Regulations on Joint Stock Limited Company Limited of Shenzhen Special Economic Zone

(Adopted at the Fifth Meeting of the First People' s Congress of Shenzhen Municipality on April 26, 1993)

Chapter I General Provisions

Article 1 These regulations are hereby formulated to establish the legal status of company limited of Shenzhen Special Economic Zone (hereinafter referred to as "Special Zone" ), standardize the organization and activities of company limited, protect the legal rights and interests of the shareholders and creditors, maintain the order of the socialist market economy and promote the economic development of the Special Zone.

Article 2 The term "joint stock limited company" mentioned in these Regulations refers to an enterprise legal person, which is incorporated within the territory of the Special Zone and whose total capital is divided into equal shares. The shareholders shall assume liability towards the company to the extent of their respective shareholdings, and the company shall be liable for its debts to the extent of all its assets.

Article 3 These Regulations applies to the joint stock limited company incorporated within the territory of the Special Zone.

These Regulations applies to all kinds of enterprise legal persons or other economic organizations incorporated within the territory of the Special Zone and have converted into joint stock limited companies.

Article 4 A joint stock limited company (hereinafter refers as "company" ) is authorized, registered and incorporated in accordance with law through the Industrial and Commercial Administrative Department of Shenzhen Municipality (hereinafter refers as "Ristration Authority" ).

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Article 5 A company must indicate the words "гиjoint stockгй limited company" in its name.

In case a company which violates the previous regulation by not indicating the words "(joint stock) limited company" in its name, the enterprise which has not been authorized or registered in accordance with the law, or company which indicates words "joint stock limited company" or "joint stock company" without authorization shall be ordered to make a rectification and be proclaimed by the Registration Authority. As to those refuse performing, punishment will be given by the Ristration Authority.

Article 6 A company' s domicile shall be the place where its main administrative organization is located.

Article 7 Articles of association must be formulated when a company is incorporated.

Article 8 A company must abide by the law and regulations.
The legal rights and interests of the company shall be protected by the law.

Article 9 Companies shall not be the unlimited liability shareholder of other economic organizations or partner of partnership organizations.

In case a company, other than an investment company or for the needs of holding, invests in other enterprise legal persons, the aggregated amount of such investments shall not exceed 50% of its net assets.
The legal representative of the company and others held directly responsible shall be punished respectively with a fine of not less than RMB 20,000 yuan but not more than RMB 70,000 yuan by the Ristration Authority if they violate Article 1 or Article 2 of these Regulations. If harms have been done to company' s interest, the corporation representative and others held directly responsible shall assume liability for compensation.

Article 10 A company fund shall not be lent to shareholders or another person with an exception to the loan companies or the operating needs in accordance with the related regulations on finance.

In case a company violates the previous regulation, the legal representative of the company and other persons held responsible shall be punished separately with a fine of not less than RMB 50,000 yuan but not more than RMB 100,000 yuan made by the Registration Authority. If the case constitute harms to the company' s interest, the legal representative of the company and other persons held responsible shall assume liability for compensation.

Article 11 Companies shall not provide guarantee to shareholder of the company or another person with an exception of another person specified by the Article of Association or approved by the shareholder meeting.

In case a company violates the previous article, the legal representative of the company and others held responsible shall be punished separately with a fine of not less than RMB 100,000 yuan but not more than RMB 150,000 yuan. In case harms have been done to the company' s interest, the legal representative of the company and others held responsible shall assume liability for compensation.

Article 12 Principle of good faith, trueness, legality shall be abided by the accounting firm, law office, assets valuation organization and other relevant organizations and their certified practicing persons when they are applying for registration, offering shares and bonds on behalf of the company, and during the process thereafter of publicizing the documents to the general public.

Where the organizations and persons aforesaid constitute malfeasance or collaborate with the company in falsifications, they shall be punished by their competent authority of operation in accordance with the law. In case infringement has been done to other persons, they shall assume the joint and several liabilities for compensation with the company. If the case constitutes a crime, criminal liabilities of the persons held directly responsible shall be investigated in accordance with the law.

Article 13 An administrative lawsuit to the government of Shenzhen Municipality (hereinafter referred to as "the Municipal Government" ) or a countersuit to the People' s Court can be instituted by a company and its related personnel, who are not subordinated to the specific administrative acts in the implement of these Regulations of the Registration Authority, the competent authority of Shenzhen Securities (hereinafter referred to as "the Competent Authority of Securities" ) or other related competent authorities and their personnel.

Article 13 Where the Registration Authority, Competent Authority of Securities or other related competent authorities and their staff and workers violate these Regulations, irregulate for favoritism, falsify, the administrative liabilities of the relevant persons held responsible shall be investigated in accordance with the law. In case infringement has been done, they shall assume the civil liabilities. If the case constitutes a crime, criminal liabilities of the persons held directly responsible shall be investigated in accordance with the law.

Article 14 Where the state-owned enterprises restructed to form companies, the rights and interests of the state-owned shareholders shall be enjoyed by the management departments of state-owned assets or the organizations authorized by them.

Chapter II Incorporation

Article 15 A company may be incorporated by means of sponsorship or share offer.
Where company is incorporated by means of sponsorship, the sponsors shall subscribe all shares issued by the company.

where the company is incorporated by means of share offer, the sponsors shall subscribe for more than 35% of the total shares issued by the company, and the shares subscribed by the staff and workers of the company shall not exceed 10% of the shares offered to the general public.

Article 16 To incorporate a company, there shall be five or more sponsors, of which one shall have his domicile within the territory of the Special Zone.

Sponsors limits to the legal persons except the ones stipulated by the laws and regulations of the state.

Where a c company is incorporated by means of sponsorship with authorization of other economic organizations invested by the state-owned enterprise or government, the number of sponsors shall no be restricted by the Article 1.
Article 17 Where a company is incorporated by means of sponsorship, the sponsors shall apply to the Registration Authority for registration of incorporation of the company.

Where a company is incorporated by means of share offer, the sponsors shall apply to the Competent Authority of Securities for share offer. Only when an approval is given, the company can offer shares. After the share offer ends, the board of directors of the company shall apply to the Ristration Authority for registration of incorporation of the company.

Where a company violates the provisions of the preceding paragraph in making share offer without authorization, it shall be ordered to stop by the Competent Authority of Securities; if the share offer has already been commenced, the issuing company shall refund the subscribers the money already paid for their subscriptions plus bank deposit interest calculated for the same period of time. Its illegal gains shall confiscated by the Registration Authority, and a punishment with a fine not less than RMB 150,000 yuan but not more than RMB 200,000 yuan shall be made to the persons held directly responsible. If the case constitutes a crime, criminal liabilities of the persons held directly responsible shall be investigated.

Article 18 An agreement of incorporation of a company shall be made by the sponsors, specifying the rights and obligations of the sponsors during incorporation. After the agreement is made, one of the sponsors may be jointly entrusted to handle the relevant affairs of the incorporation of the company.

Article 19 The registered capital of the company shall be the total amount of the paid-up contributions of all its shareholders as registered with the Registration Authority. Not less than RMB 1,000 yuan for a company incorporated by the means of sponsorship not less than RMB 5,000 yuan of registered capital for a company incorporated by the means of share offer

Where a company reduces its registered capital, the registered capital, after reduction, shall not be less than the minimum amount of the registered capital stipulated by these Regulations.

Article 21 The sponsors may make their capital contribution in cash, or with material objects, land-use rights, industrial property rights or non-patented technology at their appraised value.

Material objects, land-use rights, industrial property rights, non-patented technology contributed as capital shall be appraised and valued by the property assessing organization, which is approved and registered by the state.

