Laws of the People's Republic of China

CHAPTER ONE GENERAL PROVISIONS CHAPTER TWO ESTABLISHMENT OF A PARTNERSHIP BUSINESS CHAPTER THREE PROPERTY OF A PARTNERSHIP BUSINESS CHAPTER FOUR OPERATION OF A PARTNERSHIP BUSINESS CHAPTER FIVE RELATIONSHIP BETWEEN A PARTNERSHIP BUSINESS AND A THIRD PARTY CHAPTER SIX ADMISSION TO AND WITHDRAWAL FROM PARTNERSHIP CHAPTER SEVEN DISBANDMENT AND LIQUIDATION OF PARTNERSHIP BUSINESS CHAPTER EIGHT LEGAL LIABILITIES CHAPTER NINE SUPPLEMENTARY PROVISIONS

   Article 1 This Law is formulated for the purposes of standardizing the behavior of partnership businesses and protecting the legitimate rights and interests of those businesses and their partners and thus to safeguard the social and economic order, and promote the development of the socialist market economy.

   Article 2 A partnership business referred to in this Law shall be any business set up by partners within the Chinese territory according to this Law with contributions by all the partners thereof through signing up of an agreement as well as a joint sharing of all the partners of the operations, incomes, risks, and unlimited liabilities of the business.

   Article 3 The agreement for a business concerned shall be made in a written form according to the law upon full agreement of all partners thereof through consultations.

   Article 4 The principles of voluntariness, equality, fairness, sincerity and creditability shall be followed for the creation of a partnership business and formulation of the agreement thereof.

   Article 5 A partnership business in not permitted to use such words as "limited" or "limited liability" in its title.

   Article 6 A partnership business must abide by laws, administrative regulations and professional ethics in its operations.

   Article 7 The property and legitimate rights and interests of a partnership business and its partners shall enjoy legal protection.

CHAPTER TWO ESTABLISHMENT OF A PARTNERSHIP BUSINESS

   Article 8 The establishment of a partnership business should be provided with the following conditions:

1) two or more partners who shall all shoulder unlimited liabilities according to the law;

2) a partnership agreement in written form;

3) capital fund contributed by all partners;

4) a name of the business concerned;

5) operating sites and conditions of the business.

   Article 9 A partner shall be a person who is fully capable of performing civil acts.

   Article 10 Any person having been banned by the laws or administrative regulations from engaging in business activities is not permitted to become a partner of a partnership business.

   Article 11 A partner of a partnership business may make contributions in cash, kinds, land use rights, intellectual property rights or rights of other property thereof and the said capital contributions shall be the legitimate property and rights of property of the partner concerned.

When in need, the capital contributions other than cash should be evaluated by all partners through consultations or by a legal evaluation agency entrusted by all partners.

With the agreement of all partners after consultations, a partner may also use labor services as capital contributions, and the method for the evaluation of the services shall be determined by all partners through consultations.

   Article 12 Capital contributions of partners of a partnership business shall be made in forms, amounts and terms as set in the partnership agreement.

Contributions actually paid up by all partners according to the partnership agreement shall form the total capital contributions of a partnership business.

   Article 13 A partnership agreement shall record clearly the following items:

1) name of the partnership business and location of its major operating site;

2) purpose of partnership and business scope of the partners business;

3) names and residences of the partners;

4) form and amount of capital contributions payable by the partners and term of payment for capital contributions;

5) method for profit distribution and loss sharing;

6) actual operations of the business;

7) conditions for admission to and withdrawal from partnership;

8) disbandment and liquidation of the partnership business; and

9) liabilities for default.

A partnership agreement may record clearly the term of operation of the partnership business and the methods for settling disputes among the partners.

   Article 14 A partnership agreement shall take effect after it is signed and sealed by all partners. The partners shall exercise their full rights and be responsible for liabilities according to the partnership agreement.

Whereas all partners agree after consultations, a partnership agreement may be revised or replenished.

   Article 15 In application for the registration of a partnership business, the partnership agreement of the business and the identification cards of the partners should be presented to the business registration authority.

