Laws of the People's Republic of China

State Council

Order of the State Council of the People's Republic of China

No. 400

Regulations on Funds, adopted at the 38th executive meeting of the State Council on February 4th, 2004, are hereby promulgated. It shall be implemented as of June 1st, 2004.

Wen Jiabao,Premierr of the State Council

March 8th, 2004

Regulations on Funds

Chapter 1 General Provisions

Article 1

This Regulation is formulated with a view to standardizing the organization and activities of funds, safeguarding the legitimate rights and interests of funds, donators and beneficiaries and promoting social involvement in the philanthropic undertakings.

Article 2

"The fund" in this Regulation refers to the non-profit legal person incorporated under this Regulation for the purpose of public benefit undertakings, on the strength of the properties donated by natural persons, legal persons or other originations.

Article 3

Funds include those that can solicit donations from the public (hereinafter referred to as public funds) and those that shall not solicit donations from the public (hereinafter referred to as non-public finds). Public funds include, in accordance with the scope of solicitation region, national public funds and local public funds.

Article 4

funds must abide by the constitution, laws, regulation, rules and national policies, shall not harm security and unification of the state and national solidarity and shall not go against public morality.

Article 5

Funds shall engage in philanthropic activities in accordance with the articles of incorporation thereof in compliance with the principle of openness and transparency.

Article 6

The civil affairs authority of the State Council and such authorities under the people's governments at the level of a province, an autonomous regions and a municipality directly under the Central Government are administrations which funds should register with.

The civil affairs authorities under the State Council are responsible for the registration and administration of the following funds or representative institutions of funds:

(1)

National public funds;

(2)

Funds whose legal representative is proposed to be assumed by a non-Chinese-mainland resident;

(3)

Non-public funds whose original fund exceeds 20 million RMB Yuan and the sponsor thereof files the incorporation application to the civil affairs authority under the State Council; and

(4)

Representative institutions established on mainland of China by overseas funds.

The civil affairs authorities under the people's governments at the level of a province, an autonomous region and a municipality directly under the Central Government are responsible for the registration and administration of local public funds within its respective administrative region and non-public funds other than those provided in the previous paragraph.

Article 7

Relevant authorities of the State Council or organizations authorized by the State Council are competent agencies for the business of funds and representative organizations of the overseas funds registered with the civil affairs authority under the State Council.

Relevant authorities under the people's governments at the level of a province, an autonomous regions and a municipality directly under the Central Government or organizations authorized thereby are competent agencies for the business of funds registered with the civil affairs authorities under the people's governments at the level of a province, an autonomous regions and a municipality directly under the Central Government.

Chapter 2 Incorporation, Alteration and Cancellation

Article 8

A fund shall meet the following conditions to be incorporated:

(1)

it is incorporated for specific public benefit purposes;

(2)

the original fund shall be not less than, in the case of a national public fund RMB 8 million Yuan, in the case of a local public fund RMB 4 million Yuan, in the case of a non-public fund RMB 2 million Yuan. The original fund shall be the monetary fund on the account.

(3)

it shall has a name, articles of incorporation, an organizational structure as well as full-time working staff in compliance with the activities it conducts;

(4)

it has a fixed domicile;

(5)

it can assume civil liabilities independently.

Article 9

The applicant shall submit the following documents to the authorities responsible for registration and administration for the incorporation of a fund:

(1)

the application;

(2)

the draft articles of incorporation;

(3)

the capital verification certificate and the domicile certificate;

(4)

the list of the directors, personal identity certificates thereof as well as resumes of the proposed chairman of the board, vice-chairman of the board and the secretary general;

(5)

the documents approving the incorporation issued by the competent authorities for business.

Article 10

The articles of incorporation of a fund shall specify its public benefit nature and shall not inure to the benefits of specific natural persons, legal persons or other organizations.