The amount of capital contributions made by sponsors in the form of industrial property rights, non-patented technology shall not exceed 20% of the registered capital of the company.

Article 21 The articles of association of the company shall be formulated with consensus and specify the following particulars:
(1) the name and domicile of the company

(2) the tenet scope of business of the company

(3) the method of incorporation of the company

(4) Registered capital of the company, the forms of shares, the total amount of all shares, the amount of each share;

(5) Name and domicile of the sponsors
(6) Way of share subscription, the amount of subscription money, the number of the converted shares and its proportion of the total shares;

(7) Methods of assigning shares;

(8) Rights and obligations of the shareholders;

(9) the functions and powers of the shareholders' general meetings and rules of procedure;

(10) the composition of the board of directors, functions and powers, rules of procedure and terms of office of directors;

(11) the functions and powers of the legal representative of the company

(12) the composition, functions and powers and rules of procedure of the supervisory board, and terms of office of the supervisors;

(12) the methods of distributing profits;

(14) the systems of financing and accounting

(15) the amendment of the articles of association of the company

(16) the termination and liquidation of the company;
(17) the ways of notification by notice and announcement;

(18) the date of concluding the articles of association;

(19) other items which is necessary to be specified

Article 22 Where a company is incorporated by means of sponsorship, the sponsors shall subscribe for the shares issued as the stipulated by the articles of association of the company through written form, deliver all his capital contributions immediately, but the legal procedures of the transferring property rights can be handled after the cooperation of the company.

Article 23 After the elections of directors and supervisors, the sponsors shall apply to the Registration Authority for registration of incorporation of the company, and submit the following documents:

(1) the application for incorporation of a company;

(2) the articles of association;
(3) the capital verification certificate;

(4) the statement of assets assessment;

(5) the certificate for the use of the premise of the main administrative organization of the company;

(6) the compositions of the board of directors and supervisory board, names, domiciles and certificates of statuses and qualifications of their members;

ги7гй the name and domicile of the legal representative
Where a company establishes special business operation, approval is required by the governmental competent organization according to the law and regulations. Documents for approval shall also be submitted.

Article 24 Where a company is incorporated by means of share offer, the sponsors shall apply to the Competent Authority of Securities for share offer, and submit the following documents:

(1) the application for share offer;

(2) the business forecast;

(3) the certificate of sponsors' qualifications;

(4) the statement specifying share offer;

(5) the certificates issued by the bank accepting subscription money on behalf of the company or other financial institutions;

(6) the name and related agreements of the consignment-in institutions or commission institutions, where there have;

(7) other necessary documents required by the Competent Authority of Securities;

A decision on approving share offer or not shall be made by the Competent Authority of Securities within 90 days since the receipt date of application. Approval documents shall be handed to the approved authority; a written reply shall be made to the unapproved authority.

Article 25 Where one of the following circumstances occurs, the Competent Authority of Securities shall not grant approval to the application for share offer. If the approval has been granted, it shall be repealed.

(1) the application items going against law, regulations or having falsification;

(2) the due complement of changes of the application items not being done over the due time;

As to the approval being repealed according to the previous regulation, if the sponsor has not started offering shares, he shall stop offering; if the shares have been offered, the Competent Authority of Securities shall order the sponsor to return the sum of the shares and the deposit interest of the bank for the corresponding period to the subscriber.

Article 26 A prospectus on share offer shall specifying the following items;

(1) the articles of association of the company;

(2) the number of shares subscribed for by the sponsors;

(3) the issue price of share which is issued by exceeding the face value;

(4) the total number of bearer shares issued;

(5) the rights and obligations of the subscribers;

(6) the number and term of share offer and a statement to the effect that subscribers may withdraw their share subscriptions if all the shares are not taken up within the time limit.

Article 27 Where a company is incorporated by means of share offer, the sponsors shall prepare subscription forms, containing the Item1, Article24, the serial number and date of approval from the Competent Authority of Securities, the number of shares subscribed for, the amount of money contributed to, and their respective domiciles on the forms, and shall sign and seal such forms.

Article 28 Where a subscriber fails to pay subscription money for the subscription within the time limit, a call shall be made to by the sponsors. If the subscriber fails to pay within the time limit, he shall be regarded to abandon automatically the shares he subscribed. Those shares shall be offered separately or self-subscribed by the sponsors. If infringement due to the subscription payment of the subscribers has been done to the sponsors or the company, the subscribers shall assume the liabilities for compensation.

Article 29 after payment in full of the subscription money for all shares is made, an inaugural meeting shall be convened and presided over by the sponsors within 40 days thereafter.

The following functions and powers shall be exercised at an inaugural meeting:

(1) to examine the sponsors' report on the preparation for the incorporation of the company;

(2) to amend the articles of association of the company formulated by the sponsors with special resolutions;

(3) to elect the members of the board of directors;

(4) to elect the representative of shareholders among the members of supervisory board;

(5) to check and ratify the reward of the sponsors, special profits and the incorporation expenditures of the company;
(6) to check and ratify the property used by the sponsors to pay for subscription money or the appraisement of the sponsors' property rights

(7) to make special resolutions on not to incorporate a company.

Article 30 The board of directors shall, within thirty days after the inaugural meeting, submit the following documents to the Registration Authority and apply for registration of the incorporation of the company:

(1) the application of incorporation of the company;
(2) the documents approved to offer shares by the Competent Authority of Securities;

(3) the sponsors' reports approved at the inaugural meeting;

(4) the articles of association of the company;

(5) the financial audit report on the preparation of the incorporation of the company;

(6) the capital verification certificate;

(7) the statement of assets assessment;
(8) the names, domiciles, and certificates of statuses and qualifications;

(9) the name and domicile of the legal representative.
To establish a company in specified trades shall gain approval of the competent municipal authority in accordance with the law, rules and regulations, and submits the approval documents.

Article 31 The Registration Authority shall, within 30 days after receipt of an application for the incorporation of a company, make a decision whether or not to register the company. Where a company shall be registered, a company business license shall be issued to the legal representative of the company. Where a company fails to be registered, a written reply shall be made thereto.

The date of issuance of a company business license shall be the date of the incorporation of the company.
Once a company is incorporated, an announcement shall be made.
Article 32 Where a company that has not been approved or registered assumes the name of company to start business, it shall be ordered to suspend business by the Registration Authority, and its illegal earning shall be confiscated. A fine of not less than RMB 50,000 yuan but not more than RMB 100,000 yuan shall be imposed on the doer. If damage has been done to others, the doer assumes the liability of compensation.

A company shall be ordered to modify by the Registration Authority in case the applicant violates the provisions of these Regulations and offer false information in the application for registration. In case the company has gained the business license and refuses to modify, its business license shall be revoked by the Registration Authority and a separate fine of not less than RMB 50,000 yuan but not more than RMB 100,000 yuan shall be imposed on the personnel hold direct responsibilities.

Article 33 Where a company fails to commence its business without justification within the period of more than six months of its incorporation or, after commencing its business, suspends business at its own will for a period of six consecutive months or more, the Registration Authority shall revoke the business license of the enterprise legal person.

Article 34 The sponsors of a company shall bear the following responsibilities:

(1) in the event of the company failing to be incorporated, joint and several liabilities for all debts incurred in the act of the incorporation;

(2) in the event of a share-offer company failing to be incorporated, joint and several liabilities for returning the share payment that has been paid by the subscriber and the deposit interest of the bank for the corresponding period;

(3) in the event of company' s interests being infringed in its incorporation due to fault of the sponsors, joint and several liabilities for compensation .

