawsuit in the people's court. If the supervisor is under the circumstance as stated in Article 150 of this Law, the aforesaid shareholder(s) may require the board of directors or the acting director of the limited liability company with no board of directors to in writing lodge a lawsuit in the people's court.

If the board of supervisors, or supervisor of a limited liability company with no board of supervisors, or the board of directors or the acting director refuses to lodge a lawsuit after it (he) receives a written request as mentioned in the preceding paragraph, or if it or he fails to file a lawsuit within 30 days after it receives the request, or if, in an emergency, the failure to lodge a lawsuit immediately will cause unrecoverable damages to the interests of the company, the shareholder(s) as listed in the preceding paragraph may, on their own behalf, directly lodge a lawsuit in the people's court.

In case the legitimate rights and interests of a company are impaired and losses are caused to the company, the shareholders as mentioned in the preceding paragraph may initiate a lawsuit in the people's court in light of the provisions of the preceding two paragraphs.

Article 153 If any director or senior manager damages the shareholders' interests by violating any law, administrative regulation or the articles of association, the shareholders may lodge a lawsuit in the people's court.

Chapter VII Corporate Bonds

Article 154 The term "corporate bonds" as mentioned in this Law refers to the securities that are issued by a company according to the statutory procedures with guaranteed payment of the principal plus interest by a specified future date. To issue corporate bonds, a company shall meet the issuance requirements of the Securities Law of the People's Republic of China.

Article 155 After an application for issuing corporate bonds is approved by the department authorized by the State Council, the company shall publish its bond issuance plan, which shall mainly state the following items:
(1) the name of the company;
(2) the purposes of use of the corporate bonds;
(3) the total amount of corporate bonds and par value thereof;
(4) the method for determining the interest rate of the bonds;
(5) the time limit and method for paying the principal plus interest;
(6) guarantee of the bonds;
(7) the issuing price of the bonds, and beginning and ending dates of the issuance;
(8) the net assets of the company;
(9) the total amount of corporate bonds having been issued but not yet due; and
(10) the underwriters of the corporate bonds.

Article 156 The physical bonds issued by a company shall state the name of company, par value, interest rate, time limit for repayment, and etc., and shall bear the signature of the legal representative and the seal of the company.

Article 157 The corporate bonds may be registered or unregistered bonds.

Article 158 A company shall prepare and keep the counterfoils of corporate bonds. If the company issues registered corporate bonds, the counterfoils thereof shall state the following items:
(1) the names and domiciles of the bondholders;
(2) the dates on which the bondholders acquires the bonds and the serial numbers of the bonds;
(3) the total amount of the bonds, par value, interest rate, time limit and method for repayment of principal plus interest; and
(4) the date on which the bonds are issued.

If the company issues unregistered corporate bonds, the counterfoils thereof shall state the total amount of the bonds, interest rate, time limit and method for repayment, issuance date and serial numbers of the bonds.

Article 159 The registration and settlement institutions of registered corporate bonds shall establish bylaws on the registration, preservation, interest payment and acceptance of bonds.

Article 160 The corporate bonds may be transferred. The transfer price shall be negotiated by the transferor and transferee.

The transfer of any corporate bonds, which gets listed and is traded in a stock exchange, shall comply with the dealing rules of the stock exchange.

Article 161 The transfer of registered corporate bonds shall be effected by the bondholder's endorsement or by other methods prescribed by the relevant laws and administrative regulations. In the case of transfer of registered bonds, the company shall record the name and domicile of the transferee in the counterfoil of corporate bonds. The transfer of unregistered corporate bonds takes effect as soon as the bondholder delivers the bonds to the transferee.

Article 162 A listed company may, upon the resolution of the shareholders' meeting, issue corporate bonds that may be converted into stocks and shall work out concrete conversion measures in the corporate bond issuance plan. To issue corporate bonds that may be converted into stocks, the listed company shall file an application with the securities regulatory institution for examination and approval. The corporate bonds that may be converted into stocks shall be marked with the words "convertible corporate bonds", and the number of convertible company bonds shall be specified in the company's records of bondholders.

Article 163 Where any convertible company bonds is issued, the company shall exchange its stocks for the bonds held by the bondholders in the prescribed method of conversion, provided that the bondholders have the option on whether or not to convert their bonds.

Chapter VIII Financial Affairs and Accounting of a Company

Article 164 A company shall establish its own financial and accounting bylaws according to laws, administrative regulations and provisions of the treasury department of the State Council.

Article 165 A company shall, after the end of each fiscal year, formulate a financial report, and shall have it checked by an accounting firm. The financial report shall be work out according to laws, administrative regulations and provisions of the treasury department of the State Council.

Article 166 A limited liability company shall submit the financial report to every shareholder within the time limit as prescribed in the articles of association. The financial report of a joint stock limited company shall be ready for the consultation of the shareholders at the company 20 days before the annual meeting of the shareholders is held. A joint stock limited company of public offer stocks shall make a public announcement of its financial report.

Article 167 Where a company distributes its aftertax profits of the current year, it shall draw 10 percent of the profits as the company's statutory common reserve. The company may stop drawing if the accumulative balance of the common reserve has already accounted for over 50 percent of the company's registered capital.

If the accumulative balance of the company's statutory common reserve is not enough to make up for the losses of the company of the previous year, the current year's profits shall first be used for making up the losses before the statutory common reserve is drawn therefrom according to the provisions of the preceding paragraph. After the company draws the statutory common reserve from the aftertax profits, it may, upon a resolution made by the shareholders' meeting, draw a discretionary common reserve from the aftertax profits. After the losses have been made up and common reserves have been drawn, a limited liability company shall distribute the remaining profits according to Article 35 of this Law; a joint stock limited company shall distribute the remaining profits in light of the proportions of shares held by shareholders, unless it is not permitted in the articles of association to distribute profits according to the proportions of shares held by shareholders.

If the shareholders' meeting, shareholders' assembly or board of directors distributes the profits by violating the provisions of the preceding paragraph before the losses are made up and the statutory common reserves are drawn, the profits distributed must be refunded to the company. No profit may be distributed for the company's shares held by this company.

Article 168 The premium of a joint stock limited company from the issuance of stocks at a price above the par value of the stocks, and other incomes listed in the capital accumulation fund according to provisions of the treasury department of the State Council shall be listed as the capital accumulation funds of the company.

Article 169 The capital accumulation funds of the company shall be used for making up losses, expanding the production and business scale or increasing the registered capital of the company. But the capital accumulation funds shall not be used for making up the company's losses.

When the statutory common reserve is changed to capital, the remainder of the common reserve shall not be less than 25 % of the registered capital prior to the increase.

Article 170 Where a company plans to hire or dismiss any accounting firm to undertake the auditing of the company, a resolution shall be made by the shareholders' meeting or shareholders' assembly or the board of directors according to the provisions of the articles of association. Where the shareholders' meeting or shareholders' assembly or the board of directors adopts a voting on the dismissal of any accounting firm, it shall allow the accounting firm to state its own opinions.

Article 171 A company shall provide to the accounting firm it hires truthful and complete accounting vouchers, account books, financial and accounting statements and other accounting materials, and may not refuse to do so or conceal any of them or make any false statements.

Article 172 Except for the statutory account books, a company shall not set up other account books.

No company asset may be deposited into any individual's account

Chapter IX Merger and Split-up of Company, Increase and Deduction of Registered Capital

Article 173 The merger of a company may be effected by way of merger or consolidation. In the case of merger, a company absorbs any other company and the absorbed company is dissolved; in the case of consolidation, two or more companies combine together for the establishment of a new one, and the existing ones are dissolved.

Article 174 As for a corporate merger, both parties to the merger shall conclude an agreement with each other and formulate balance sheets and checklists of properties. The companies involved shall, within ten days as of making the decision of merger, notify the creditors, and shall make a public announcement on a newspaper within 30 days. The creditors may, within 30 days as of the receipt of the notice or within 45 days as of the issuance of the public announcement if it fails to receive a notice, require the company to clear off its debts or to provide corresponding guarantees.

Article 175 In the case of a merger, the credits and debts of the companies involved shall be succeeded by the company that survives the merger or by the newly established company.

Article 176 As for the split-up of a company, the properties thereof shall be divided accordingly, and balance sheets and checklists of properties shall be worked out. The company shall, within 10 days as of the day when the decision of split-up is made, notice the creditors and shall make a public announcement on a newspaper within 30 days.

Article 177 The post-split companies shall bear joint liabilities for the debts of the former company before it is split up, unless it is otherwise prescribed by the company and the creditors before the split-up with regard to the clearance of debts in written agreement.

Article 178 Where a company finds it necessary to reduce its registered capital, it must work out balance sheets and checklists of properties.

The company shall, within ten days as of the day when the decision of reducing registered capital, notify the creditors and make a public announcement on a newspaper within 30 days. The creditors shall, within 30 days as of the receipt of a notice or within 45 days as of the issuance of the public announcement if it fails to receive a notice, be entitled to require the company to clear off its debts or to provide corresponding guarantees. The registered capital of the company after reducing its registered capital shall not be any lower than the bottom line requirement as provided for by law.

Article 179 Where a limited liability company increases its registered capital, the capital contributions of the shareholders for the increased amount shall be subject to the relevant provisions of the present Law regarding the capital contributions for the establishment of a limited liability company. Where a joint stock limited company issues new stocks for increasing its registered capital, the subscription for new stocks by shareholders shall be subject to the relevant provisions of the present Law regarding the payment of stock money for the establishment of a joint stock limited company.

Article 180 Where any of the registered items is changed during the process of merger or split-up of a company, the company shall go through modification registration with the company registration authority. If it is dissolved, it shall be deregistered according to law. If any new company is established, it shall go through the procedures for company establishment according to law.

In the case of increasing or reducing its registered capital, a company shall go through the modification registration with the company registration authority according to law.

Chapter X Dissolution and Liquidation of a Company

Article 181 A company may be dissolved under any of the following circumstances:
(1) The term of business operation as stipulated by the articles of association expires or any of the matters for dissolution as stipulated in the articles of association of the company appears;
(2) The shareholders' meeting or the shareholders' assembly decides to dissolve it;
(3) It is necessary to be dissolved due to merger or split-up of the company;
(4) Its business license is canceled or it is ordered to close down or to be dissolved according to law; or
(5) The people's court decides to dissolve it according to Article 183 of this Law.

