Article 77
The establishment of a joint stock limited company is subject to the following conditions:
(1) The number of sponsors meets legal requirement;
(2) The amount of capital stocks subscribed for by the sponsors and publicly placed reaches the legally-prescribed minimum capital level;
(3) The issue of its shares and the preparation for its establishment comply with the law;
(4) The sponsors prepare the articles of association, and such articles of association of a company established by public share offer shall be adopted by the establishment meeting;
(5) There is a company name, and the organs complying with the requirements for a joint stock limited company are established;
(6) The company has a domicile.
Article 78
A joint stock limited company may be established either by sponsorship or public share offer.
Establishment by sponsorship means establishment of the company through subscription by the sponsors for all the shares to be issued by the company.
Establishment by public share offer means establishment of the company through subscription by sponsors for part of the shares to be issued by the company, and public or targeted placement of the remaining shares.
Article 79
In order to establish a joint stock limited company, there shall be not fewer than two but no more than two hundred sponsors, half of whom shall be domiciled in China.
Article 80
Sponsors of a joint stock limited company shall be responsible for the preparation of the establishment of the company and enter into a sponsor’s agreement to clarify the rights and obligations during the incorporation of the company.
Article 81
The registered capital of a joint stock limited company established by public share offer shall be the total amount of share capital subscribed for by all the sponsors and registered with the company registration authority. The initial capital contribution of all the sponsors shall not be less than twenty percent (20%) of the registered capital, the remaining of which shall be paid in full within two (2) years of the establishment of the company. In the event of an investment company, the remaining part of the registered capital may be fully paid within five (5) years of the establishment of the company. Prior to a full contribution to the registered capital, sponsors shall not offer the shares to others.
The registered capital of a joint stock limited company established by sponsorship shall be the actual total amount of share capital that is paid up and registered with the company registration authority. The minimum amount of the registered capital of a joint stock limited company shall be RMB 5,000,000. Where there is a higher level of the minimum amount stipulated by laws and administrative regulations, such stipulations shall apply.
Article 82
The articles of association of a joint stock limited company shall set forth the following:
(1) its name and domicile;
(2) its business scope;
(3) the method for its establishment;
(4) the total number of shares of the company, the value of each share, and the registered capital of the company;
(5) the names of the sponsors, the number of shares they have subscribed for, the form and time of capital contribution;
(6) the composition of the board of directors, its authorities, term, and rules of conducting business;
(7) its legal representative;
(8) the composition of the board of supervisors, its authorities, term, and rules of conducting business;
(9) the method for company profit distribution;
(10) the causes for its dissolution and the method for its liquidation;
(11) the method for giving notice and making public announcement;
(12) other matters which the general meeting of shareholders deems necessary to provide for.
Article 83
The provisions of Article 27 herein shall apply to the form of sponsor’s capital contribution.
Article 84
In the event of establishing a joint stock limited company by sponsorship, the sponsors shall fully subscribe in writing for the shares to be issued as prescribed in the articles of association. In the event of a lump sum payment, the investment shall be fully paid up in due time. In the event of payment in installments, the initial contribution shall be paid up in due time. In the event of contributions in form of non-currency property, the property rights therein shall be transferred in accordance with legally prescribed procedures.
Sponsors failing to make the capital contribution pursuant to the preceding paragraph shall bear the breach liability in accordance with the sponsor’s agreement.
Upon the initial contribution of the share capital which the sponsors have subscribed for, they shall elect members to the board of directors and the board of supervisors, and the board of directors shall apply for establishment registration by submitting the articles of association, the capital verification certificate issued by a legally established capital inspection organization and other documents required by laws and administrative regulations to the company registration authority.
Article 85
In the case of establishing a joint stock limited company by public share offer, the shares subscribed for by the sponsors shall be not less than thirty five percent (35%) of the total shares of the company. Where laws and administrative regulations stipulate otherwise, such stipulations shall apply.
Article 86
In a public share offer, the sponsors shall make the prospectus available to the public and prepare the share subscription form. The share subscription form shall contain the items listed in Article 87, and a subscriber shall fill in the following: the number of shares subscribed for, the amount of share proceeds, and his or her domicile, and shall sign or impress his chop on the form. A subscriber shall pay the share proceeds according to the number of shares he has subscribed for.
Article 87
The prospectus shall be accompanied with the articles of association prepared by the sponsors, and shall set forth the following:
(1) the number of shares subscribed for by the sponsors;
(2) the par value and issuing price of each share;
(3) the total number of bearer share certificates issued;
(4) the purpose of the fund raised;
(5) the rights and obligations of the subscribers;
(6) the commencing time and expiration time of the share offer, and a statement that in the event the shares have not be placed in full upon the expiration time, the subscribers may revoke their share subscriptions.