(4) in the event of sponsor' s false payment of shares or colluding with other share holders to make false payment for the shares, order from the Registration Authority to pay in full for all the shares within a specific time limit, and a fine of not less than RMB 150,000 yuan but not more than RMB 200,000 yuan; Joint and several liabilities for compensation if damages have been done to the company and creditors. If the case constitutes a crime, criminal liabilities of the personnel hold directly responsible shall be investigated in accordance with the law.

Chapter III Shares and Stocks

Article 35 The whole capital of a company shall be divided into shares of equal value which adopt the form of share certificates.

Shares are the vouchers issued by the company to certify the rights and obligations enjoyed and assumed by their shareholders in accordance with the number of shares their hold.

Article 36 The shares of a company may issue ordinary shares and preference shares.

While issuing the preference shares, the following items shall be stipulated in the articles of association of the company:

(1) the order, ration or fixed-rate of distributing the dividends of the preference shares, and to cumulate the dividends or not;

ги2гйthe order, ration or the fixed-rate of preference shareholders' distributing the surplus properties of the company

(3) Decision on whether the preference shares can be changed into ordinary shares or not, and its changing conditions;

(4) Decision on whether the preference shareholders have the right to vote, and voting order and restrictions;

Article 37 The company shall issue the Renminbi special shares which the investors can subscribe and deal by the exchangeable foreign currencies with the approval of the competent authority of securities. The par value of the Renminbi special share shall be marked by Renminbi.

The rights and interests of the Renminbi special shares' shareholder are the same as the ones of the common shares' shareholders.
The issuance and dealing of the Renminbi special shares shall be handled according to the related provisions of the management of securities.

Article 38 Where the share is shared by many people, one of the co-owners shall be appointed to exercise the powers of shareholder.

Where none of the co-owners has been fixed to exercise the powers of shareholder, the announcement or interpellation from the company to the all co-owners will take effect upon the delivery to any one of the co-owners.

Article 39 Where new shares are issued with the suggestion of the board of directors after the incorporation of the company, resolutions for the following items shall be made by the shareholders' general meeting:

(1) The class and number of the new shares;

(2) The issue price of the new shares and the date for payment of subscription money;

(3) Adoption of taking method of using other possession outside currencies as capital subscription as the classes of capital subscription and share exchanges;

(4) The classes and amount of the new shares subscribed by the existing shareholders;
(5) The stipulations on transferring subscription rights of the preceding provisions.

Article 40 To issue new shares, a company must satisfy the following conditions:

(1) the company has a fine operating circumstances and records of steady profits;
(2) the proportion of previous year' s net assets shall not be less than 25% of the material assets;

(3) The capital has established investment direction and the prospective benefits can go above the average profit margin of the industries;

(4) There is not less than one year has elapsed since the previous issue of shares.

Article 41 A company shall not issue new shares if its two consecutive years' s distributable interests is insufficient to pay for the dividends of the preference shares or has not paid for the dividends of the common shares for two years after it has paid for the dividends of the preference shares.

Article 42 Where a listed company issues new shares to the general public, the new share capital shall not exceed 30% of the total existing share capital, with an exception that the company distribute the dividends by shares and accumulation fund is convertible into share capital.

Article 43 To issue new shares to increase the registered capital, a company shall apply to the Registration Authority for modification of registration and make a public announcement.

Article 44 Where a company offers shares to the general public for the issuance of new shares, the offering procedures shall apply to the provisions from Article 24 to Article 27 of these Regulations.

The new share subscribers, who has not pay for the subscription money on time or do not pay for the contributive property, shall apply to the provision of Article 28 of these Regulation.

Article 45 In case the company issues new shares by violating the laws, rules, articles of association of the company or inequitable means, and damages may be caused to the shareholders, the shareholders can request the company to suspend the issuance of new shares. If the issuance continues, the shareholders can institute a proceeding to the People' s Court.

Article 46 A company' s shares are divided into registered shares and bearer shares. However, the proportion of the bearer shares shall not exceed 30% of the shares that have been issued.

Where shares are issued to the sponsors, legal persons, staff of the company, department of management of national assets or their authorized organizations, they shall be registered shares.

The registered shares shall be registered in the shareholders' true name, and shall not be registered in other names, or names of their representatives.

Article 47 The shares may adopt the written form or other forms approved by the Competent Authority of Securities.

The following particulars shall be clearly stated on a share certificate:

(1) the name and domicile of the company;

(2) the serial numbers of date of the registration of incorporation or modification;

(3) the serial number of share offer approved by the Competent Authority of Securities;

(4) the total number of shares, face value of each share, number of the share offer;
ги5гй the classes of shares, the number and face value each share represents

(6) the name, or title and the domicile of the registered shareholders;

(7) the serial numbers and the date of issuance of the shares;

(8) the stamp of the company and the signature of the chairman of the board of directors;

(9) in the case of share certificates owned by sponsors, the words "sponsor' s share certificate" shall be clearly stated on the share certificates.

The proceeding items processed by computer by the legal securities registration authority or securities centralized commendation authority share the equal effect with the share items recorded by the written form.

Article 48 The issuance of the bearer shares shall be stipulated in the articles of association of the company and must be approved by the competent organs of securities. The shareholder of the bearer shares can request to convert the bearer shares into registered shares.

Article 49 The issue price of each share shall not be under the face value. The issue prices for shares issued at the same time shall be the same.

In case the company violates the provisions of the proceeding item, it shall be ordered by the competent organ of securities to make a rectification within a specific time limit; and if it refuses to rectify, punishment will be given.

Article 50 No share certificates shall be delivered by the sponsors to the subscribers, and no shares to be transferred by the subscribers, prior to the registration of the company' s incorporation.

Article 51 Relevant regulations shall be complied with by the administrative department of the state-owned assets or other authorized organs in their transference of shares.

Article 52 A company shall not restrict the share transference by the articles of association of the company except the following circumstances:

(1) The shares held by the personnel of the company shall not be transferred within 1 year after the date of allocated subscription. Where the transference of the shares is workable, the yearly transferable shares shall not exceed 20% of the existing shares.

(2) Where a company is incorporated by the means of sponsorship, the shares held by the sponsors shall not be transferred within 3 years since the date of incorporation of the company. The transference of shares after 3 years shall be approved by the shareholders' general meeting .бббб

(3) Where a company is incorporated by the means of share offer, the shares held by the sponsors shall not be transferred within 1 year since the date of incorporation of the company. The transference of the shares after 1 year shall be approved by the shareholders' general meeting and a record shall be put to the competent organ of securities.

(4) Shares held by the administrative officers like directors, supervisors and managers shall not be transferred within 3 years after the date of allocated subscriptions for.

(5) The shares of the shareholders shall not be transferred since the date of liquidation.

Where the laws, administrative laws and regulations have other restrictive provisions, the transference of the shares shall comply with them.

Article 53 Registered shares can be transferred by means of endorsement by the shareholders or by other means authorized by the competent organs of securities. In case the name or title of the transferee has not be registered in the share certificates, and the name or title of the transferee and his domicile have not been registered in the roster of shareholders of the company, the shares shall not be transferred to the antagonizing company.
The transference of the bearer shares shall go into effect upon delivery.

Article 54 A company may not purchase its own shares except the following circumstances:

(1) For the purpose of reducing its capital, shares need to be cancelled;

(2) The company merges with other companies which hold its shares;

(3) The company purchase other companies which hold its shares.
In case the shares purchased by the company itself in accordance with the proceeding paragraph, has not been cancelled, they shall be sold within 6 months.
In case the company fails to sell the shares within six months, it shall be ordered by the competent organ of securities to cancel the shares. The Registration Authority shall transact in accordance with the procedures of reducing registered capital, and a separate find of not less than RMB 10,000 yuan but not more RMB 100,000 yuan will be imposed to the corporation representative and the personnel held directly responsible.