Article 182 Where any of the circumstances as prescribed in Article 181 (1) of this Law occurs, a company may continue to exist by modifying its articles of association. To modifying its articles of association according to the provisions of the preceding paragraph, the consent of the shareholders who hold two thirds or more of the voting rights shall be obtained if it is a limited liability company, and the consent of two thirds or more of the voting rights the shareholders who attend the meeting of the shareholders shall be obtained if it is a joint stock limited company.

Article 183 Where a company meets any serious difficulty during its operation or management so that the interests of the shareholders will be subject to heavy loss if it continues to exist and it cannot be solved by any other means, the shareholders who hold ten percent or more of the voting rights of all the shareholders of the company may plead the people's court to dissolve the company.

Article 184 Where any company is dissolved according to the provisions of Article 181 (1) , (2) , (4) or (5) of this Law, a liquidation group shall be formed, within fifteen days as of the occurrence of the causes of dissolution, to carry out a liquidation. The liquidation group of a limited liability company shall comprise the shareholders, while that of a joint stock limited company shall comprise the directors or any other people as determined by the shareholders' meeting. Where no liquidation group is formed within the time limit, the creditors may plead the people's court to designate relevant persons to form a liquidation group. The people's court shall accept such request and form a liquidation group so as to carry out the liquidation in a timely manner.

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.

Article 201 Where any initiator or shareholder unlawfully take away its capital contribution after the company is established, he 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 capital contribution he has unlawfully taken away.

Article 202 Any company which has established another account books apart from the legally prescribed account books and violates of the present Law shall be ordered by the treasury department of the people's government at the county level or above to make corrections, and shall be fined not less than 50,000 Yuan but not more than 500, 000 Yuan.

Article 203 Where a company makes any false records or conceals any important fact in such materials as financial and accounting statements submitted to the relevant departments in charge, the relevant department in charge shall impose a fine of not more than 30, 000 Yuan but not more than 300, 000 Yuan upon the directly liable persons in charge and other directly liable persons.

Article 204 Where a company fails to draw legal accumulation funds according to the present Law, it shall be ordered by the treasury department of the people's government at the county level or above to make up the amount it is due, and may be fined up to 200, 000 Yuan.

Article 205 Where any company fails to inform its creditors by notice or by public announcement during the process of merger, split, reducing its registered capital or liquidation, it shall be ordered by the company registration authority to make corrections, and may be fined not less than 10, 000 Yuan but not more than 100, 000 Yuan.

Where, during the process of liquidation, any company hides any of its properties or makes any false record in its balance sheet or property checklist, or distributes any of the company's properties before clearing off its debts, it shall be ordered by the company registration authority to make corrections, and may be fined not less than 5% but not more than 10% of the value of the company properties it has hidden or distributed prior to the clearing of company debts, and the directly liable person-in-charge as well other directly liable persons may be fined not less than 10, 000 Yuan but not more than100, 000 Yuan.

Article 206 Where, during the process of liquidation, any company undertakes any business activity which has nothing to do with the liquidation, it shall be admonished by the company registration authority, and its illegal proceeds shall be confiscated.

Article 207 Where the liquidation group fails to submit a liquidation report to the company registration authority according to the provisions of the present Law, or where any important fact is concealed or there is any important omission in the liquidation report it submits, it shall be ordered by the company registration authority to make corrections.

Where any member of the liquidation group takes advantage of his power to seek unlawful benefits for himself or any of his relatives, procures any unlawful gains or misappropriates any of the properties of the company, he shall be ordered by the company registration authority to return the properties of the company with his illegal gains being confiscated, and shall be fined 1 up to 5 times of the illegal proceeds.

Article 208 Where any institution that undertakes the evaluation or verification of assets or the verification of certificates provides any false materials, its illegal proceeds shall be confiscated by the company registration authority, and be fined 1 up to 5 times of the illegal proceeds, and may be ordered by the competent administrative department to suspend its business operation or to withdraw the qualification certificates of the directly liable persons, and cancel its business license.

Where any institution that undertakes the evaluation or verification of assets or the verification of certificates makes any important omission in the report it submits, it shall be ordered by the company registration authority to make corrections; if the circumstances are serious, it shall be fined 1 up to 5 times of the proceeds it has obtained, and may be ordered by the competent administrative department to suspend its business operation and to withdraw the qualification certificates of the directly liable persons, and cancel its business license. Where the evaluation result or proof of asset verification or certificate verification, as provided by any institution that undertakes the evaluation or verification of assets or the verification of certificates, is proved to be untrue, which has caused any loss to the creditors of the company, it shall bear the compensation liabilities within the sum which is found to be untrue, unless it can prove that it has no fault in the incurrence of the loss.

Article 209 Where any company registration authority registers any application that does not meet the conditions as provided for in the present Law, or fails to register any application that meets the conditions as prescribed in the present Law, the directly liable person-in-charge and other directly liable persons shall be imposed upon an administrative sanction.

Article 210 Where the superior organ of any company registration authority forces the latter to register any application that does not satisfy the conditions as prescribed in the present Law or to refuse any application that meets the conditions as provided for in the present Law, or covers up for any illegal registration, the directly liable person-in-charge and other directly liable persons shall be imposed upon an administrative sanction according to law.

Article 211 Where anyone fails to register as a limited liability company or joint stock limited company according to law but undertakes business operation in the name of a limited liability company or joint stock limited company, or fails to register as a subsidiary of a limited liability company or joint stock limited company according to law but undertakes business operation in the name of a subsidiary of the limited liability company or joint stock limited company, it shall be ordered by the company registration authority to make corrections or be clamped down on, and may be fined not more than 100,000 Yuan.

Article 212 Where any company fails to start its business operation six months after the establishment of it without justifiable reasons, or suspends its business operation on its own initiative for consecutively six months after it has started the business operation, its business license may be revoked by the company registration authority.

Where any registered item of any company changes, and the company fails to go through the corresponding modification formalities according to the present Law, it shall be ordered by the company registration authority to make modification registration within a time limit; if it still fails to make the registration, it shall be fined not less than 10, 000 Yuan but not more than 100, 000 Yuan.

Article 213 Where any foreign company violates this Law by unlawfully establishing any branch within China, it shall be ordered by the company registration authority to make corrections or to close it down, and may be fined not less than 50,000 Yuan but not more than 200, 000 Yuan.

Article 214 Where anyone commits, in the name of a company, any serious violation of law so that the security of the state or the public interests of the society is injured, the business license of the company shall be revoked.

Article 215 Where a company violates any provision of this Law, it shall bear the corresponding civil liabilities of compensation, and shall pay the corresponding fines and pecuniary penalties; if the property thereof is not enough to pay for the compensation, it shall bear the civil liabilities first.

Article 216 Where any company violates the present Law and any crime is constituted, it shall be subject to criminal liabilities.


Chapter XIII Supplementary Provisions

Article 217 Definitions of the following terms:
(1) The "senior manager" refers to the manager, vice manager, person in charge of finance of a company, and the secretary of the board of directors of a listed company as well as any other person as stimulated in the articles of association.
(2) The "controlling shareholder" refers to a shareholder whose capital contribution occupies 5% or more of the total capital of a limited liability company, or a shareholder whose stocks occupy more than 50% of the total equity stocks of a joint stock limited company, or a shareholder whose capital contribution or proportion of stocks is less than 50% but who enjoys a voting right according to its capital contribution or the stocks it holds is large enough to impose an big impact upon the resolution of the shareholders' meeting or the shareholders' assembly.
(3) The "actual controller" refers to anyone who is not a shareholder but is able to hold actual control of the acts of the company by means of investment relations, agreements or any other arrangements.
(4) The "connection relationship" refers to the relationship between the controlling shareholder, actual controller, director, supervisor, or senior manager of a company and the enterprise directly or indirectly controlled thereby, and any other relationship that may lead to the transfer of any interests of the company. However, the enterprises controlled by the state do not incur a connection relationship simply because their shares are controlled by the state.

Article 218 The limited liability companies and joint stock limited companies invested by foreign investors shall be governed by the present Law. Where there are otherwise different provisions in any law regarding foreign investment, such provisions shall prevail.

Article 219 This Law shall go into effect on January 1, 2006.

Criminal Law of the People's Republic of China

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Adopted at the Second Session of the Fifth National People's Congress on July 1, 1979; revised at the Fifth Session of the Eighth National People's Congress on March 14, 1997 and promulgated by Order No.83 of the President of the People's Republic of China on March 14, 1997

Contents

Part One General Provisions

Chapter I The Aim, Basic Principles and Scope of Application of the Criminal Law

Chapter II Crimes

Section 1 Crimes and Criminal Responsibility

Section 2 Preparation for a Crime, Criminal Attempt and Discontinuation of a Crime

Section 3 Joint Crimes

Section 4 Crimes Committed by a Unit

Chapter III Punishments

Section 1 Types of Punishments

Section 2 Public Surveillance

Section 3 Criminal Detention

Section 5 The Death Penalty

Section 6 Fines

Section 7 Deprivation of Political Rights

Section 8 Confiscation of Property

Chapter IV The Concrete Application of Punishments

Section 1 Sentencing

Section 2 Recidivists

Section 3 Voluntary Surrender and Meritorious Performance

Section 4 Combined Punishment for Several Crimes

Section 5 Suspension of Sentence

Section 6 Commutation of Punishment

Section 7 Parole

Section 8 Limitation

Chapter V Other Provisions

Part Two Specific Provisions

Chapter I Crimes of Endangering National Security

Chapter II Crimes of Endangering Public Security

Chapter III Crimes of Disrupting the Order of the Socialist Market Economy

Section 1 Crimes of Producing and Marketing Fake or Substandard Commodities

Section 2 Crimes of Smuggling

Section 3 Crimes of Disrupting the Order of Administration of Companies and Enterprises

Section 4 Crimes of Disrupting the Order of Financial Administration

Section 5 Crimes of Financial Fraud

Section 6 Crimes of Jeopardizing Administration of Tax Collection

Section 7 Crimes of Infringing on Intellectual Property Rights

Section 8 Crimes of Disrupting Market Order

Chapter IV Crimes of Infringing upon Citizens' Right of the Person and Democratic Rights

Chapter V Crimes of Property Violation

Chapter VI Crimes of Obstructing the Administration of Public Order

Section 1 Crimes of Disturbing Pubic Order

Section 2 Crimes of Impairing Judicial Administration

Section 3 Crimes Against Control of National Border (Frontier)

Section 4 Crimes Against Control of Cultural Relics

Section 5 Crimes of Impairing Public Health

Section 6 Crimes of Impairing the Protection of Environment and Resources

Section 7 Crimes of Smuggling, Trafficking in, Transporting and Manufacturing Narcotic Drugs

Section 8 Crimes of Organizing, Forcing, Luring, Sheltering or Procuring Other Persons to Engage in Prostitution

Section 9 Crimes of Producing, Selling, Disseminating Pornographic Materials

Chapter VII Crimes of Impairing the Interests of National Defence

Chapter VIII Crimes of Embezzlement and Bribery

Chapter IX Crimes of Dereliction of Duty

Chapter X Crimes of Servicemen's Transgression of Duties

Chapter XI Supplementary Provisions


Part I General Provisions

Chapter I  Tasks, Basic Principles, and Scope of Application of the Criminal Law

Article 1. This law is formulated in accordance with the Constitution and in light of the concrete experience of China launching a struggle against crime and the realities in the country, with a view to punishing crime and protecting the people.

