Fifteen Questions and Answers for the New Companies Act 2024

1, the new company law revision time and effective time?

A: the the People's Republic of China Company Law was revised and adopted at the seventh meeting of the standing Committee of the 14th National people's Congress on December 29, 2023, and will come into force on July 1, 2024.

2. What is the meaning and category of "company" in the new company law?

Answer: According to the provisions of Article 2-7 of this law, its meaning and classification are as follows,

A company refers to an enterprise organization established within the territory of the People's Republic of China in accordance with this Law, which is an enterprise legal person, has independent legal person property and enjoys legal person property rights, and is liable for the debts of the company with all its property.

There are two types of companies: limited liability companies and companies limited by shares.

3. What are the contents of the chapters, sections and articles of the new company law and how many are there respectively?

Answer: The new company law is divided into 15 chapters, including general rules, company registration, the establishment and organization of limited liability companies, the transfer of shares of limited liability companies, the establishment and organization of joint stock limited companies, the issuance and transfer of shares of joint stock limited companies, special regulations on the organization of state-funded companies, the qualifications and obligations of company directors, supervisors and senior managers, corporate bonds, corporate finance and accounting, company merger, division, capital increase, capital reduction, company dissolution and liquidation, branches of foreign companies, legal liability, by-laws.

In the new company law, there are three chapters divided into different sections, the third chapter has two sections, the fifth chapter has five sections, and the sixth chapter has two sections.

Chapter V Establishment and Organization of a Joint Stock Company has five sections, which respectively explain the establishment of the company, the shareholders' meeting, the board of directors and managers, the board of supervisors, and the special provisions of the organization of listed companies.

The new company law is divided into 266 articles.

4, the company registration, should have what specific matters?

Answer: According to the provisions of Article 32 of the new Company Law, the establishment of a new company includes the following matters,

Name of (I);

(II) residence;

(III) registered capital;

(IV) business scope;

The name of the legal representative of the (V);

The names of the shareholders of the (VI) limited liability company or the promoters of the joint stock limited company.

The company registration authority shall publicize the company registration items specified in the preceding paragraph to the public through the national enterprise credit information publicity system.

5. What matters should the articles of association of a limited liability company have?

A: Article 46 of the new Company Law stipulates that a limited company shall have the following matters:

Name and domicile of the (I) company;

Business scope of the (II) company;

Registered capital of the (III) company;

the name of the (IV) shareholder;

The amount, method and date of capital contribution of the (V) shareholders;

The organization of the (VI) company and the method for its establishment, powers and rules of procedure;

The method for the creation and change of the legal representative of the (VII) company;

(VIII) other matters deemed necessary by the shareholders' meeting.

The shareholders shall sign or seal the articles of association.

6, the company's registered capital is subscribed, or paid, the new law requires how long to pay in full?

A: Article 47 of the new Company Law stipulates that the registered capital of a limited liability company shall be the amount of capital contribution paid by all shareholders registered with the company registration authority. The amount of capital contribution subscribed by all shareholders shall be fully paid by the shareholders within five years from the date of establishment of the company in accordance with the provisions of the articles of association.

In other words, starting from July 1, 2024, newly established companies will adopt a subscription system, requiring full payment within five years from the date of establishment of the company.

7, registered capital paid-in, can use what form of capital contribution?

Answer: According to the provisions of Article 48 of the new company law, shareholders can make capital contributions in at least six forms, namely: monetary capital contributions, and they can also use physical objects, intellectual property rights, land use rights, equity, creditor's rights, etc. that can be valued in currency and can be transferred according to law. Non-monetary property is used as capital contribution; however, except for property that cannot be used as capital contribution according to laws and administrative regulations.

8. What is the highest authority of the company and what are its powers?

A: According to Article 58-59 of the new company law, the shareholders' meeting is composed of all shareholders and is the authority of the company, which exercises its functions and powers in accordance with this law. Its powers are as follows:

To (I) the election and replacement of directors and supervisors, and to decide on matters relating to the remuneration of directors and supervisors;

(II) review and approve the reports of the Board of Directors;

(III) review and approve the report of the board of supervisors;

(IV) review and approve the company's profit distribution plan and loss recovery plan;

The (V) shall make resolutions on increasing or decreasing the registered capital of the Company;

The (VI) makes resolutions on the issuance of corporate bonds;

The (VII) shall make resolutions on the merger, division, dissolution, liquidation or change of corporate form of the Company;

(VIII) amendment of the articles of association;

(IX) other powers specified in the articles of association.

The shareholders' meeting may authorize the board of directors to make a resolution on the issuance of corporate bonds.

9. A limited liability company has a board of directors. What are the powers of the board of directors?

A: According to Article 67 of the New Company Law, the functions and powers of the Board of Directors:

(I) convene the shareholders' meeting and report to the shareholders' meeting;

(II) implement the resolutions of the shareholders' meeting;

(III) determine the company's business plans and investment plans;

(IV) formulating the company's profit distribution plan and loss recovery plan;

(V) formulate plans for the company to increase or decrease its registered capital and issue corporate bonds;

(VI) formulate plans for the merger, division, dissolution or change of corporate form of the Company;

(VII) determine the establishment of the company's internal management structure;

The (VIII) decides on the appointment or dismissal of the manager of the Company and his remuneration, and decides on the appointment or dismissal of the deputy manager and the person in charge of finance of the Company and his remuneration in accordance with the manager's nomination;

(IX) formulate the basic management system of the company;

(X) the provisions of the articles of association or other powers granted by the shareholders' meeting.

