Q1
Are there any differences between foreign-funded enterprises and domestic enterprises regarding the statutory qualifications of GM, directors, supervisors and senior officers?
A: No. Foreign investors enjoy national treatment in terms of foreign investments. In addition, with the application of the Foreign Investment Law, the relevant regulations of foreign-funded enterprises are basically consistent with those of domestic enterprises.
Q2
Are there any restrictions on the nationality of the company’s GM, directors, supervisors and senior managers?
A: No, China does not have the nationality restriction on GM, board members supervisors or senior managers.
Q3
How to appoint a company’s legal representative?
A: The legal representative of a company shall be the chairman of its board of directors, its executive director or its manager in accordance with the articles of association of the company and shall be registered.
Q4
What are the differences between a company’s legal representative and the chairman of a company’s board of directors/executive director?
A: Legal representative refers to the person who exercises functions and powers on behalf of the company in accordance with the provisions of laws or articles of association, and acting as the primary person to represent the company externally, such as signing documentation and taking part in legal proceedings on behalf of the company. Also, the legal representative’s full name shall be recorded on the Business Registration Certificate of the company.
Apart from legal representative, the chairman or executive director's functions and powers are limited to those listed in the articles of association, which mainly include internal functions and management of the company, such as convening meetings.
More importantly, if the company is included in the list of dishonest persons subject to execution, the legal representative of the company will also be imposed credit penalties and restricted from extravagant spending.
Q5
Does the company have to set up a board of directors?
A: It depends. Normally, the board of directors of a limited liability company shall comprise 3 to 13 members. However, limited liability companies with a smaller number of shareholders or those of a smaller scale may have an executive director without setting up the board of directors. The executive director may concurrently hold the post of a company manager.
Q6
What are the functions and powers of the board of directors?
A: The board of directors shall be responsible to the board of shareholders and shall exercise the following functions and powers regarding formulating specific plans for major decisions of the company, hiring and firing senior officers:
1.convene meetings of the board of shareholders and report to the board of shareholders on its work;
2.execute resolutions of the board of shareholders;
3.determine the company's operational plans and investment plans;
4.formulate the company's annual budgets and final accounts;
5.formulate the company's profit distribution plans and loss recovery plans;
6.formulate the company's plans on the increase or reduction of its registered capital and on the issuance of corporate bonds;
7.formulate the company's plans on the combination, division, dissolution or transformation of the company;
8.make decisions on the establishment of the company's internal management departments;
9.make decisions on the appointment or dismissal of the company's manager and his remuneration, and, according to the nomination by the manager, make decisions on the appointment or dismissal of any deputy manager and financial principal and their remunerations;
10.develop the company's basic management system; and
11.any other function or power specified in the articles of association.
Q7
What are the functions and powers of GM?
A: A limited liability company may have a general manager, who shall be appointed or dismissed by its board of directors. Generally speaking, the manager is responsible for managing the overall operations of the company, such as implementing the company's resolutions, formulating specific rules and regulations, etc. According to the company law, the manager shall be responsible to the board of directors and shall exercise the following functions and powers:
1. oversee the production and business operations of the company and organize the implementation of the resolutions of the board of directors;
2. organize the implementation of the company's annual operational plans and investment plans;
3. draw up plans on the establishment of the company's internal management departments;
4. draw up the company's basic management system;
5. formulate the company's specific rules and regulations;
6. propose the appointment or dismissal of the company's any deputy manager and financial principal;
7. decide on the appointment or dismissal of executive personnel other than those whose appointment or dismissal is to be decided by the board of directors; and
8. any other function or power conferred on the manager by the board of directors.
Where the functions and powers of the manager are otherwise provided in the articles of association, the articles of association shall prevail.
The manager shall attend meetings of the board of directors as a non-voting attendee.
Q8
Does the company have to set up a board of supervisors？
A: It depends. A limited liability company shall have the board of supervisors composed of no less than 3 members. Limited liability companies with a smaller number of shareholders or those of a smaller scale may have one to two supervisors without setting up the board of supervisors.
Q9
What are the functions and powers of supervisor(s)?
A: The main function of supervisor(s) is to supervise the work of directors and senior officers. According to the Company Law, the board of supervisors or, where there is no board of supervisors, the supervisor(s) of a company shall exercise the following functions and powers:
1. inspect the financial affairs of the company;
2. supervise performance of the directors and senior officers of their respective company duties and propose the removal of any director or senior officer who violates any law, administrative regulation, the articles of association or any resolution of the board of shareholders;
3. require any director or senior officer to take corrective action where his actions damage the interests of the company;
4. propose the holding of interim meetings of the board of shareholders and convene and preside over meetings of the board of shareholders where the board of directors does not exercise its duties in this regard as prescribed in the Law;
5. put forward proposals at meetings of the board of shareholders;
6. initiate lawsuits against a director or senior officer in accordance with Article 151 of the Law; and
7. any other function or power specified in the articles of association.
Q10
Can financial personnel act as supervisors? How about the normal financial personnel?
A: The Company Law clearly stipulates that the directors or senior officers of the company shall not concurrently serve as supervisors. If the financial personnel acting as the senior executive responsible for managing the financial actions of a company, he/she is forbidden to hold the position of a supervisor.
We recommend normal financial personnel not serve as supervisors neither. Since one of the functions and powers of the supervisors is: inspecting the financial affairs of the company, if the supervisor of a company is a normal financial personnel, he/she shall inspect his/her own work(financial affairs) which may cause risks to the company.
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