Article 2. The tasks of the PRC Criminal Law are to use punishment struggle against all criminal acts to defend national security, the political power of the people's democratic dictatorship, and the socialist system; to protect state-owned property and property collectively owned by the laboring masses; to protect citizens' privately owned property; to protect citizens' right of the person, democratic rights, and other rights; to maintain social and economic order; and to safeguard the smooth progress of the cause of socialist construction.

Article 3. Any act deemed by explicit stipulations of law as a crime is to be convicted and given punishment by law and any act that no explicit stipulations of law deems a crime is not to be convicted or given punishment.

Article 4. Every one is equal before the law in committing crime. No one is permitted to have privileges to transgress the law.

Article 5. The severity of punishments must be commensurate with the crime committed by an offender and the criminal responsibility he bears.

Article 6. This law is applicable to all who commit crimes within the territory of the PRC except as specially stipulated by law.

This law is also applicable to all who commit crimes aboard a ship or aircraft of the PRC.

When either the act or consequence of a crime takes place within PRC territory, a crime is deemed to have been committed within PRC territory.

Article 7. This law is applicable to PRC citizens who commit the crimes specified in this law outside the territory of the PRC; but those who commit the crimes, provided that this law stipulates a minimum sentence of less than a three-year fixed-term imprisonment for such crimes, may not be dealt with.

This law is applicable to PRC state personnel and military personnel who commit the crimes specified in this law outside PRC territory.

Article 8. This law may be applicable to foreigners, who outside PRC territory, commit crimes against the PRC state or against its citizens, provided that this law stipulates a minimum sentence of not less than a three-year fixed term of imprisonment for such crimes; but an exception is to be made if a crime is not punishable according the law of the place where it was committed.

Article 9. This law is applicable to the crimes specified in international treaties to which the PRC is a signatory state or with which it is a member and the PRC exercises criminal jurisdiction over such crimes within its treaty obligations.

Article 10. Any person who commits a crime outside PRC territory and according to this law bear criminal responsibility may still be dealt with according to this law even if he has been tried in a foreign country; however, a person who has already received criminal punishment in a foreign country may be exempted from punishment or given a mitigated punishment.

Article 11. The problem of criminal responsibility of foreigners who enjoy diplomatic privileges and immunity is to be resolved through

diplomatic channels.

Article 12. If an act committed after the founding of the PRC and before

the implementation of this law was not deemed a crime under the laws at

that time, the laws at that time are to be applicable. If the act was

deemed a crime under the laws at that time, and if under the provisions of

Chapter IV, Section 8 of the general provisions of this law it should be prosecuted, criminal responsibility is to be investigated according to the laws at that time. However, if this law does not deem it a crime or imposes a lesser punishment, this law is to be applicable.

The effective judgments that were made according to the laws at that time before the implementation of this law will continue to be in force.

Chapter II  Crimes

Section 1. Crimes and Criminal Responsibility

Article 13. All acts that endanger the sovereignty, territorial integrity, and security of the state; split the state; subvert the political power of the people's democratic dictatorship and overthrow the socialist system; undermine social and economic order; violate property owned by the state or property collectively owned by the laboring masses; violate citizens' privately owned property; infringe upon citizens' rights of the person, democratic rights. and other rights; and other acts that endanger society, are crimes if according to law they should be criminally punished. However, if the circumstances are clearly minor and the harm is not great, they are not to be deemed crimes.

Article 14. An intentional crime is a crime constituted as a result of

clear knowledge that one's own act will cause socially dangerous

consequences, and of hope for or indifference to the occurrence of those

consequences.

Criminal responsibility shall be borne for intentional crimes.

Article 15. A negligent crime occurs when one should foresee that one's

act may cause socially dangerous consequences but fails to do so because of

carelessness or, having foreseen the consequences, readily assumes he can

prevent them, with the result that these consequences occur.

Criminal responsibility is to be borne for negligent crimes only when the

law so stipulates.

Article 16. Although an act objectively creates harmful consequences, if

it does not result from intent or negligence but rather stems from

irresistible or unforeseeable causes, it is not a crime.

Article 17. A person who has reached the age of eighteen who commits a

crime shall bear criminal responsibility.

A person who has reached the age of fourteen but not the age of eighteen

who commits the crimes of intentionally killing another or intentionally

injuring another, even causing serious injury or death, and the crimes of rape, robbery, drug trafficking, arson, explosion, and poisoning shall bear criminal responsibility.

A person who has reached the age of fourteen but not the age of eighteen who commits a crime shall be given a lesser punishment or a mitigated punishment.

When a person is not criminally punished because he has not reached the age of eighteen, the head of his family or guardian is to be ordered to subject him to discipline. When necessary, he may also be given shelter and rehabilitation by the government.

Article 18. A mentally ill person who causes dangerous consequences at a time when he is unable to recognize or unable to control his own conduct is not to bear criminal responsibility after being established through accreditation of legal procedures; but his family or guardian shall be ordered to subject him to strict surveillance and arrange for his medical treatment. When necessary, he will be given compulsory medical treatment by the government.

A person whose mental illness is of an intermittent nature shall bear criminal responsibility if he commits a crime during a period of mental normality.

A mentally ill person who commits a crime at a time when he has not yet

completely lost his ability to recognize or control his own conduct shall

bear criminal responsibility but he may be given a lesser or a mitigated

punishment.

An intoxicated person who commits a crime shall bear criminal

responsibility.

Article 19. A deaf-mute or a blind person who commits a crime may be given a lesser punishment or a mitigated punishment or be exempted from punishment.

Article 20. Criminal responsibility is not to be borne for an act of

legitimate defense that is under taken to stop present unlawful infringement of the state's and public interest or the rights of the person, property or other rights of the actor or of other people and that causes harm to the unlawful infringer.

Criminal responsibility shall be borne where legitimate defense noticeably exceeds the necessary limits and causes great harm. However, consideration shall be given to imposing a mitigated punishment or to granting exemption from punishment.

Criminal responsibility is not to be borne for a defensive act undertaken against ongoing physical assault, murder, robbery, rape, kidnap, and other violent crimes that seriously endanger personal safety that causes injury or death to the unlawful infringer since such an act is not an excessive defense.

Article 21. Criminal responsibility is not to be borne for damage resulting from an act of urgent danger prevention that must be undertaken in order to avert the occurrence of present danger to the state or public interest or the rights of the person, property rights, or other rights of the actor or of other people.

Criminal responsibility shall be borne where urgent danger prevention exceeds the necessary limits and causes undue harm. However, consideration shall be given according to the circumstances to imposing a mitigated punishment or to granting exemption from punishment.

The provisions of the first paragraph with respect to preventing danger to oneself do not apply to a person who bears specific responsibility in his post or profession.

Section 2. Preparation for a Crime, Criminal Attempt and Discontinuation of a Crime

Article 22. Preparation for a crime is preparation of the instruments or creation of the conditions for the commission of a crime.

One who prepares for a crime may, in comparison with one who consummates the crime, be given a lesser punishment or a mitigated punishment or be exempted from punishment.

Article 23. Criminal attempt occurs when a crime has already begun to be carried out but is not consummated because of factors independent of the will of the criminal element.

One who attempts to commit a crime may, in comparison with one who consummates the crime, be given a lesser punishment or a mitigated punishment.

Article 24. Discontinuation of a crime occurs when, during the process of

committing a crime, the actor voluntarily discontinues the crime or

voluntarily and effectively prevents the consequences of the crime from occurring.

One who discontinues a crime shall be exempted from punishment when there is no harm done or be given a mitigated punishment when there is harm done.

Section 3. Joint Crimes

Article 25. A joint crime is an intentional crime committed by two or more persons jointly.

A negligent crime committed by two or more persons jointly is not to be punished as a joint crime; those who should bear criminal responsibility are to be punished separately according to the crimes they have committed.

Article 26. A principal offender is one who organizes and leads a criminal group in conducting criminal activities or plays a principal role in a joint crime.

A crime syndicate is a more or less permanent crime organization composed of three or more persons for the purpose of jointly committing crimes.

The head who organizes or leads a crime syndicate shall bear criminal responsibility for all the crimes committed by the syndicate.

A principal offender other that the one stipulated in the third paragraph shall bear criminal responsibility for all the crimes he participated in, organized, or directed.

Article 27. An accomplice is one who plays a secondary or supplementary role in a joint crime.

An accomplice shall, in comparison with a principal offender, be given a lesser punishment or a mitigated punishment or be exempted from punishment.

Article 28. One who is coerced to participate in a crime shall, according to the circumstances of his crime, be given a mitigated punishment or be exempted from punishment.

Article 29. One who instigates others to commit a crime shall be punished according to the role he plays in the joint crime. One who instigates a person under the age of eighteen to commit a crime shall be given a heavier punishment.

If the instigated person does not commit the instigated crime, the instigator may be given a lesser punishment or a mitigated punishment.

Section 4. Crimes Committed by a Unit

Article 30. A company, enterprise, institution, organization, or group which commits an act endangering society that is considered a crime under the law shall bear criminal responsibility.

