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PARTNERSHIP BUSINESS LAW
OF THE PEOPLE'S REPUBLIC
OF CHINA
(Adopted at the 24th session of the Standing Committee of
the National People's Congress on February 23, 1997)
CONTENTS
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
CHAPTER ONE GENERAL 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
PARTY
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.
CHAPTER EIGHT LEGAL LIABILITIES
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 personal use by taking advantage of one's own position shall
be borne by the said employee according to the law; if the case
constitutes a crime, a criminal responsibility shall be affixed.
Article 73 Whereas a failure to submit a liquidation report to the
business registration authority by any liquidator according to the
provisions of this Law, or the submitted liquidation report hides
important facts or has major omissions, a correction shall be ordered
to be made by the said liquidator.
Article 74 Whereas the property of a partnership business is obtained
or converted by a partner of the partnership business in executing the
liquidation affairs as a liquidator, the intruded or converted property
shall be ordered to be returned to the partnership business, and
responsibility for the compensation shall be borne by the said partner;
if the case constitutes a crime, a criminal responsibility shall be
affixed.
Whereas an act as provided for in the preceding paragraph is conducted
by a liquidator as entrusted by the partner, the said intruded or
converted property shall be ordered to be returned to the partnership
business, and due compensation shall be borne by the said liquidator
according to the law; if the case constitutes a crime criminal responsibilities
shall be affixed.
Article 75 Whereas a liquidator, in violation of the provisions
of this Law, withholds or transfers the property of a partnership business,
makes false records on the asset-liability statement or the property
list, or distributes property of the partnership business before debts
are paid, he(she) shall be ordered to make a correction; if the case
does harm to the interests of the creditor, he(she) shall according to
the law assume responsibility for the compensation; if the case
constitutes a crime, he(she) shall be prosecuted for criminal
responsibilities.
Article 76 Whereas a violation of the partnership agreement by any
partner, responsibility for the default shall be borne by the said
partner according to the law.
Disputies arisen in execution of the partnership agreement may be
settled through consultations or mediation. Whereas an unwillingness of
the partners to settle the dispute through consultations or mediation,
or the said dispute fails to be settled through consultations or
mediation, the dispute may according to the arbitration clauses
in the partnership agreement or an arbitration agreement in writing reached
later be submitted to an arbitration agency for arbitration. Whereas
the interested parties fail to make arbitration clauses in the partnership
agreement and an arbitration agreement fails to be reached later, legal
proceedings may be instituted with the people's court.
Article 77 Whereas any relevant administrative authority and its
working personnel, in violation of the provisions of this Law, abuse power,
conduct malpractice for personal gains, receive bribery and encroach on
the legitimate rights of a partnership business, they shall according
to the law be given administrative punishments; if the case constitutes a
crime, they shall according to the law be prosecuted for criminal
responsibilities.
CHAPTER NINE SUPPLEMENTARY PROVISIONS
Article 78 This Law shall take effect on August 1, 1997.
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