Category Archives: Corporation

A Brief Analysis of the 2013 Amendment to the China Company Law

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(By Yu ZhiYuan) On 28 December 2013, the decision on amending the previous company law was promulgated by the National People’s Congress. The amendment this time will concentrate solely on changing the corporate capital system dramatically in the following three ways. First, the registered capital to-be-paid-in system will be launched. Second, the minimum registered capital will no longer be required. Third, the maximum proportion of intangible assets to the total registered capital will no longer be required. Obviously the amendment was made as a response of legislative authorities to the resolutions approved at the Third Plenary Session of the Eighteenth Central Committee. This article provides an analysis and brief comments on the amendment.

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Tenfold Punitive Damages for Auchan’s Inferior Foods Reasonable in China?

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oushang store

(BY You Yunting) Chinese food safety problems have always puzzled consumers in China. The Food Safety Law that came into force in 2009 strengthens the legal liability of food enterprises that produce inferior foods. Earlier in 2013, China’s Supreme People’s Court published a guidance case regarding the judgment handed down by Jiangning District Lower People’s Court, in Jiangsu Province. In this case, the Auchan Store that sold expired foods was ordered to offer tenfold damages to consumers. For overseas companies that intend to invest in the industry of food production and sales in China, such legal risks should be noted. In judicial practice, however, some local courts have made judgments deciding that products for personal use should not be compensated. Another point of this case is that the Supreme People’s Court has overruled the verdicts issued by some local courts.

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Could Tencent be Exempt from Compensation for Losses of WeChat LiCaiTong? Part 2

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wechat LicaiTONG

(ByYou Yunting)  Yesterday we explained the legal status of WeChat LiCaiTong and the exemption clauses of Tencent in Could Tencent be Exempt from Compensation for Losses of WeChat LiCaiTong ? Part 1. We will continue to analyze this in today’s post.

III.   Could Tencent be exempted from liability for the risks of losses?

If any losses arise from the purchase from LiCaiTong, purchasers shall assume responsibilities in accordance with Tencent’s agreements. In my opinion, however, WeChat does not disclose the risks of LiCaiTong completely. Therefore, Tencent will not necessarily be exempt from its liabilities.

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Could Tencent be Exempt from Compensation for Losses of WeChat LiCaiTong? Part I

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wechat LicaiTONG

(ByYou Yunting) Abstract： Tencent will make no compensation to WeChat users who lost all their money in purchasing its LiCaiTong (an online financial services product) in accordance with Tencent’s Users Agreement. However, where the mobile client system of WeChat’s LiCaiTong is so simple that WeChat users are deliberately not informed of the fund name before making investments and where WeChat discloses the risk of higher interest rates in an overly optimistic way, were there any loss in the view of LiCaiTong, Tencent will face the risk of assuming compensation liability on the grounds of its fault of inadequate risk disclosure.

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What’s the Difference in the 2014 version of Company’s Business License in China?

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(By You Yunting) Our previous post introduced that recently China revised the Company Law. All Company’s business license will be changed in China to cooperate with this revision. In today’s post, we would like to introduce some leading reform measures in Shanghai and Guangdong Province which will be implemented all over the China. The following are the differences between the 2014 version of Company’s business license and the preceding one.

  1. All companies shall renew its new business license

The prosperous coastal regions in China will fully renew its business license of commercial registration Since January 1, 2014. Enterprises registered in Shanghai and Guangdong province shall renew its business license before December 31, 2013. Failure to renew its business license will be fined.

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How Can the Double Wages Payment Provision be Misused In China?

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(By You Yunting) In order to protect the legitimate rights and interests of laborers and to avoid enterprises failing to conclude a labor contract with laborers, China’s Labor Contract Law stipulates that, where an employing unit fails to conclude a written labor contract with a laborer that has provided labor services for more than one month but less than one year, it shall pay double wages payment to the laborer each month.

In practice, however, many enterprises found this stipulation being misused. To achieve double wages payment, some laborers intentionally failed to conclude the written labor contract with their employing units and then brought the employing units to labor arbitrations claiming for double wages payment. In our post, we would like to introduce a typical case where a laborer in charge of human resources who deliberately did not conclude a labor contract with its enterprise is supported by the courts to receive double wages payment after their departure. Foreign investors who do business in China should be aware of this potential labor risk.

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How to Ascertain a Director’s Liability in Chinese Bankruptcy Liquidation?

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(By You Yunting and Wang Ting) With many foreign investors establishing enterprises in China, there are many successful examples as well as the inevitable examples of failure. Bad management may lead an enterprise to eventual failure. In the situation where an enterprise goes bankrupt due to poor management, even an individual foreigner, playing the role as a director or senior officer, may have to assume personal liability. Such liability may arise from either civil or criminal laws. Today, we will discuss what kinds of liabilities directors may assume in bankruptcy liquidation.

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Was Tencent’s Unverified Non-Competition Agreement Illegal?

