英文合同范本.doc

来源 万法通翻译社 DOMESTIC DIRECT INVESTMENT DRAFTING CONSIDERATIONS 1 INTRODUCTION 1 2 RELEVANT LEGISLATION 1 3 ARTICLES OF ASSOCIATION 2 4 SHAREHOLDERS AGREEMENT 10 5 NON COMPETITION AGREEMENT 13 6 JOINT STOCK LIMITED COMPANIES 14 7 ISSUE AND TRANSFER OF SHARES FOR LIMITED LIABILITIES COMPANIES AND JOINT STOCK LIMITED COMPANIES 22 8 PLEDGE OF OWNERSHIP INTERESTS SHARES BY LIMITED LIABILITIES COMPANIES AND JOINT STOCK LIMITED COMPANIES 23 9 PROVISIONAL REGULATIONS ON CERTAIN ISSUES CONCERNING THE ESTABLISHMENT OF JOINT STOCK LIMITED COMPANIES WITH FOREIGN INVESTMENT 24 1 INTRODUCTION This chapter focuses on the key documents required for establishing a Chinese domestic enterprise with no foreign investment According to the Company Law of the PRC 1993 the Regulations of the PRC on the Administration of Registration of Companies 1994 and the Regulations of the PRC on the Administration of Registration of Enterprise Legal Person 1988 the registration for establishing a Chinese domestic enterprise shall be conducted with the relevant Administration for Industry and Commerce AIC 2 RELEVANT LEGISLATION 2 1Current Law Applicable to Chinese Domestic Enterprises with No Foreign Investment Company Law of the People s Republic of China 1993 the Company Law This law was formulated in accordance with the Constitution of the PRC in order to meet the need of establishing a modern enterprise system to standardize the organization and activities of companies to protect the legitimate rights and interests of companies shareholders and creditors to maintain socio economic order and to promote the development of the socialist market economy Regulations of PRC on the Administration of Registration of Companies 1994 来源 万法通翻译社 This Regulation was enacted in order to ascertain the legal person qualification of a company and regulate the registration of establishment Regulations of PRC on the Administration of Registration of Enterprise Legal Person 1988 This Regulation was enacted in order to establish an administration system for the registration of enterprise legal person to protect the legitimate rights and interests of the enterprise 2 2Required Documents 1 Articles of Association Investors in a domestic enterprise must prepare at a minimum an Articles of Association to form a PRC company The Company Law of the PRC governs the articles of association 2 Shareholders Agreement In practice a shareholders agreement is seldom used when establishing a domestic company however it may still be employed for special occasions For instance a shareholders agreement may be used to establish a private hospital as relevant government permission must be first obtained prior to such a company s registration and issuance of business license In such a case a shareholders agreement must contain regulations regarding matters of the construction of the hospital Upon completion of the construction of the hospital the government permission can be obtained It is important that the shareholders agreement state in case of any discrepancy between the shareholders agreement and the Articles of Association which document will prevail For a joint venture company the law is clear that the joint venture agreement shall prevail however the law is silent for a domestic company in this regard 3 Non competition Agreement 3 ARTICLES OF ASSOCIATION The Articles of Association which governs the shareholders directors managers staff and the company itself are articles of a document specifying amongst other things the business scope and management structure of the company in compliance with Company Law and the basic principles set out in the shareholders agreement 来源 万法通翻译社 3 1Structure of PRC Articles of Association vs Joint Venture Articles of Association The structure of the Articles of Association under the Company Law is different from Law of the People s Republic of China on Chinese Foreign Equity Ventures and its Implementation Rules the Joint Venture Law in many key aspects including 1 timing of capital contributions 2 shareholders investors meetings 3 the board of directors 4 the board of supervisors and 5 distribution of after tax profits 1 Timing of Capital Contributions Under the Company Law the shareholders of a domestic company must make full payment of the registered capital before they file a registration application with the local Administration for Industry and Commerce In contrast under the Joint Venture Law the investors may contribute capital by way of a lump sum or in instalments after registration of the company but before certain deadlines stated in the Joint Venture Law and other relevant regulations 2 Shareholder Meetings Under the Company Law a limited liability company must hold shareholder meetings which would consider resolutions regarding material issues such as merger division and dissolution of the company and amendments to its Articles of Association For any of the above matters the relevant resolution must be passed by shareholders holding two thirds or more of the total voting rights However under the Joint Venture Law no shareholder meetings are required 3 The Board of Directors 来源 万法通翻译社 Under the Company Law the board of directors shall be responsible to the shareholders of the company implement resolutions passed at shareholder meetings and formulate plans regarding important issues The Articles of Association shall stipulate to the extent allowed by the Company Law the agenda of meetings of the board of directors Under the Joint Venture Law the board of directors has full authority to make decisions on all material issues affecting the company Decisions on the following issues may be made only with the unanimous consent of those directors present at the board meeting 1 amendment to the Articles of Association 2 suspension or dissolution of the company 3 increase in or assignment of any interest in the company s registered capital and 4 merger with any other enterprise Decisions on other matters may be made