(Adopted at the 7th Routine Meeting of the State Council onJune 3, 1988. Issued by the 4th Order of the State Council of the People'sRepublic of China on June 5,1988)

(Adopted at the 7th Routine Meeting of the State Council onJune 3, 1988. Issued by the 4th Order of the State Council of the People'sRepublic of China on June 5,1988) Whole Doc.


Chapter 1 General Provisions Article 1 These Regulations are formulated to encourage and guide a healthy development of private enterprises, to protect their legal rights and interests and strengthen the supervision and administration, thus prospering the socialist planned commodity economy.

Article 2 The "private enterprise" referred to in these Regulations means the benefit-sought economic organization whose property is owned by the individuals with more than 8 employees.

Article 3 The private economy is a supplement to the socialist economy under the public ownership. The State protects the legal rights and interests of the private enterprise.

The private enterprise shall conduct its business within the scope stipulated by laws, regulations and policies of the State.

Article 4 The staff and workers of the private enterprise may organize the trade union in accordance with the law. The staff and worker's legal rights and interests shall be protected by laws of the State.

Article 5 The private enterprises are entitled to establish the private enterprise association.

Chapter 2 Types of Private Enterprises Article 6 The private enterprises are classified under the following 3 types: (1) personal-fund enterprise; (2) partnership enterprise; (3) limited-liability company.

Article 7 The "personal-fund enterprise" refers to the enterprise which is invested in and managed by one person.

The investor of the personal-fund enterprise shall assume unlimited liability for the debts of the enterprise.

Article 8 The "partnership enterprise" means the enterprise which is funded according to an agreement, managed together, and whose profits and losses are born jointly by more than 2 persons.

The partnership enterprise shall have a written agreement. The partners shall assu me unlimited joint liability for the debts of the enterprise.

Article 9 The "limited-liability company" means the investors shall hold the liability for the company according to their contribution and the company shall bear its liabilities with its all assets.

The limited-liability company shall comply with the following provisions: (1) the name of the company shall be titled with "limited-liability company" or "limited company"; (2) the articles of associations of the company shall conform with the stipulations of these Regulations; (3) the number of investors shall range from 2 to 30; (4) registered fund shall have a legal certificate of capital verification; (5) the transfer of an investor's contribution shall be agreed upon by the oth er investors; if the number of investors is more than 3, the transfer shall be agreed up on by the majority of the investors; (6) the registered fund shall not be reduced; (7) the public issue of stocks shall not be permitted.

The limited-liability company with more than 30 investors shall ap ply and report specially to the department in change of administration of industrial and commercial, and go through the registration formalities upon the permission.

Article 10 The limited-liability company shall obtain the status of legal person according to law.

Chapter 3 Establishment and Termination of Private Enterprise Article 11 The following persons may apply for establishing a private enterprise: (1) villagers in rural areas; (2) unemployed people in cities and towns; (3) individual industrial and commercial households; (4) persons who have resigned or been discharged; (5) persons who have retired, and other people permitted by laws, regulations and policies of the State.

Article 12 Within the scope stipulated by laws, regulations and policies of the State, the private enterprise can conduct its production and business in the lines of industry, construction, traffic and transportation, commerce, catering, service, repairing and consulting of science and technology.

The private enterprise shall not be engaged in military industry and banking, and cannot produce and deal in the products prohibited by the State.

Article 13 When applying for establishing a private enterprise, it shall meet the following requirements: (1) having funds and employees in conformity to the scale of business and service of the enterprise; (2) having fixed place of business and necessary equipment; (3) its business scope being in conformity with provisions of laws, regulation s and policies of the State.

Article 14 The articles of association of the limited-liability company shall include the following items: (1) the name and address of the company; (2) the purpose of establishing the company and its business scope; (3) the amounts of registered funds and the contribution of each investor; (4) each investor's name and address, and his rights and obligations; (5) the institution of the company; (6) conditions for dissolution of the company; (7) conditions for investors transferring their share of investment; (8) allocation of profits and bearing of losses; (9) procedures for the amendment of articles of association of the company; (10) other items needed to be stated expressly.

Article 15 When applying for establishing a private enterprise, the applicant shall register with the local department in charge of administration of industry and commerce by the related certificates. Upon the ratification and the issuing of its business license, the private enterprise can conduct its business operations.

