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Provisional Regulations of the
People's Republic of China onPrivate Enterprises
(Adopted at the 7th Routine Meeting of the State Council onJune 3, 1988.
Issued by the 4th Order of the State Council of the People'sRepublic of
China on June 5,1988)
Whole Doc.
Chapter 1 General Provisions
Article 1
These Regulations are formulated to encourage and guide a healthy
development of private enterprises, to protect their legal rights and
interests and strengthen the supervision and administration, thus
prospering the socialist planned commodity economy.
Article 2
The "private enterprise" referred to in these Regulations means
the
benefit-sought economic organization whose property is owned by the
individuals with more than 8 employees.
Article 3
The private economy is a supplement to the socialist economy under
the public ownership. The State protects the legal rights and interests of
the private enterprise.
The private enterprise shall conduct its business within the scope
stipulated by laws, regulations and policies of the State.
Article 4
The staff and workers of the private enterprise may organize the
trade union in accordance with the law. The staff and worker's legal
rights and interests shall be protected by laws of the State.
Article 5
The private enterprises are entitled to establish the private
enterprise association.
Chapter 2 Types of Private Enterprises
Article 6
The private enterprises are classified under the following 3 types:
(1) personal-fund enterprise;
(2) partnership enterprise;
(3) limited-liability company.
Article 7
The "personal-fund enterprise" refers to the enterprise which is
invested in and managed by one person.
The investor of the personal-fund enterprise shall assume unlimited
liability for the debts of the enterprise.
Article 8
The "partnership enterprise" means the enterprise which is
funded
according to an agreement, managed together, and whose profits and losses
are born jointly by more than 2 persons.
The partnership enterprise shall have a written agreement. The
partners shall assu me unlimited joint liability for the debts of the
enterprise.
Article 9
The "limited-liability company" means the investors shall hold
the
liability for the company according to their contribution and the company
shall bear its liabilities with its all assets.
The limited-liability company shall comply with the following
provisions:
(1) the name of the company shall be titled with "limited-liability
company" or "limited company";
(2) the articles of associations of the company shall conform with
the stipulations of these Regulations;
(3) the number of investors shall range from 2 to 30;
(4) registered fund shall have a legal certificate of capital
verification;
(5) the transfer of an investor's contribution shall be agreed upon
by the oth er investors; if the number of investors is more than 3, the
transfer shall be agreed up on by the majority of the investors;
(6) the registered fund shall not be reduced;
(7) the public issue of stocks shall not be permitted.
The limited-liability company with more than 30 investors shall ap
ply and report specially to the department in change of administration of
industrial and commercial, and go through the registration formalities
upon the permission.
Article 10
The limited-liability company shall obtain the status of legal person
according to law.
Chapter 3 Establishment and Termination of Private Enterprise
Article 11
The following persons may apply for establishing a private
enterprise:
(1) villagers in rural areas;
(2) unemployed people in cities and towns;
(3) individual industrial and commercial households;
(4) persons who have resigned or been discharged;
(5) persons who have retired, and other people permitted by laws,
regulations and policies of the State.
Article 12
Within the scope stipulated by laws, regulations and policies of the
State, the private enterprise can conduct its production and business in
the lines of industry, construction, traffic and transportation, commerce,
catering, service, repairing and consulting of science and technology.
The private enterprise shall not be engaged in military industry and
banking, and cannot produce and deal in the products prohibited by the
State.
Article 13
When applying for establishing a private enterprise, it shall meet
the following requirements:
(1) having funds and employees in conformity to the scale of business
and service of the enterprise;
(2) having fixed place of business and necessary equipment;
(3) its business scope being in conformity with provisions of laws,
regulation s and policies of the State.
Article 14
The articles of association of the limited-liability company shall
include the following items:
(1) the name and address of the company;
(2) the purpose of establishing the company and its business scope;
(3) the amounts of registered funds and the contribution of each
investor;
(4) each investor's name and address, and his rights and obligations;
(5) the institution of the company;
(6) conditions for dissolution of the company;
(7) conditions for investors transferring their share of investment;
(8) allocation of profits and bearing of losses;
(9) procedures for the amendment of articles of association of the
company;
(10) other items needed to be stated expressly.
Article 15
When applying for establishing a private enterprise, the applicant
shall register with the local department in charge of administration of
industry and commerce by the related certificates. Upon the ratification
and the issuing of its business license, the private enterprise can
conduct its business operations.