The restrictions on the powers of the board of directors in the articles of association shall not be used against the bona fide counterpart.

10. What are the articles of association of a joint stock limited company?

A: Article 95 of the new Company Law stipulates that the articles of association of a joint stock limited company shall state the following matters:

The name and domicile of the (I) company; the business scope of the (II) company; the method of establishment of the (III) company; the registered capital of the (IV) company, the number of shares issued and the number of shares issued at the time of establishment, the amount per share of the par value shares; if the (V) issues class shares, the number of shares in each class of shares and their rights and obligations; the names or names of the (VI) promoters, the number of shares subscribed shares, and the method of capital contribution; the composition, powers and rules of procedure of the board of directors of the (VII); the method for the generation and change of the legal representative of the (VIII) company; the composition, powers and rules of procedure of the board of supervisors of the (IX); the method for profit distribution of the (X) company; (11) the reasons for dissolution and liquidation of the company; (12) the method for notification and announcement of the company; and (13) other matters that the shareholders' meeting deems necessary.

11, the meaning of listed companies, what are the basic provisions?

A: Chapter V, Section V, Special Provisions for the Organization of Listed Companies

(1) A listed company is a company limited by shares whose shares are listed and traded on a stock exchange.

(2) A listed company shall establish an independent director, an audit committee and a secretary of the board of directors; the information of shareholders and actual controllers shall be disclosed in accordance with the law, and the relevant information shall be true, accurate and complete.

12. What are the stocks of listed companies and what are the specific regulations?

A: The provisions of articles 147-150 of the new company law,

The shares of the company take the form of shares. A share certificate is a certificate issued by a company to certify the shares held by a shareholder. The shares issued by the company shall be registered shares.

The issue price of the par value shares may be at the par value or in excess of the par value, but not less than the par value.

If the stock is in paper form, it shall also contain the serial number of the stock, signed by the legal representative and sealed by the company.

Upon the establishment of a company limited by shares, the shares are formally delivered to the shareholders. A company may not deliver shares to its shareholders prior to its establishment.

13. What is included in the prospectus of a listed company?

A: Article 154 stipulates that the prospectus of a listed company shall be accompanied by the articles of association of the company and shall state the following:

the total number of shares issued by the (I);

The par value and issue price of (II) denomination shares or the issue price of non-denomination shares;

(III) the purpose of the funds raised;

(IV) rights and obligations of subscribers;

(V) types of shares and their rights and obligations;

(VI) the start and end dates of this offering and the statement that the subscriber may withdraw the shares subscribed when the subscription is overdue.

Where shares are issued at the time of establishment of the company, the number of shares subscribed by the promoters shall also be stated.

14. Who is not allowed to serve as a director, supervisor or senior manager of the company?

A: Article 178 of the new Company Law stipulates that the following actors shall not act as directors, supervisors or senior directors of the company:

(I) incapacity or limited capacity for civil conduct;

If a (II) is sentenced to criminal punishment for embezzlement, bribery, embezzlement of property, misappropriation of property or disruption of the order of the socialist market economy, or is deprived of political rights for a crime, and the sentence of probation is suspended for less than five years, it shall be suspended for less than two years from the date of expiration of the probation period;

If a (III) is a director, factory director or manager of a company or enterprise that has been liquidated and is personally responsible for the bankruptcy of the company or enterprise, three years have not elapsed since the date of completion of the bankruptcy liquidation of the company or enterprise;

If the (IV) is the legal representative of a company or enterprise whose business license has been revoked and which has been ordered to close down due to violation of the law, and is personally liable, not more than three years have elapsed since the date on which the company or enterprise's business license has been revoked and which has been ordered to close down;

The (V) individual is listed by the people's court as a person who has broken his promise due to the large amount of debt.

Where a director or supervisor is elected or appointed or a senior manager is appointed in violation of the provisions of the preceding paragraph, such election, appointment or appointment shall be invalid.

The company shall remove a director, supervisor or senior manager from his post if any of the circumstances listed in the first paragraph of this Article occur during his term of office.

15. What are the senior managers, controlling shareholders, actual controllers and related relationships of the company?

A: The provisions of Article 256 of the new Company Law explain the senior management, controlling shareholders, actual controllers and related relationships respectively,

(I) senior management personnel refer to the company's manager, deputy manager, financial officer, secretary of the board of directors of a listed company and other personnel specified in the company's articles of association.

(II) controlling shareholder refers to a shareholder whose capital contribution accounts for more than 50% of the total capital of a limited liability company or whose shares account for more than 50% of the total share capital of a joint stock limited company; although the capital contribution or the proportion of shares held is less than 50%, however, the voting rights enjoyed by the capital contribution or the shares held are sufficient to have a significant impact on the resolution of the shareholders' meeting.

The actual controller of the (III) refers to the person who can actually control the company's behavior through investment relationship, agreement or other arrangement.

(IV) relationship refers to the relationship between the controlling shareholders, actual controllers, directors, supervisors and senior managers of the company and the enterprises directly or indirectly controlled by them, as well as other relationships that may lead to the transfer of interests of the company. However, state-controlled enterprises are not only related to each other because they are controlled by the state.