Regulations of Shenzhen Special Economic
Zone on the Cooperative Stock Companies
Originally adopted at the Twenty-second Meeting of Standing Committee of the First Shenzhen Municipal People’s Representative assembly on April 29, 1994, as revised in accordance with the Decision on Revision of Article 27 of the Regulations of Shenzhen Special Economic Zone on the Cooperative Stock Companies of the Seventeen Meeting of the Standing Committee of the Second Municipal People’s Representative assembly on September 4, 1997.
Chapter I General Provisions
Article 1 In order to affirm the legal status of cooperative stock companies of Shenzhen Special Economic Zone (hereinafter referred to as the "Special Zone"), standardize their organization and behaviors, protect the lawful rights and interests of the shareholders, the creditors and the social public, promote the development of the economy of collective ownership of the Special Zone and maintain the order of the socialist market economy, these regulations are hereby formulated.
Article 2 "Cooperative stock companies" in these regulations refer to enterprises with status of legal person established according to these regulations, whose registered capital is composed of shares of equal amount converted from the collective-owned property of a specific community, and probably raised partially from other sources as well, and whose shareholders shall enjoy rights and assume the obligations according to the provisions of the articles of association and which shall bear its own liabilities with all its assets. However, the collective-owned land shall not be used to offset the liabilities directly.
Article 3 These regulations shall be applicable to the cooperative stock companies formed by restructuring collective economic organizations of various communities.
The "collective economic organizations of various communities" referred to in preceding paragraph shall mean the cooperative economic organizations formed on basis of administrative village units or villagers' teams (natural villages, hereinafter inclusive).
Article 4 A cooperative stock company (hereinafter referred to as "the company" or "a company") shall be established upon approval and registration of municipal industrial and commercial administration organ of Shenzhen (hereinafter referred to as the "registration organ") according to law.
Article 5 The company shall clearly indicate the words "stock cooperative company" in its name.
Article 6 The domicile of a company is the place where its principal place of business is located.
Article 7 The company shall not become an unlimited liability shareholder of other companies or a partner of a partnership. Where the company becomes a limited liability shareholder of other company, except for necessary of controlling a majority of shares, the contributing fund shall not exceed 50% of the net assets of the company.
Where the company provides a guarantee for shareholders or others shall be in compliance with the articles of association of the company or approved by the shareholders' meetings.
In violation of the first or second paragraphs of this Article, the registration organ shall impose a fine not less than RMB 10,000 but not more than RMB 50,000 upon the legal representative and the person who is directly liable of the company; if any loss is caused to the company, the legal representative and the person held directly liable of the company shall bear the liability for compensation.
Article 8 The company shall enjoy the rights and bear the obligations stipulated by laws and regulations for enterprises of collective ownership, meanwhile, enjoy the preferential treatments stipulated by laws, rules and regulations for enterprises of collective ownership.
Article 9 The company shall abide by laws, rules and regulations.
The lawful rights and interests of the company shall be protected by law. Any unit or individual shall not infringe the ownership of collective property of the company.
Article 10 If the company or any concerned person refuses to comply with the concrete administrative act of the municipal registration organ or other competent administrative organs, or the concrete administrative act of staff members in enforcing these regulations, it or he may apply to the administrative reconsideration organ under the Municipal People's Government for reconsideration or may directly file a lawsuit in a people's court.
Article 11 Except otherwise specified in these regulations, the villagers' team and administrative village and their villagers referred herein shall include the original villagers' teams and administrative villages now urbanized and original villagers now transferred to be urban residents.
Chapter II Establishment
Article 12 A cooperative stock company may be established by means of converting other assets into stock shares or by means of converting assets and raising funds in combination.
Establishment by converting assets into stock shares shall mean the establishment of a cooperative stock company by means of converting the collective-owned assets into stock shares.
Establishment by means of converting assets and raising funds in combination shall mean the establishment of a cooperative stock company by means of converting collective-owned assets and raising shares in addition.
Article 13 Where a company is established on basis of the collective assets owned by a villagers' team, the villagers of the villagers' team shall be shareholders. Where a cooperative stock company is established on basis of the collective assets owned by an administrative village, the villagers' teams shall be shareholders. However, upon decision in form of special resolution by the villagers' meeting, an administrative village may also establish a company on basis of the collective assets owned by the administrative villages and the villagers' teams and with the villagers as shareholders.
Article 14 Before establishment of a company, a preparatory team shall be formed at first.
Where a villagers' team establishes a company, members of the preparatory team shall be elected by the villagers' team; where an administrative village establishes a company, the members of the preparatory team shall be composed of the members of the villagers' committee.