The articles of incorporation shall set forth:

(1)

the name and the domicile;

(2)

the purpose of incorporation and the business scope of public benefit activities;

(3)

the amount of original fund

(4)

the composition, authorities and discussion rules of the board of directors, and the qualification, determination and term of office of the directors

(5)

the responsibilities of the legal representative;

(6)

the responsibilities, qualifications, determination and term of office of the supervisors;

(7)

the preparation and the examination and approval of financial accounting reports;

(8)

the system of the management and utilization of properties

(9)

the conditions and procedures for the termination of the fund and the disposal of properties after termination.

Article 11

The registration and administration authorities shall, within 60 days from its receipt of all the valid documents set forth by Article 9 of this Regulation, decide whether to grant approval to registration or not. In case of approval, a Registration Certificate for the Fund Legal Person shall be issued; In case of disapproval, reasons shall be given in writing.

The matters subject to incorporation registration of a fund include: the name, the domicile, the type, the purposes, the business scope of public benefit activities, the original fund amount and the legal representative.

Article 12

To establish branches or representative institutions, a fund shall file the application for registration to the original registration and administration authority, and submit documents containing such matters as the name, the domicile and the person in charge thereof.

The registration and administration authorities shall, within 60 days from receipt of all the valid documents set forth in the previous article, decide whether to grant approval to registration or not. In case of approval, a Registration Certificate for Branch (Representative) Institution of Fund shall be issued; In case of disapproval, reasons shall be given in writing.

The matters subject to incorporation registration of branch or representative institutions of a fund include: the name, the domicile, the business scope of public benefit activities and the person in charge.

Branches or the representative institutions of a fund shall conduct activities as authorized by the fund and it does not possess the status of a legal person.

Article 13

To establish representative institutions in mainland China, an overseas fund shall submit the following documents to the competent authorities responsible for registration after obtaining the approval of the relevant authorities responsible for business:

(1)

the application;

(2)

the certificate of legal establishment of the fund abroad according to law and the charter of the fund;

(3)

the identity certificate and resume of the person in charge of the proposed representative institutions;

(4)

the certificate of domicile;

(5)

the document issued by the competent authorities for the business approving the establishment of the representative institutions in mainland China.

The registration and administration authorities shall, within 60 days from receipt of all the valid documents set forth in the previous article, decide whether to grant approval to registration or not. In case of approval, a Registration Certificate for Representative Institution of Overseas Fund shall be issued; In case of disapproval, reasons shall be given in writing.

The matters subject to incorporation registration of the representative institution of an overseas fund include: the name, the domicile, the business scope of public benefit activities and the person in charge.

Representative institution of an overseas fund shall engage in activities in compliance with the nature of Chinese public benefit undertakings. The overseas funds shall assume civil liabilities in accordance with Chinese laws with respect to civil actions of their representative institutions in mainland China.

Article 14

Funds and representative institutions of overseas funds shall, after registration in accordance with this Regulation, go through tax registration according to law.

Funds and representative institutions of overseas funds shall, based on registration certificates, apply for organization code, prepare seals and open bank accounts according to law.

Funds and representative institutions of overseas funds shall file with the registration and administration authorities the organization code, the sample of the seal, the bank account number and the copy of taxation registration certificate.

Article 15

Funds, branches of funds, representative institutions of funds, and representative institutions of overseas funds shall, in case of any change of registration entries, apply to the registration and administration authorities for alteration registration.

Amendments to the articles of incorporation of the fund shall be approved by the competent authorities of business and ratified by the registration and administration authority.

Article 16

Funds and representative institutions of overseas funds shall apply for cancellation registration to the registration and administration authority in case of:

(1)

termination pursuant to articles of incorporation;

(2)

inability to continue to engage in the public benefit activities pursuant to the purposes provided in the articles of incorporation;

(3)

termination on account of other reasons.

Article 17

A fund shall, in event of cancellation of its branches or its representative institutions, make cancellation registration of its branches or its representative institutions with the registration and administration authority.

