Law
of the People's Republic of China on Individual Proprietorship Enterprises
NPC.gov.cn
(Adopted at the 11th Meeting of the
Standing Committee of the Ninth National People's Congress on August 30, 1999
and promulgated by Order No. 20 of the President of the People’s Republic of
China on August 30, 1999)
Contents
Chapter I
General Provisions
Chapter II
Establishment of Individual Proprietorship Enterprises
Chapter III
Investors and Business Management of Individual Proprietorship Enterprises
Chapter IV Dissolution and
Liquidation of Individual Proprietorship Enterprises
Chapter V Legal
Responsibilities
Chapter VI
Supplementary Provisions
Chapter
I General
Provisions
Article 1 This
Law is enacted in accordance with the Constitution with a view to regulating
activities of individual proprietorship enterprises, protecting the legitimate
rights and interests of investors and creditors of individual proprietorship
enterprises, maintaining the socio-economic order and promoting the development
of the socialist market economy in China.
Article 2 The
individual proprietorship enterprise referred to by this Law means a business
entity which, in accordance with this Law, is established within China and
invested in by one natural person and the property of which is personally owned
by the investor who shall assume unlimited liabilities for the debts of the
enterprise with his own property.
Article 3 The
domicile of an individual proprietorship enterprise shall be the place where
its major business office is located.
Article 4 Individual
proprietorship enterprises must abide by law and administrative regulations in
their business operations, comply with the principle of honest and good-faith,
and may not harm public interests.
Individual
proprietorship enterprises shall fulfill the obligation of tax payment
according to law.
Article 5 The
State shall protect the property and other legitimate rights and interests of
individual proprietorship enterprises according to law.
Article 6
Individual proprietorship enterprises shall employ personnel according to law.
The legitimate rights and interests of the employees of individual
proprietorship enterprises shall be protected by law.
Employees
of individual proprietorship enterprises shall establish their trade unions
according to law which shall display their activities according to law.
Article 7 The
members of the Chinese Communist Party among the employees of individual
proprietorship enterprises shall conduct their activities in accordance with
the Constitution of the Chinese Communist Party.
Chapter
II Establishment
of Individual Proprietorship Enterprises
Article
8 In establishing an individual proprietorship
enterprise, the following requirements shall met:
(1)
the investor being one natural person;
(2)
having a legal enterprise name;
(3)
having a capital to contributed by the investor;
(4)
having a fix place for its production and business
operation with necessary conditions therefor; and
(5)
having necessary personnel.
Article 9 In
applying for the establishment of an individual proprietorship enterprise, the
investor or his entrusted agent shall submit to the registration authority of
the locality where the individual proprietorship enterprise is to be situated
such documents as a formal application for the establishment of the individual
proprietorship enterprise, a document certifying the investor's status and a
document permitting the use of production and business operation. Where the
application for the establishment of an individual proprietorship enterprise is
entrusted to an agent, the agent shall produce the power of attorney issued by
the investor and a document certifying his legitimacy as an agent.
Individual
proprietorship enterprises may not engage in any business prohibited by law or
administrative regulations. For the establishment of an individual
proprietorship enterprise the business of which is subject to approval by a
competent authority according to law or administrative regulations, the
document of approval issued by the competent authority shall be submitted when
applying for the establishment.
Article 10 The
application for the establishment of an individual proprietorship enterprise
shall specify the following particulars:
(1)
the name and domicile of the individual proprietorship
enterprise;
(2)
the name and domicile of the investor;
(3)
the amount of capital to be contributed by the
investor and the mode of capital contributor; and
(4)
the scope of business of the individual proprietorship
enterprise.
Article 11 The
name of an individual proprietorship enterprise shall be consistent with the
form of its liabilities and the business it will undertake.
Article 12 The
registration authority shall, within 15 days counted from the date of receiving
a written application for the establishment of an individual proprietorship
enterprise, permits the registration where the requirements defined by this Law
are met and grant to the applicant a business license or shall deny the
registration where the requirements defined by this Law are not met and give
the applicant a written reply to state the reasons therefor.
Article 13 The
date of issuance of the business licence to an
individual proprietorship enterprise shall be the date of its establishment.
The
investor of an individual proprietorship enterprise may not conduct any
business under the name of the enterprise before obtaining the business license
for the enterprise.
Article 14
Where an individual proprietorship enterprise plans to establish a branch, its
investor or his entrusted agent shall apply for the registration to a competent
registration authority in the locality where the branch is to be established,
and shall obtain a business licence for the branch.
After
the establishment of a branch is approved and registered, its registration
shall be reported for the record to the original registration authority of the
individual proprietorship enterprise to which the branch is affiliated.
The
civil liabilities of a branch shall be assumed by the individual proprietorship
enterprise that has established it.
Article 15
Where a registered matter of an individual proprietorship enterprise is to be
changed in the period of its continued existence, a registration change shall
be applied for to the relevant registration authority according to law within
15 days counted from the date of decision on the change.