Article 88
The sponsors' share offer to the public shall be underwritten by a securities underwriter established in accordance with the law, and an underwriting agreement shall be executed.
Article 89
When conducting public share offer, the sponsors shall execute an agreement with a bank for deposit of share proceeds.
The depository bank shall collect and hold the share proceeds in accordance with the agreement, and issue receipts to subscribers who have paid their share proceeds, and is obligated to provide to the relevant authority a certificate for receipt of share proceeds.
Article 90
After the proceeds from issue of the shares are paid in full, the share capital shall be verified by a legally-prescribed capital verification institution and a certificate shall be issued thereby. Within thirty (30) days, the sponsors shall convene and preside over the establishment meeting, which is composed of the subscribers.
If the issued shares are not fully placed upon expiration of the time limit prescribed in the prospectus, or the sponsors fail to hold the establishment meeting within thirty (30) days of full payment of the proceeds from issue of the shares, the subscribers may demand that the sponsors return the share proceeds.
Article 91
The sponsors shall notify each subscriber of the date of the establishment meeting or make a public announcement for such meeting fifteen (15) days in advance. The establishment meeting may not be held unless attended by subscribers representing at least half of the shares.
The establishment meeting shall exercise the following authorities:
(1) considering the report on 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) verifying expenses incurred for the establishment of the company;
(6) verifying the value of the assets contributed by the sponsors in lieu of share proceeds;
(7) where an event of force majeure or any material change in operating condition affecting the company's establishment has occurred, a resolution not to establish the company may be adopted.
A resolution adopted at the establishment meeting on any of the matters mentioned in the preceding paragraph requires affirmative votes by subscribers present at the meeting representing more than half of the voting rights.
Article 92
Upon payment of the share proceeds or delivery of the items as contribution of share capital in lieu of share proceeds, the sponsors and subscribers may not withdraw their share capital, except where the shares issued are not fully placed in time, the sponsors fail to hold the establishment meeting in time, or the establishment meeting adopts a resolution not to establish the company.
Article 93
Within thirty (30) days of the completion of the establishment meeting, the board of directors shall apply for establishment registration by submitting to the company registration authority the following:
(1) the company registration application;
(2) the minutes of the establishment meeting;
(3) the articles of association;
(4) the capital verification certificate;
(5) the engagement letters and identity certificates of the legal representative, directors and supervisors;
(6) the legal person’s qualification certificate of sponsors or identity certificate of natural persons;
(7) the company’s certificate of domicile.
The verification documents issued by the securities regulatory department under the State Council shall be submitted to the company registration authority in the event of public share offer by a joint stock limited company established by public share offer.
Article 94
Sponsors failing to contribute in full after the establishment of a joint stock limited company shall make up the rest of the contribution. Other sponsors shall bear joint and several liability for such contribution.
Where the actual value of the non-currency property contribution, after the establishment of a joint stock limited company, is found to be obviously lower than the amount prescribed in the articles of association of the company, the sponsor making such contribution shall make up the balance and other sponsors shall bear joint and several liability therefor.
Article 95
The sponsors of a joint stock limited company shall bear liabilities as follows:
(1) in the event of failure to establish the company, being jointly and severally liable for the debts and expenses incurred as a result of the pre-establishment activities;
(2) in the event of failure to establish the company, being jointly and severally liable for the return of share proceeds paid by the subscribers, together with the interest thereon as if they have been deposited in a bank for a like period.
(3) if the company's interest is harmed in the course of its establishment due to the negligence of the sponsors, being liable to the company for damages.
Article 96
Where a limited liability company is converted to a joint stock limited company, the total value of the converted shares shall not be higher than the company's net assets value. Public share offering by a joint stock limited company converted from a limited liability company for the purpose of increasing capital shall be carried out in accordance with the law.
Article 97
A joint stock limited company shall maintain its articles of association, the record of shareholders, the counterfoils of bonds, the minutes of the general meeting of shareholders, the board of directors and the board of supervisors as well as its financial and accounting reports at the company's premises.
Article 98 A shareholder is entitled to inspect the articles of association, the record of shareholders, the counterfoils of bonds, the minutes of the general meeting of shareholders, the board of directors and the board of supervisors as well as its financial and accounting reports and is entitled to make a proposal or inquiry concerning the company's operation.