Where a fund is canceled, its branches or representative institutions shall be canceled simultaneously.

Article 18

A fund shall, before cancellation registration, establish a liquidation group and complete liquidation under the guidance of the registration and administration authority and competent authorities of business.

A fund shall, within 15 days from the date when liquidation terminates, make cancellation registration with the registration and administration authority. No activities other than liquidation shall be carried out within the liquidation period.

Article 19

Registration of incorporation, alteration or cancellation of funds, branches of funds, representative institutions of funds and representative institutions of overseas funds shall be made public by the registration and administration authority.

Chapter 3 Organizational Structure

Article 20

A fund shall have a board of directors composed of 5 to 25 directors. Each term of office of the directors is provided for in the articles of incorporation and shall not exceed 5 years. A director may serve consecutive terms if reelected upon expiration of his term of office.

In the case of a non-public fund incorporated with private properties, the total number of directors as near relatives shall not exceed one third of all the directors. In the case of other funds, directors as near relatives shall not serve on the board simultaneously.

The number of directors receiving remuneration from the fund shall not exceed one third of the total number of the directors.

Chairman of the board, vice-chairman of the board and secretary general of a fund are elected from the directors. The chairman of the board is the legal representative of the fund.

Article 21

Board of directors, the decision-making organ of a foundation, shall perform its functions provided in the articles of incorporation according to law.

The board of directors shall convene at least twice a year. The board of directors shall meet only if more than two thirds of the directors are present. Any resolution of the board shall be approved by half of the directors present to be valid.

Resolution with respect to the following important matters shall be subject to vote by the directors present and approved by two thirds to be valid:

(1)

amendments to the articles of incorporation;

(2)

election or removal of the Chairman of the Board, vice-chairman of the Board or the secretary general;

(3)

significant solicitation of donations or investment activities provided for in the articles of incorporation;

(4)

division or merger of the fund.

Meetings of the board shall be minted. Such minutes shall be checked, approved and signed by the directors present.

Article 22

A fund shall have a Board of supervisors, whose term of office is the same with that of the directors. Directors, close relatives of the directors and financial staff of the fund shall not serve concurrently as supervisors.

Supervisors shall examine the financial and accounting materials pursuant to the procedures provided for in the articles of incorporation, and supervise compliance by the Board of directors with laws and articles of incorporation.

Supervisors shall attend meetings of the board of directors as non-voting delegates. They have the right to inquire the board of directors and make suggestions thereto and should report to the registration and administration authority, competent authorities of business and authorities responsible for taxation and accounting.

Article 23

The positions of Chairman of the board, Vice-chairman and secretary general of funds shall not be held by current public servants. The legal representative of funds shall not serve as the legal representative of other organizations simultaneously. The positions of legal representatives of public funds and the non-public funds whose original fund comes from the mainland China shall be held by residents in mainland China.

Anyone who was sentenced to public surveillance, detention or set term of imprisonment for committing a crime and not more than five years has elapsed since the date of the expiration of the enforcement period, or anyone who is being or was deprived of political rights for committing a crime, or anyone who ever served as Chairman, Vice-chairman or secretary general of a fund whose registration was cancelled for illegal activities and was personally responsible for the illegal activities thereof, and not more than five years has elapsed since the date of cancellation shall not serve as Chairman of the board, Vice-chairman or secretary general of a fund.

Directors of a fund shall not engage in the decision-making of relevant matters where their personal interests are related with the interests of the fund. Directors, supervisors and their close relatives shall not have any transaction activities with the fund that they are serving.

Supervisors and part-time directors serving in a fund shall not receive remuneration therefrom.

Article 24

Residents from Hong Kong, Macau, Taiwan and foreigners serving as Chairman of the board, Vice-chairman or secretary general of funds as well as the person in charge of the representative institutions of overseas funds shall stay in mainland China for not less than three months a year.