Chapter
III Investors
and Business Management of Individual Proprietorship Enterprises
Article 16 Whoever
is prohibited by law or administrative regulations from operating profit-making
business, may not apply for the establishment of an individual proprietorship
enterprise in the capacity of an investor.
Article 17 The
investor of an individual proprietorship enterprise enjoys the ownership of the
property of the enterprise according to law, and the relevant rights may be
transferred or inherited according to law.
Article 18 The
investor of an individual proprietorship enterprise who, while applying for
registering the establishment of the enterprise, clearly indicates that the
common property of his family is the capital contributed shall assume unlimited
liabilities for the debts of the enterprise with the common property of his
family according to law.
Article 19 The
investor of an individual proprietorship may manage the enterprise business by
himself, or may commission or employ any other person with civil capacity to
take charge of the management of the enterprise business.
Where
the investor of an individual proprietorship enterprise commissions or employs
another person to manage the enterprise business, he shall conclude with the
person commissioned or employed a written contract to specify the business
commissioned and the scope of authorization.
The
person commissioned or employed shall fulfill the obligation of honesty,
good-faith and diligence, and shall manage the business of the relevant
individual proprietorship enterprise in accordance with the contract signed
with its investor.
The
restriction put by the investor of an individual proprietorship enterprise on
the power of the person commissioned or employed may not oppose a bona fide
party.
Article 20 Any
person commissioned or employed by the investor of an individual proprietorship
enterprise to manage the enterprise business may not commit any of the
following acts:
(1)
to seek or take bribes by taking advantage of his
position;
(2)
to embezzle enterprise property by taking advantage of
his position or work;
(3)
to misappropriate enterprise funds for personal use,
or to lend such funds to other persons;
(4)
to open a bank account for depositing enterprise funds
in his own name or in any others name without authorization;
(5)
to provide guarantee with enterprise property without
authorization;
(6)
to undertake a business that competes with the
enterprise without consent of the investor;
(7)
to conclude a contract or to trade with the enterprise
itself without consent of the investor;
(8)
to transfer the trademark or other intellectual
property rights of the enterprise to others for their use without consent of
the investor;
(9)
to divulge business secret of the enterprise; or
(10)
any other acts prohibited by law or administrative
regulations.
Article 21 Individual
proprietorship enterprises shall establish their account books and practice
accounting according to law.
Article 22 Where
individual proprietorship enterprises employ workers, they shall conclude labour contracts with the workers according to law, ensure
their labour safety, and pay them salaries on time
and in full.
Article 23
Individual proprietorship enterprises shall, in accordance with relevant
regulations of the State, participate in social insurance programs and pay
social insurance premiums for their employees.
Article 24 Individual
proprietorship enterprises may apply for loans and obtain the right to use land
according to law and enjoy other rights defined by law and administrative
regulations.
Article 25 No
institutions or individuals may force individual proprietorship enterprises to
provide financial resources, material resources or manpower by any means in
violation of law or administrative regulations. Individual proprietorship
enterprises have the right to reject any acts meant to force them to provide
financial resources, material resources or manpower in violation of law.
Chapter
IV Dissolution
and Liquidation of Individual Proprietorship Enterprises
Article 26 An
individual proprietorship enterprise shall be dissolved in any of the following
circumstances:
(1)
the decision of the investor to dissolve the
enterprise;
(2)
the death of the investor or the announcement of his
death without an heir or with the decision of his heir to waive the right to
inheritance;
(3)
revocation of its business license according to law;
or
(4)
other circumstances as defined by law or
administrative regulations.
Article 27 When
an individual proprietorship enterprise is dissolved, its liquidation shall be
done either by the investor himself or by a liquidator designated by a People's
Court at the request of its creditors.
Where
the liquidation is done by he investor himself, he
shall notify the creditors in writing 15 days before the liquidation. If it is
impossible to notify the creditors, he shall make a public announcement. The
creditors shall declare their claims within 30 days counted from the date of receiving
the notification, or within 60 days counted from the date of the public
announcement in the absence of a notification.
Article 28
After an individual proprietorship enterprise is dissolved,
its original investor shall still be liable to pay the debts of the enterprise
incurred during the period of its continued existence. However, where creditors
do not claim the refund by the debtor within a period of five years, such
liabilities shall vanish.
Article 29
After the dissolution of an individual proprietorship enterprise, its property
shall be liquidated in the following order:
(1)
the salaries and the social insurance premiums owed to
its employees;
(2)
the taxes due; and
(3)
other debts.
Article 30 In
the period of its liquidation, the individual proprietorship enterprise may not
operate any business irrelevant to the purpose of liquidation. Before its
property is liquidated in accordance with the preceding Article, the investor
may not transfer or hide his property.
Article 31
Where the property of an individual proprietorship enterprise is insufficient
for the liquidation, the investor shall pay off the debts with his other
property.