Article 55 A company shall not accept its shares taking as guaranty.

Where the company violates the proceeding paragraph, the mortgage shall be of no effect, the corporation representative and the personnel held directly responsible and the mortgaer shall be assumed the joint and several liability, and a separate fine of not less than RMB 10,000 yuan but not more than RMB 15,000 yuan will be imposed by the the Registration Authority to the corporation representative and personnel held directly responsible.

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Article 56 Where registered shares are issued, the company shall prepare a roster of shareholders.

The roster of shareholders shall specify the following items:

(1) the name or tile, and the domicile of the shareholders;

(2) the forms of shares held by all shareholders' and the number of shares held by the representative;

(3) the serial numbers of the share certificates;

(4) the date on which each shareholder obtained his shares.

Article 57 Where a company issues bearer shares, it shall specify the forms of shares, number, serial number and the date of issuance.

Article 58 Where the company issue notice or interpellation to the shareholders, the registered share certificates shall be served in accordance with the shareholders' domiciles registered in the roster of shareholders, and the bearer share certificates shall adopt the means of publication.

Article 95 Where registered share certificates are destroyed, the shareholder may declare such share certificates as void by the procedure for publicizing public notice for assertion of claims provided for.

After the voidness has been declared with the aforesaid procedure, the shareholder may apply to the company for a replacement of the share certificates.

Article 60 A company shall gain the approval of the relevant competent departments before it has its issued shares listed and traded. The conditions and procedures of approval shall be complied with the relevant provisions of the management of securities.

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Chapter IV Company Bonds

Article 61 A company may issue company bonds. To issue company bonds, a plan shall be formulated by its board of directors and approved by its general meeting of shareholders, and approval of the competent organ of securities shall be gained.

Article 62 The total amount of company bonds shall not exceed the amount of net asset of the company.

In case other legal persons stand guarantee for the company issuing company bonds, the total amount of the bonds shall not be restricted by the provisions of preceding paragraph, but shall not exceed the net assets of the guarantees.

Article 63 A company may issue convertible bonds in accordance with the provisions from Article 39 to Article 45 on issuing company bonds of these Regulations.

The sum of the convertible bonds issued according to the proceeding paragraph shall not exceed 30% of the total capital of the company.
Article 64 A company may issue registered bonds and bearer bonds. The owner of bearer bonds may request to convert the bearer bonds into registered ones.

Article 65 In any of the following circumstances, a company may not issue bonds or make another issue of bonds:

(1) if the company bonds that have been issued have not been fully subscribed for;

(2) if it is a fact that the company has defaulted on, or deferred repayment of the principal and the payment of interest of its previously issued company bonds or its debts, and such default or deferment still persists;

(3) the average ex-taxation profits of the recent three years are lower than the average interests of the debts of the corresponding period.

Article 66 For a company to issue company bonds, its board of directors shall prepare the bond offer statement.

The bond offer statement shall specify the following particulars:
(1) the name of the company;

(2) the total amount of the company bonds and the amount of company bonds of all classes;

(3) the functions of company bonds;

(4) the interest rate of company bonds;

(5) the ways and time limit of reimbursement of company bonds;

(6) the paying way and time limit of interest rate;

(7) the method of paying the company bonds and its beginning and terminal dates;

(8) the issue price of company bonds;

(9) the registered capital of the company;

(10) the total number of shares of the company and face value of each share;

(11) the amount of the present net assets of the company;

(12) the methods of transferring company debts and converting bonds;

(13) the name of the consignment-in institution of the company bonds;

(14) the name and vouching promises of the cautioner if avouching bonds are issued;

Article 67 To issue company bonds, a company shall prepare bond certificates. Before issuing, a bond certificate shall obtain the signature of the chairman of board of directors, stamp of the company and approval from the Competent Authority of Securities.

Article 68 The company bonds may adopt the written form or other forms approved by the Competent Authority of Securities.

The following particulars shall be clearly stated on a bond certificate:

(1) the name and domicile of the company;

(2) the serial number and date of registration of incorporation or modification of the company;

(3) the serial number of issuance approved by the Competent Authority of Securities;

(4) the total amount of the company bonds, face vale of each bond, interest rate, repayment and time limit of the company bonds;

(5) the classes of bonds;
(6) the names and domiciles of registered company bonds holders;

(7) the serial number and issuing date of the bonds;

(8) the convertible bonds and their converting methods;
(9) the particulars of the avouching bonds if there are issued;
(10) the stamp of the company and signature of chairman of the board of directors.

Article 69 A company shall prepare the counterfoils of bonds.

When registered company bonds are issued, the counterfoils of bonds shall specify the following:

(1) the name and domicile of the bondholder;

(2) the total amount of the company bonds, the par value, the interest rate of the bonds and the method of and time limit for repayment of the company bonds;

(3) the issuing date of the company bonds;

(4) the date on which the holder acquired the bonds and their serial numbers;

Where bearer company bonds are issued, the counterfoils of the company bonds shall specify the total amount of the bonds, interest rate, methods of repayment, time limit, issuing date and serial numbers of the bonds.

Article 70 The registered bonds shall be transferred by means of endorsement by the bondholder. The registered bonds shall not be transferred to the opposite companies in case the name or title of the transferee has not been recorded in the bond certificates or in the counterfoils of bonds.

Where the bear bonds are transferred, the transfer becomes effective immediately after it was delivered to the transferee by the bondholder.

Article 71 The transfer of bonds shall be perform at the premises fixed by the Competent Authority of Securities.

The unit of bond trades shall not be lower than the par value of the each bond.

Article 72 For the company bonds convertible into shares, the company is liable to check and offer the shares to the bond holders. The bond holder has options on the conversion of the bonds.

Article 73 the company shall hold the creditors' meeting and discuss the items on the common interests of the creditors, in case the creditors who hold over 10% of debenture of the companies of the same level.

Article 74 The following functions and powers shall be exercised at the bondholders' meeting:

(10 to elect the representative of bondholders to negotiate with the company;
(2) to lodge an objection when the company' s activities harm the bondholders;

(3) to file an appeal when the company violates the law.

Article 75 A notification on the items to be discussed in the meeting shall be made to the creditors of the company at least 30 days prior to the convening date. Where bearer bonds are issued, the items to be discussed in the meeting shall be published at least 45 days prior to the convening date.

Article 76 The resolution of the creditors' meeting shall be approved by two thirds of the creditors who held over half amount of the debenture presented in the meeting.
The voting right of the preceding paragraph shall be accounted by the lowest par per debenture, taking as a voting right.

If the company bond issue has already commence, the issuing company Shall refund the subscribers the money already paid for their subscriptions plus bank deposit interest calculated for the same period of time.

Chapter IV Shareholders and Shareholders' General Meetings

Article 78 The holders of the shares of the company are shareholders. The shareholders shall enjoy rights and assume obligations basing on the classes and numbers of the shares he holds.

Article 79 Shareholders shall enjoy the following rights:

(1) to attend or entrust attorney on attending the shareholders' general meetings, and to vote according to the articles of association of the company;

(2) to transfer the shares according to the provisions of these Regulations and the articles of association of the company;

(3) to consult the articles of association of the company, minutes of the shareholders' general meetings and financial and accounting report, to bring forward suggesting or inquiries;

(4) to obtain profits in accordance with the shares he holds;
(5) to obtain the company' s remaining property in accordance with these Regulations and the Articles of Association after the company has conducted the liquidation and dissolution.
(6) Other powers stipulated by the articles of association of the company.

