Establishment and Restructuring of the Company

Author: Chief Editor: Chen Gong et al.
Publisher:
Publish Date: 2000-02-01
Features: Preface: Since the second edition of this series of textbooks was published, two years have passed. During these two years, the most significant changes in China's securities market have primarily been reflected in system construction and development concepts. The first sign is the promulgation and implementation of the "Securities Law of the People's Republic of China," which took effect on July 1, 1999, and was passed by the sixth session of the Standing Committee of the Ninth National People's Congress on December 29, 1998. The promulgation and implementation of the "Securities Law" mark the maturation of the institutional framework and legal system of China's securities market, indicating that the market is beginning to move toward standardization and represents a milestone in the history of China's securities market development. The second sign is the series of substantive measures introduced since mid-May 1999 to promote the development of the securities market. These measures demonstrate our firm confidence and scientific approach to developing the securities market. These substantive measures mainly include: reforms in the stock issuance process; allowing "" to enter the secondary market under certain conditions; the introduction of interest tax; allowing insurance funds to indirectly enter the stock market; converting qualified corporate debts into equity; regulations on the transfer and allotment of state-owned shares of listed companies; allowing securities companies to enter the interbank lending market and the repurchase market; and the ongoing research on financing methods for securities companies. A sound institutional background and a favorable policy environment have provided China's securities market with unprecedented development opportunities. As the securities market continues to develop, cultivating securities professionals who meet international standards has become particularly important and urgent. The first national securities practitioners (investment consultants) qualification examination, held in April 1999, is a significant initiative in cultivating securities professionals who meet international standards, and its significance is far-reaching. The revision principles for the third edition of this series of textbooks are as follows: (1) Adhere to the basic spirit of the "Securities Law" as the guiding principle, removing content inconsistent with the basic spirit of the "Securities Law." For some basic concepts that the "Securities Law" does not regulate, conventional terms and definitions have been adopted, and for some controversial theoretical issues, our views have been expressed; (2) Increase exam-oriented content, such as adding some case analysis questions and calculation problems, and removing some highly complex and difficult-to-understand content, such as part of the fifth volume; (3) Strive to reflect the provisions and spirit of a series of recent administrative regulations and some interpretive documents to enhance the targetedness and practical value of this series of textbooks. The third edition of this series consists of nine volumes, with the addition of the ninth volume, "Review Guide and Exercises," based on the second volume. The basic structure of the other volumes remains largely the same as the second edition. In terms of content, the second volume, "Fundamentals of the Securities Market," the fifth volume, "Securities Investment Analysis," the sixth volume, "Principles and Cases of Corporate Mergers and Acquisitions," and the seventh volume, "Overseas Securities Markets," have undergone significant revisions. The eighth volume, "Comprehensive Summary of Securities Regulations in China," includes important laws and regulations related to the securities market issued in the recent two years, including the "Securities Law," and removes some regulations and interpretive documents less relevant to the securities market. The third, fourth, and fifth volumes have undergone minor revisions. Like the second edition, some content in the third edition may not fall within the scope of the qualification examination, but from the perspective of business training for securities practitioners, it may still be necessary to retain it. Content not covered by the qualification examination is still marked with asterisks (). The revision of the third edition of this series of textbooks is still led by Professor Wu Xiaogou, Vice Dean of the School of Finance and Public Finance at Renmin University of China, Director of the Institute of Finance and Securities at Renmin University of China (FSL), and Doctoral Supervisor in the field of securities research. Some experts and professionals from the Institute of Finance and Securities at Renmin University of China (FSL) participated in the revision. They are: Wang Yunsheng, Wang Mingfu, Zhou Xinchang, Zhao Xiniannian, Dong Ansheng, Ye Lin, Mei Jun, Fang Fang, Xia Youli, Wu Jiang, Li Xiangke, Ji Dongsheng, Long Yonghong, Feng Wei, Li Yongsen, Fu Min, Cui Yong, Yuan Zhaicai, Fu Yijiang, Wei Jianhua, Zha Song, Guo Lu, Liu Weijie, Xia Yuan, Zhao Liang, Li Xuejun, Ying Zhanyu, Chen Shan, Xu Rong, Yang Zehu, etc. Wu Jiang played a significant role in coordinating the work. Special thanks are extended to all of them. ------ The first and second editions of this series of textbooks were published by Renmin University of China Press. Starting from the third edition (2000 edition), this series of textbooks has been exclusively published by China Financial and Economic Publishing House. During the publication process of the third edition of this series of textbooks, we received strong support and assistance from Professor Yang Tiansci, President and Chief Editor of China Financial and Economic Publishing House, and Associate Chief Editor Zhang Licheng. Special thanks are extended to them. Due to the extensive nature of the revision work and the difficulty in fully aligning individual understandings of China's securities market, the third edition of this series of textbooks will undoubtedly still have imperfections. If readers have any suggestions or comments on the third edition of the textbooks, they can be sent to us at (8610) 62514363. Institute of Finance and Securities at Renmin University of China (FSL) Renmin University of China Securities Industry Training Center (SS) December 20, 1999
Excerpt: Article 54, Paragraph 1 of the law states: "A company is a legal entity." This shows that what Western countries refer to as a company is a social legal entity established in accordance with legal procedures and aimed at profit. The "Company Law of the People's Republic of China" (hereinafter referred to as the "Company Law"), passed by the fifth session of the Standing Committee of the Eighth National People's Congress on December 29, 1993, Article 2 stipulates: "The term 'company' referred to in this Law refers to limited liability companies and joint-stock companies established in China in accordance with this Law." Article 3, Paragraph 1 states: "Limited liability companies and joint-stock companies are corporate legal entities." Although these two articles do not directly stipulate that companies must be profit-oriented, Article 5 of the law states: "Under the macro-control of the state, companies autonomously organize production and operation according to market demand to improve economic efficiency, labor productivity, and achieve asset preservation and appreciation." The term "asset preservation and appreciation" in this article reflects the profit-oriented purpose of companies. It can be seen that the entire content of the Company Law is aimed at profit-oriented companies.