Article 31. A unit responsible for a criminal act shall be fined. The person in charge and other personnel who are directly responsible shall also bear criminal responsibility. Where there are other stipulations in the Special Provisions of this Law or other laws, those stipulations shall apply.

Chapter III Punishments

Section 1. Types of Punishments

Article 32. Punishments are divided into principal punishments and supplementary punishments.

Article 33. The types of principal punishments are:

(1) control;

(2) Criminal detention;

(3) fixed-term imprisonment;

(4) life imprisonment; and

(5) The death penalty.

Article 34. The types of supplementary punishments are:

(1) Fines;

(2) Deprivation of political rights; and

(3) Confiscation of property.

Supplementary punishments may also be applied independently.

Article 35. Deportation may be applied in an independent or supplementary manner to a foreigner who commits a crime.

Article 36. Where the victim has suffered economic loss as a result of a criminal act, the criminal element, in addition to receiving criminal sanctions according to law, shall in accordance with the circumstances be sentenced to make compensation for the economic loss.

Where the criminal element bears responsibility for civil compensation and is also imposed a fine, if his property is not enough to pay the compensation and fine in full or if he has also been sentenced to confiscation of property, he shall first pay civil compensation to the victim.

Article 37. Where the circumstances of a person's crime are minor and do not require sentencing for punishment, an exemption from criminal sanctions may be granted him, but he may, according to the different circumstances of each case, be reprimanded or ordered to make a statement of repentance or formal apology or make compensation for losses, or be subjected to administrative sanctions by the competent department.

Section 2. Control

Article 38. The term of control is not less than three months and not more than two years.

The judgment of control for a criminal element is executed by a public security organ.

Article 39. A criminal element who is sentenced to control must abide by the following rules during the term in which his control is being carried out:

(1) abide by laws and administrative regulations, submit himself to supervision;

(2) shall not exercise the rights to freedom of speech, of the press, of assembly, of association, of procession, and of demonstration without the approval of the organ executing the control;

(3) report on his own activities pursuant to the rules of the organ

executing the control;

(4) abide by the rules of the organ executing the control for meeting

visitors;

(5) report and obtain approval from the organ executing the control

for a change in residence or departure from the city or county.

A criminal element who is sentenced to control shall, while engaged in

labor, receive equal pay for equal work.

Article 40. Upon the expiration of the term of the control, the organ

executing the control shall announce the termination of control to the

criminal element sentenced to control and to the masses concerned.

Article 41. The term of control is counted as commencing on the date the

judgment begins to be executed; where custody has been employed before the

judgment begins to be executed, the term is to be shortened by two days for

each day spent in custody.

Section 3. Criminal Detention

Article 42. The term of criminal detention is not less a month and not more than six months.

Article 43. A criminal element sentenced to criminal detention is to have his sentence executed by the public security organ in the vicinity.

During the period of execution, a criminal element sentenced to criminal detention may go home for one or two days each month; consideration may be given according to the circumstances to granting compensation to those who participate in labor.

Article 44. The term of criminal detention is counted as commencing on the date the judgment begins to be executed; where custody has been employed before the judgment, the term is to be shortened by one day for each day spent in custody.

Section 4. Fixed-Term Imprisonment And Life Imprisonment

Article 45. Except as otherwise provided in Articles 50 and 69 of this

Law, the term of fixed-term imprisonment is not less than six months and

not more than fifteen years.

Article 46. A criminal element sentenced to fixed-term imprisonment or

life imprisonment is to have his sentence executed in prison or in another

organ executing the sentence; anyone with the ability to labor shall take

part in labor, receive education, and undergo reform.

Article 47. The term of fixed-term imprisonment is counted as commencing

on the date the judgment begins to be executed; where custody has been

employed before the judgment begins to be executed, the term is to be

shortened by one day for each day spent in custody.

Section 5. The Death Penalty

Article 48. The death penalty is only to be applied to criminal elements

who commit the most heinous crimes. In the case of a criminal element who

should be sentenced to death, if immediate execution is not essential, a

two-year suspension of execution may be announced at the same time the

sentence of death is imposed.

Except for judgments made by the Supreme People's Court according to law,

all sentences of death shall be submitted to the Supreme People's Court for

approval. Sentences of death with suspension of execution may be decided or

approved by a high people's court.

Article 49. The death penalty is not to be applied to persons who have

not reached the age of eighteen at the time the crime is committed or to

women who are pregnant at the time of adjudication.

Article 50. If a person sentenced to death with a suspension of execution

dose not intentionally commit a crime during the period of suspension, he

is to be given a reduction of sentence to life imprisonment upon the

expiration of the two-year period; if he demonstrates meritorious service,

he is to be given a reduction of sentence to not less than fifteen years

and not more than twenty years of fixed-term imprisonment upon the

expiration of the two-year period; if there is verified evidence that he

has intentionally committed a crime, the death penalty is be executed upon

the approval of the Supreme People's Court.

Article 51. The term for suspending execution of a sentence of death is

counted as commencing on the date the judgment becomes final. The term of a

sentence that is reduced from the death penalty with suspension of

execution to fixed-term imprisonment is counted as commencing on the date

the suspension of execution expires.

Section 6. Fines

Article 52. In imposing a fine, the amount of the fine shall be determined according to the circumstances of the crime.

Article 53. A fine is to be paid in a lump sum or in installments within the period specified in the judgment.

Upon the expiration of the period, one who has not paid is to be compelled to pay. Where the person sentenced is unable to pay the fine in full, the people's court may collect whenever he is found in possession of executable property.

If a person truly has difficulties in paying because he has suffered irresistible calamity, consideration may be given according to the circumstances to granting him a reduction or exemption.

Section 7. Deprivation of Political Rights

Article 54. Deprivation of political rights is deprivation of the following rights:

(1) The right to elect and the right to be elected;

(2) the right to freedom of speech, of the press, of assembly, of association, of procession, and of demonstration;

(3) the right to hold a position in state organs; and

(4) the right to hold a leading position in a state-owned company, enterprise, or institution or people's organization.

Article 55. The term of deprivation of political rights is not less than one year and not more than five years, except as otherwise stipulated in Article 57 of this Law.

In situations where a person is sentenced to control and to deprivation of political rights as a supplementary punishment, the term of deprivation of political rights is to be the same as the term of control, and the punishments are to be executed at the same time.

Article 56. A criminal element endangering state security shall be

sentenced to deprivation of political rights as a supplementary punishment;

a criminal element guilty of murder, rape, arson, explosion, spreading

poison, or robbery who seriously undermines social order may also be

sentenced to deprivation of political rights as a supplementary punishment.

Where deprivation of political rights is applied independently,

stipulations in the Special Provisions of this Law shall be followed.

Article 57. A criminal element who is sentenced to death or to life

imprisonment shall be deprived of political rights for life.

When the death penalty with a suspension of execution is reduced to

fixed-term imprisonment, or life imprisonment is reduced to fixed-term

imprisonment, the term of the supplementary punishment of deprivation of

political rights shall be changed to not less than three years and not more

than ten years.

Article 58. The term of the supplementary punishment of deprivation of

political rights is counted as commencing on the date that imprisonment or

criminal detention ends or on the date that parole begins; the deprivation

of political rights is naturally to be effective during the period in which

the principal punishment is being executed.

A criminal element who is deprived of political rights shall abide by laws,

administrative regulations, and relevant regulations on supervision and

administration promulgated by public security departments under the State

Council; submit to supervision; and is forbidden from exercising rights

stipulated in Article 54 of this Law.

Section 8. Confiscation of Property

Article 59. Confiscation of property is the confiscation of part or all

of the property personally owned by the criminal element. Where all of the

property personally owned by the criminal element is confiscated, living

expenses shall be set aside for the criminal element himself and the

dependents he supports.

When a sentence of confiscation of property is imposed, property that

belongs to or should belong to family members of the criminal element may

not be confiscated.

Article 60. Where it is necessary to use the confiscated property to

repay legitimate debts incurred by the criminal element before the property

was confiscated, the debts shall be paid at the request of the creditors.

Chapter IV  The Concrete Application Of Punishments

Section 1. Sentencing

Article 61. When deciding the punishment of a criminal element, the sentence shall be imposed on the basis of the facts of the crime, the nature and circumstances of the crime, and the degree of harm to society, in accordance with the relevant stipulations of this law.

Article 62. Where the circumstances of a criminal element are such as to give him a heavier punishment or a lesser punishment under the stipulations of this law, he shall be sentenced to a punishment within the legally prescribed limits of punishment.

Article 63. Where the circumstances of a criminal element are such as to give him a mitigated punishment under the stipulations of this law, he shall be sentenced to a punishment below the legally prescribed punishment.

Although the circumstances of a criminal element do not warrant giving him a mitigated punishment under the stipulations of this law, he too may be sentenced to a punishment below the legally prescribed punishment based on the special situation of the case and with the approval of the Supreme People's Court.

Article 64. All articles of property illegally obtained by the criminal element shall be recovered or he shall be ordered to make restitution or pay compensation for them.

The legitimate property of the victims shall be promptly returned.

Contraband and articles of the criminal's own property used for committing the crime shall be confiscated.

Articles of confiscated property and fines shall be handed over to the national treasury and shall not be diverted or otherwise disposed of.

Section 2. Recidivists

Article 65. A criminal element who has been sentenced to a punishment of

not less than fixed-term imprisonment and who, within five years after his

punishment has been completely executed or he has received a pardon,

commits another crime for which he should be sentenced to a punishment of

not less than a fixed-term imprisonment is a recidivist and shall be given

a heavier punishment. However, negligent commission of a crime is an

exception.

In situations where a criminal element is granted a parole, the period

stipulated in the preceding paragraph is to be counted as commencing on the

date of expiration of the parole.

Article 66. Criminal elements endangering state security who, at any time after their punishment has been completely executed or they have received a pardon, commit another crime endangering state security are all to be treated as recidivists.

Section 3. Voluntary Surrender and Meritorious Service

Article 67. The act of voluntarily giving oneself up to the police and giving a true account of one's crime after committing it is an act of voluntary surrender. Criminal elements who voluntarily surrender may be given a lesser punishment or a mitigated punishment. Those among them whose crimes are relatively minor may be exempted from punishment.