Whereas an approval from relevant authority is needed for the setting up of the business concerned according to the law and administrative regulations, the document of approval should also be presented during the application for registration of the business.

   Article 16 The business registration authority shall make a decision on whether or not to approve the registration within thirty days after receipt of the application documents for the registration. The registration shall be approved and the business license shall be granted if the provisions of this Law are met; and the registration shall not be approved if the provisions of this Law are not met and then a reply in written form shall be given to explain the reasons.

   Article 17 The date on which the business license of a partnership business is issued is considered the date of the establishment of the partnership business concerned.

Before the acquirement of the business license, partners of the partnership business concerned are not permitted to engage in operating activities in the name of the business.

   Article 18 For setting up of a subsidiary, a partnership business should apply for the registration of the subsidiary with and obtain the business license concerned from the business registration authority where the said subsidiary is located.

CHAPTER THREE PROPERTY OF A PARTNERSHIP BUSINESS

   Article 19 During the term of operation of a partnership business, the capital contributions by its partners and all incomes obtained in the name of the partnership business shall all be property of the partnership business.

Property of a partnership business should be put under the joint management and uses of all partners according to this Law.

   Article 20 Before the liquidation of a partnership business, partners concerned are not permitted to request for distribution of the property thereof except for cases as provided separately by this Law.

Secret transference or uses of property of a partnership business by a partner before the liquidation of the business should not be made in counter to the interest of an uninformed bona fide third party.

   Article 21 An unanimous agreement from other partners must be obtained before a partner of a partnership business transfers to a party other than the partners of the business concerned all or part of the share thereof during the term of operation of the business.

For such a transference, a notice should be given to all partners of the business.

   Article 22 Whenever a transference by a partner of a partnership business his/her share thereof according to the law, the other partners concerned shall enjoy the priority for assignment under the same conditions.

   Article 23 A new party other than all partners of a partnership business shall become a new partner of the business after acquiring a share of the said business as transferred by a partner thereof under a unanimous agreement of all partners of the business according to law and thereto upon a revision to the partnership agreement, enjoy the rights and be responsible for the liabilities of the business according to the revised partnership agreement.

   Article 24 The use of property share in a partnership business by a partner thereof as a pledge should acquire in advance an unanimous agreement from other partners concerned.

Use of property share in a partnership business by a partner as a pledge without a unanimous agreement from other partners shall be considered invalid or as withdrawal of the partner from the partnership; and the latter shall take responsibility for the compensation if the act thereupon causes any loss to other partners according to the law.

CHAPTER FOUR OPERATION OF A PARTNERSHIP BUSINESS

   Article 25 Each partner shall enjoy equal right in the operation of a partnership business. A partnership business may be operated jointly by all partners but the operation might also be entrusted to one or several partners according to the provisions of the partnership agreement or the decision of all partners.

Partners who actively operate the partnership business should be considered as representatives of the said partnership business in terms of external affairs.

   Article 26 Whereas one or several partners are entrusted to operate a partnership business according to the preceding article, other partners shall be kept out of the operation of the said partnership business but still have right to supervise upon the said operation.

   Article 27 One or several partners entursted to operate a partnership business should, according to the agreement, report to other partners who do not join in the operation the operating conditions and financial status of the business concerned and earnings or liabilities therefrom shall be shared by all partners.

   Article 28 Partners of a partnership bussiness are entitled to check on the accounts of the business so as to keep in knowledge of the operating and financial conditions of the business.

Decisions by the partners on matters of a partnership business according to this Law or the partnership agreement, can be based on one vote for one partner as decided by all partners except for cases provided for separately by this Law or the partnership agreement.

   Article 29 Whereas a partnership business is subjected to separated operations by individual partners as stipulated in the partnership agreement or upon decision of all partners, a partner may put forward an opposition to the operation of other partners. When the opposition is put forward, the operation concerned should be stopped temporarily and arguements arisen therefrom should be settled by all partners.

Whereas a partner who has been entrusted to operate a business fails to act according to the partnership agreement or the decision by all partners, the entrustment may be put off upon decision of other partners.

