What is the main source of law authorising this entity form?

Company Law, Foreign Investment Law, and other laws and regulations.

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

LLC has separate legal personality.

(Maximum) period of existence

There is no maximum period of existence; LLC can be incorporated for either a definite term which can be extended, or an indefinite term.

Governing document(s)

LLC is governed by its articles of association.

Liability of incorporators / shareholders

The liability of a shareholder of an LLC shall be limited to the amount of its capital contribution. Shareholders are not personally liable for the debts of the company, save to the extent to which their subscribed capital are not fully paid-up. LLC is subject to limited instances of piercing the corporate veil, such as when its shareholders abuse the separate legal personality of the company and limited liability of shareholders to evade debts and cause damage to the interests of the creditors of the company.

(Governing) bodies

The management of LLC is governed by its Board of Directors 董事会 or a single Executive Director 执行董事 if so provided by the articles of association. The highest authority of LLC is its Meeting of Shareholders 股东会 or its sole shareholder.

Other particularities

Board of Supervisors 监事会 (if applicable).

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

It is generally possible for an LLC to be involved in international restructurings (cross border merger, asset acquisitions, equity acquisitions, etc.) to the extent that relevant approval, registration or filling requirements (if any) are satisfied.

Can this type of entity be publicly listed or held?

No. The form of a listed company should be the company limited by shares.

Can this type of entity be used for a non-profit or charitable organization?

No, given its nature as a commercial entity, with the ability to make profit distributions to shareholders, and being subject to corporate income tax.

Give a brief summary of the process of incorporation, formation, or organization, including:

Shareholder(s) shall make filings with the Administration for Market Regulation (AMR) 市场监督管理局, obtain a business license, open bank accounts, and file documents with various other authorities

Main documents required

Main documents: articles of association 公司章程; shareholders’ agreement 股东协议, appointments of Board of Directors, lease agreement, etc.

Involvement of notary, company register, governmental authorities

Incorporation documents of non-Chinese shareholders need to be notarized by the notary public and authenticated by the Chinese Embassy or Consulate.

Timing (estimate)

Estimated time is 3 months in general if there are non-Chinese investors. It may take a longer time if the industry involves special approval from the government authorities.

Main costs, including registration and similar fees (excluding legal fees)

The main costs are the lawyer, notary and agent fees (if any).

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The business scope must be stated in the business license and articles of association.

Minimum number of incorporators / shareholders and residency requirements

There must be at least one shareholder upon incorporation. There is no residency requirements for shareholders.

Minimum number of directors (or other applicable officers) and residency requirements

There must be at least one director and one supervisor upon incorporation, depending on the governance structure and scale of the LLC. There are no residency requirements for directors.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

Capital in the LLC is not descripted by shares. Rather, it is described as equity interest. The amount of the registered capital in the LLC must be specified.

In general, there is no minimum amount requirement for the registered capital except for some particular industries (e.g., telecom related business).

The timeframe for capital contribution by the shareholders shall be stipulated in the articles of association.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

Generally, no, the incorporation can be done by virtue of a power of attorney. But certain local practices may require physical presence of the LLC’s legal representative to obtain a business license.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Yes. Upon completion of the incorporation, LLC is required to make a tax registration. The Unified Social Credit Code 统一社会信用代码 on the business license also serves as the Taxpayer Identity Number 纳税人识别号.

What is the title of the applicable company registry?

Adminstration for Market Regulation (AMR) 市场行政管理局

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

• Articles of association
• Business scope
• Ownership identification (direct ownership)
• Registered capital
• Legal address
• Directors, legal representative, general manager, chief finance officer and contact person.
• Status of deregistration
• Pledge of the LLC’s equity (equity pledge is valid only if it is registered with AMR)

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The Board of Directors or the Executive Director. The board represents the company and carry out management duties in the interests of the LLC, in accordance with the objects as provided in the articles of association of the LLC.

How are the members of the executive body appointed, dismissed and replaced?

The Company Law requires that the directors should be appointed by the Meeting of Shareholders 股东会, although in practice, directors are often appointed by the shareholders and dismissed by the same shareholders which make such appointment, in accordance with the articles of association. Any changes of directors must be registered with AMR.

Is it possible to appoint corporate directors or must all directors be natural persons?