Article 80 The following obligations shall be performed by the shareholders:

(1) to abide by the articles of association of the company;

(2) to pay the subscription money in connection with the shares he subscribed for and the way of buying shares;

(3) to bear liabilities in accordance with the his subscription money;

(4) not to withdraw the shares after registration of incorporation of the company;

(5) to perform other obligations stipulated by the articles of association of the company.

Article 81 The shareholder' s general meeting shall be organ of power of the company.

The shareholders' general meeting exercises its functions and powers through the standing shareholders' general meeting and the interim shareholders' general meeting.

The standing shareholders' general meeting shall be convened at least once a year. The interval between each shareholder' s general meeting and last shareholders' general meeting shall not exceed fifteen months.

An interim shareholders' general meeting shall be convened if any of the following situations occurs:

(1) if the number of directors is less than 1/3 of the number stipulated by these Regulations or the articles of association of the company;

(2) if the amount of the company' s losses that have not been made up reaches 1/3 of its total paid-up share capital;

(3) if shareholders holding 10% or more of the company' s shares request to convene a shareholders' meeting;

(4) if the board of directors or supervisory board deems it necessary.

Article 83 The shareholders' general meeting shall exercise the following functions and powers:

(1) to examine and approve reports of the board of directors and the supervisory board;

(2) to examine and approve plans of the company' s fiscal financial budget and final accounts;

(3) to examine and approve plans for company' s profit distribution and making up losses;

(4) to adopt resolutions on the issuance of company bonds;

(5) to make up resolutions on the increase or reduction of the registered capital of the company;

(6) to adopt resolutions on matters such as the merger, division, dissolution and liquidation of the company;
(7) to elect or dismiss members of the board of directors and the board of supervisors and to make up resolutions on the remunerations and paying measures;

(8) to amend the articles of association of the company;

(9) other functions and powers stipulated by the articles of association.
Where the shareholders' general meeting exercise functions and powers from Item 5 to Item 8 of the preceding paragraph, an approval of the special resolutions shall be obtained.

Article 83 The shareholders' general meeting shall be convened by the board of directors and be presided over by the chairman of the board of directors with an exceptions stipulated by these Regulations or the articles of association of the company.

shareholders shall be notified of the matters to be considered at a shareholders' general meeting 30 days prior to the holding of such a meeting. At interim shareholders' general meetings, no resolutions may be adopted in respect of matters not included in the notice.

Where bearer shares are to be issued, a public announcement shall be made in respect of the matters mentioned in the preceding paragraph at least 45 days prior to the holding of such a meeting.

Holders of bearer shares shall deposit their share certificates with the company for within 5 days prior to the holding of the meeting.

Article 84 The resolutions of the shareholders' general meeting are divided into common resolutions and special resolutions.
Any common resolution shall be adopted by shareholders of the company representing more than half of all shareholders in the shareholders' general meeting attended by shareholders holding over half of all shares.

Any special resolution shall be adopted by shareholders of the company representing three-fourths or more of the voting rights in the shareholders' general meeting attended shareholders holding over half of all shares.

Article 85 Where an attorney is entrusted to attend the shareholders' general meeting and exercise the voting right by a shareholder, the attorney shall submit the shareholder' s power of attorney defining the scope of authorization to the board of directors.

Article 86 Where a shareholder is from the Management department of state-owned assets or its authorized organs, or being legal person of other organs, the legal representative of the shareholder or the attorney entrusted by the legal representative shall attend the shareholders' general meeting and exercise the voting rights.

Article 87 Where the shareholders' general meeting is attended by shareholders representing less than half of all shares, the meeting shall be postponed for 20 days, and re-notification shall be made to the shareholders not presented or a public announcement shall be made.
In case the postponed shareholders' general meeting is still attended by shareholders representing less than half of all shares, the number of present shall be regarded as reaching the statutory number. The resolution will be adopted if the proportion of voting which is calculated in accordance with the amount of the shares held by the shareholders present at the meeting reached the one stipulated in Article 84.

Article 88 Each share represents a voting right with an exception of the provisions stipulated in the articles of association of the company on the preference stock

Article 89 Results on matters discussed at the shareholders' general meeting shall be recorded and such records of the meeting shall be signed by the directors present. The record of the meeting shall be preserved with the sign-in album and the powers of attorney in attending the meeting.

ббArticle 90 In case the convening procedure and the resolution methods of the shareholders' general meeting violate the provisions of the law, regulations and the articles of association of the company, the shareholders may institute a proceeding to the People' s Cout.

Chapter VI Directors and Board of Directors

Article 91 The company shall have a board of directors. The board of directors shall be responsible to the shareholders' general meeting and make up resolutions on and execute the business operation.

The board of directors shall be composed of 3 directors.

Article 92 The directors shall be elected by the affirmative votes in shareholders' general meeting. The director can be a shareholder or non-shareholder, but the total amount of the directors of the non-shareholders shall not exceed one-third of number of all directors.

The tenancy conditions of director of non-shareholder shall be decided by the articles of associations of the company but it shall not violate the relevant provisions of these Regulations.

Article 93 The board of directors shall exercise the following functions and powers:

(1) to convene the shareholders' general meeting and to report on its work to the shareholders' general meeting;

(2) to implement resolutions passed at the shareholders' general meeting;

(3) to examine and approve the development plans, fiscal production and business operation plans of the company
(4) to formulate the fiscal financial budgets and final accounts of the company;
(5) to formulate plans for the profit distribution and making up losses of the company;

(6) to formulate plans for increasing or reducing the registered capital of the company and plans for the issue of company bonds;
(7) to decide the mortagage and transfer of company' s important capital;

(8) to formulate plans for the merger, division and dissolution of the company;

(9) to decide on the establishment of the management organs of the company;

(10) to engage or dismiss the high managers, such as manager, deputy manager(s), responsible persons in charge of the financial affairs, and to decide plans for remuneration and methods of disbursement;
(11) to formulate the plans for amendment of the articles of association of the company;

(12) to bring forward the application of bankruptcy of the company;
(13) to prescribe the other rights and powers of the articles of association of the company.
Article 94 The directors shall enjoy the following rights:
(1) to attend the board of directors and exert rights of voting;

(2) to represent the company in accordance with the articles of association of the company or the consignment of the board of directors;

(3) to implement the company affairs in accordance with the Articles of Association or the commission of the board of directors;
(4) other rights and powers stipulated or granted by the Articles of Association or the board of shareholders.
The directors shall assume the following obligations:

(1) to abide by the articles of association of the company and resolutions of the shareholders' general meetings and board of directors;

(2) not to be unlimited liability shareholder of other economic organs or partner of partnership organs;
(3) not to engage for his own account or for another person in the same kind of business as his company is engaging in without the authorization of the shareholders' general meeting;

(4) not to conduct trades, loans for oneself or on behalf of the office-holding company or others or act against the interests of the company.
In case the director has benefited by violating the provisions of the preceding paragraph, the shareholders' general meeting shall have the right to confiscate the illegal gains. If damages have been caused to the company, compensation is authorized to claim by the company. If the case constitutes a crime, criminal liabilities shall be investigated in accordance with the law.

Article 95 The term of office of the directors shall be stipulated in the articles of association of the company.