   Article 30 A partner is not permitted to be involved solely or jointly into other business that is competitive with the partnership business.

Except for cases as stipulated in the partner agreement or other agreements of all partners, a partner of a partnership business is not allowed to trade with the above-mentioned business.

A partner of a partnership business is not permitted to engage in activities in counter to the interests of the business.

   Article 31 A unanimous agreement of all partners is required for the following undertakings of a partnership business:

1) handling of the real estate of the partnership business;

2) a change to the name of the partnership business;

3) transference or handling of the intellectual property rights and rights of other property of the partnership business;

4) application with the business registration authority for a change of the registration;

5) provision of guarantee for a third party in the name of the partnership business;

6) appointment of persons other than the partners as managers of the partnership business; and

7) related matters as stipulated in the partnership agreement.

   Article 32 Profits and losses of a partnership business shall be shared by its partners according to the proportion stipulated in the partnership agreement; the profits and losses shall be shared equally by the partners if there are no set proportions written down in the partnership agreement.

Partnership agreements should not attribute whole part of the profits or losses to part of the partners.

   Article 33 Capital contributions can be added to a partnership business by its partners according to the partnership agreement or decision of all partners within the operation term of the business for the purposes of expanding business scale or compensating for loss.

   Article 34 Specific plans of a partnership business for sharing of profits and losses in a year or in a certain period can be decided upon by all partners through consultations or by the methods as stipulated in the partnership agreement.

   Article 35 Managers appointed by partnership businesses shall perform their duties within the scope of authorization by the partnership businesses.

Whereas managers appointed by partnership businesses operate in excess of the scope that has been authorized by the businesses or cause any loss to the partnership business because of intentional or major fault, responsibility for the compensation shall be imposed according to law.

   Article 36 A partnership business should establish a financial and accounting system for the business according to the provisions of the law and administrative regulations.

   Article 37 A partnership business should pay due taxes according to law.

CHAPTER FIVE RELATIONSHIP BETWEEN A PARTNERSHIP BUSINESS AND A THIRD

   Article 38 Restrictions of a partnership business on the operation of a partner in terms of the business or the right of a partner to represent the business in handling of external affairs should not act in counter to the interest of an uninformed bona fide third party.

   Article 39 A partnership business shall first of all use all of its property to repay its debts. Whereas the property of the partnership business is insufficient for repayment of its payable debts, each partner shall shoulder unlimited joint liabilities for the repayment.

   Article 40 Whereas debts of a partnership business cannot be fully borne by the property of the business concerned, the insufficient part should be paid by each partner by using property other than that having been contributed to the partnership business according to the proportion set in the first paragraph of Article 32 of this Law.

Whereas a partner repays an amount in excess of the respect share because of joint liabilities a reimbursement is entitled from other partners.

   Article 41 Debts owed by a partner in a partnership business to a third party cannot be used to offset debts owed by the said party to the business concerned.

   Article 42 A personal creditor of a partner to a partnership business is not permitted to subrogate the rights of the said partner in the business concerned.

   Article 43 Personal debts of a partner to a partnership business can only be settled with the distributable income to the partner from the said business; the creditor concerned may also file a request with the people's court for compulsory repayment of the debt concerned by the said partner's property share in the business concerned according to the law.

Other partners have the preemptive rights for assignment of the property share of the said partner.

CHAPTER SIX ADMISSION TO AND WITHDRAWAL FROM PARTNERSHIP

   Article 44 Admission to a partnership business of a new partner should be agreed upon by all partners concerned and a partnership admission agreement should be made in writing according to the law.

When a partnership admission agreement is made, the original partners should inform the new partner of the original partnership business' operating conditions and financial status.

   Article 45 A new partner admitted to a partnership business shall enjoy the same rights and shoulder the same liabilities as the original partners. Whereas there is a separate contract in the partnership admission agreement, the said agreement shall prevail.

A new partner admitted to a partnership business shall shoulder joint liabilities for the debts of the partnership business as the admission taking effect.