Where criminal suspects, defendants, and criminals serving sentences give a true account of their other crimes which are not known to the judicial organ, their actions are regarded as an act of voluntary surrender.

Article 68. Criminal elements who perform meritorious service by exposing other people's crimes that can be verified or who provide important clues leading the cracking of other cases may be given a lesser punishment or a mitigated punishment. Those who performed major meritorious service may be given a mitigated punishment or may be exempted from punishment.

Those who surrender themselves voluntarily and perform major meritorious service after committing a crime shall be given a mitigated punishment or exempted from punishment.

Section 4. Combined Punishment For More Than One Crime

Article 69. If a person commits more than one crime before judgment has been pronounced, except where he is sentenced to death or life imprisonment, the term of sentence that it is decided to be executed, in consideration of the circumstances, shall be less than the total term for all the crimes but more than the maximum term for any of the crimes; however, the term of control cannot exceed three years, the term of criminal detention cannot exceed one year, and fixed-term imprisonment cannot exceed 20 years.

If among the crimes there are any for which a supplementary punishment is to be imposed, the supplementary punishment must still be executed.

Article 70. If, after judgment has been pronounced but before the punishment has been completely executed, it is discovered that, before judgment was pronounced, the sentenced criminal element committed another crime for which he has not been sentenced, a judgment shall be rendered for the newly-discovered crime, and the punishment to be executed for the punishments sentenced in the two, former and latter, judgments decided according to the stipulations of Article 69 of this law. The term that has already been executed shall be counted in the term decided by the new judgment.

Article 71. If after judgment has been pronounced but before the

punishment has been completely executed the sentenced criminal element

again commits a crime, a judgment shall be rendered for the newly-committed

crime, and the punishment to be executed for the punishment that has not

been executed for the former crime and the punishment imposed for the

latter crime decided according to the stipulations of Article 69 of this law.

Section 5. Suspension of Sentence

Article 72. A suspension of sentence may be pronounced for a criminal element who has been sentenced to criminal detention or to fixed-term imprisonment for not more than three years, according to the circumstances of his crime and his demonstration of repentance, and where applying a suspended sentence will not in fact result in further harm to society.

If a criminal element for whom a suspension of sentence has been pronounced has been sentenced to a supplementary punishment, the supplementary punishment must still be executed.

Article 73. The probation period for suspension of criminal detention is to be not less than the term originally decided and not more than one year, but it may not be less than two months. The probation period for suspension of fixed-term imprisonment is to be not less than the term originally decided and not more than five years, but it may not be less than one year.

The probation period for suspension is to be counted as commencing on the date the judgment becomes final.

Article 74. Suspension of sentence is not to be applied to recidivists.

Article 75. A criminal element for whom a suspension of sentence has been pronounced shall observe the following stipulations:

(1) observing the law and administrative statutes and accepting

supervision;

(2) reporting his activities in accordance with the stipulation of the

observing organ;

(3) following the observing organ's stipulation on meeting visitors;

(4) reporting and applying to the observing organ for approval before

leaving or moving from the city or county of residence.

Article 76. A criminal element for whom a suspension of sentence has been

pronounced is to be observed by the public security organ during the

probation period for suspension, with his unit or the basic level

organization taking coordinated action. Upon the expiration of the

probation period for suspension, public pronouncement that the punishment

originally decided is not to be executed shall be made, provided there are

no circumstances as stipulated in Article 77 of this law.

Article 77. If a criminal element for whom a suspension of sentence has

been pronounced commits new crimes during the probation period for

suspension or is discovered that, before judgment was pronounced, the

sentenced criminal element committed another crime for which he has not

been sentenced, the suspension is to be revoked and the punishment to be

executed for the punishments imposed for the former and latter crimes is to

be decided according to the stipulations of Article 69 of this law.

If, during the probation period for suspension, a criminal element for whom

a suspension of sentence has been pronounced violates relevant provisions

governing the supervision and control of suspension of sentence provided

for in the law, administrative statutes, or regulations of public security

departments of the State Council, the suspension is to be revoked and the

punishments originally imposed shall be executed.

Section 6. Reduction of Sentence

Article 78. A criminal element who is sentenced to control, criminal detention, fixed-term imprisonment or life imprisonment may have his sentence reduced if, during the period his punishment is being executed, he earnestly observes prison regulations, accepts reform through education, truly repents, or performs meritorious service.

The sentence shall be reduced if any of the following meritorious services are performed:

(1) preventing someone from engaging in major criminal activities;

(2) informing on major criminal activities in or outside the prison that can be verified;

(3) making inventions or major technological renovations;

(4) risking his life to save others in day-to-day production

activities and life;

(5) performing outstanding service in combating natural disaster or

preventing major accidents;

(6) making other major contributions to the state or society.

For those sentenced to control, criminal detention, or fixed-term

imprisonment, the term of the punishment actually to be executed may not,

after reductions of sentence, be less than half of the term originally

decided; for those sentenced to life imprisonment it may not be less than

10 years.

Article 79. To receive reductions of sentence for criminal elements, the

organ executing the sentence shall submit letters of sentence reduction

proposal to the people's court at or above the intermediate level. The

people's court shall form a collegial panel to examine the proposals and to

issue sentence reduction orders for those who demonstrate true repentance

and performed meritorious service.

Article 80. The term of fixed-term imprisonment that is reduced from life

imprisonment is counted as commencing on the date of the order reducing the

sentence; no sentence reduction shall be made without due legal process.

Section 7. Parole

Article 81. A criminal element sentenced to fixed-term imprisonment of

which not less than half has been executed, or a criminal element sentenced

to life imprisonment of which not less than 10 years has actually been

executed, may be granted parole if he earnestly observes prison

regulations, undergoes reform through education, demonstrates true

repentance, and will not cause further harm to society after being paroled.

If special circumstances exist, with the approval of the Supreme People's

Court, the above restrictions relating to the term executed need not be

imposed.

Criminal elements who are recidivists or who are sentenced to fixed-term

imprisonment of more than 10 years or to life imprisonment for murder,

bombing, robbery, rape, kidnap, or other violent crimes shall not be

granted parole.

Article 82. The granting of parole to criminal elements shall be carried out in accordance with the procedures stipulated in Article 79 of this law; no parole shall be granted without due legal process.

Article 83. The probation period for parole in the case of fixed-term imprisonment is the term that has not been completed; the probation period for parole in the case of life imprisonment is 10 years.

The probation period for parole is counted as commencing on the date of parole.

Article 84. Criminal elements granted parole shall observe the following stipulations:

(1) observing the law and administrative statutes and accepting supervision;

(2) reporting his activities in accordance with the stipulation of the supervising organ;

(3) observing the supervising organ's stipulation on meeting visitors;

(4) reporting and applying to the observing organ for approval before leaving or moving from the city or county of residence.

Article 85. During the probation period for parole, a criminal element who is granted parole is to be supervised by the public security organs, and upon completion of the parole, if there are no circumstances as stipulated in Article 86 of this law, the punishment to which he was originally sentenced is to be considered as having been completely executed, and a public pronouncement to the effect shall be made accordingly.

Article 86. If, during the probation period for parole, a criminal element commits any further crime, the parole is to be revoked and the punishment is to be executed for the punishment that has not been executed for the former crime and the punishment imposed for the latter crime decided according to the stipulations of Article 71 of this law.

If, during the probation period for parole, a criminal element violates relevant provisions governing the supervision and control of suspension of sentence provided for in the law, administrative statutes, or regulations of public security departments of the State Council but the violation does not constitutes a new crime, the parole shall be revoked in accordance with the legal procedures and the parolee shall be returned to prison to complete the unfinished prison term.

Section 8. Limitation

Article 87. Crimes are not to be prosecuted where the following periods have elapsed:

(1) in cases where the maximum legally-prescribed punishment is fixed-term imprisonment of less than five years, where five years have elapsed;

(2) in cases where the maximum legally-prescribed punishment is fixed-term imprisonment of not less than five years and less than ten years, where ten years have elapsed.

(3) in cases where the maximum fixed-term imprisonment is not less

than ten years, where fifteen years have elapsed.

(4) in cases where the maximum legally-prescribed punishment is

life-imprisonment or death, where twenty Years have elapsed. If it is

considered that a crime must be prosecuted after twenty years, the

matter must be submitted to the Supreme People's Procuratorate for

approval.

Article 88. No limitation on the period for prosecution is to be imposed

in cases where, after the people's procuratorates, public security organs,

or state security organs have filed to investigate or after the people' s

courts have decided to hear the cases, the criminal element escapes from

investigation or adjudication.

No limitation on the period for prosecution is to be imposed in cases where, after the victims filed charges within the period for prosecution, the people' s court, people's procuratorates, or public security organs refused to file for investigation as they should.

Article 89. The period for prosecution is counted as commencing on the date of the crime; if the criminal act is of a continuous or continuing nature, it is counted as commencing on the date the criminal act is completed.

If any further crime is committed during the period for prosecution, the period for prosecution of the former crime is counted as commencing on the date of the latter crime.



Chapter V Other Provisions

Article 90. In situations where the autonomous areas inhabited by ethnic groups cannot completely apply the stipulations of this law, the people's congresses of the autonomous regions or of the provinces may formulate alternative or supplementary provisions based upon the political, economic, and cultural characteristics of the local ethnic groups and the basic principles of the stipulations of this law, and these provisions shall go into effect after they have been submitted to and approved by the National People's Congress Standing Committee.

Article 91. The term "public property" in this law refers to the following property:

(1) property owned by the state;

(2) property owned collectively by the laboring masses;

(3) public donations to be used for aiding the poor and other public services, or property of special funds.

Private property that is being managed, used or transported by state organs, state-owned corporations, enterprises, collective enterprises, and people's organizations is to be treated as public property.

Article 92. The term "citizens' private property" in this law refers to

the following property:

(1) citizens' lawful income, savings, houses and other means of livelihood;

(2) means of production that are under individual or family ownership according to law;

(3) lawful property of independent businesses and private enterprises;

(4) shares, stocks, securities and other property that are under individual ownership according to law.

Article 93. The term "state personnel" in this law refers to all personnel of state organs.

Personnel engaged in public service in state-owned corporations, enterprises, institutions, and people's organizations; and personnel which state organs, state-owned corporations, enterprises, and institutions assign to engage in public service in nonstate-owned corporations, enterprises, institutions, and social organizations; as well as other working personnel engaged in public service according to the law, are to be treated as state personnel.

