Law of the PRC on Foreign-funded Enterprises

Chapter X Workers and Staff Members

Article 64 The foreign-funded enterprise employing workers and staff members from China shall conclude labor contracts with the workers and staff members employed in accordance with Chinese laws and regulations. The contract shall contain such matters as employment, dismissal, remuneration, welfare, labor protection and labor insurance.No foreign-funded enterprise may employ child laborers.

Article 65 A foreign-funded enterprise shall be responsible for the vocational and technical training of its workers and staff members, set up checking and appraisal system, and make the workers and staff members capable of meeting the needs of the production and development of the enterprise.

Chapter XI Trade Union

Article 66 Workers and staff members of any foreign-funded enterprise shall be entitled to set up grass-roots trade union organizations and carry out trade union activities in accordance with the Trade Union Law of the People's Republic of China.

Article 67 The trade union in a foreign-funded enterprise, represents the interests of the relevant workers and staff members, and shall have the right to conclude labor contracts, on behalf of the workers and staff members, with the enterprise, and shall supervise the execution of such labor contracts.

Article 68 The basic tasks of the trade union in a foreign-funded enterprise shall be: to safeguard lawful rights and interests of the workers and staff members in accordance with the provisions of Chinese laws and regulations, and to assist the enterprise in making proper arrangements for and use of the welfare and bonus funds for worker and staff members; to organize for the workers and staff members political study, and study of scientific, technical and professional knowledge, and to carry out recreational and sports activities; to educate the workers and staff members to observe labor disciplines and strive to fulfill the economic tasks of the enterprise.

The representative of trade union in a foreign-funded enterprise shall have the right to attend, as an observer, meetings held to discuss and decide matters regarding rewards and punishment to workers and staff members, salary and wage system, welfare, labor protection and labor insurance, etc. The foreign-funded enterprise shall heed the opinions of the trade union, and win the cooperation thereof.

Article 69 The foreign-funded enterprise shall give an active support to the work of the trade union, and in accordance with the provisions of the Trade Union Law of the People's Republic of China, provide the trade union organization with housing and facilities necessary for office use, meeting, and carrying out collective undertakings of welfare, culture and sports for the workers and staff members. The foreign-funded enterprise shall, at a monthly basis, appropriate a sum of 2% of the actual total amount of wages and salaries of the workers and staff members, as funds of the trade union, which shall be used by the trade union in accordance with the relevant measures of All-China Federation of Trade Unions for the management of funds of trade unions.

Chapter XII Duration (Operating Period), Termination and Liquidation

Article 70 The duration of a foreign-funded enterprise shall, in the light of the circumstances of the specific trade and enterprise, be proposed by the relevant foreign investor in the application for the establishment of the foreign-funded enterprise, and shall be subject to the approval by the examining and approval authority.

Article 71 The duration of a foreign-funded enterprise shall be calculated from the date of issue of its business license.

In case of an intention to extend the duration of a foreign-funded enterprise, an application for such extension shall be submitted 180 days prior to the expiration of the duration to the examining and approving authority, which shall, within 30 days from the date of receiving the application, make a decision of approving or disapproving of the extension.

If the application for the extension of duration is approved, the foreign-funded enterprise shall, within 30 days from the date of receiving the approval, go through the procedures for change of registration with the administrative department for industry and commerce.

Article 72 A foreign-funded enterprise shall be terminated, if it is under any of the following circumstances:

(1) upon the expiration of its duration;

(2) if the foreign investor decides to dissolve it because of poor management and serious losses;

(3) if the business cannot be carried on because of heavy losses resulting from force majeure such as natural disasters and wars;

(4) if it becomes bankrupt;

(5) if it is cancelled according to law due to its violation of Chinese laws and regulations or due to its harming the social and public interests; or

(6) if any other cause for dissolution, stipulated in the articles of association of the foreign-funded enterprise, has occurred.

In case of circumstances of (2), (3) or (4) of the preceding paragraph, the foreign-funded enterprise shall, on its own initiative, submit an application for termination to the examining and approving authority for approval. The date of approval after verification by the examining and approving authority shall be the date of termination of the enterprise.

Article 73 In case of termination under (1), (2), (3) or (6) of Article 72 of these Rules, the foreign-funded enterprise shall, within 15 days from the date of termination, make a public announcement and notify the creditors of the termination and, within 15 day from the date of such announcement, put forward liquidation procedures, principles and candidates for the liquidation committee, submit them to the examining and approving authority for verification and approval and, upon such approval, carry out the liquidation.

Article 74 The liquidation committee shall be composed of the legal representative of the foreign-funded enterprise, representative of creditors and representatives from the competent authorities concerned, and Chinese certified public accountants and lawyers shall also be engaged to participating in the liquidation.

Article 75 The liquidation committee shall execute the following functions and powers:

(1) to convene meetings of creditors;

(2) to take over and liquidate the property of the enterprise, and to prepare the statement of assets and liabilities and inventory of the property;

(3) to propose a basis for the valuation and computation of the property of the enterprise;

(4) to work out a liquidation plan;　　

(5) to recover and discharge debts;

(6) to recover payments payable but not yet paid by shareholders;

(7) to distribute the residual property;

(8) to institute and respond to actions on behalf of the enterprise.

Article 76 The foreign investor may not remit or carry the enterprise's money out of the territory of China, nor dispose of the enterprise's property privately, until the liquidation of the foreign-funded enterprise is gone through.

The net assets and residual property of a foreign-funded enterprise, after the liquidation is gone through, shall be treated as profit and subject to income tax in accordance with Chinese tax law.

Article 77 When the liquidation is completed, the foreign-funded enterprise shall go through the procedures for cancellation of registration with and hand in its business license for cancellation to the administrative department for industry and commerce.

Article 78 Chinese enterprises and other economic organizations shall, under equal conditions, have the right of preemption to assets to be disposed of during the liquidation of any foreign-funded enterprise.

Article 79 In case of termination of a foreign-funded enterprise under (4) of Article 72 of these Rules, the liquidation shall be conducted by reference to Chinese laws and regulations.

In case of termination of a foreign-funded enterprise under (5) of Article 72 of these Rules, the liquidation shall be conducted in accordance with the relevant Chinese provisions.