No.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

There are no legal concepts of non-executive directors and two-tier structure in Chinese law. If the non-executive directors refer to the independent directors, which is mandatory in a limited company by shares rather than an LLC. It is not a common practice to have independent director in an LLC.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The Meeting of Shareholders has all rights and responsibilities provided to it by law and the articles of association, that are not imposed upon the Board of Directors or other bodies within the LLC.

Its power ranges from (1) making business decisions for the LLC; (2) appointment and dismissal of directors and supervisors; (3) review and approval of relevant plans formulated by the board; (4) passing resolution on issues of capital change, profit distributions, liquidation, etc.; and (5) amendment of the articles of association.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Decisions are made in accordance with a simple majority or super majority on different items according to the law and/or articles of association. However, the following items must require a supermajority of more than two-thirds of voting rights: amendment to the articles of association, increase or reduction of registered capital, and company merger, division, dissolution or change of company structure.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

There are some special regulations over State-owned companies, such as the board shall comprise employee representatives.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

LLC must maintain accounting records that are sufficient to determine the financial positon of the company.

LLC shall prepare annual financial accounting reports, which shall be audited by a qualified audit firm and presented within 4 months after the end of that accounting year.

The annual financial accounting reports of an LLC shall be submitted to AMR along with the annual report of the company.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

Yes.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

General Manager whose duties are subject to the articles of association. No. There are no residency requirements in general.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Equity interest.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

While the voting rights exercisable by shareholders of an LLC are in general based on the ratio of capital contribution, the Company Law also provides that the LLC’s articles of association may decide otherwise. Therefore, voting rights do not have to reflect the ratio of capital contribution, and different voting classes could be possible in LLC. However, it is rare in practice to adopt such different classes in an LLC, and local AMR often rejects to register articles of association containing such arrangement.

What documentation is required for the transfer of ownership interests?

Major documents are: equity transfer agreement 股权转让协议, new shareholders’ agreement, and new articles of association.

The original articles of association may contain transfer restrictions (e.g. approvals and/or pre-emptive rights) that must be complied with.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

The transfer must be filed with the company register, AMR.

In some industry sectors, transfers need special approval from relevant government authority(s).

Are there any applicable stamp duties imposed when transferring ownership interests?

Documentary evidence on the transfer of equity interest falls in the scope of stamp duty, which is 0.05% of the stated value, to be paid by the party which initiated the contract.

How are shares issued? (including information on payment obligations, registration requirements)

LLC does not issue shares. The ownership interest is described as equity interest and is based on the ratio of capital contribution of the shareholders. The registered capital of an LLC shall be the amount of capital contribution subscribed by all its shareholders.

The timeframe for capital contribution by the promoters or shareholders of an LLC shall be stipulated in the articles of association.

Registered capital and capital increase must be registered with AMR.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Non-cash payment for shares requires the consent of the other shareholders on the value attributed to the in-kind contributions being contributed. No external appraisal is required in general subject to shareholders’ decision. Appraisal is required when involving in the state-owned assets or companies.

Equity contributions without issuing shares are possible subject to accounting rules.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

The Company Law does not prohibit an LLC from making share cancellations and repurchases, so long as such act does not violate the provisions of other laws and administrative regulations under relevant circumstances, or cause damage to the company and the interests of other shareholders. Share cancellations and repurchases are made in the way of registered capital reduction in an LLC.

Registered capital reduction will require shareholders’ resolution, and shall undergo relevant procedures for change registration. An LLC which proposes to reduce its registered capital shall prepare a balance sheet and a list of assets. The LLC shall notify its creditors and publish an announcement on the newspapers within a certain period of time from the date of resolution on such capital reduction.

Any requirements with respect to distributions to shareholders?

Generally, there must be a resolution to be adopted by the Meeting of Shareholders or Board of Directors, depending on the articles of association, to make a distribution, provided that the company makes the profits in the particular year.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The LLC must maintain its registered legal address, has directors, and has the substance business operation. The shareholders and/or Board of Directors must each year hold their meetings (or adopt a resolution in writing). Annual accounts must be prepared and audited each year which will be submitted, together with other documents, to the government authorities for annual inspection. Relevant tax filings must be made.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

25%. Various exemptions and special rules may apply.

Summary of any specific matters, e.g. recent or prospective major legal developments

N/A.