Article 16 When separating, merging, transferring, moving and changing business scope, the private enterprise shall go through the formalities of alternation of registration or re-registration with the departments in charge of administration of industry and commerce.

Article 17 In case of termination, the private enterprise shall file application with the departments in charge of administration of industry and commerce 30 days before termination, and cancel the registration after verification by the department.

In case of termination, the private enterprise shall carry out liquidation and pay off its debts.

Article 18 In case of bankruptcy, the private enterprise shall carry out liquidation of bankru ptcy and pay off its debts. The detailed measures for the liquidation will be made out s eparately.

Article 19 A private enterprise with the qualification of legal person shall handle the registration of establishment, alternation or cancellation of the registration according to the provisions of Regulations of the People's Republic of China for the Registration of the Enterprise Legal Person.

Chapter 4 Rights and Obligations of the Private Enterprise Article 20 The investor of the private enterprise is entitled to have the ownership to his property, which can be inherited according to law.

Article 21 The private enterprise is entitled to have the following rights in the course of production and operation: (1) exclusive right of using the name which is ratified and registered in the ratified scope; (2) independent right of management in the ratified scope of business; (3) right of making decisions for setting up institution and employing and dis missing the staff and workers of the enterprise; (4) right of making decisions for the system of wages and salaries, and the forms of profit distribution; (5) right of making out the price of the products and the standard of charges according to the regulations of the State on price control; (6) right of signing the contract; (7) rights of application for patent and registration of trade-mark.

Article 22 The private enterprise, according to the provisions of laws and regulations of the State, may set up Sino-foreign joint ventures, Sino-foreign cooperative enterprise with foreign company, enterprise and other economic organizations or individuals, and may eng age in processing with supplied materials and samples, assembling with supplied parts an d compensation trade.

Article 23 The private enterprise shall perform the following obligations in the course of production and operation: (1) abiding by laws, regulations and policies of the State; (2) paying taxes according to law; (3) obeying the supervision and administration of the relevant authorities of the State.

Article 24 The private enterprise shall open account (s) with a bank or other financial institutes according to the relevant provisions of the State.

Those who are up to the stipulated conditions can apply for the loans.

Article 25 No unit can require in any way the private enterprise to provide financial and material assistance or manpower, except for the stipulations of laws and regulations of the State. The private enterprise has the right to refuse the apportion allotted to it, and the departments in charge of administration of industry and commerce are authorised to stop the apportion.

Article 26 The private enterprise's "Business License of Enterprise Legal Person" or its "Business License" cannot be suspended and revoked, except that it is suspended and revoked by the departments in charge of administration of industry and commerce according to legal procedures.

Chapter 5 Labour Management of the Private Enterprise Article 27 When the private enterprise employs staff and workers, the two parties shall, according to the principles of equality, willingness, consultation and consensus, sign the labour contract in a written form to define the rights and obligations of the two parties.

The labour contract of the private enterprise shall be put on file to the local departments of labour administration and management.

Article 28 The labour contract shall include the following items: (1) the requirements of the quality and quantity of the labour of the staff an d workers; (2) the term of the contract; (3) the working conditions; (4) payment for labour, insurance and welfare treatment; (5) discipline of working; (6) responsibility for breach of the labour contract; (7) other items reached by the two parties.

Article 29 The labour disputes occurred from the private enterprise shall be settled with reference to the Interim Provisions on Handling the Labour Dispute of the State-owned Enterprise.

Article 30 The private enterprise must implement the relevant stipulations of the State on labour protection, set up necessary rules and system, and provide with security and sanitation facilities, thus ensuring safety and health of the staff and workers.

The private enterprise must procure insurance for the staff and workers engaging in such jobs related to the health and security of their life according to the provisions of the State.

The private enterprise, if having capacity, shall procure social insurance for its staff and workers.

Article 31 The private enterprise shall institute an eight-hour working day system.

Article 32 It is prohibited for the private enterprise to employ child labour who has not reached the age of 16.

Article 33 The trade union of a private enterprise has the right to sign a collective contract on behalf of the staff and workers, protect lawful rights and interests of the staff and workers, and support the activities of production and operation of the enterprise.

Chapter 6 Financial Affairs and Tax of the Private Enterprise Article 34 The private enterprise shall, within 30 days from the date of getting its "Business License of Enterprise Legal Person" or its "Business License", apply and report to the local tax authority for carrying out tax registration .