Article 94. The term "judicial personnel" in this law refers to personnel engaged in the functions of investigating, prosecuting, adjudicating, supervising and controlling offenders.

Article 95. The term "serious injury" in this law refers to any one of the following injuries:

(1) injuries resulting in loss of the use of a person's limbs or disfigurement;

(2) injuries resulting in loss of the use of a person's hearing, sight, or functions of any other organ; or

(3) other injuries that cause grave harm to a person's physical health.

Article 96. The phrase "violating state stipulations" in this law refers to violation of laws and decisions formulated by the National People's Congress or the National People's Congress Standing Committee; and administrative measures prescribed in administrative ordinance and regulations formulated by the State Council; as well as decisions and decrees the State Council promulgated.

Article 97. The term "ringleader" in this law refers to a criminal element who plays the role of organizing, planning or directing a criminal group or a crowd assembled to commit a crime.

Article 98. The phrase "To be handled only upon complaint" in this law refers to handling a case only when the victim files a complaint. If the victim is unable to file a complaint because of coercion or intimidation, a people's procuratorate and the victim's close relatives may also file the complaint.

Article 99. Such phrases as "not less than," "not more than" and "within" in this law all include the given figure.

Article 100. When people join the military, or seek employment, those who received criminal punishments according to law shall factually report to the relevant units the punishments they had received and may not conceal them.

Article 101. The General Provisions of this law are applicable to other laws and decrees with stipulations for criminal punishments, but other laws having special stipulations are exceptions.

Part II Special Provisions

Chapter I Crimes of Endangering National Security

Article 102. Whoever colludes with foreign states in plotting to harm the motherland's sovereignty, territorial integrity and security is to be sentenced to life imprisonment or not less than ten years of fixed-term imprisonment.

Whoever commits the crimes in the preceding paragraph in collusion with institutions, organization, or individuals outside the country shall be punished according to the stipulations in the preceding paragraph.

Article 103. Whoever organizes, plots, or acts to split the country or undermine national unification, the ringleader, or the one whose crime is grave, is to be sentenced to life imprisonment or not less than ten years of fixed-term imprisonment; other active participants are to be sentenced to not less than three but not more than 10 years of fixed-term imprisonment; and other participants are to be sentenced to not more than three years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights.

Whoever instigates to split the country and undermine national unification is to be sentenced to not more than five years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights; ringleaders or those whose crimes are grave are to be sentenced to not less than five years of fixed-term imprisonment.

Article 104. Whoever organizes, plots, or carries out armed rebellion, or armed riots, the ringleaders, or those who crimes are grave, are to be sentenced to life imprisonment, or not less than 10 years of fixed-term imprisonment; the active participants are to be sentenced from not less than three to not more than 10 years of fixed-term imprisonment; and other participants are to be sentenced to not more than three years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights.

Whoever instigates, coerces, lures, and bribes state personnel, members of the armed forces, people's police or people's militia to carry out armed rebellion or armed riot are to be heavily punished according to the stipulations in the preceding paragraph.

Article 105. Whoever organizes, plots, or acts to subvert the political power of the state and overthrow the socialist system, the ringleaders or those whose crimes are grave are to be sentenced to life imprisonment, or not less than 10 years of fixed-term imprisonment; active participants are to be sentenced from not less than three years to not more than 10 years of fixed-term imprisonment; other participants are to be sentenced to not more than three years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights.

Whoever instigates the subversion of the political power of the state and

overthrow the socialist system through spreading rumors, slandering, or other ways are to be sentenced to not more than five years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights; the ringleaders and those whose crimes are grave are to be sentenced to not less than five years of fixed-term imprisonment.

Article 106. Whoever colludes with institutions, organizations, or individuals outside the country and commits crimes stipulated in Articles 103, 104, and 105 of this chapter are to be heavily punished according to the stipulations in the articles.

Article 107. When institutions, organizations, or individuals inside or outside the country provide financial support for organizations or individuals in the country to commit the crimes stipulated in Articles 102, 103, 104, and 105, their direct persons in charge are to be sentenced to not more than five years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights; and if the case is serious, they shall be sentenced to not less than five years of fixed-term imprisonment.

Article 108. Whoever defects to the enemy and turns traitor is to be sentenced to not less than three years and not more than ten years of fixed-term imprisonment; when the circumstances are serious or when it is a case of leading a group of armed personnel, people's police, or militia to defect to the enemy and turn traitor, the sentence is to be not less than ten years of fixed-term imprisonment or life imprisonment.

Article 109. If a state organ personnel, during the time of performing his public functions, leave his post without authorization and defects from the country; or if the defection takes place when he is already outside the country, thereby endangering the PRC's national security, he is to be sentenced to not more than five years of fixed-term imprisonment, criminal detention, control, or deprivation of political rights; when the

circumstances are serious, he is to be sentenced to not less than five

years and not more than 10 years of fixed-term imprisonment.

When a state personnel handling state secrets commits the crime in the

preceding paragraph, he is to be heavily punished according to the

stipulations in the preceding paragraph.

Article 110. Whoever commits any of the following acts of espionage and

endangers national security is to be sentenced to not less than 10 years of

fixed-term imprisonment or life imprisonment; when the circumstances are

relatively minor, the sentence is to be not less than three years and not

more than ten years of fixed-termed imprisonment:

(1) Joining an espionage organization or accepting a mission assigned

by it or its agent; or

(2) Pointing out bombing or shelling targets to the enemy.

Article 111. Whoever steals, secretly gathers, purchases, or illegally

provides state secrets or intelligence for an organization, institution, or

personnel outside the country is to be sentenced from not less than five

years to not more than 10 years of fixed-term imprisonment; when

circumstances are particularly serious, he is to be sentenced to not less

than 10 years of fixed- term imprisonment, or life sentence; and when

circumstances are relatively minor, he is to be sentenced to not more than

five years of fixed-term imprisonment, criminal detention, control, or

deprivation of political rights.

Article 112. Whoever supplies arms and ammunition or other military

materials to an enemy during war time is to be sentence to not less than 10

years of fixed-term imprisonment or life imprisonment; and when the

circumstances are relatively minor, he will be sentenced a fixed-term

imprisonment from not less than three years to not more than 10 years.

Article 113. When one commits the aforementioned crimes in this chapter

that endanger national security -- except those stipulated in the second

clause of Article 103, and Articles 105, 107 and 109 -- and has incurred

particularly serious harms to the country and the people, and the

circumstances are particularly vile, he may be sentenced to death.

Whoever commits the crimes in this chapter may also be punished by having

his property confiscated.



Chapter II Crimes of Endangering Public Security

Article 114. Whoever endangers public security by setting fires,

breaching dikes, causing explosions, administering poison; or employing

other dangerous means to sabotage factories, mines, oilfields, seaports,

rivers, water sources, warehouses, dwellings, forests, farms, threshing

grounds, ranches, important pipelines, public buildings, and other public

and private property is to be sentenced to not less than three years but

not more than 10 years of fixed-term imprisonment in cases where serious

consequences have not been caused.

Article 115. Whoever sets fire, breaches dikes, causes explosions, and spreads poison; employs other dangerous means that lead to serious injuries or death; or causes public or private property major losses is to be sentenced to not less than 10 years of fixed-term imprisonment, life imprisonment, or death.

Whoever commits the crimes in the preceding paragraph negligently is to be

sentenced to not less than three years to not more than seven years of

fixed-term imprisonment; or not more than three years of fixed-term

imprisonment, or criminal detention, when circumstances are relatively

minor.

Article 116. Whoever sabotages trains, motor vehicles, streetcars, ships,

or airplanes in a manner sufficient to threaten the overturning or

destruction of these trains, motor vehicles, streetcars, ships, or airplanes is to be sentenced to not less than three years and not more than ten years of fixed-term imprisonment, in cases when serious consequences have not been caused.

Article 117. Whoever sabotages railroads, bridges, tunnels, highways, airports, waterways, lighthouses or signs, or conducts other destructive activities in a manner sufficient to threaten the overturning or destruction of trains, motor vehicles, streets, ships or airplanes, is to be sentenced to not less than three years and not more than ten years of fixed-term imprisonment in cases where serious consequences have not been caused.

Article 118. Whoever endangers public security by sabotaging electric power, gas or other combustible or explosive equipment is to be sentenced to not less than three years and not more than ten yeas of fixed-term imprisonment in cases where serious consequences have not been caused.

Article 119. Whoever causes serious consequences by sabotaging means of transportation, transportation equipment, electric power or gas equipment, or combustible or explosive equipment is to be sentenced to not less than ten years of fixed-term imprisonment, life imprisonment, or death.

Whoever commits the crime in the preceding paragraph negligently is to be sentenced to not less than three years but not more than seven years of fixed-term imprisonment; or not more than three years of fixed-term imprisonment, or criminal detention if circumstances are relatively minor.

Article 120. Whoever organizes, leads, and actively participates in a terrorist organization is to be sentenced to not less than three years but

not more than 10 years of fixed-term imprisonment; other participants are

to be sentenced to not more than three years of fixed-term imprisonment,

criminal detention, or control.

Whoever commits the crime in the preceding paragraph and also commits

murder, explosion, or kidnapping is to be punished according to the

regulations for punishing multiple crimes.

Article 121. Whoever hijacks an airplane through violence, coercion, or

other means is to be sentenced to not less than 10 years of fixed-term

imprisonment or life imprisonment; or death if the hijacking causes serious

injuries, death, or serious destruction of the airplane.

Article 122. Whoever hijacks a ship or motor vehicle through violence,

coercion, or other means is to be sentenced to not less than five years but

not more than 10 years of fixed-termed imprisonment; or not less than 10

years of fixed-term imprisonment, of life imprisonment, if the hijacking

causes serious consequences.

Article 123. Whoever uses violence on personnel on an in-flight airplane

and endangers flying safety is to be sentenced to not more than five years

of fixed-termed imprisonment or criminal detention in case no serious

consequences have been caused; or not less than five years of fixed-term

imprisonment if serious consequences have been caused.

Article 124. Whoever sabotages radio and television broadcasting

facilities, public telecommunications facilities, and endangers public

safety is to be sentenced to not less than three years but not more than

seven years of fixed-term imprisonment; or not less than seven years of

fixed-term imprisonment if serious consequences have been caused.