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(By You Yunting)  Abstract: Many of Tencent’s non-competition contracts, recently reported online are likely not real due to obvious invalidity. If the contracts were genuine, one might wonder about the intelligence and morality of Tencent’s managers and officers. These agreements are arrogant, domineering, selfish and largely ignorant of relevant laws. It is hard to imagine how these contracts could come from a listed company with billions of dollars. Additionally, Tencent could possibly be required to pay large amounts of compensation to departing employees in order to fully comply with the relevant laws.

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The Amendment to the Corporate Law of the People’s Republic of Law

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Notice: On December 28, 2013, China adopted a new amendment to the Corporate Law which will come into force on March 1, 2014. Combining with our original 2005 version of the Corporate Law, Ms Wang translates the new amendment to the Corporate Law into English and posts it today. If anyone needs to reprint our translated revision on web, please note the following content on the reprint page: This amendment is translated by Bridge IP Law Commentary  http://www.chinaiplawyer.com.

 To help foreign friends better understanding of Chinese laws, today we would first publish a comparison between the 2005 version of the Corporate Law and the 2013 amendment.

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The Confusion of Affiliated Companies shall Assume Joint Liability for Their Debts

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(By Luo Yanjie) Abstract: Company’s independent status as a legal person is a prerequisite for bearing liabilities independently incurred to the company. If a company loses its independent status as a legal person, shareholders shall bear several and joint liability for the debts of the company or the affiliated company, similarly for debts incurred in affiliated companies.

    In recent years, there are many disputes regarding abuse of company’s independent status as a legal person that many intelligent merchants attempted to evade the payments of debts by abusing the company’s independent status as a legal person or the limited liability of shareholders. In today’s post, we would like to introduce a typical case regarding the confusion of company’s independent status as a legal person on the Cases Guidance of the Supreme People’s Court in China as follows.

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How an Employer Terminates a Labor Contract with an Unqualified Laborer in China?

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(By Luo Yanjie) Abstract: “where a laborer is unqualified for his work and remains unqualified even after receiving a training or an adjustment to another work post”, the employer may terminate a labor contract. The employer shall, if terminates a labor contract with an unqualified laborer, prove the employer to be incompetent from many aspects not just based on a bad performance.

Pursuant to the Labor Contract Law, there are many conditions for termination of a labor contract with laborers. Among these conditions, the most used one is that a labor is unqualified for his work. This means, the employer may not consider rescinding a labor contract unless a laborer is unqualified for his work. During the process of termination, among many disputes between laborers and employers, we would like to introduce a typical cases regarding termination of an unqualified laborer from Case Guidance of the Supreme People’s Court.

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How to Protect Trade Secrets When a Shareholder want to Inquiry Company’s Account Book?

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(By You Yunting and Wang Ting) Pursuant to China’s Company Law, any shareholder shall be entitled to inspect and copy the Articles of association, minutes of shareholders’ meetings, resolutions of meetings of the board of directors, resolutions of meetings of the board of supervisors and financial reports of a company in which he or she owns shares. However, if a shareholder operates a business in competition with a company in which he or she owns stocks, then when exercising the shareholder’s right to information, such inspection may result in leaks of confidential business and trade secrets. In today’s post, we will introduce this conflict, and discuss ways in accordance with relevant Chinese laws to balance this conflict of interests while maintaining a shareholder’s right to information and a business’ right to protect its trade secrets.

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Why did the Courts Determine Google Receive a Prior Right in its Pre-approved China Enterprise Name?

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(By You Yunting and Wang Ting) Abstract: Generally, before registration, an enterprise never receives corresponding protection for its enterprise name. However, in relation to its pre-approved enterprise name before registration, the pre-approved enterprise name shall be provided appropriate protection.

Today, we will introduce a typical case touching upon this issue, specifically, the process of approving an enterprise name under the establishment of a foreign-invested company. In this case, Google successfully defended itself against a Chinese enterprise, and finally won rights in the Chinese transliteration of its name, written in Chinese as“谷歌” and pronounced “gu-ge”.

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How shall Overseas Companies Undergo Registration Procedures When Attempting to Provide Guarantees for a Domestic Loan?

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(By You Yunting and Wang Ting) The Chinese government imposes very strict regulations in regard to guarantees in foreign funds for domestic companies. Overseas companies or institutions, whether acting as a guarantor or a guaranteed person, must perform these registration procedures. Today we would like to introduce how domestic companies perform these registration procedures when overseas companies attempt to provide guarantees for domestic loans.

When overseas companies, in accordance with relevant regulations regarding loans to domestic finance organizations, offer loans to aforesaid finance organizations, these domestic groups can accept such loans and guarantees from both individuals and organizations outside China’s border. Such services provided by individuals and organizations in foreign jurisdictions can support the development of domestic companies, as well as exert positive effects on the investment of enterprise fixed assets and requirements of liquid capital.

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