Article 16
When separating, merging, transferring, moving and changing business
scope, the private enterprise shall go through the formalities of
alternation of registration or re-registration with the departments in
charge of administration of industry and commerce.
Article 17
In case of termination, the private enterprise shall file application
with the departments in charge of administration of industry and commerce
30 days before termination, and cancel the registration after verification
by the department.
In case of termination, the private enterprise shall carry out
liquidation and pay off its debts.
Article 18
In case of bankruptcy, the private enterprise shall carry out
liquidation of bankru ptcy and pay off its debts. The detailed measures
for the liquidation will be made out s eparately.
Article 19
A private enterprise with the qualification of legal person shall
handle the registration of establishment, alternation or cancellation of
the registration according to the provisions of Regulations of the
People's Republic of China for the Registration of the Enterprise Legal
Person.
Chapter 4 Rights and Obligations of the Private Enterprise
Article 20
The investor of the private enterprise is entitled to have the
ownership to his property, which can be inherited according to law.
Article 21
The private enterprise is entitled to have the following rights in
the course of production and operation:
(1) exclusive right of using the name which is ratified and
registered in the ratified scope;
(2) independent right of management in the ratified scope of
business;
(3) right of making decisions for setting up institution and
employing and dis missing the staff and workers of the enterprise;
(4) right of making decisions for the system of wages and salaries,
and the forms of profit distribution;
(5) right of making out the price of the products and the standard of
charges according to the regulations of the State on price control;
(6) right of signing the contract;
(7) rights of application for patent and registration of trade-mark.
Article 22
The private enterprise, according to the provisions of laws and
regulations of the State, may set up Sino-foreign joint ventures,
Sino-foreign cooperative enterprise with foreign company, enterprise and
other economic organizations or individuals, and may eng age in processing
with supplied materials and samples, assembling with supplied parts an d
compensation trade.
Article 23
The private enterprise shall perform the following obligations in the
course of production and operation:
(1) abiding by laws, regulations and policies of the State;
(2) paying taxes according to law;
(3) obeying the supervision and administration of the relevant
authorities of the State.
Article 24
The private enterprise shall open account (s) with a bank or other
financial institutes according to the relevant provisions of the State.
Those who are up to the stipulated conditions can apply for the loans.
Article 25
No unit can require in any way the private enterprise to provide
financial and material assistance or manpower, except for the stipulations
of laws and regulations of the State. The private enterprise has the right
to refuse the apportion allotted to it, and the departments in charge of
administration of industry and commerce are authorised to stop the
apportion.
Article 26
The private enterprise's "Business License of Enterprise Legal
Person" or its "Business License" cannot be suspended and
revoked, except
that it is suspended and revoked by the departments in charge of
administration of industry and commerce according to legal procedures.
Chapter 5 Labour Management of the Private Enterprise
Article 27
When the private enterprise employs staff and workers, the two
parties shall, according to the principles of equality, willingness,
consultation and consensus, sign the labour contract in a written form to
define the rights and obligations of the two parties.
The labour contract of the private enterprise shall be put on file to
the local departments of labour administration and management.
Article 28
The labour contract shall include the following items:
(1) the requirements of the quality and quantity of the labour of the
staff an d workers;
(2) the term of the contract;
(3) the working conditions;
(4) payment for labour, insurance and welfare treatment;
(5) discipline of working;
(6) responsibility for breach of the labour contract;
(7) other items reached by the two parties.
Article 29
The labour disputes occurred from the private enterprise shall be
settled with reference to the Interim Provisions on Handling the Labour
Dispute of the State-owned Enterprise.
Article 30
The private enterprise must implement the relevant stipulations of
the State on labour protection, set up necessary rules and system, and
provide with security and sanitation facilities, thus ensuring safety and
health of the staff and workers.
The private enterprise must procure insurance for the staff and
workers engaging in such jobs related to the health and security of their
life according to the provisions of the State.
The private enterprise, if having capacity, shall procure social
insurance for its staff and workers.
Article 31
The private enterprise shall institute an eight-hour working day
system.
Article 32
It is prohibited for the private enterprise to employ child labour
who has not reached the age of 16.
Article 33
The trade union of a private enterprise has the right to sign a
collective contract on behalf of the staff and workers, protect lawful
rights and interests of the staff and workers, and support the activities
of production and operation of the enterprise.
Chapter 6 Financial Affairs and Tax of the Private Enterprise
Article 34
The private enterprise shall, within 30 days from the date of getting
its "Business License of Enterprise Legal Person" or its
"Business
License", apply and report to the local tax authority for carrying
out tax
registration .