Chapter 4 Management and Utilization of Properties

Article 25

Funds shall solicit donations and accept donations in accordance with purposes and business scope of public benefit activities provided for in the articles of incorporation thereof. Representative institutions of overseas funds are not allowed to solicit donations and accept donations within the territory of China.

Public funds shall, in case of donations soliciting, make a public notice of the public benefit activities proposed to be held and the detailed plans for utilization of the funds after having raised the funds concerned.

Article 26

Funds and donators and beneficiaries enjoy the preferential taxation treatment in accordance with the provisions of laws and administrative regulations.

Article 27

The properties and other income of funds are protected by law and shall not be illicitly distributed, seized or embezzled among any units or individuals.

Funds shall utilize its properties in accordance with purposes and business scope of public benefit activities provided for in the articles of incorporation thereof, or in case of the donation whose specific way of utilization is specified in the donation agreement, in accordance with the provisions in the donation agreement.

Where donated materials are unable to be utilized in compliance with the purposes, funds may auction or sell it, and the income thereof shall be subject to the purposes of donation.

Article 28

Funds shall realize the preservation and increase of the value of funds on the principle of safety and efficiency according to law.

Article 29

Expenditure on the public benefit undertakings stipulated in the articles of incorporation every year shall be not less than, in case of public funds 70% of the gross income in the previous year, in case of non-public funds 8% of the fund balance in the previous year.

Expenditure on staff salary and welfare and administrative outlay of funds shall not exceed 10% of total expenditure in the current year.

Article 30

Funds shall, in implementing public benefit financial support programmes, make a public notice of the types of the public benefit financial support programmes and the procedures for application and appraisal.

Article 31

Funds may enter into contracts with beneficiaries, and the way of support to provide for the amount of support as well as the purpose and way of utilization of the funds.

Funds have the right to supervise the utilization of the financial support. In case beneficiaries fail to utilize the financial support in accordance with the contract or violate the contract, foundations are entitled to rescind the financial support contract.

Article 32

Funds should carry out the national uniform accounting system, conduct accounting check-up according to law and establish and perfect the internal accounting supervisory system.

Article 33

Remaining fund properties after cancellation shall be utilized for public benefit purposes as stipulated in the articles of incorporation. For those cannot be disposed in accordance with the articles of incorporation, the registration and administration authority shall donate them to social public benefit organization with the same nature and purpose as the said fund and make a public notice thereof.

Chapter 5 Supervision and Administration

Article 34

Fund registration and administration authorities perform the following supervisory and administrative functions:

(1)

conduct annual inspection on funds and representative institutions of overseas funds,

(2)

conduct daily supervision and administration over the activities of funds and representative institution of overseas funds in accordance with this Regulation and the articles of incorporation,

(3)

punish the actions of funds and representative institutions of overseas funds in violation of this Regulation.

Article 35

Competent authorities for the business of the fund shall perform the following supervisory and administrative functions:

(1)

guide and supervise public benefit activities of funds and representative institutions of overseas funds in accordance with law and articles of incorporation;

(2)

take charge of preliminary examination of the annual inspection on funds and representative institutions of overseas funds

(3)

cooperate with the registration and administration authorities and other law enforcement agencies to inspect and punish illegal actions of funds and representative institutions of overseas funds.

Article 36

Funds and representative institutions of overseas funds shall submit annual working reports to the registration and administration authorities before March 31st every year for annual examination. Annual working reports shall be examined and approved by competent authorities of businesses before their submission to the registration and administration authorities.

Annual working reports shall include: financial accounting reports, auditing reports issued by certified public accountants, reports on such activities as donation soliciting, donation acceptance, financial support provision and reports on the change of personnel and organizational structure.

Article 37

Funds shall be subject to taxation and accounting supervision conducted by authorities responsible for taxation and accounting according to law.

Funds shall, before reelection at expiration of office terms and change of legal representatives, conduct financial auditing.