according to the rules of procedure stipulated in the Articles of Association 4 The Board of Supervisors Under the Company Law a company must have a board of supervisors consisting of representatives of the company s staff and workers The purpose of the board of supervisors is to supervise the acts of the company s directors and managers convene special shareholder meetings and inspect the company s financial affairs In contrast the Joint Venture Law has no provisions regarding a board of supervisors 5 Distribution of After Tax Profits 来源 万法通翻译社 Under the Company Law when distributing profits a company must allocate 10 of the after tax profits to its Statutory Common Reserve Fund and another 5 10 of the after tax profits to its Statutory Common Welfare Fund No further allocation may be made to the Statutory Common Reserve Fund once the accumulated amount exceeds 50 of the registered capital of the company Only with the shareholders consent may the company make any allocation to the Discretionary Common Reserve Fund After paying off any accrued losses and making such allocations the company may distribute all or part of the remaining profits to its shareholders according to their respective contributions to the company s registered capital A company s Statutory Common Reserve Fund shall be used to pay off the company s losses expand its production and operations or can be converted into registered capital The Statutory Common Welfare Fund may only be used for the collective welfare of the company s staff and workers Under the Joint Venture Law a joint venture company shall allocate part of its profits to Reserve and Expansion Funds as well as Bonuses and Welfare Funds for staff and workers in proportions decided by the board of directors After paying off any accrued losses and making such allocations the company shall if the directors so decide distribute the remaining profits to the investors according to the investors respective contributions to the company s registered capital As for domestic companies reserve funds can be used to pay off the company s losses or with the consent of the relevant authorities to increase the company s registered capital 3 2Relevant Company Law to the Articles of Association The following clauses of the Company Law apply or are relevant to the Articles of Association of a limited liability company 1 Clause 22 specifies the major contents of the Articles of Association See Key Provisions of the Articles of Association below 2 Clauses 23 to 27 deal with the registered capital contributions and establishment of the company 来源 万法通翻译社 PRC laws set different requirements for the minimum amount of the registered capital depending on the nature of the company Generally the registered capital may only be contributed by way of cash intellectual property rights know how and land use rights Any intellectual property rights know how or land use rights to be contributed as capital must be subjected to an asset valuation and verification process to ensure the intellectual property rights or know how is not overvalued or undervalued Not more than 20 of the company s registered capital may be contributed in the form of intellectual property rights or know how except in special cases involving advanced technologies The contribution to be made by each shareholder shall be made in full and verified by and issued a capital verification report from an approved institution Once the contribution has been verified an application and accompanying documents may then be filed with the local Administration for Industry and Commerce AIC for the registration of the company If the company meets the requirements then the local AIC shall register and issue a business licence After the registration the company shall issue capital contribution certificates to its shareholders and prepare a registration of such person 3 Clauses 31 to 36 address the rights and obligations of shareholders Every shareholder is entitled to inspect the minutes of shareholder meetings and the financial and accounting reports of the company In the event of any distribution of profits a shareholder is entitled to receive a profit share proportionate to his capital contribution In addition shareholders have priority in the event the company decides to issue new shares and they may transfer all or part of their shares to other shareholders or third parties Once a company has been registered its shareholders may not withdraw their capital contributions 4 Clauses 37 to 44 explain the purpose and procedures of shareholder meetings Shareholder meetings shall be composed of all shareholders and the decisions and resolutions of these meetings shall be superior to any decisions or resolutions passed by any governing body of the company Only shareholders holding two thirds or more of the voting rights may pass resolutions on certain major issues such as business policy investment plans issue of securities increase or reduction of the registered capital of the company any merger division transformation dissolution and liquidation or any amendment to the Articles of Association At shareholder meetings shareholders may also elect and remove members of the board of directors and supervisors Shareholders may also examine and approve reports of either of such boards 来源 万法通翻译社 A company s Articles of Association may not overrule or conflict with any principles concerning shareholder meetings set out in the Company Law such as the two thirds voting requirement above Shareholder meetings may be held as either regular meetings or special meetings All shareholders shall be notified of the shareholder meeting at least 15 days in advance Minutes shall be kept of the proceedings at each shareholder meeting and all shareholders present at the meeting shall sign the minutes 5 Clauses 45 to 49 deal with the board of directors A limited liability company shall have a board of directors composed of three to thirteen members The chairman of the board