Article 15 The preparatory team for a cooperative stock company shall handle following issues on establishment of the company:
(1) Drawing out the overall program for establishing the cooperative stock company;
(2) Liquidating the creditors' right and liabilities of the villagers' team or the administrative village, entrusting an agency with assets valuation qualification to conduct valuation of the assets collectively owned by the villagers' team or the administrative village and determine the net value of collective assets;
(3) Working out the programs for stock share classification, the distribution and management of stock rights and ownership;
(4) Drafting out the articles of association and preparing documents necessary for establishment of the cooperative stock company;
(5) Convening villagers' meetings and submitting the articles of association for the cooperative stock company for deliberation; and
(6) Other issues concerning establishment of the cooperative stock company.
Article 16 The registered capital of a company shall be the total amount of the capital stock registered with the registration organ.
The registered capital of a company shall not be less than RMB 2,000,000.
The threshold after a company's reducing registered capital shall not be less than the minimum amounting for registered capital stipulated in the preceding paragraph.
The registered capital shall bear a clear indication of the shares converted from the collective-owned land, however, the collective land owned by a company shall not be used to offset the liabilities of the company directly.
Article 17 To establish a company, the articles of association shall be formulated. The articles of association shall be discussed and passed in the villagers' meeting.
The articles of association of the company shall state the following items clearly:
(1) The company name and domicile / address;
(2) The tenet and business scope of the company;
(3) The mode of establishment of the company;
(4) The registered capital, types of stock shares, distribution and management of stock shares, the total amount of all types of stock shares and the amount of per share;
(5) The concrete conditions for acquiring the qualification of the shareholder of the company;
(6) The limitation on the turnover of stock shares, the transfer scope of transferable stock shares, transfer measures and the measures of the company purchasing shares;
(7) The rights and obligations of the shareholders;
(8) The election, rights and obligations of the representatives of the shareholders;
(9) The responsibility and authority and the rules of procedure of the shareholders' representative assembly;
(10) The composition, responsibility and authority, the rules of procedure and term of office of the directors of the board of directors;
(11) The legal representative and his responsibility and authority;
(12) The composition, responsibility and authority, the rules of procedure and term of office of the supervisors of the board of supervisors;
(13) The measures of distribution of profit;
(14) The financial and accounting system;
(15) The revision of the articles of association;
(16) Disbandment and liquidation;
(17) The mode of notification and public notice; and
(18) The date of formulating the articles of association.
Article 18 Where the company is established by means of converting the collective-owned assets into stock shares and raising shares in combination, the objects for raising the shares shall only be confined to the villagers of its own village and staff members of the company.
The staff members of the company shall include, in addition to the villagers in its own village, the directors, managers, staff members of the company, the former personnel of the subsidiaries and shareholding companies of the said company.
Where shares are raised in violation of the provisions of the preceding paragraph, the authorized organ of the district people's government in the seat of the company (hereinafter referred to as the "authorized organ of the district government" shall order the preparatory team of the company to refund the amount for the raised shares and the banking interests thereon to the share subscribers and impose a fine not less than RMB 50,000 but not more than RMB 100,000 to the persons held directly liable.
Article 19 Where the company is established by means of converting the collective-owned assets into stock shares and raising shares in combination, the preparatory team of the company shall file an application to the authorized organ of the district government for approval of raising shares.
The authorized organ of the district government shall make decision on whether to approve the raising of stock shares within 30 days upon receiving the application. Where the application is approved, the applicant shall be issued with the approval document; where the application is rejected, the applicant shall be replied in writing.
Upon approval of raising stock shares, the company shall raise the stock shares in terms of the approved number of shares and the term of raising stock shares.
Article 20 Where a company is established by converting the collective-owned assets into shares, the preparatory team of the company shall convene a villagers' meeting within 30 days upon fulfilling the preparatory issues; where a company is established by converting the collective-owned assets into shares and raising shares in combination, the preparatory team of the company shall convene a villagers' meeting within 30 days upon all the amount of the raised shares have been paid up.
The villagers' meeting shall exercise the following functions and powers:
(1) Deliberating the report of the preparatory team of the company on preparatory status of the company;
(2) Revising the articles of association of the company;
(3) Electing the members of the board of directors;
(4) Electing the members of the board of directors; and
(5) Checking and determining the remuneration of the members of the preparatory team and the expenditure of the establishment of the company.