Whoever commits the crime in the preceding paragraph negligently is to be

sentenced to not more than seven years of fixed-term imprisonment; or not

more than three years of fixed-term imprisonment or criminal detention in

case the circumstances are relatively minor.

Article 125. Whoever illegally manufactures, trades, transports, mails,

or stocks up guns, ammunition, or explosives is to be sentenced to not less

than three years but not more than 10 years of fixed-termed imprisonment;

or not less than 10 years of imprisonment, life imprisonment, or death if

the consequences are serious.

Whoever illegally trades or transports nuclear materials is to be punished

according to stipulations in the preceding paragraph.

If a unit commits the crime in the preceding two paragraphs, the unit will

be fined, and its direct person in charge and other persons in charge are

to be punished according to the regulations in the first paragraph.

Article 126. Any enterprises which are legally designated or determined

to manufacture or sell guns, violate the regulations governing gun

management by performing one of the following acts, the units are to be

fined and personnel who are in charge and directly responsible together

with other personnel who are directly responsible are to be sentenced to

not more than five years of fixed-term imprisonment; when the consequences

are serious, to not less than five years and not more than ten years of

fixed-term imprisonment ; when the consequences are particularly serious,

to not less than 10 years of fixed- term imprisonment or life imprisonment:

(1) for the purpose of illegal sale, manufacture or allocation guns

whose numbers exceed quotas or whose varieties do not meet the

regulations;

(2) for the purpose of illegal sale, manufacture guns without a

number, or with an overlapped number, or with a fake number;

(3) illegally sell guns or sell guns manufactured for export inside

the territory .

Article 127. Whoever steals, seizes guns, ammunition, and explosive

articles is to be sentenced to not less than three years and not more than

ten years of fixed-term imprisonment; when the circumstances are serious,

to not less than ten years of fixed-term imprisonment, life imprisonment,

or death penalty.

Whoever steals guns, ammunition, explosive articles, or steals, seizes

guns, ammunition, explosive articles from the state's organs, military and

police personnel, people's militia is to be sentenced to not less than ten

years of fixed-term imprisonment, life imprisonment, or death penalty.

Article 128. Whoever violates the regulations governing gun management by

owning or unlawfully possessing, guns and ammunition is to be sentenced to

not more than three years of fixed-term imprisonment, criminal detention,

or control; when the circumstances are serious, to not less than three

years and not more than seven years of fixed-term imprisonment.

Any personnel who are provided with official-use guns who illegally lease

or lend the guns are to be punished in accordance with the previous

paragraph.

Any personnel who are provided with official-use guns who illegally lease

or lend the guns, thereby causing serious consequences are to be punished

in accordance with the first paragraph.

Any units committing such crimes as stated in the second and third

paragraph, are to be fined and personnel who are in charge and directly

responsible are to be punished in accordance with the regulation of the

first paragraph.

Article 129. Any personnel who are provided with official-use guns who

lose the guns without reporting the loss in a timely fashion, thereby

causing serious consequences are to be sentenced to not more than three

years of fixed-term imprisonment or criminal detention.

Article 130. Whoever illegally carries guns, ammunition, controlled

knives and tools, articles of an explosive, combustible, radioactive,

poisonous or corrosive nature into a public place or public transportation

vehicle, thereby endangering public safety, is to be sentenced, when the

circumstances are serious, to not more than three years of fixed-term

imprisonment, detention, or control when the circumstances are serious.

Article 131. Any aviation personnel who violate the rules and regulations

thereby causing major air accidents and serious consequences are to be

sentenced to not more than three years of fixed-term imprisonment or

detention; when causing the crash of an airplane or the death of personnel

are to be sentenced to not less than three years and not more than seven

years of fixed-term imprisonment.

Article 132. Any railway staff and workers who violate the rules and

regulations thereby giving rise to accidents affecting the safety of

railway operation are to be sentenced to not less than three years of

fixed-term imprisonment or criminal detention; when the consequences are

particularly serious, to not less than three years and not more than seven

years of fixed-term imprisonment.

Article 133. Whoever violates traffic and transportation laws and

regulations thereby giving rise to major accidents involving severe

injuries, deaths, or great losses of public and private properties are to be sentenced to not more than three years of fixed-term imprisonment; when fleeing the scene after an traffic and transportation accident or under other particularly odious circumstances, to not less than three years and not more than seven years of fixed-term imprisonment; when running away causes a person's death, to not less than seven years of fixed-term imprisonment.

Article 134. The staff and workers of factories, mines, forestry centers, construction enterprises or other enterprises and institutions who do not submit to management and violate the rules and regulations or force workers to work in a risky way in violation of the rules, thereby giving rise to major accidents involving injury or death and causing other serious consequences, are to be sentenced to not more than three years of fixed-term imprisonment or criminal detention; when the circumstances are particularly odious, to not less than three years and not more than seven years of fixed-term imprisonment.

Article 135. Any factories, mines, forestry centers, construction enterprises or other enterprises and institutions that have labor safety facilities failing to conform with the state's regulations and do not take measures to prevent hidden dangers after a request was made by relevant departments or the units' staff and workers, thereby giving rise to major accidents involving injury or death or other serious consequences, personnel who are directly responsible are to be sentenced to not more than three years of fixed-term imprisonment or criminal detention; when the circumstances are particularly odious, the sentence is to be not less than three years and not more than seven years of fixed-term imprisonment.

Article 136. Whoever violates the regulations on the control of articles of an explosive; combustible, radioactive, poisonous or corrosive nature, thereby giving rise to a major accident in the course of production, storage, transportation or use and causing serious consequences, is to be

sentenced to not more than three years of fixed-term imprisonment or

criminal detention; when the consequences are particularly serious, the

sentence is to be not less than three years and not more than seven years

of fixed-term imprisonment.

Article 137. When construction, design, working, and engineering

supervision units violate the state's regulations by reducing the quality

standard of the projects, thereby giving rise to a major safety accident,

those who are directly responsible are to be sentenced to not more than

five years of fixed-term imprisonment or criminal detention, in addition to

fine; when the consequences are particularly serious, the sentence is to be

not less than five years and not more than ten years of fixed-term

imprisonment, in addition to fine.

Article 138. When school buildings or educational and teaching facilities

are obviously known to be dangerous but measures are not taken or reports

are not made in a timely fashion, thereby giving rise to a major accident,

those who are directly responsible are to be sentenced to not more than

three years of fixed-term imprisonment or criminal detention; when the

consequences are particularly serious, the sentence is to be not less than

three years and not more than seven years of fixed-term imprisonment.

Article 139. When rules of fire prevention and control are violated and

the notification, given by a supervision organ of fire prevention and

control, to take corrective measures are refused, thereby giving rise to

severe consequences, those who are directly responsible are to be sentenced

to not more than three years of fixed-term imprisonment or criminal

detention; when the consequences are particularly serious, the sentence is

to be not less than three years and not more than seven years of fixed-term

imprisonment.


Chapter III Crimes of Undermining the Order of Socialist Market Economy

Section 1. Crimes of Manufacturing and Selling Fake and Shoddy Goods


Article 140. Any producer or seller who mixes up or adulterates products, passes fake imitations for genuine, sells seconds at best quality price, or passes unqualified products as qualified ones, with a sale amount of not less than 50,000 yuan and not more than 200,000 yuan, is to be sentenced to not more than two years of fixed-term imprisonment or criminal detention and may in addition or exclusively be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount; when the sale amount is not less than 200,000 yuan and not more than 500,000 yuan, is to be sentenced to not less than two years and not more than seven years of fixed-term imprisonment and may in addition be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount; when the sale amount is not less than 500,000 yuan and not more than 2 million yuan, is to be sentenced to not less than seven years and may in addition be sentenced to a fine of not less than 50 percent and not more than 200

percent of the sale amount; when the sale amount is not less than two million yuan, is to be sentenced to 15 years of fixed-term imprisonment or life imprisonment and may in addition be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount or confiscation of property.

Article 141. Whoever produces or sells fake medicines which are sufficiently able to seriously endanger human health is to be sentenced to not more than three years of fixed-term imprisonment or criminal detention and may in addition or exclusively be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount; when causing serious harm to human health, is to be sentenced to not less than three years and not more than ten years of fixed-term imprisonment and may in addition be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount; when causing death or particular harm to human health, is to be sentenced to not less than ten years of fixed-term imprisonment, life imprisonment, or death penalty and may in addition be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount or confiscation of property.

The fake medicines referred to in this article mean those fake medicines as well as those medicines and non- medicines that fall into such a category as to be dealt with as fake medicines in accordance with the regulations of the "Law of the PRC Governing the Management of Pharmaceutical Products."

Article 142. Whoever produces, sells inferior medicines, thereby causing severe harm to human health is to be sentenced to not less than three years and not more than ten years of fixed-term imprisonment and may in addition be sentenced to a fine of not less than 50 percent and not more than 200 percent of the sale amount; when the consequences are particularly serious, the sentence is to be not less than ten years of fixed-term imprisonment

and may in addition be sentenced to a fine of not less than 50 percent and

not more than 200 percent of the sale amount or confiscation of property.

The inferior medicines referred to in this article mean those inferior

pharmaceutical products that fall into the category of inferior medicines

in accordance with the regulations of the "Law of the PRC Governing the

Management of Pharmaceutical Products."

Article 143. Whoever produces, sells foods that do not conform with

hygienic standards which sufficiently gives rise to food poisoning

accidents or other severe food- originated diseases is to be sentenced to

not more than three years of fixed-term imprisonment and may in addition or

exclusively be sentenced to a fine of not less than 50 percent and not more

than 200 percent of the sale amount; when causing serious harm to human

health, the sentence is to be not less than three years and not more than

seven years of fixed-term imprisonment and may in addition be sentenced to

a fine of not less than 50 percent and not more than 200 percent of the

sale amount; when the circumstances are particularly serious, to be not

less than seven years of fixed-term imprisonment or life imprisonment and

may in addition be sentenced to a fine of not less than 50 percent and not

more than 200 percent of the sale amount or confiscation of property.

