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Sole Proprietorship Enterprise Law of the People's Republic of China

Contents
Chapter One: General Provisions
Chapter Two: Establishment of Sole Proprietorship Enterprise
Chapter Three: Sole Proprietor and Management of the Sole Proprietor Enterprise's Affairs
Chapter Four: Dissolution and Liquidation of Sole Proprietorship Enterprise
Chapter Five: Legal Liabilities
Chapter Six: Supplementary Provisions
Chapter One: General Provisions
Article 1 With a view to regulate the activities of sole proprietorship enterprises, to protect the lawful rights and interests of sole proprietors and creditors of sole proprietorship enterprises, to safeguard the social and economic order, and to promote the development of socialist market economy, this Law is formulated in accordance with the Constitution.
Article 2 For purposes of this Law, a sole proprietorship enterprise means a business entity established within China with its capital contributed by one individual and its assets owned personally by the sole proprietor, who assumes unlimited liability to the extent of his personal assets.
Article 3 A sole proprietorship enterprise's main place of business shall be its domicile.
Article 4 In conducting business activities, a sole proprietorship enterprise shall abide by law and administrative regulations, as well as the principle of good faith and may not harm the public interests.
A sole proprietorship enterprise shall fulfill its obligation to pay tax in accordance with the law.
Article 5 The state shall protect the property and other lawful rights and interests of a sole proprietorship enterprise in accordance with the law.
Article 6 A sole proprietorship enterprise shall hire workers in accordance with the law. The lawful rights and interests of its workers are protected by law.
The workers of the sole proprietorship enterprise shall establish a labor union in accordance with the law, and the labor union shall conduct its activities in accordance with the law.
Article 7 A member of the Chinese Communist Party in a sole proprietorship enterprise shall conduct his activities in accordance with the Charter of the Chinese Communist Party.
Chapter Two: Establishment of Sole Proprietorship Enterprise
Article 8 For the establishment of a sole proprietorship enterprise, the following conditions shall be met:
(i) The sole proprietor is a natural person;
(ii) There is a lawful enterprise name;
(iii) There is capital contribution declared by the sole proprietor;
(iv) There is a permanent place and the necessary conditions for production and operation;
(v) There are necessary personnel.
Article 9 In establishing a sole proprietorship enterprise, the sole proprietor or the agent appointed thereby shall submit such documents as an application for the establishment of a sole proprietorship enterprise, proof of identity of the sole proprietor, proof of use of the place for production and operation, etc. to the registration authority of the place where the sole proprietorship enterprise will be located. Where an agent is appointed to apply for the establishment of the sole proprietorship enterprise, the power of attorney issued by the sole proprietor and the legal identity of the agent shall be presented.
A sole proprietorship enterprise may not engage in any business prohibited by law or administrative regulations; where the sole proprietorship enterprise intends to engage in any business which requires approval by the relevant authority, the approval document issued by the relevant authority shall be presented at the time of applying for establishment registration.
Article 10 The application form for the establishment of a sole proprietorship enterprise shall set forth the following:
(i) name and domicile of the enterprise;
(ii) name and residence of the sole proprietor;
(iii) the amount and form of capital contribution;
(iv) the scope of business.
Article 11 The name of a sole proprietorship enterprise shall be consistent with its form of liability and its type of business.
Article 12 Within fifteen days of its receipt of the application documents, the registration authority shall register the sole proprietorship enterprise and issue a business license thereto if the documents comply with the requirements set forth herein, or deny registration and issue a written response stating the reason for denial.
Article 13 The date of issuance of the business license for a sole proprietorship enterprise shall be the date of its establishment.
Prior to issuance of a business license for sole proprietorship enterprise, the sole proprietor may not engage in any business in the name of the sole proprietorship enterprise.
Article 14 In establishing a branch of a sole proprietorship enterprise, the sole proprietor or an agent appointed thereby shall submit an application for registration to the registration authority of the place where the branch will be located, and the branch shall be issued a business license.
Upon approval and registration of the branch, its registration certificate shall be filed with the registration authority having jurisdiction over the sole proprietorship enterprise to which such branch belongs.
The civil liabilities of the branch shall be borne by the sole proprietorship enterprise establishing such branch.
Article 15 Where during its existence, a sole proprietorship enterprise undergoes a change which affects a registered item, an application for registration amendment shall be submitted to the registration authority in accordance with the law within fifteen days of the decision to make such change.
Chapter Three: Sole Proprietor and Management of the Sole Proprietor Enterprise's Affairs
Article 16 A person who is prohibited from engaging in any for-profit activity may not apply for the establishment of a sole proprietorship enterprise as a sole proprietor.
Article 17 A sole proprietor has lawful title to the assets of the sole proprietorship enterprise, and any related right may be assigned or inherited in accordance with the law.