Article 21 The board of directors shall apply to the registration organ for registration of establishment and submit the following documents within 30 days upon concluding the villagers' meeting:
(1) The application for establishing the company;
(2) The report of the preparatory team passed in the villagers' meeting;
(3) The articles of association of the company;
(4) The financial audit report on establishing the company;
(5) The capital inspection certificate;
(6) The report on assets valuation;
(7) The names, addresses and the certificates of identification and qualification of the members of the board of directors and the board of supervisors; and
(8) The name and address of the legal representatives.
Where the company is established by converting the collective-owned assets into shares and raising shares in combination, the board of directors shall also submit the document of the authorized organ of the district government approving the raising of shares.
Article 22 The registration organ shall make the decision on whether to grant registration or not within 30 days upon receiving the application for establishing the company. If the registration is granted, the company shall be issued the business license for enterprise with status of legal person; where the registration is rejected, a reply in writing shall be made to the company.
The date of issuing the business license for corporation shall be the date of establishment of the company.
The establishment of company shall be proclaimed.
Article 23 Any one who operates in the name of a company without approval shall be ordered to terminate the operation and confiscated of the illegal business gains by the registration organ; meanwhile the actors shall be imposed upon a fine of not less than RMB 10,000 but not more than RMB 50,000 respectively; if any loss is caused to others, the actors shall bear the liability for compensation.
Any applicant who, in violation of these regulations, stoops to deception in applying for establishment of a company shall be ordered to make corrections by the registration organ; any one who has received the business license for enterprise with status of legal person by employing trickery while refuses to make corrections shall be revoked of the business license for enterprise with status of legal person; meanwhile the persons held directly liable shall be imposed upon a fine of not less than RMB 10,000 but not more than RMB 50,000 respectively.
Article 24 The collective enterprises without the qualification of the enterprise with status of legal person established by the administrative village or the villagers' team before establishment of the company shall be deemed as the branches of the company after establishment of the company. If the branches need to go through the modification formalities according to law, the company shall apply to the registration organ for going through the modification formalities.
Article 25 The enterprises established by an administrative village or a villagers' team, which holds not less than 50% of the stock shares or not up to 50% of the stock shares of the said enterprises, shall be deemed as the subsidiaries or shareholding companies of the company after its establishment. If the subsidiaries or shareholding companies of the company need to go through modification registration formalities according to law, they shall apply to the registration organ for going through the modification formalities.
Chapter III Shares
Article 26 The capital of the company shall be divided into shares with equal amount in the form of stock right certificate.
Article 27 The company shall set up collective shares and cooperative shares and may set up raised shares as well.
The collective shares shall mean the shares left to the cooperative shareholders, of which the dividends are enjoyed by the shareholders of the cooperative shares on a collective basis upon conversion of collective-owned property into shares. The proportion of the collective shares among the total number of shares from conversion of collective-owned assets shall be determined by the Municipal People's Government. The management measures of the collective shares shall be formulated in the articles of association of the company.
The cooperative shares shall mean the shares allocated to shareholders individually upon conversion of collective-owned property into shares when the company is established.
The raised shares shall mean the shares subscribed by the cooperative shareholders and the staff members of the company by means of raising shares. The raised shares shall not exceed 30% of the amount of the total shares. (Notes: according to the Decision on Revising Article 27 of the Regulations on the Cooperative Stock Companies of Shenzhen Special Economic Zone adopted at the 17th Session of the 2nd Meeting of the Standing Committee of the People's Representative assembly of Shenzhen Municipality dated 4th September 1997, the second paragraph of this Article shall be revised as follows: " The collective shares shall mean the shares left to the cooperative shareholders, of which the dividends are enjoyed by the shareholders of the cooperative shares on a collective basis upon conversion of collective-owned property into shares.. The shareholders of the collective shares, i.e. the representatives of the capital, shall be the village collective-owned assets management committee. The proportion of the collective shares among the total number of shares from conversion of collective-owned assets shall be determined by the Municipal People's Government. The management measures of the collective shares shall be stipulated in the articles of association of the company. The establishment of the village collective-owned assets management committee shall be approved by the collective-owned assets management organ of the district government.)
Article 28 The cooperative shares shall be distributed among the villagers or the villagers' teams on basis of the relationship of household registration. The distribution of cooperative shares shall be based on the following principles:
(1) Equality between the sexes;
(2) Protecting the lawful rights and interests of the old, children and the disabled without labor capability;
(3) Protecting the lawful rights and interests of the armymen in active service;
(4) Protecting the lawful rights and interests of students studying in schools; and
(5) Promoting the shareholders to fulfill their due obligations.
The concrete measures of distribution of cooperative shares shall be stipulated in the articles of association of the company.