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[ESTABLISHING A BUSINESS ENTITY IN CHINA]
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legal representative has to conduct activities on behalf of the company within the authorized scope. The legal representative candidate is limited to either the chairperson of the board of directors, the executive director, or the manager of the LLC. ◼ An LLC shall also have at least one manager that conducts the day-to-day operation of the company. The manager is appointed or removed by the board of directors and reports thereto.
Like an LLC, a CLS will also have registered capital and a total investment amount although the requirements differ in detail. Governance ◼ The shareholders’ general meeting is the highest organ of authority of a CLS. The articles of association of a CLS may provide for the proceedings and voting procedures of the shareholders’ general meeting except as otherwise mandated by law. ◼ Like an LLC, a CLS shall also have a board of directors, a board of supervisors, a legal representative, and one or more managers that exercise powers and undertake obligations similar to those described in subsection a). ◼ The law provides for higher requirements regarding the day-to-day operation and management of a CLS. For example, a CLS must have a board of five to nineteen directors and a board of at least three supervisors – an executive director or one or two supervisors is not allowed. The law also provides for mandatory procedural requirements for the proceedings of the shareholders’ general meetings and the meetings of the board of directors that
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b) Company Limited by Shares (“ CLS ”) A CLS in China is similar to a corporation in many other jurisdictions. Unlike an LLC where the ownership of the shareholders is represented by subscribed capital, the shareholders of a CLS subscribe for shares. Investors tend to choose the CLS where the company is in a larger scale. In general, it is more burdensome to operate a CLS than an LLC, as the law sets higher requirements for CLSs with respect to corporate governance, standardized operation, and many other aspects. - Limited liability The shareholders’ liability is limited to the aggregate subscription price of their subscribed shares.
ILN Corporate Group – Establishing a Business Entity Series
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