Table of Contents
Chapter I: General Provisions
Article 1 This Law is enacted for the purposes of regulating the conduct of partnership enterprises, protecting the lawful rights and interests of partnership enterprises and their partners, maintaining social and economic order, and promoting the development of the socialist market economy.
Article 2 For the purposes of this Law, “partnership enterprise” means a for-profit organization established within the territory of China by natural persons, legal persons, and other organizations in accordance with this Law, in which the partners enter into a partnership agreement, jointly contribute capital, conduct business operations jointly, share profits, and bear risks, and in which the partners assume unlimited and joint and several liability for the debts of the partnership enterprise. For the purposes of this Law, “general partnership enterprise” means a partnership enterprise consisting of general partners, who assume unlimited and joint and several liability for the debts of the partnership enterprise. Where the provisions of this Law provide otherwise on the form of liability of general partners, such provisions shall prevail. For the purposes of this Law, “limited liability partnership enterprise” means a partnership enterprise consisting of general partners and limited partners, in which the general partners assume unlimited and joint and several liability for the debts of the partnership enterprise, and the limited partners assume liability to the extent of their capital contributions.
Article 3 Wholly state-owned companies, state-owned enterprises, listed companies, public welfare institutions, and social organizations shall not become general partners.
Article 4 A partnership agreement shall be concluded in writing in accordance with law by all partners through consensus through consultation.
Article 5 The conclusion of a partnership agreement or the establishment of a partnership enterprise shall abide by the principle of voluntariness, equality, fairness, and good faith.
Article 6 The production, business operation, and other income of a partnership enterprise shall be subject to taxation by its partners separately in accordance with the relevant state tax provisions.
Article 7 A partnership enterprise and its partners shall abide by laws and administrative regulations, observe commercial morals, and assume social responsibilities.
Article 8 The lawful property and rights and interests of a partnership enterprise and its partners shall be protected by law.
Article 9 For the application for the registration of establishment of a partnership enterprise, the applicant shall submit to the enterprise registration authority documents such as the application for registration, the partnership agreement, and the partner identity certificate. Where the business scope of a partnership enterprise includes matters for which administrative approval is required prior to registration, the enterprise shall fulfill the administrative approval procedures in accordance with law and submit the approval document at the time of registration.
Article 10 Where the application materials submitted by an applicant are complete and conform to the statutory form and the enterprise registration authority can register them on the spot, registration shall be processed on the spot and a business license shall be issued. Except under the circumstances specified in the preceding paragraph, the enterprise registration authority shall decide whether to approve registration within 20 days from the date of accepting the application; if registration is approved, a business license shall be issued; if registration is not approved, a written reply shall be given with reasons stated.
Article 11 The date of issuance of the business license of a partnership enterprise shall be the date of establishment of the partnership enterprise. Before a partnership enterprise obtains its business license, its partners shall not conduct business activities in the name of the partnership enterprise.
Article 12 Where a partnership enterprise establishes a branch, it shall apply for registration with the enterprise registration authority at the place where the branch is located and obtain a business license.
Article 13 Where a matter recorded in the registration of a partnership enterprise changes, the partner executing the partnership affairs shall, within 15 days from the date of the change decision or the date of occurrence of the change, apply to the enterprise registration authority for registration of the change.
Chapter II: Establishment of a Partnership Enterprise
Article 14 To establish a partnership enterprise, the following conditions shall be met: (1) having two or more partners; where a partner is a natural person, he shall have full capacity for civil conduct; (2) having a written partnership agreement; (3) having capital contributions subscribed or actually paid by the partners; (4) having a name and a business premise for the partnership enterprise; and (5) other conditions prescribed by laws and administrative regulations.
Article 15 The name of a partnership enterprise shall indicate the words “general partnership” or “limited liability partnership.”
Article 16 A partner may make capital contributions in cash, in kind, with intellectual property rights, land use rights, or other property rights, or with labor services. Where a partner makes a capital contribution in kind, with intellectual property rights, land use rights, or other property rights, and it is necessary to assess the value, the value may be determined by all partners through consultation, or an assessment may be entrusted to a statutory assessment institution. Where a partner makes a capital contribution with labor services, the method of assessment shall be determined by all partners through consultation and stated in the partnership agreement.
Article 17 A partner shall fulfill the capital contribution obligation in accordance with the method, amount, and time limit for capital contribution stipulated in the partnership agreement. Where a capital contribution is made with non-monetary property and it is necessary to go through the formalities for the transfer of property rights in accordance with laws and administrative regulations, such formalities shall be completed in accordance with law.