Article 18 Where at the time of application for establishment, the sole proprietor expressly declares any property jointly owned by his family as capital contribution, he shall assume unlimited liability to the extent of such joint property in accordance with the law.
Article 19 A sole proprietor may manage the affairs of the sole proprietorship enterprise by himself, and may also appoint or hire another person with the capacity for civil act to manage the sole proprietorship enterprise.
Where a sole proprietor appoints or hires another person to manage the affairs of the sole proprietorship enterprise, he shall conclude with the agent or employee a written contract prescribing the entrusted affairs and the scope of authority granted.
The agent or employee shall perform the obligations of good faith and due care, and manage the affairs of the sole proprietorship enterprise in accordance with the contract with the sole proprietor.
Any restriction by the sole proprietor on the authority of the agent or employee shall not constitutes a defense against a third person in good faith.
Article 20 The person appointed or hired by the sole proprietor to manage the affairs of the sole proprietorship enterprise may not engage in any of the following conducts:
(i) demanding or accepting bribes by usurping his official position;
(ii) converting property of the sole proprietorship enterprise by usurping his official position or working relationship;
(iii) misappropriating funds of the sole proprietorship enterprise by using them for his own purpose or lending them to a third person.
(iv) depositing funds of the sole proprietorship enterprise in his own name or in the name of any third person without authorization;
(v) pledging assets of the sole proprietorship enterprise as security without authorization;
(vi) engaging in any business in competition with the sole proprietorship enterprise without consent by the sole proprietor;
(vii) entering into any contract or conducting any transaction with the sole proprietorship enterprise without consent by the sole proprietor;
(viii) assigning any trademark or other intellectual property of the sole proprietorship enterprise to a third person for use without consent by the sole proprietor;
(ix) disclosing trade secrets of the sole proprietorship enterprise;
(x) any other act prohibited by law or administrative regulations.
Article 21 A sole proprietorship enterprise shall set up accounting books and conduct accounting in accordance with the law.
Article 22 Where a sole proprietorship enterprise employs workers, it shall enter into labor contracts with the workers, and ensure workplace safety and make full and timely payment of wages.
Article 23 A sole proprietorship enterprise shall participate in the social insurance scheme in accordance with the relevant stipulations of the state, and shall pay social insurance premiums for its workers.
Article 24 A sole proprietorship enterprise may apply for loan and acquire land-use-rights in accordance with the law, and shall enjoy other rights prescribed by law or administrative regulations.
Article 25 No entity or individual may force a sole proprietorship enterprise to contribute funds, goods or labor in any manner in violation of law or administrative regulations; a sole proprietorship enterprise is entitled to reject any attempt forcing it to contribute funds, goods or labor in violation of law.
Chapter Four: Dissolution and Liquidation of Sole Proprietorship Enterprise
Article 26 A sole proprietorship enterprise shall be dissolved in any of the following circumstances:
(i) The sole proprietor decides to dissolve the sole proprietorship enterprise;
(ii) The sole proprietor is deceased or is declared deceased, and there is no heir or the heir has renounced his inheritance;
(iii) Its business license is lawfully revoked;
(iv) Any other situation prescribed by law or administrative regulations has occurred.
Article 27 Where a sole proprietorship enterprise is to be dissolved, the sole proprietor shall conduct liquidation himself, or the creditors thereof may apply to the People's Court to designate a liquidator to conduct liquidation.
Where the sole proprietor conducts liquidation himself, he shall notify the creditors fifteen days prior to liquidation, and where he is unable to give notice, he shall make a public announcement. A creditor who has received such notice shall file a claim with the sole proprietor within thirty days of notification, and a creditor who has not received such notice shall file a claim with the sole proprietor within sixty days of the public announcement.
Article 28 Upon dissolution of a sole proprietorship enterprise, the former sole proprietor shall be liable to repay the debt incurred by the sole proprietorship enterprise during its existence, provided that any claim not made by the relevant creditor within five years shall be extinguished.
Article 29 Upon dissolution of a sole proprietorship enterprise, its assets shall be paid out in the following order of priority:
(i) wages and social insurance premiums payable;
(ii) taxes payable;
(iii) other debts.
Article 30 During liquidation, a sole proprietorship enterprise may not engage in any business activity unrelated to the liquidation. The sole proprietor may not transfer or conceal the property of the sole proprietorship enterprise prior to full payment of its debt.
Article 31 Where the assets of a sole proprietorship enterprise are not sufficient to repay its debts in full, the sole proprietor shall contribute his other personal assets to cover the difference.
Article 32 Upon completion of the liquidation of a sole proprietorship enterprise, the sole proprietor or the liquidator designated by the People's Court shall prepare a liquidation report, and shall conduct de-registration with the registration authority within fifteen days.
