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BIZCHINA / Company laws

Company Law of the People's Republic of China (revised in 2005)

Updated: 2006-04-17 10:09

Article 201 Where any initiator or shareholder unlawfully take away its capital contribution after the company is established, he shall be ordered by the company registration authority to make corrections, and shall be fined not less than 5% but not more than 15% of the capital contribution he has unlawfully taken away.

Article 202 Any company which has established another account books apart from the legally prescribed account books and violates of the present Law shall be ordered by the treasury department of the people's government at the county level or above to make corrections, and shall be fined not less than 50,000 Yuan but not more than 500, 000 Yuan.

Article 203 Where a company makes any false records or conceals any important fact in such materials as financial and accounting statements submitted to the relevant departments in charge, the relevant department in charge shall impose a fine of not more than 30, 000 Yuan but not more than 300, 000 Yuan upon the directly liable persons in charge and other directly liable persons.

Article 204 Where a company fails to draw legal accumulation funds according to the present Law, it shall be ordered by the treasury department of the people's government at the county level or above to make up the amount it is due, and may be fined up to 200, 000 Yuan.

Article 205 Where any company fails to inform its creditors by notice or by public announcement during the process of merger, split, reducing its registered capital or liquidation, it shall be ordered by the company registration authority to make corrections, and may be fined not less than 10, 000 Yuan but not more than 100, 000 Yuan.
Where, during the process of liquidation, any company hides any of its properties or makes any false record in its balance sheet or property checklist, or distributes any of the company's properties before clearing off its debts, it shall be ordered by the company registration authority to make corrections, and may be fined not less than 5% but not more than 10% of the value of the company properties it has hidden or distributed prior to the clearing of company debts, and the directly liable person-in-charge as well other directly liable persons may be fined not less than 10, 000 Yuan but not more than100, 000 Yuan.

Article 206 Where, during the process of liquidation, any company undertakes any business activity which has nothing to do with the liquidation, it shall be admonished by the company registration authority, and its illegal proceeds shall be confiscated.

Article 207 Where the liquidation group fails to submit a liquidation report to the company registration authority according to the provisions of the present Law, or where any important fact is concealed or there is any important omission in the liquidation report it submits, it shall be ordered by the company registration authority to make corrections.

Where any member of the liquidation group takes advantage of his power to seek unlawful benefits for himself or any of his relatives, procures any unlawful gains or misappropriates any of the properties of the company, he shall be ordered by the company registration authority to return the properties of the company with his illegal gains being confiscated, and shall be fined 1 up to 5 times of the illegal proceeds.

Article 208 Where any institution that undertakes the evaluation or verification of assets or the verification of certificates provides any false materials, its illegal proceeds shall be confiscated by the company registration authority, and be fined 1 up to 5 times of the illegal proceeds, and may be ordered by the competent administrative department to suspend its business operation or to withdraw the qualification certificates of the directly liable persons, and cancel its business license.

Where any institution that undertakes the evaluation or verification of assets or the verification of certificates makes any important omission in the report it submits, it shall be ordered by the company registration authority to make corrections; if the circumstances are serious, it shall be fined 1 up to 5 times of the proceeds it has obtained, and may be ordered by the competent administrative department to suspend its business operation and to withdraw the qualification certificates of the directly liable persons, and cancel its business license. Where the evaluation result or proof of asset verification or certificate verification, as provided by any institution that undertakes the evaluation or verification of assets or the verification of certificates, is proved to be untrue, which has caused any loss to the creditors of the company, it shall bear the compensation liabilities within the sum which is found to be untrue, unless it can prove that it has no fault in the incurrence of the loss.

Article 209 Where any company registration authority registers any application that does not meet the conditions as provided for in the present Law, or fails to register any application that meets the conditions as prescribed in the present Law, the directly liable person-in-charge and other directly liable persons shall be imposed upon an administrative sanction.

Article 210 Where the superior organ of any company registration authority forces the latter to register any application that does not satisfy the conditions as prescribed in the present Law or to refuse any application that meets the conditions as provided for in the present Law, or covers up for any illegal registration, the directly liable person-in-charge and other directly liable persons shall be imposed upon an administrative sanction according to law.

Article 211 Where anyone fails to register as a limited liability company or joint stock limited company according to law but undertakes business operation in the name of a limited liability company or joint stock limited company, or fails to register as a subsidiary of a limited liability company or joint stock limited company according to law but undertakes business operation in the name of a subsidiary of the limited liability company or joint stock limited company, it shall be ordered by the company registration authority to make corrections or be clamped down on, and may be fined not more than 100,000 Yuan.

Article 212 Where any company fails to start its business operation six months after the establishment of it without justifiable reasons, or suspends its business operation on its own initiative for consecutively six months after it has started the business operation, its business license may be revoked by the company registration authority.
Where any registered item of any company changes, and the company fails to go through the corresponding modification formalities according to the present Law, it shall be ordered by the company registration authority to make modification registration within a time limit; if it still fails to make the registration, it shall be fined not less than 10, 000 Yuan but not more than 100, 000 Yuan.

Article 213 Where any foreign company violates this Law by unlawfully establishing any branch within China, it shall be ordered by the company registration authority to make corrections or to close it down, and may be fined not less than 50,000 Yuan but not more than 200, 000 Yuan.

Article 214 Where anyone commits, in the name of a company, any serious violation of law so that the security of the state or the public interests of the society is injured, the business license of the company shall be revoked.

Article 215 Where a company violates any provision of this Law, it shall bear the corresponding civil liabilities of compensation, and shall pay the corresponding fines and pecuniary penalties; if the property thereof is not enough to pay for the compensation, it shall bear the civil liabilities first.

Article 216 Where any company violates the present Law and any crime is constituted, it shall be subject to criminal liabilities.
 
Chapter XIII Supplementary Provisions

Article 217 Definitions of the following terms:
 (1) The "senior manager" refers to the manager, vice manager, person in charge of finance of a company, and the secretary of the board of directors of a listed company as well as any other person as stimulated in the articles of association.
 (2) The "controlling shareholder" refers to a shareholder whose capital contribution occupies 5% or more of the total capital of a limited liability company, or a shareholder whose stocks occupy more than 50% of the total equity stocks of a joint stock limited company, or a shareholder whose capital contribution or proportion of stocks is less than 50% but who enjoys a voting right according to its capital contribution or the stocks it holds is large enough to impose an big impact upon the resolution of the shareholders' meeting or the shareholders' assembly.
 (3) The "actual controller" refers to anyone who is not a shareholder but is able to hold actual control of the acts of the company by means of investment relations, agreements or any other arrangements.

 (4) The "connection relationship" refers to the relationship between the controlling shareholder, actual controller, director, supervisor, or senior manager of a company and the enterprise directly or indirectly controlled thereby, and any other relationship that may lead to the transfer of any interests of the company. However, the enterprises controlled by the state do not incur a connection relationship simply because their shares are controlled by the state.

Article 218 The limited liability companies and joint stock limited companies invested by foreign investors shall be governed by the present Law. Where there are otherwise different provisions in any law regarding foreign investment, such provisions shall prevail.

Article 219 This Law shall go into effect on January 1, 2006. 

Promulgated by the Standing Committee of the National People's Congress on 2005-10-27


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