Article 18 A partnership agreement shall state the following matters: (1) the name and principal business premise of the partnership enterprise; (2) the purpose of the partnership and the business scope of the partnership enterprise; (3) the names or titles and domiciles of the partners; (4) the method, amount, and time limit for capital contributions by the partners; (5) the method of profit distribution and loss sharing; (6) the execution of partnership affairs; (7) admission to and withdrawal from the partnership; (8) the method for dispute resolution; (9) the dissolution and liquidation of the partnership enterprise; and (10) liability for breach of contract.
Article 19 A partnership agreement shall become effective upon the signatures, seals, or affixation of fingerprints by all partners. A partner shall enjoy rights and assume liabilities in accordance with the partnership agreement. Where a partnership agreement is amended or supplemented, it shall be subject to the unanimous consent of all partners, unless otherwise provided in the partnership agreement. Where matters are not specified in the partnership agreement or the specification is unclear, the partners shall decide through consultation; where consultation fails, the matter shall be handled in accordance with the provisions of this Law and other relevant laws and administrative regulations.
Chapter III: Property of a Partnership Enterprise
Article 20 The capital contributions made by the partners, the proceeds and other property acquired in the name of the partnership enterprise, and all other property lawfully acquired shall be the property of the partnership enterprise.
Article 21 Before the liquidation of a partnership enterprise, no partner may request the division of the property of the partnership enterprise, unless otherwise provided in this Law. Where a partner transfers all or part of his share of property in the partnership enterprise to a person other than the partners before the end of the partnership, the unanimous consent of the other partners shall be required, unless otherwise provided in the partnership agreement.
Article 22 Where a partner transfers all or part of his share of property in the partnership enterprise among the partners, he shall notify the other partners.
Article 23 Where a partner transfers his share of property in the partnership enterprise to a person other than the partners, the other partners shall have the right of first refusal under equal conditions, unless otherwise provided in the partnership agreement.
Article 24 A person other than the partners who lawfully acquires a partner’s share of property in the partnership enterprise shall become a partner of the partnership enterprise upon the amendment of the partnership agreement, and shall enjoy rights and assume obligations in accordance with this Law and the amended partnership agreement.
Article 25 Where a partner pledges his share of property in the partnership enterprise, the unanimous consent of the other partners shall be required; without the unanimous consent of the other partners, the pledge shall be invalid, and where losses are caused to a bona fide third party, the actor shall assume liability for compensation in accordance with law.
Chapter IV: Execution of Partnership Affairs
Article 26 Each partner shall have the right to execute partnership affairs. Where all partners unanimously agree in accordance with the partnership agreement or through decision to appoint one or more partners to execute partnership affairs, the appointed partner or partners shall execute the partnership affairs. Where a legal person or other organization executes partnership affairs, the representative appointed by it shall execute the affairs.
Article 27 Where one or more partners are appointed to execute partnership affairs in accordance with the provisions of the second paragraph of Article 26 of this Law, the other partners shall no longer execute partnership affairs. A partner who does not execute partnership affairs shall have the right to supervise the execution of affairs by the executing partner.
Article 28 Where one or more partners execute partnership affairs, they shall periodically report to the other partners on the state of affairs execution and the business operations and financial status of the partnership enterprise. The proceeds derived by the executing partner from the execution of partnership affairs shall belong to the partnership enterprise, and the expenses incurred and debts assumed shall be borne by the partnership enterprise. In order to know the business operations and financial status of the partnership enterprise, a partner shall have the right to examine the accounting books and other financial materials of the partnership enterprise.
Article 29 Where partners separately execute partnership affairs, the executing partner may raise an objection to the affairs executed by another partner. Upon an objection being raised, the execution of the relevant affair shall be suspended. Where a dispute arises, it shall be resolved in accordance with the provisions of Article 30 of this Law. Where a partner appointed to execute partnership affairs fails to execute the partnership affairs in accordance with the partnership agreement or the decision of all partners, the other partners may decide to remove him. Where the partnership enterprise appoints a partner to execute partnership affairs in accordance with the provisions of the second paragraph of Article 26 of this Law, the other partners shall no longer execute partnership affairs.