Chapter Five: Legal Liabilities
Article 33 Where a sole proprietor, in violation of the provisions hereof, obtains registration for the sole proprietorship enterprise by submitting false documents or by other fraudulent means, he shall be ordered to rectify the situation, and shall be fined not more than five thousand Yuan; where the circumstance is serious, its business license shall be concurrently revoked.
Article 34 Where the name of a sole proprietorship enterprise, in contravention to the provisions hereof, is not consistent with the name registered with the registration authority, the sole proprietorship enterprise shall be ordered to rectify the situation within a prescribed time limit, and shall be fined not more than two thousand Yuan.
Article 35 Where a sole proprietorship enterprise alters, rents or assigns its business license to any other person, it shall be ordered to rectify the situation, and any resulting illegal income shall be confiscated, and the sole proprietorship enterprise shall be fined not more than three thousand Yuan; where the circumstance is serious, its business license shall be revoked.
Where a person falsifies the business license of a sole proprietorship enterprise, he shall be ordered to cease his business, and any illegal income shall be confiscated, and he shall be fined not more than five thousand Yuan. Where such act constitutes a crime, criminal liability shall be imposed in accordance with the law.
Article 36 If a sole proprietorship enterprise fails to commence business within six months from the time of its establishment, or it ceases to carry out its business for more than six consecutive months, its business license shall be revoked.
Article 37 Where a person, in violation of the provisions hereof, engages in any business activity in the name of a sole proprietorship enterprise while no business license has been issued, he shall be ordered to cease such business activity, and he shall be fined not more than three thousand Yuan.
Where a registered item of a sole proprietorship enterprise has changed, if amendment registration is not carried out in accordance herewith, the sole proprietorship enterprise shall be ordered to carry out such registration within a prescribed time limit; where amendment registration is not carried out within the prescribed time limit, the sole proprietorship enterprise shall be fined not more than two thousand Yuan.
Article 38 If while conducting the affairs of the sole proprietorship enterprise, the person appointed or hired by a sole proprietor breaches the contract between them, thereby causing harm to the sole proprietor, such person shall be liable for civil damages.
Article 39 Where a sole proprietorship enterprise, in violation hereof, violates the lawful rights and interests of its workers, fails to ensure the safety of its workers or fails to pay their social insurance premiums, it shall be sanctioned in accordance with the relevant laws or administrative regulations, and liability shall be imposed on the relevant person.
Article 40 Where the person appointed or hired by a sole proprietor infringes on the property interests of the sole proprietorship enterprise, he shall be ordered to make restitution,
and where the sole proprietorship enterprise sustains any loss as a result, he shall be liable for damages in accordance with the law; where he has made any illegal gain, such illegal gain shall be confiscated; where a crime is committed, criminal liability shall be imposed.
Article 41 Where a sole proprietorship enterprise is forced to contribute resources in the form of labor, goods, or funds in violation of law or administrative regulations, the responsible party shall be sanctioned in accordance with the relevant law or administrative regulation, and liability shall be imposed on the relevant person.
Article 42 Where before or during the liquidation of a sole proprietorship enterprise, the sole proprietorship enterprise or the sole proprietor conceals or transfers its/his assets in order to evade debts, such assets shall be reclaimed in accordance with the law and sanction shall be imposed in accordance with the law; where such act constitutes a crime, criminal liability shall be imposed in accordance with the law.
Article 43 Where the sole proprietor violates the provisions hereof, thereby incurring civil liability for damages as well as administrative or criminal fine, if his assets are not sufficient to pay the above amounts in full, or his assets are to be confiscated, satisfaction of the relevant civil liability shall have priority.
Article 44 Where the registration authority grants registration to an application for the registration of sole proprietorship enterprise which fails to meet the conditions prescribed herein, or fails to grant registration to an application for registration of sole proprietorship enterprise which meets the conditions prescribed herein, the person direct responsible shall be assessed administrative penalties in accordance with the law. Where such act constitutes a crime, criminal liability shall be imposed in accordance with the law.
Article 45 Where the department in charge of the registration authority compels it to grant registration to an application which fails to meet the conditions prescribed herein, or engages in cover up for an illegal registration, the person with directly responsible shall be assessed administrative penalties in accordance with the law. Where such act constitutes a crime, criminal liability shall be imposed in accordance with the law.
Article 46 Where the registration authority fails to grant registration to an application which meets the conditions prescribed herein, or fails to issue any response after the legally prescribed time limit has expired, the party may apply for administrative review or bring an administrative suit.
Chapter Six: Supplementary Provisions
Article 47 This Law shall not apply to a wholly foreign-owned enterprise.
Article 48 This Law shall take effect as from January 1, 2000.

 

 

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