Article 35 The private enterprise must, in accordance with the finance and accounting regulations of the State and provisions of the tax authority, set up its financial and accounting system, allocate personnel in charge of finance and accounting, establish the accounting books, make up and report the statement of financial affairs, perform strictly the obligation of tax-paying and accept the supervision and check of the tax authority.

Article 36 The salary of the factory manager (or the general manager or the chairman of the board of directors) of the private enterprise may be defined no more than 10 times of the average salary of the staff and workers of the enterprise.

Article 37 The income tax of private enterprise shall be imposed in accordance with Interim Regulations of the People's Republic of China on Income Tax of the Private Enterprise and other relevant provisions.

Article 38 After payment of taxes, the proportion of the profits earned by the private enterprise for the productive development fund shall not be less than 50%. If the proportion is less than 50% owing to special reasons, it must be approved by the tax authority.

The productive development fund of a private enterprise may be used in the fields of increasing its capital for production expansion, investing in other enterprises, paying off its loan or making up the losses of the enterprise. If used for other purposes, it must be approved by the tax authority.

Article 39 For the income of salary and gains allotted from profit-after-tax, the private enterprise investor shall pay the personal income adjusted tax according to law.

Chapter 7 Supervision and Punishment Article 40 The departments in charge of administration of industry and commerce shall strengthen the supervision and administration over the private enterprise, protect its lawful business operation and make check and punishment on the illegal business activities.

Every department in charge in the related lines of business shall be responsible for the direction, help and administration to the production and operation of the private enterprise.

Article 41 If the private enterprise conducts one of the following actions, the departments in charge of administration of industry and commerce shall, depending on the seriousness of the individual case, impose different punishment including warning, fining, confiscating the unlawful income, ordering to close for rectification and suspending its "Business License": (1) concealing the facts and making fraud in registration or doing business without approval and registration; (2) dealing with operation beyond the scope of business upon approval and registration or going through the registration formalities of alteration, reregistration and cancellation in violation of the provisions; (3) forging, altering, renting, transferring, selling the "Business License" or duplicating it without permission; (4) engaging in unlawful business activities.

The private enterprise qualified as legal person which violates the provisions for administration of registration shall be punished according to the Regulation of the People's Republic of China for Registration of Enterprise Legal Perso n.

Article 42 The private enterprise who conducts one of the following actions shall be imposed a punishment of warning or fining according to the seriousness of the individual case by the departments in charge of labour administration: (1) conducting in production and operation in violation of the provisions for labour protection of the State; (2) employing the child labour; (3) infringing upon the legal rights and interests of the staff and workers.

Article 43 The private enterprise who conducts actions in violation of Article 38 of these Regulations shall be given punishment of warning or fining by the tax authority according to the seriousness of the individual case.

Article 44 If the private enterprise is not satisfied with decision on punishment made by the departments. in charge according to Articles 41 and 42 of these Regulations, it may, within 15 days from the date of receipt of the notification of punishment, apply for reconsideration to the department at next higher level than that which made the decision of punishment. The department shall, within 30 days from the date of receipt of the application, make the decision of reconsideration. And if the applicant is not satisfied with the decision of reconsideration, it may bring an action at the people's court within 30 days from the date of receipt of the notification.

If the private enterprise does not apply for reconsideration or bring an action at the people's court within the term specified, the decision of punishment shall enter into force.

Article 45 The private enterprise in violation of laws and regulations of the State relating to tax, resource, administration of industry and commerce, price, finance, measurement, quality, sanitation, environment protection shall be punished by the relevant authorities according to law.

Article 46 If the personnel of the departments in charge violates the provisions of these Regulations, abusing power, seeking personal gains by fraud, accepting bribes or infringing upon legal rights and interests of the private enterprise, the related departments in charge shall give administrative punishment or economic punishment according to the seriousness of the individual case. For those who violate the criminal law, the judicial authority shall investigate and affix the criminal responsibility according to law.

Chapter 8 Supplementary Provisions Article 47 The State Administration of Industry and Commerce is responsible for the interpretation of these Regulations; The implementing measures shall be formulated by the State Administration of Industry and Commerce together with other departments concerned.

Article 48 These Regulations shall enter into force from July 1, 1988.