Article 144. Whoever produces, sells foods that are mixed with poisonous

or harmful non-food materials or knowingly sells such things is to be

sentenced to not more than five years of fixed-term imprisonment or

criminal detention and may in addition or exclusively be sentenced to a

fine of not less than 50 percent and not more than 200 percent of the sale

amount; when causing serious food poisoning accidents or other serious

food-originated diseases and giving rise to serious harm to human health,

the sentence is to be not less than five years and not more than ten years

of fixed-term imprisonment and may in addition be sentenced to a fine of

not less than 50 percent and not more than 200 percent of the sale amount;

when causing death or particularly harm to human health, is to be punished

in accordance with article 141 of the law.

Article 145. Whoever produces medical apparatus and instruments, and

clinic-use sanitary materials which do not conform with the standards of

the state and the trade aiming at protecting human health or knowingly

sells such things, thereby giving rise to serious harm to human health is

to be sentenced to not more than five years of fixed-term imprisonment and

may in addition be sentenced to a fine of not less than 50 percent and not

more than 200 percent of the sale amount; when the consequences are

particularly serious, the sentence is to be not less than five years and

not more than ten years of fixed-term imprisonment and may in addition be

sentenced to a fine of not less than 50 percent and not more than 200

percent of the sale amount; when the circumstances are particularly odious,

the sentence is to be not less than ten years of fixed-term imprisonment or

life imprisonment and may in addition be sentenced to a fine of not less

than 50 percent and not more than 200 percent of the sale amount or

confiscation of property.

Article 146. Whoever produces electrical appliances, pressure containers,

explosive and combustible products that do not conform with the standards

of the state and the trade aiming to protect the human safety and property

or other products that do not conform with such standards or knowingly

sells the above-mentioned products thereby giving rise to serious

consequences is to be sentenced to not more than five years of fixed-term

imprisonment and may in addition be sentenced to a fine of not less than 50

percent and not more than 200 percent of the sale amount; when the

consequences are particularly serious, the sentence is to be not less than

five years of fixed-term imprisonment and may in addition be sentenced to a

fine of not less than 50 percent and not more than 200 percent of the sale.

Article 147. Whoever produces fake insecticides, fake animal-use

medicines, fake chemical fertilizers or knowingly sells insecticides,

animal-use medicines, chemical fertilizers and seeds which are fake or are

no longer effective or any producer or seller who passes unqualified

insecticides, animal-use medicines, chemical fertilizers and seeds as

qualified ones, thereby giving rise to relatively large losses in

production is to be sentenced to not more than three years of fixed-term

imprisonment or criminal detention and may in addition or exclusively be

sentenced to a fine of not less than 50 percent and not more than 200

percent of the sale amount; when causing grave losses in production, is to

be sentenced to not less than three years and not more than seven years of

fixed-term imprisonment and may in addition be sentenced to a fine of not

less than 50 percent and not more than 200 percent of the sale amount; when

causing particularly grave losses in production, is to be sentenced to not

less than seven years of fixed-term imprisonment or life imprisonment or

confiscation of property.

Article 148. Production of cosmetics that fails to meet hygienic

standards or knowingly selling such cosmetics that cause serious

consequences shall be punished with imprisonment or criminal detention of

less than three years, and a fine of over 50 percent but less than 100

percent of the sales amount.

Article 149. The production and selling of products prescribed under

Articles 141 to 148 of this Section that does not constitute an offense

under these articles but with sales amount exceeding 50,000 yuan, shall be

convicted and punished according to provisions under Article 140 of this

Section.

The production and selling of products prescribed under Articles 141 and

148 of this Section that constitutes an offense under these articles and

Article 140, shall be convicted and punished under provisions carrying a

heavier penalty.

Article 150. Units violating provisions between Articles 140 and 148 of

this Section shall be punished with a fine, with personnel directly in

charge and other directly responsible personnel being punished according to

provisions under the respective articles.


Section 2. Smuggling Offenses

Article 151. Smuggling arms, ammunitions, nuclear materials, or

counterfeit currency notes shall be sentenced to imprisonment of over seven

years, with a fine or forfeiture of property; for the less serious offenses

to imprisonment of more than three years but less than seven years, and

with fine.

Smuggling out of the country prohibited cultural relics, gold, silver, and

other precious metals and rare animals and their products shall be

sentenced to imprisonment of over five years with fine; for less serious

offenses to imprisonment of less than five years with fine.

Smuggling out of the country prohibited rare plants and their products

shall be sentenced to imprisonment of less than five years with fine; or a

fine alone; for serious cases, to imprisonment of over five years with

fine.

Offenses of an extraordinarily serious nature under Paragraphs 1 and 2

should be punished with life imprisonment or death, with forfeiture of

property.

Units violating provisions under this article shall be fined, with

personnel directly in charge and other directly responsible personnel being

punished under the respective paragraphs of this article.

Article 152. Smuggling obscene movies, video tapes, audio tapes,

pictures, books and journals, and other obscene articles for profit or

dissemination shall be punished with imprisonment of more than three years

but less than ten years with fine; for offenses of a serious nature to over

ten years of imprisonment or life imprisonment, with fine or forfeiture of

property; for offenses of a less serious nature to imprisonment or criminal

detention or restraint of less than three years, and with fine.

Units committing offenses under the preceding paragraph shall be punished

with a fine, with personnel directly in charge and other directly

responsible personnel being punished under provisions of the preceding

paragraph.

Article 153. Smuggling goods and articles not mentioned in Articles 151,

152, and 347, as mentioned in Article 153, shall be respectively punished

according to the following provisions, depending on seriousness of the

offense:

(1) smuggling goods and articles carrying a tax of over 500,000 yuan shall be punished with imprisonment of over 10 years or life imprisonment, with a fine of over 100 percent but less than 500 percent of the evaded taxes, or forfeiture of property. Offenses of an extraordinary serious nature shall be punished according to provisions under Paragraph 4 of Article 151 of this law.

(2) smuggling goods and articles carrying a tax over 150,000 yuan but less than 500,000 yuan shall be punished with imprisonment of over three years but less than 10 years, with a fine of over 100 percent but less than 500 percent of the evaded taxes. Offenses of an extraordinarily serious nature shall be punished with imprisonment of over 10 years or life imprisonment, with a fine of over 100 percent but less than 500 percent of the evaded taxes, or forfeiture of property.

(3) smuggling goods and articles carrying a tax over 50,000 yuan and less than 150,000 yuan shall be punished with imprisonment or criminal detention of less than three years, with a fine of over 100 percent and less than 500 percent of the evaded taxes.

Units committing offenses under the preceding paragraph shall be punished with a fine, with personnel directly in charge and other directly responsible personnel being sentenced to imprisonment or criminal detention of less than three years; and, for cases of a serious nature, to imprisonment of over three years and less than 10 years; and -- for cases of an extraordinary serious nature -- to imprisonment of over 10 years.

For smuggling cases not being detected for several occasions, fines should

be based on an accumulation of all evaded taxes of such goods and articles.

Article 154. The following smuggling cases that constitute an offense

under provisions of this section shall be convicted and sentenced according

to provisions under Article 153 of this law:

(1) without the approval of the Customs and before settling defaulted

taxes, sale for profit in China of bonded goods approved for import

for the purposes of processing, assembly, and compensated trade,

including raw and processed materials, parts, finished products, and

equipment; and

(2) without the approval of the Customs and before settling defaulted

taxes, sale for profits in China of goods and articles with reduced

import duties or tax exemption.

Article 155. The following acts shall be regarded as smuggling offenses

and punished according to the relevant provisions under this Section:

(1) those who illegally and directly buy from smugglers goods whose

import has been banned by the state, or buy directly from smugglers

other smuggled goods and articles in relatively large quantities;

(2) those who transport, buy, or sell, in inland seas or territorial

waters, goods whose import has been banned by the state; or transport,

buy, or sell goods whose import has been restricted by the state, in

relatively large quantity and without legal documentation; and

(3) those who ship solid wastes into the country without being

detected by the Customs.

Article 156. Whoever colludes with smugglers by supplying them with

loans, funds, accounts, invoices, proofs, or such conveniences as

transportation, safe- keeping, and mailing services, shall be regarded and

punished as smuggling accomplices.

Article 157. Whoever provides armed escort to smugglers shall be

seriously punished according to provisions under the first and fourth

paragraphs of Article 151 of this law.

Whoever resorts to violence and threatening measures while resisting

Customs detection shall be punished for smuggling and obstructing state

organ personnel from enforcing their lawful duties provided under Article

277 of this law, and shall be punished for all offenses committed.

Section 3. Offenses Against Company and Enterprise Management Order

Article 158. Using forged certifications to apply for company

registration or using other fraudulent means to falsely declare registered

capital with intent to deceive company registration departments, where the

registered capital so falsely declared is large in figures with serious

consequences or of a severe nature, shall be punished by imprisonment or

criminal detention of less than three years, with a fine or a separately

imposed fine of over 1 percent but less than 5 percent of the falsely

declared registered capital.

Units committing offenses under the preceding paragraph shall be punished

with a fine, with personnel directly in charge and other directly

responsible personnel being punished with imprisonment or criminal

detention of less than three years.

Article 159. Company promoters, shareholders who, in violation of

provisions under the Company law, fail to pay up with currency notes,

provide actual property, or transfer property rights; or falsely claim to

have paid up the capital; or withdraw their capital upon registration of

company, where the amount involved is large with serious consequences or of

a serious nature, shall be punished with imprisonment or criminal detention

of less than five years, with a fine or a separately imposed fine of over 2

percent but less than 10 percent of the amount of capital so falsely

claimed to have been paid up or so withdrawn.

Units committing offenses under the preceding paragraph shall be punished

with a fine, with personnel directly in charge and other directly

responsible personnel being punished with imprisonment or criminal

detention of less than five years.

Article 160. Concealment of material facts or fabrication of major

fraudulent contents in share-soliciting prospectuses, share-subscription

applications, and bond solicitation by companies and enterprises for the

purpose of issuing shares or company or enterprise bonds shall, in cases

involving large amounts, with serious consequences, or of a serious nature,

be punished with imprisonment or criminal detention of less than five

years, with a fine or a separately imposed fine of over 1 percent and less

than 5 percent of the illegally raised capital.

Units committing offenses under the preceding paragraph shall be punished with a fine, with personnel directly in charge and other personnel directly responsible being punished with imprisonment or criminal detention of less than five years.