Article 35
The private enterprise must, in accordance with the finance and
accounting regulations of the State and provisions of the tax authority,
set up its financial and accounting system, allocate personnel in charge
of finance and accounting, establish the accounting books, make up and
report the statement of financial affairs, perform strictly the obligation
of tax-paying and accept the supervision and check of the tax authority.
Article 36
The salary of the factory manager (or the general manager or the
chairman of the board of directors) of the private enterprise may be
defined no more than 10 times of the average salary of the staff and
workers of the enterprise.
Article 37
The income tax of private enterprise shall be imposed in accordance
with Interim Regulations of the People's Republic of China on Income Tax
of the Private Enterprise and other relevant provisions.
Article 38
After payment of taxes, the proportion of the profits earned by the
private enterprise for the productive development fund shall not be less
than 50%. If the proportion is less than 50% owing to special reasons, it
must be approved by the tax authority.
The productive development fund of a private enterprise may be used
in the fields of increasing its capital for production expansion,
investing in other enterprises, paying off its loan or making up the
losses of the enterprise. If used for other purposes, it must be approved
by the tax authority.
Article 39
For the income of salary and gains allotted from profit-after-tax,
the private enterprise investor shall pay the personal income adjusted tax
according to law.
Chapter 7 Supervision and Punishment
Article 40
The departments in charge of administration of industry and commerce
shall strengthen the supervision and administration over the private
enterprise, protect its lawful business operation and make check and
punishment on the illegal business activities.
Every department in charge in the related lines of business shall be
responsible for the direction, help and administration to the production
and operation of the private enterprise.
Article 41
If the private enterprise conducts one of the following actions, the
departments in charge of administration of industry and commerce shall,
depending on the seriousness of the individual case, impose different
punishment including warning, fining, confiscating the unlawful income,
ordering to close for rectification and suspending its "Business
License":
(1) concealing the facts and making fraud in registration or doing
business without approval and registration;
(2) dealing with operation beyond the scope of business upon approval
and registration or going through the registration formalities of
alteration, reregistration and cancellation in violation of the
provisions;
(3) forging, altering, renting, transferring, selling the "Business
License" or duplicating it without permission;
(4) engaging in unlawful business activities.
The private enterprise qualified as legal person which violates the
provisions for administration of registration shall be punished according
to the Regulation of the People's Republic of China for Registration of
Enterprise Legal Perso n.
Article 42
The private enterprise who conducts one of the following actions
shall be imposed a punishment of warning or fining according to the
seriousness of the individual case by the departments in charge of labour
administration:
(1) conducting in production and operation in violation of the
provisions for labour protection of the State;
(2) employing the child labour;
(3) infringing upon the legal rights and interests of the staff and
workers.
Article 43
The private enterprise who conducts actions in violation of Article
38 of these Regulations shall be given punishment of warning or fining by
the tax authority according to the seriousness of the individual case.
Article 44
If the private enterprise is not satisfied with decision on
punishment made by the departments. in charge according to Articles 41 and
42 of these Regulations, it may, within 15 days from the date of receipt
of the notification of punishment, apply for reconsideration to the
department at next higher level than that which made the decision of
punishment. The department shall, within 30 days from the date of receipt
of the application, make the decision of reconsideration. And if the
applicant is not satisfied with the decision of reconsideration, it may
bring an action at the people's court within 30 days from the date of
receipt of the notification.
If the private enterprise does not apply for reconsideration or bring
an action at the people's court within the term specified, the decision of
punishment shall enter into force.
Article 45
The private enterprise in violation of laws and regulations of the
State relating to tax, resource, administration of industry and commerce,
price, finance, measurement, quality, sanitation, environment protection
shall be punished by the relevant authorities according to law.
Article 46
If the personnel of the departments in charge violates the provisions
of these Regulations, abusing power, seeking personal gains by fraud,
accepting bribes or infringing upon legal rights and interests of the
private enterprise, the related departments in charge shall give
administrative punishment or economic punishment according to the
seriousness of the individual case. For those who violate the criminal
law, the judicial authority shall investigate and affix the criminal
responsibility according to law.
Chapter 8 Supplementary Provisions
Article 47
The State Administration of Industry and Commerce is responsible for
the interpretation of these Regulations; The implementing measures shall
be formulated by the State Administration of Industry and Commerce
together with other departments concerned.
Article 48
These Regulations shall enter into force from July 1, 1988.
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