Article 96 None of the following persons may hold the office of director of the company:

(1) a person without capacity or with restricted capacity for civil acts;

(2) a person accused by the judicatory organs and being placed a case for investigation and the case has not be wound up;

(3) a person who had sentenced to criminal punishment fixed-term imprisonment or above, and there had not been over three years since the release upon completion of his term of imprisonment;

(4) a legal representative and persons held directly responsible of enterprise that had the business license revoked for violating the law, and not more than 3 years have elapsed since the date of revocation of the business license;

(5) persons held directly responsible of the enterprise that was liquidated due to bankruptcy or terminated due to violation of the law, not more than 3 years have elapsed since the date of liquidation or termination;

(6) a person with relatively large amount of personal debts and has not performed the obligation of reimbursement during a long period;

(7) other persons prescribed in the law, rules and regulations.

Where the company violates provisions of preceding paragraph on electing directors, it shall be ordered by the Registration Authority to make a rectification within a time limit.

Article 97 Where a shareholders' general meeting is convened to elect more than two directors, the shareholders may bring forward a request of accumulated votes in written form to the company five days before holding such a meeting, expecting the circumstances stipulated in the articles of association of the company.

As for the accumulated votes for decision on the election of director, each share shall have the same amount of voting right as the number of the to-be-selected directors. Any shareholder may vote for one person or more and the one having more votes will be selected.

Article 98 A special resolution on demission of a director of the board shall be made by the shareholders' general meeting. The shareholders' meeting of a company may not unwarrantedly dismiss a director of the board prior to his term of office, and the dismissed director shall claim to the company for compensation of infringement.

Article 99 The board of directors shall have one chairman who shall be elected by the affirmative votes of more than half of al the directors.

The chairman of the board shall be the legal representative of the company.

Article 100 The chairman of the board shall exercise the following functions and powers:

(1) to preside over shareholders' general meetings, and to convene and preside over meetings of the board of directors;

(2) to examine the implementation of resolutions of the board of directors and to report to the board;

(3) to sign documents for the shares, bonds of the company and documents within the functions and powers;
(4) to exercise other functions and powers stipulated by the articles of association of the company or authorized by the board of directors.

Article 101 One or two vice-chairman of the board of directors shall be elected by the affirmative votes of more than half of all the directors in accordance of the articles of association of the company. The vice-chairman of the board shall assist the chairman of the board in his work and shall exercise the chairman' s powers and functions on behalf of the chairman of the board in case the chairman is unable to perform his powers and functions.

Article 102 The board of directors shall have secretary. The secretary employed by the board takes charge of the daily affairs of the board and shall be responsible to the board.

Article 103 Meetings of the board of directors shall be held at least once every half of the year. A meeting of the board of directors shall convene once 1/3 of all directors proposed.

Article 104 All members of the board shall notified of the meeting at least 10 days prior to the holding of the meeting and matters concerning the meeting. However, an interim meeting of the board of directors shall be convened any time once there are emergencies.

Article 105 The resolutions of the board of directors shall be adopted by the affirmative votes of more than one half of all the directors. As for the same ballots, the chairman of the board has the decisive vote.

Article 106 Meetings of the board of directors shall be attended by the directors in person with an exception of the situations having attorney stipulated by the articles of association.
Where a director entrust another director to attend the meeting on his behalf, the scope of authorization shall be defined in the written power of attorney.

Article 107 Minutes of the meetings of the board of directors shall be made and signed by the directors and secretary of the board. Present. Directors shall be responsible to the minutes of the meetings.

If a resolution of the meeting of the board of directors violates these Regulations, and thus causes losses to the company, the directors who participated in the adoption of such as resolution shall be liable for compensation to the company.

Article 108 Articles of association of the company, records of past meetings of shareholders or the directors, balance sheets, profit and loss statements shall be kept in the company by the board of the directors. The roster of th4e shareholders shall be kept in the company and its agents. Shareholders and creditors with the relevant proven documents are authorized to consult or excerpt those materials within the fixed scopes.

Article 109 While exercising functions and powers, the board of directors shall abide by the law, regulations, the articles of association and the resolutions of the shareholders' general meeting.

Chapter VII Manager

Article 110 A company shall have a manager who employed by the board of directors.

A company may have several vice-managers who are nominated by the manager and authorized by the board of directors. The vice-managers assist in manager' s work and exercise the powers and functions on behalf of the manager in case the manager is unable to perform his powers and functions.

Article 111 Manager' s restrictive conditions of holding office and the transactions on violating these conditions shall apply to provisions of Article 96 of these Regulations.

Article 112 The manager shall exercise the following functions and powers:

(1) to be in charge of the daily business operation and management of the company in accordance with the articles of association and the authorization of the board of the directors;

(2) to be in charge of the concrete implementation of the resolutions of the shareholders' general meetings and meetings of the board of directors;

(3) to draft plans for the development of the company and the annual plans for production and operation;

(4) to make suggestion on the candidates for the high-class managers like vice-managers and the finance superintend, and to appoint and dismiss other personnel of management;
(5) to make decision on the employment, demission, rewards and punishment of staff and workers of the company;

(6) to attend meetings of the board of directors as a non-voting participant;

(7) to exercise other functions powers authorized by the articles of association of the company and by the board of directors.

Article 113 The obligations and responsibilities of the manager apply to the Item 2 and Item 3 of Article 94.

Chapter VIII Supervisory Board

Article 114 A company shall have a supervisory board. The supervisory board is the supervisory organ on the business activities of the company and its ways of execution is stipulated by the articles of association of the company.

Article 115 The supervisory board shall be composed of not less than 3 members, including representatives of the staff of the company in proportion of one-third of the members who are to be democratically selected and dismissed by the staff of the company, and other members from the shareholders who are to be selected and dismissed by the shareholders' general meeting.

The term of office of the members of supervisory board shall be stipulated by the articles of association of the company.

High-ranking managers like directors, managers and financial superintend shall not serve concurrently as supervisors.

Article 116 The supervisory board shall report to shareholders' general meetings and exercise the following functions and powers:
(1) to attend the meetings of directors as non-voting participants;

(2) to examine the affairs of business and finance of the company;

(3) to examine, approve and consult the financial and accounting report and other financial and accounting materials;
(4) to supervise the works of the board of directors and manager;

(5) to propose the convening of the interim shareholders' general meetings;
(6) Where there are conflicts between the acts of chairman of the board of directors and manager and the interests of the company, the representative of the company shall negotiate with the chairman and manager, or proceed against the chairman and manager.

(7) to exercise other functions and powers stipulated by the articles of association of the company.

Article 117 The solutions of the supervisory board shall be approved only if 2/3 of all members of the board agreed.

Article 118 Where the supervisory board exercise its functions and powers, it may entrust the Chinese certified lawyers, Chinese certified public accountant or other professional personnel with assistance, and the commission expenditures shall be paid by the company.

Article 119 The preparation of auditors may be provided for by the articles of association of the company. The auditor shall be appointed by and be responsible for the supervisory board.

Article 120 In case the supervisory board fails to supervise the acts causing losses to the profits of the company and the shareholders, it shall assume the joint and several liability as the responsible actor.

Chapter IX Financial affairs and Accounting

Article 120 A company shall establish its financial and accounting system in accordance with the law, regulations, and the relevant stipulations of the Accounting System of the Special Zone.

Article 122 Companies shall submit annual financial and accounting report examined and approved by the Chinese registered accountant to the relevant organs. These statements include the balance sheet, profit and loss statement, statement on changes in the financial position of the company.