Article 38

Funds and representative institutions of overseas funds shall, after passing the annual examination conducted by the registration and administration authorities, make public the working reports through the media designated by the registration and administration authorities for the inspection and supervision by the public.

Article 39

Donators are entitled to inquire with funds the utilization and management of donated properties and make suggestions. Funds should respond to the inquiry of donators faithfully and in time.

In case funds utilize donated properties in violation of the donation contracts, donators are entitled to request funds to act in compliance with the donation contract or apply to the people's court for revoking the donation action or rescind donation contract.

Chapter 6 Legal Liabilities

Article 40

In case any organization that have not been registered or have its registration cancelled carries out activities in the name of a fund, a branch of fund, a representative institution of a fund or a representative institutions of an overseas fund, the registration and administration authorities shall outlaw it, confiscate its unlawful properties and issue public notice thereof.

Article 41

In the following cases, registration of involved funds, branches of funds, representative institutions of funds or representative institutions of overseas funds shall be cancelled by the registration and administration authorities:

(1)

conceal real situations and practice fraud when applying for registration, or fail to conduct activities in accordance with articles of incorporation within 12 months from the date of obtaining registration certificate;

(2)

where they satisfy conditions for cancellation but do not go through cancellation registration in accordance with this Regulation and still continue to carry out activities .

Article 42

In the following cases, funds, branches of funds, representative institutions of funds or representative institutions of overseas funds, which engage in any of the following circumstances, shall be given a warning, ordered to cease their activities by the registration and administration authority and in serious cases, registration shall be cancelled:

(1)

fail to conduct activities in accordance with purposes and business scope of public benefit activities provided for in the articles of incorporation thereof;

(2)

conceal real situations and practice fraud when preparing accounting certificates, registering accounting records or preparing financial accounting reports;

(3)

fail to go through alteration registration procedures in accordance with provisions;

(4)

fail to fulfill the expenditure amount for public benefit undertakings in accordance with this Regulation;

(5)

fail to accept annual examination in accordance with this Regulation, or fail to qualify therein;

(6)

fail to perform the obligation of information disclosure or disclose fraudulent information

In case funds and representative institutions of overseas funds engaging in any of the above actions, the registration and administration authority should request taxation authority to order the supplementary payment of the deducted and exempted taxes enjoyed during the period of the continuing illegal actions by them.

Article 43

In case the board of directors make inappropriate decisions in violation of the provisions of this Regulation and articles of incorporation, which incurred property loss to funds, directors participating in the decision shall assume corresponding liability for compensation.

Directors, supervisors and full-time working staff of funds who illegally distribute, seize or embezzle fund properties, shall return property illegally possessed and utilized, or shall be prosecuted for criminal liabilities if the case constitutes a crime.

Article 44

In case funds and representative institutions of overseas funds are ordered to cease activities, the registration and administration authority shall seal up the registration certificates, seals and financial certificates.

Article 45

In case any staff member working in the registration and administration authority and competent authorities of businesses abuses his power, neglects his duty, engages in malpractices for personal gains, he shall be prosecuted for criminal liabilities if the case constitutes a crime, or shall be subject to administrative sanctions or disciplinary sanctions if the case dose not constitute a crime according to law.

Chapter 7 Supplementary Provisions

Article 46

For the purposes of this Regulation, overseas funds refer to funds incorporated according to law in foreign countries as well as in Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan Region of the People's Republic of China.

Article 47

Applications for establishing funds, format for annual working reports of funds and sample for articles of incorporation of funds shall be formulated by civil affairs authorities under the State Council.

Article 48

This Regulation shall enter into force as of June 1, 2004, and Measures for Funds Administration promulgated by the State Council on September 27, 1988 shall be repealed simultaneously.

Funds and representative institutions of overseas funds established before this Regulation goes into force shall, within six months from the date when this Regulation come into force, apply for issuance of a new registration certificate in accordance with this Regulation.