   Article 46 Whereas the term of operation of a partnership business has been set in the partnership agreement, a partner may withdraw from partnership in any of the following cases:

1) a cause for withdrawal from partnership as set in the partnership agreement appears;

2) all partners agree to the withdrawal; 3) a cause to make the said partner difficult to remain in the partnership takes place; and

4) other partners seriously go against their obligations as set in the partnership agreement.

   Article 47 Whereas the term of operation of a partnership business has not been set in the partnership agreement, a partner may withdraw from the partnership on the condition that the winthdrawal would not cause adverse effect to the operation of the said partnership business. But the withdrawal must be informed to other partners thirty days in advance.

   Article 48 Whereas a partner withdraws from partnership in violation of the provisions of the preceding two articles, compensation must be made by the said partner for the loss caused to other partners thereof.

   Article 49 Whereas a partner has any of the following cases, a withdrawal of the said partner shall be effected naturally:

1) being dead or declared as being dead according to the law;

2) declared as a person without capacity for civil acts according to the law;

3) losing individual debt service capacity; and

4) compulsorily executed by the people's court of all property share in the partnership business.

Withdrawal from partnership as provided for in the preceding paragraph shall take effect on the date on which it actually takes place.

   Article 50 Whereas a partner has any of the following cases, a resolution may be made with unanimous agreement of other partners to dismiss the said partner:

1) failing to perform the obligation for capital contributions;

2) causing loss to the partnership business for intentional or major fault;

3) having unfair behavior in executing affairs of the partnership business; and

4) other causes as set in the partnership agreement.

The resolution to dismiss a partner should be sent in a notice in writing to the person who is dismissed. The dismission shall take effect on the date on which the person who is dismissed receives the dismission notice, and the person who is dismissed shall withdraw from partnership.

Whereas the person who is dismissed has any opposition to the dismission resolution, legal proceedings may be instituted with be people's court within thirty days after receipt of the dismission notice.

   Article 51 Whereas a partner is dead and declared according to the law as being dead, the heir who enjoys the legitimate right of inheriting the said partner's property share in a partnership business shall as set in the partnership agreement or with agreement of all partners obtain the qualification for being a partner of the said partnership business as of the date of succession.

Whereas the said heir refuses to be a partner, the partnership business should reinburse to the heir the respective share of the inherited property.

Whereas a legitimate heir has not become mature, a guardian may with unanimous agreement of other partners subrogate the rights of the said heir before the latter becomes mature.

   Article 52 Whereas a partner wihtdraws from partnership, other partners shall conduct settlement with the said partner in accordance with the property conditions of the partnership business at the time of the withdrawal, and return the property share of the withdrawing partner.

Whereas some affairs of the partnership business fail to be settled at the time of the withdrawal, the property share shall be settled after the affairs are settled.

   Article 53 The methods of refunding the property share of a withdrawing partner in a partnership business shall be set in the partnership agreement or determined by all partners. The refunding may be in cash or in kind.

   Article 54 A withdrawing partner should together with other partners shoulder joint liabilities for the debts of the partnership business occurred before the said withdrawal.

   Article 55 Whereas the property of a partnership business is less than the debts of the said business when a partner withdraws from partnership, the withdrawing partner should share the loss according to the provisions in the first paragraph of Article 32 of this Law.

   Article 56 Whereas the registration matters of a partnership business change or re-registration is necessary for such reason as withdrawal from partnership, admission to partnership of revision of the partnership agreement, the said partnership business should handle relevant registration procedures with the business registration authority within fifteen days as of the date on which the decision for the change is made or the cause for the change takes place.

CHAPTER SEVEN DISBANDMENT AND LIQUIDATION OF PARTNERSHIP BUSINESS

   Article 57 A partnership business shall disband in any of the following cases:

1) the term of operation as set in the partnership agreement expires and the partners are unwilling to continue the operaiton;

2) a cause for disbandment as set in the partnership agreement appears;

3) all partners decide to disband;

4) there is an insufficient number of partners as provided for by the Law;

5) the purpose for partnership as set in the partnership agreement has been finalized or is not able to be realized;

6) the business license is revoked according to the law; and

7) other reasons for disbandment of a partnership business as provided for by the law and administrative regulations appear.