Where shares and bonds are offered to the public by a company, the above annual fiscal statements shall be announced in accordance with the relevant forms, contents in the newspapers.
Where the listed annual fiscal statements have not been submitted and announced according to Item 1 of this Article, the relevant organs shall order the company to make a rectification with a specific time limit; if the company fails to rectify within the specific time limit, sanctions will be given to the legal representatives and the persons held directly responsible.

Where false documents are submitted and announced, the company shall be ordered by the relevant organs to make a rectification within a specific time lime, and sanctions will be given to the legal representatives and persons held directly responsible.

Article 123 A company shall make the annual financial and accounting documents available at the company for examination by its shareholders and creditors 20 days prior to the convening of the shareholders' general meeting. The report shall documents shall include including a balance sheet, a profit and loss statement, a statement on changes in the financial position of the company, a statement explaining the financial situation of the company and a statement regarding the distribution of profits..

Article 124 When a company distributes the annual after-tax profits, it shall accord with the following orders:
(1) to make up the losses;

(2) to allocate the common reserve fund;

(3) to allocate the common welfare fund;

(4) to pay for the dividend of the preference stock according to the articles of association of the company;

(5) to pay for the dividend of the common stock.
The distribution shall be inefficacy if the company violates the preceding stipulation. In case infringement has been done to the creditors, creditors are entitled to claim for compensation for losses.

Article 125 The common reserve fund is divided into statutory common reserve fund and discretionary common reserve fund.

The statutory common reserve fund shall be composed of the following funds:

(1) Surplus common reserve fund. A company allocates 10% of annual after-tax profits to its surplus common reserve fund. Where the accumulated amount of the statutory common reserve fund shall exceeded 50% of the registered capital of the company, no further allocation may be made.

(2) Capital common reserve fund. The capital common reserve fund mainly includes premium income derived from issuing shares above par, capital donations and other funds which should be entered into the capital common reserve fund according to the rules.

(3) Discretionary common reserve fund. This fund is allocated and used according to the articles of association of the company or the resolutions of the shareholders' general meetings.

Article 126 The statutory common reserve fund applies to the following functions:
(1) to make up the losses. Where the statutory common reserve fund is used to make up the company' s losses, the surplus common reserve fund shall be used before the supplementation of the capital common reserve fund.

(2) to convert into capital stock. While converting, it shall issue new shares in proportion to the original shares held by the shareholders or increase the original par value of each share. However, when the statutory common reserve fund is converted into its capital stock, the remaining amount of the statutory common reserve fund shall not be less than 50% of the registered capital.

(3) to serve for other functions stipulated by the law and regulations.

Article 127 Where the statutory common reserve fund is used to increase a company' s capitalization, a proposal shall be produced by the board of directors be adopted by extraordinary resolution of the shareholders' general meeting.

To increase the capitalization by means of conversion, a company shall obtain approval from the Competent Authority of Securities and apply to the Registration Authority for registration of modification in registered capital.

Article 128 The statutory common welfare fund retained by a company shall be used for the collective welfare of the company' s staff and workers.

Article 129 Where a company fails to allocate and used the statutory common reserve fund, common welfare fund according to the provisions of these Regulations, it shall be ordered to make a rectification and be punished on the basis of circumstances.

Article 130 Where a company do not have profit gains in a year, it shall not distribute the dividend. However, in case the surplus common reserve fund has exceed 50% of the registered capital, with adoption of the extraordinary resolution of the shareholders' general meeting, the surplus part may be used for dividend distribution basing on not more than a year' s deposit interest rate of the bank.
In case the distributive profits are insufficient to be distributed at the deposit interest rate, the company may transact according to the provision of the preceding paragraph.

Article 130 Where a company distributes the dividends, it may adopt the following forms:

(1) cash;

(2) shares.

The shareholders shall draw dividends of common shares in proportion to the shares they held separately.

бббб Where the company is to distribute the dividend in the form of shares, adoption must be secured by the extraordinary decision of the shareholders' general meeting, and approval must be gained from the competent department of securities.

Chapter X Merger and Division of Companies

Article 132 The merge or division of a company shall require the board of directors' formulation of a plan, preparation of a balance sheet and a inventory of assets., and the adoption of the extraordinary resolution of shareholders' general meeting.

Application for approval shall be made to the competent department of securities in case the merge or division of a company will influence the issue or modification of the shares,
The merger or division of a company shall not infringe the interests of the creditors.

Article 133 The merger of a company may take the form of merger by absorption or merger by new establishment.

When a company absorbs another, it is an absorption merger, and the company being absorbed shall be dissolved and the absorbing one continues to exist. When two or more companies merge to establish a new company, it is merger for new establishment, and all the parties being merged shall be dissolved.

Article 134 Where companies merge, the companies shall inform their creditors of the intended merger within 10 days following the date on which the merger resolution is adopted, and make at least 3 announcements in newspapers within 30 days.

Where a company fails to inform of or make public announcements to its creditors in violation of the provisions of the preceding paragraphs, it shall be ordered by the Register Authority to make a rectification within a specific time limit, and a fine of not less than RMB 20,000 yuan but not more than RMB 50,000 yuan will be imposed. Where a company has conducted the flight of money, conceal of assets and debts doddery, it shall be ordered to return the property within a specific time limit, and a fine of not less than RMB 100,000 yuan but not more than RMB 200,000 yuan will be imposed on persons held directly responsible. If the case constitutes a crime, criminal liabilities of persons held directly responsible will be investigated in accordance with law.

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A company' s creditors shall lodge objections within 30 days of receipt of the notice, or, within 90 days from the date of the public announcement for those who have not received the notice.
As to the creditors who have lodges objections, the company shall repay its debts in full or provide corresponding guarantees. In case the creditors who have not made objections, as to absorption merger, debts of the company being absorbed shall be assumed by the absorbing company, and as to the merger for new establishment, debts of all parties being merged shall be assumed by the new company.

Article 135 The division of the company may take the form of division by new establishment and division by derivation.

When a company divides all its assets into for two or more new companies, it is a new establishment division and the original company shall conduct liquidation in accordance with these Regulations. When a company uses part of its assets to establish a new company of assumption of debts, it is a derivative split. Where the original company intends to reduce its registered capital, it shall complete the procedures of reduction of registered capital in accordance with these Regulations.

Where a company proceeds into a division, the notification of creditors by notice or announcement shall apply to the provisions of Article 134 of these Regulations.

Article 136 All parties involving in the merger or division of the company shall reach an agreement on the transactions of the claims and debts of the original company before merger or division.

The solution of the preceding paragraph shall obtain the approval of the creditors and shall not infringe the interests of the creditors.

Article 137 A company of continued existence, new establishment and dissolving after of merger or division shall go to the Register Authority and register its variation, establishment and cancellation with following documents:

(1) report of application;

(2) resolutions of the shareholders' general meetings;

(3) agreements of merger or division;

(4) the articles of association of continued-existence or new-establishment of the company

(5) other documents stipulated by the municipal government.

Where the merger and division of a company concern the issuance or modification of shares, it shall submit documents for approval to the Competent Authority of Securities.

An announcement shall be made by related parties involving in the merger or division of a company within seven days after the merge or division.

Chapter XI Amendment of the Articles of Association of companies

Article 138 To amend the articles of association of a company shall accord with the following procedures:

(1) Board of directors shall make plans for the amendment of articles of association of the company;

(2) Resolution of amending the articles of association of the company shall be adopted by the extraordinary resolution of shareholders' general meeting;

(3) Approval of the Register Authority must be secured.
The issue or variation of the shares influenced by the amendment of articles of association of the company shall be reported to the competent department of securities for approval.