Article 32 After
the liquidation of an individual proprietorship enterprise is ended, the investor or the liquidator designated by a
People's Court shall work out a liquidation report and have its registration
cancelled by registration authority within a period of 15 days.
Chapter
V Legal
Responsibilities
Article 33 In
case of a violation of the provisions of this Law by submitting false documents
or taking other fraudulent means to obtain the registration of an individual
proprietorship enterprise, due correction shall be ordered, and a fine of not
more than 5,000 yuan shall be imposed; and the
business license shall be concurrently revoked if the case is serious.
Article 34 In
case of a violation of the provision of this Law by giving a name inconsistent
with the name registered at the competent registration authority, a correction
shall be ordered within a prescribed period of time,
and a fine of not more than 2,000 yuan shall be
imposed.
Article 35 In
case of altering , leasing or transferring the
business of an individual proprietorship enterprise, correction shall be
ordered, the illegal gains shall be confiscated, and a fine of not more than
3,000 yuan shall be imposed; and the business license
shall be revoked if the case is serious.
In
case of forgery of a business license, the suspension of the business operation
shall be ordered, the illegal gains shall be confiscated, and a fine of not
more than 5,000 yuan shall be imposed
; and criminal responsibility shall be investigated according to law if
the case constitutes a crime.
Article 36 Where
an individual proprietorship enterprise fails to start its business operation
over six months following its establishment without justification, or suspends
its business operation by itself over six months after its opening, its
business license shall be revoked.
Article 37 In
case of a violation of the provisions of this Law by operating business in the
name of an individual proprietorship enterprise without obtaining a business
license, suspension of the business operation shall be ordered and a fine of
not more than 3.000 yuan shall be imposed.
In
case of failure to apply for a registration change about the change in
registered matters of an individual proprietorship enterprise, due registration
change within a prescribed period of time shall be ordered; in case of failure
to apply for the registration change within the prescribed period of time, a
fine of not more than 2,000 yuan shall be imposed.
Article 38 Where
any person commissioned or employed by an investor to manage his individual
proprietorship enterprise breaks the contract concluded by the two parties
causing thus damage to the investor, the person shall assume the civil
liability for damage.
Article 39 Any
individual proprietorship enterprise that, in violation of the provisions of
this Law, infringes upon legitimate rights and interests of its employees,
fails to ensure the labour safety for its employees
or fails to pay their social insurance premiums shall be punished in accordance
with the law or the relevant administrative regulations, and the liability
therefor shall be investigated.
Article 40 When
a person commissioned or employed by an investor violates the provisions of
Article 20 of this Law, if the case is embezzlement of enterprises property or
infringement of enterprise property rights or interests, the return of the
property embezzled shall be ordered; if the case involves illegal gains, the
illegal gains shall be confiscated; and if the case constitutes a crime,
criminal responsibility shall be investigated according to law.
Article 41 Any
violation of law or administrative regulations by individual proprietorship
enterprises to provide financial resources, material resources or manpower
shall be punished in accordance with the relevant law or administrative
regulations, and the liability of the persons responsible therefor shall be
investigated.
Article 42 Where
an individual proprietorship enterprise and its investor hide or transfer
property before or during the period of liquidation to evade liabilities, the
property hidden or transferred shall be retrieved according to law, and
punishment shall be given in accordance with the relevant regulations; if the
case constitutes a crime, criminal responsibility shall be investigated
according to law.
Article 43 When
an investor violates the provisions of this Law and thus holds civil liability
for damage and has to pay fines or forfeits as well, if his property is
insufficient to cover the payment, or if he has been sentenced to the
confiscation of his property, he shall meet the civil liability for damage
first.
Article 44
Where a registration authority permits the registration of an individual
proprietorship enterprise that does not meet the registration requirements
defined by this Law, or denies the registration of an individual proprietorship
enterprise that meets the registration requirements defined by this Law, the
person directly responsible therefor shall be given administrative punishment
according to law; if the case constitutes a crime, criminal responsibility
shall be investigated according to law.
Article 45
Where the person in charge of a department superior to a registration authority
forcibly orders the interested registration authority to permit the
registration of an individual proprietorship enterprise that does not meet the
registration requirements defined by this Law, or forcibly orders it to deny
the registration of an individual proprietorship that meets the registration
requirements defined by this Law, or covers up its unlawful registration acts,
the person directly responsible therefor shall be given administrative
punishment according to law; and if the case constitutes a crime, criminal
responsibility shall be investigated according to law.
Article 46 Where
a registration authority denies the registration of an application that meets
the legal requirements or fails to give a reply beyond the legally prescribed
time limit, the party concerned may apply for an administrative reconsideration
or file an administrative lawsuit in accordance with the law.
Chapter
VI Supplementary
Provisions
Article 47 This
Law shall not apply to the foreign-capital enterprises in China.
Article 48 This
Law shall go into effect as of January 1, 2000.