II. Characteristics of a Company According to the Company Law and the summary of China's legal academia, the legal characteristics of a company are reflected in the following aspects:
1. A company is an economic entity aimed at profit. Being aimed at profit reflects the economic characteristics of a company. A company is an economic organization that organizes its production and operations for profit, and is a form of enterprise with general attributes of enterprises. From an economic perspective, an enterprise, as a basic economic unit of society, refers to an organization that combines human and material resources for profit-oriented production or service operations. The organizational forms of enterprises can be divided into sole proprietorship, partnership, and company based on investment methods and liability-bearing methods. As a specific organizational form of enterprises, a company has the general characteristics of enterprises, namely engaging in profit-oriented business activities. Profitability is the starting point and destination for establishing enterprises, and it is also the basic attribute of companies. The profitability of a company not only refers to the increase in the company's property and profits through operations, but also refers to the legal distribution of the benefits obtained by shareholders. If there are profit-making activities in reality, but the surplus is not distributed to its shareholders, it is not considered a company.
2. A company must be a legal entity. As a profit-oriented economic entity, a company possesses the general attributes of enterprises. However, a company is not the only organizational form of enterprises, and not all enterprises are companies. As a special organizational form of enterprises, a company has characteristics that distinguish it from enterprises organized in other forms, namely that a company has legal status. A legal entity is an organization that has civil rights capacity and civil action capacity, and enjoys civil rights and assumes civil obligations in accordance with law. Article 37 of the "General Principles of the Civil Law of the People's Republic of China" (hereinafter referred to as the "Civil Law General Principles") stipulates: "A legal entity shall meet the following conditions: (1) established in accordance with law; (2) with necessary property or funds; (3) with its own name, organizational structure, and location; (4) capable of independently bearing civil liabilities." As a type of legal entity, a company should also meet the above conditions.
(1) A company must be established in accordance with law. A legal entity is a social organization that is granted legal personality by law, so it cannot be established without legal provisions. The establishment of a legal entity in accordance with law first refers to the legality of the establishment process, that is, a legal entity must be established in accordance with the procedures stipulated by law; second, establishing in accordance with law means that the legal entity must be a legal organization, and its purpose and objectives, organizational structure, business scope, and business methods must all be legal. Article 8 of China's Company Law stipulates: "The establishment of limited liability companies and joint-stock companies must meet the conditions stipulated by this Law." This provision reveals the principle that companies must be established in accordance with law.
(2) A company has independent property. The independence of a company's property is the foundation and prerequisite for the independent existence of a company, and it is also the material guarantee for a company to independently bear property obligations and responsibilities. The property of a company is mainly composed of the capital contributed by shareholders. Once the capital of shareholders is invested in the company, it becomes the property of the company, and the company acquires ownership. Article 4, Paragraph 2 of China's Company Law stipulates: "A company enjoys the full legal personality property rights formed by the investment of shareholders, and enjoys civil rights and assumes civil liabilities in accordance with law."
(3) A company must have its own name, organizational structure, or location. This is the organizational characteristic of a company. A company needs to have its own name, which is a mark for distinguishing between companies and also helps to indicate the nature of the company. The organizational structure of a company includes its management structure: The writing division of this book is as follows: Ma Qiang: volume, chapters 2 and 3; Zha Song: Volume 2, chapters 4, 5, 6, 7, and 8; Volume 3, chapters 9, 10, 11, and 12. According to the requirements of the "Outline for the Qualification Training and Examination of Securities Industry Practitioners (Trial)" issued by the China Securities Regulatory Commission on July 4, 1997, we made targeted modifications to this book to make it fully adapted to the requirements of the qualification examination. Ye Lin made unified revisions to the entire book. "Series Starting Point" Third Edition Revision Group 1999 December