Article 139 Where the amendment of the articles of association shall influence the rights and obligations of shareholders of preference shares, the approval on the amendment must be secured by the preference shareholders' meeting.
Procedures and voting formula of the preference shareholders' meeting shall comply to the provisions of these Regulation on shareholders' general meeting.

Article 140 Where a company amend its articles of associations because of reducing its registered capital, it shall stipulate the means of reducing registered capital in the resolution of the amendment of the articles of association of the company.
Where the company reducing the registered capital and needing to change for receipt of new shares, it shall make a public announcement in newspapers to notify the shareholders to change for receipt of new shares after it has register the reduction of registered capital. In case a shareholder fails to transact the procedures of changing for receipt within the specific time limit, he will lose the rights of a shareholder. The company shall sell his shares by auction and the lot money will be given to this shareholder.
Where a company merges its shares because of the reduction of registered capital, the shares which not suit for merger shall be transacted in accordance with the provisions of the preceding paragraph.

Article 141 Where a company reduced its registered capital, it shall formulate a balance sheet and a inventory of assets.
When a company reduces its registered capital, it shall inform its creditors of the intended reduction within 10 days following the date on which the reduction resolution is adopted, and make at least 3 announcements in newspaper within 30 days. The creditors shall lodge an objection within 30 days since the receipt of the notice, or within 90 days since the public announcement for those who have not received the notice. The company shall repay the debts in full or provide a corresponding guarantee to those creditors who have lodged objections.

Article 142 Where the articles of association of the company has been amended, the board of directors shall apply to the Register Authority for registration of changes and make a public announcement.

Chapter XII Termination and Liquidation of Companies

Article 143 Where one of the following circumstances occurs, a company shall terminate and liquidate:

(1) the term of operation as stipulated by the articles of association of the company expires or other reasons for termination as stipulated by the articles of association occur;

(2) Tenet established by the company has been realized or been unable to realize;

(3) the shareholders' general meeting resolves to dissolve the company;

(4) the company has been merged with another company or newly established by division;
(5) the company fails to commence its business without justification within the period of more than 6 months of its incorporation or, after commencing its business, suspends business at its own will for a period of six consecutive months or more,.
(6) The company has been cancelled in accordance with the law.
(7) The company has been declared bankrupt in accordance with the law.

Article 144 Where a company is terminated in accordance with Item 1, 2,3,and 4 of Paragraph 1 of Article 143, shareholders shall be notified by board of directors of the written resolution of the termination of the company since the date of adoption. Members of the board of directors form the liquidation committee which shall conduct the liquidation of the company, and a public announcement shall be made. Where members of the board of directors cannot be members of the liquidation committee, Chinese certifies lawyers, Chinese certifies accountant and the like professional persons may be employed for assumption by the resolution of shareholders' general meeting. In case the company does not form the liquidation committee, the creditors may apply to the people' s court for appointment of persons to form the liquidation committee to conduct the liquidation.

Where the company is terminated in accordance with Item 5,6 and 7 of Article 143, the Register Authority or people' s court shall appoint relevant persons to form the liquidation committee to conduct the liquidation.

Article 145 During liquidation, a liquidation committee shall exercise the following functions and powers"

(1) to check up on the company' s assets, and formulate a balance sheet, assets catalog and lists of claims and debts;

(2) to dispose of the company' s unfishied business;

(3) to require the creditors of the company to implement their obligations;

(4) to pay off the debts of the company according to the repaying procedures prescribed by the law.

(5) to dispose of the remaining property of the company;

(7) to participate in lawsuit and arbitration on behalf of the company.

Article 146 The liquidation committee shall make at least 3 public announcements within 30 days since the date of establishment to urge the creditors to declare their claims within in a specific time limit. The time limit for claim declaration shall not be less than 3 months.
Where creditors fail to declare the claims within the time limit stipulated in the public announcement, they shall be taken as automatic abandonment of claims.

The creditors who are known by the liquidation committee, written notification shall be made to them within 10 days following the date of its establishment.

Article 147 The liquidation committee shall not repay creditors' debts in full during the claim declaring period. But with the approval of people' s court, the committee may repay in full those creditors who may have the guaranteed claims and have not damages to other creditors' interests.

Article 148 The company shall not engage in activities irrelevant to the liquidation after the liquidation begins. Any one is allowed to dispose of the property of the company without approval of the liquidation committee.

Where the property of the company is sufficient to pay off its debts after the liquidation committee has conducted the liquidation of company' s property, formulated a balance sheet and a inventory of assets, it may repay its creditors in full.

The liquidation committee shall not distribute the assets of the company to the shareholders prior to the full payments the expenditures and debts of the company.

Article 149 When the liquidation committee has preferentially pay off the expenditures of the company with its assets, it shall discharge in accordance with the followings:
(1) the wages and social insurance fee of the staff;
(2) taxes
(3) Debts of the company.

Article 150 After paying off the debts of the company, the remaining property shall be contributed to the shareholders by the liquidation committee in accordance with the articles of association of the company.

Article 151 After the completion of liquidation, the liquidation committee shall bring the liquidation report forward, and report the income and expense statement and various fiscal accounts during the period of liquidation to the shareholders' general meeting for confirmation with an exception of the illegal acts of the liquidation committee. The liquidation committee shall submit the liquidation report to the Register Authority in order to cancel the registration of the company and publicly announce the company' s determination with the approval of the Register Authority. If no registration of the company' s determination is transacted, the Register Authority shall revoke the business license of the company and publicly announce the revocation.

Liabilities which shall be assumed by the members of the liquidation committee apply to the provisions of Article 12 of these Regulations.

Article 152 If the liquidation committee has checked up on the company' s assets and formulated the balance sheet and a inventory of assets, discovers that there are insufficient assets in the company the pay off its debts, the committee shall apply to the people' s court for a declaration of bankruptcy of the company.

Where a company is declared bankrupt according to the law, liquidation shall be conducted in accordance with the relevant bankruptcy law and regulations.

Article 153 One of the following acts occurred during liquidating, the liquidation committee shall assume civil liabilities:

(1) to notify the creditors by notice or announcement disaccording to the provisions of regulation;

(2) to formulate false balance sheet and a inventory of assets..;
(3) to withdraw capital contribution surreptitiously, transfer assets, conceal claims and fabricate debts;

(4) to distribute company' s assets before paying off debts;

(5) to fail to pay off debts or distribute remaining property according to law.

бббб Crime shall be constituted in the case that the liquidation committee conducts acts prescribed by the preceding paragraph during liquidation. Criminal liabilities of the persons held directly responsible shall be investigated in accordance with the law.

Chapter XIII Supplementary Provisions

Article 154 The conditions and procedures for a state-owned enterprise to convert into company shall be specified by the municipal government.

Article 155 The joint stock limited companies incorporated within the territory of the Special Zone before the implementation of these Regulations shall improve the conditions of the companies and the articles of association of the companies, and transact the procedures of annual inspection during the period of annual inspection of 1994.

Article 156 The items of public announcement formulated by these Regulations shall be published in the prominent place of the Shenzhen Special Zone Daily, Shenzhen Economic Daily or other newspapers and magazines expressly provided by the municipal government.

Article 157 These Regulations shall be interpreted by the Standing Committee of Shenzhen Municipal People' s Congress.

Article 158 The specific rules of implementation may be formulated by the municipal government in accordance with these Regulations.

Article 159 These Regulations shall take effect as of October 1, 1993.

Article 160 In case of discrepancies between these Regulations and the relevant regulations formulated in the Special Zone prior to these Regulations, these Regulations shall prevail.

Laws of the Guangdong Province

Regulations on Joint Stock Limited Company Limited of Shenzhen Special Economic Zone