   Article 58 A partnership business shall after disbandment conduct liquidation and inform its creditors in notice or announcement thereof.

   Article 59 Whereas a partnership business disbands, the liquidators shall be acted by all partners; whereas not all partners are able to act as the liquidators, one or several partners, or a third party may with agreement of more than half of the partners be designated or entrusted to act as the liquidators within fifteen days after the partnership business disbands.

Whereas the liquidators are not determined within the fifteen days, the partners or other interested parties may request the people's court to designate the liquidators.

   Article 60 The liquidators shall execute the following affairs during the period of liquidation:

1) to sort out the property of the partnership business, and draft up the balance sheets and the property list of the said business;

2) to handle unsettled affairs of the partnership business that are related to the liquidation;

3) to pay up taxes payable;

4) to settle credits and debts;

5) to handle the remaining property after the partnership business repays its debts; and

6) to take part in civil suits on behalf of the partnership business.

   Article 61 After the liquidation expenses are paid, the property of the partnership business shall be distributed in the following order:

1) wages and labor insurance costs owed by the partnership business to its employees;

2) taxes payable by the partnership business;

3) debts of the partnership business; and

4) returning capital contributions to the partners.

Whereas there is a surplus after the property of the partnership business is distributed in the above-mentioned order, it shall be distributed according to the proportion as provided for in the first paragraph of Article 32 of this Law.

   Article 62 Whereas all property of a partnership business is insufficient for paying its debts, it shall be handled according to Article 39 and Article 40 of this Law.

   Article 63 After a partnership business disbands, the original partners shall still shoulder joint liabilities for the debts in the duration of existence of the partnership business. But the said liabilities shall be eliminated if the creditors fail to ask for repayment from the debtees within five years.

   Article 64 After the liquidation ends, a liquidation report shall be made, and it shall after the signing and sealing of all partners be sent to the business registration authority within fifteen days to register the cancellation of the partnership business.

   Article 65 Whereas a business registration is obtained by presenting counterfeit documents or taking other deceitful means in violation of the provisions of this Law, a correction shall be ordered to be made and a fine of less than RMB5,000 may be imposed; if the case is serious enough, the business registration shall be revoked.

   Article 66 Whereas the words of "limited" or "limited liability" are used in the name of a partnership business in violation of the provisions of this Law, a correction shall be ordered to be made within the prescribed time limit and a fine of less than RMB2,000 may be imposed.

   Article 67 Whereas an operation in the name of a partnership business without a business license in violation of the provisions of this Law, a stop of the operation shall be ordered and a fine of less than RMB5,000 may be imposed.

Whereas a change of the registration matters of a partnership business without the relevant change of registration in accordance with the provisions of this Law, a registration shall be ordered within the prescribed time limit; whereas the registration is not made after the time limit, a fine of less than RMB2,000 shall be imposed.

   Article 68 Whereas a forcible possession of the interests attributable to a partnership business during operation or coversion of property of the partnership business by other means by a said partner(s), return of the said interests and property to the partnership business shall be ordered; if the case causes loss to the partnership business or other partners, the said partner(s) shall take responsibility for the compensation; if the case constitutes a crime, the said partner shall be prosecuted for criminal responsibilities.

   Article 69 Whereas any handling by a partner(s), without authorization, of affairs which can only be handled with agreement of all partners as provided for in this Law or as contracted in the partnership agreement and thereto causes loss to the partnership business or other partners, responsibility shall be assumed by the said partner(s) for compensation according to Law.

   Article 70 Whereas execution of affairs of a partnership business by a partner(s) without the power to execute such affairs and thereto causes loss to the partnership business or other partners, responsibility should be assumed by the said partner(s) for compensation according to the law.

   Article 71 Whereas an engagement of business which is competitive to a certain partnership business or a trade with the partnership business by a partner of the said partnership business in violation of the provisions of this Law, and thereto causes loss to the said partnership business or other partners of the business, due compensation shall be responsible by the partner concerned according to the law.

   Article 72 Compensation arising from an illegal possession of the poverty of a partnership business or misappropriation of the funds of the partnership business by any employee of the partnership business for