shall be the company s legal representative In the case of a company with a small number of shareholders it may have a single executive director instead of a board of directors and the executive director shall be the legal representative of the company The board shall be accountable to the company s shareholders and shall report its work to shareholder meetings and implement resolutions passed by the shareholders The board may formulate plans on business and investment prepare annual budgets and final accounts make proposals on the distribution of profits increase or reduce the company s registered capital or any merger division transformation and dissolution of the company The term served by each of the directors shall be stipulated in the Articles of Association and must not exceed three years The shareholders may not without good cause dismiss a director prior to the expiration of his term of office 6 Clause 50 concerns the general manager A company shall have one general manager The general manager will be appointed and dismissed by the board of directors He shall be in charge of the day to day operations of the company carry out the instructions of the board of directors and formulate rules and regulations applicable to the staff and workers 7 Clauses 52 to 54 explain the purpose and composition of the board of supervisors 来源 万法通翻译社 A board of supervisors shall be established and its members shall include representatives of the shareholders and the staff and workers of the company The term of office of a supervisor shall be three years The board has the right to 1 examine the financial affairs of the company 2 supervise the acts of the directors and general manager and require remedial action if such an act is found to have damaged the interests of the company 3 propose the convening of extraordinary shareholder meetings and 4 perform such other functions and exercise such other powers as stipulated in the Articles of Association Supervisors may attend but not vote at meetings of the board of directors 8 Clauses 59 to 63 set out the obligations of the directors supervisors and general manager The directors supervisors and the general manager must comply with the Articles of Association faithfully perform their duties and protect the interests of the company The Company Law prohibits such persons from taking advantage of their positions For instance unless provided for in the Articles of Association or approved by the shareholders neither the directors nor the general manager may enter into any contract or other transaction with the company 9 Clauses 174 to 181 address financial statements and the distribution of after tax profits At the end of each fiscal year the company must prepare a report and financial statements to be examined and verified by a Chinese Certified Public Accountants Before distributing any after tax profits the company must allocate certain percentages of such profits to Statutory Common Reserve and Common Welfare Funds as described in more detail above point 5 under Required Documents Only then may the balance be distributed to the shareholders on a pro rata basis 10 Clauses 182 to 187 set out requirements applicable to any merger or division 来源 万法通翻译社 Any merger or division of the company shall require the affirmative resolution of shareholders holding two thirds or more of the total voting rights In the event of a merger the parties shall sign a merger agreement and prepare a balance sheet and a detailed inventory of assets The company shall inform its creditors of the intended merger following procedures stipulated in the Company Law The creditors shall be entitled to claim either full repayment of debts due to them or the provision of a guarantee If the company fails to repay its debts in full or to provide a guarantee it shall be prohibited from implementing such merger In the event of a division the company shall prepare a balance sheet and a detailed inventory of assets and shall inform its creditors of the intended division following procedures stipulated in the Company Law The creditors shall be entitled to claim either full repayment of debts due or a guarantee as described above If the creditor fails to file a claim or issue a guarantee then the division may not be implemented 11 Clauses 189 to 198 deal with liquidation procedures and related matters In the event of liquidation of a company a liquidation committee shall be established This committee is responsible for verifying the company s assets preparing a statement of affairs and formulating a liquidation plan to be submitted to a shareholder meeting and relevant governmental authorities for confirmation If the assets of the company are sufficient to discharge the company s debts such assets shall be used first to pay the liquidation expenses unpaid wages due to staff and workers outstanding taxes and then all other debts The remaining assets shall be distributed among the shareholders in proportion to their respective contributions made to the company s registered capital If the assets of the company are insufficient to discharge its debts the committee must apply for a declaration of bankruptcy with the court Most of the provisions listed above are usually reproduced in a company s Articles of Association without change If the shareholders wish other provisions may be included in the articles as long as such changes do not violate or conflict with the Company Law 3 3Key Provisions of the Articles of Association According to the Company Law the articles of association of a limited liability company must set out the following 1 The company s and its shareholder s name and legal address 来源 万法通翻译社 See Articles 2 and 3 of the model Articles of Association 2 The company s business scope See Articles 7 and 8 of the model Articles of Association 3 The company s registered capital See Article 9 of the model articles For a domestic limited liability company the total registered capital shall be the amount