Article 30 Partners shall resolve matters relating to the partnership enterprise by voting in accordance with the method stipulated in the partnership agreement. Where the partnership agreement is silent or the specification is unclear, the method of one person, one vote, with the consent of the majority of all partners, shall be adopted. Except as otherwise provided in this Law, the following matters shall be subject to the unanimous consent of all partners: (1) changing the name of the partnership enterprise; (2) changing the business scope and the principal business premise of the partnership enterprise; (3) disposing of the real property of the partnership enterprise; (4) transferring or disposing of the intellectual property rights and other property rights of the partnership enterprise; (5) providing security with the property of the partnership enterprise; (6) appointing a person other than the partners to serve as the manager of the partnership enterprise.
Article 31 A partner shall not engage, by himself or in cooperation with others, in any business that competes with the partnership enterprise. A partner shall not conduct business transactions with the partnership enterprise, unless otherwise provided in the partnership agreement or unanimously agreed by all partners. A partner shall not engage in any activity that harms the interests of the partnership enterprise.
Article 32 The partners shall distribute profits and share losses of the partnership enterprise in accordance with the provisions of the partnership agreement; where the partnership agreement is silent or the specification is unclear, the partners shall decide through consultation; where consultation fails, the partners shall distribute and share in proportion to their actual capital contributions; where the proportion of capital contributions cannot be determined, the profits and losses shall be distributed and shared equally among the partners. A partnership agreement shall not stipulate that all profits be distributed to some of the partners or that all losses be borne by some of the partners.
Article 33 Where a partner increases or decreases his capital contribution to the partnership enterprise in accordance with the partnership agreement or the decision of all partners, he shall fulfill the relevant formalities in accordance with law.
Article 34 A manager appointed by the partnership enterprise shall perform his duties within the scope of authorization of the partnership enterprise. Where a manager appointed by the partnership enterprise exceeds the scope of authorization in performing his duties, or causes losses to the partnership enterprise due to intentional or gross negligence, he shall assume liability for compensation in accordance with law.
Article 35 A partnership enterprise shall establish its enterprise financial and accounting system in accordance with laws and administrative regulations.
Chapter V: Relationship between the Partnership Enterprise and Third Parties
Article 36 The restrictions imposed by a partnership enterprise on a partner’s execution of partnership affairs and his right to represent the partnership enterprise externally shall not be set up against a bona fide third party.
Article 37 A partnership enterprise shall first pay off its debts with all of its property. Where the property of a partnership enterprise is insufficient to pay off the debts when due, each partner shall assume unlimited and joint and several liability. Where a partner assumes liability in excess of his share of the loss due to his joint and several liability, he shall have the right to seek recovery from the other partners.
Article 38 Where a partnership enterprise and its partners assume joint and several liability, the creditor may, at his option, demand any one, several, or all of the partners to perform the obligation.
Article 39 Where a partner assumes unlimited and joint and several liability for the debts of a partnership enterprise, the provisions of Article 38 of this Law shall apply.
Article 40 A debt claimed from the partnership enterprise by a creditor shall not be set off against a debt owed by the creditor to a partner. A creditor of a partner shall not exercise the partner’s rights in the partnership enterprise on his behalf by subrogation, but the creditor may seek satisfaction from the partner’s share of proceeds from the partnership enterprise.
Article 41 Where a partner’s personal debts are due and payable, his creditor shall not use the creditor’s rights to set off against the debts owed by him to the partnership enterprise; nor shall he exercise the partner’s rights in the partnership enterprise on his behalf by subrogation. Where a partner’s own property is insufficient to pay off his personal debts, the creditor may apply to the people’s court for enforcement against the partner’s share of property in the partnership enterprise in accordance with law. Where the people’s court enforces the partner’s share of property in the partnership enterprise, it shall serve a notice on all partners, and the other partners shall have the right of first refusal; where the other partners do not purchase it and do not agree to transfer the share of property to another person, they shall handle the withdrawal of the partner in accordance with the provisions of Article 51 of this Law, or handle the reduction of the partner’s corresponding share of property.
Chapter VI: Admission to and Withdrawal from Partnership
Article 42 For a new partner to be admitted to the partnership, the unanimous consent of all partners shall be required, and a written admission agreement shall be concluded in accordance with law. When concluding the admission agreement, the original partners shall truthfully inform the new partner of the business operations and financial status of the original partnership enterprise.
Article 43 A new partner admitted to the partnership shall enjoy the same rights and assume the same liabilities as the original partners. Where the admission agreement provides otherwise, such agreement shall govern. A new partner admitted to a general partnership shall assume joint and several liability for the debts of the partnership enterprise incurred before his admission.
Article 44 In any of the following circumstances during the duration of the partnership, a partner may withdraw from the partnership in accordance with the withdrawal matters stipulated in the partnership agreement: (1) the cause for withdrawal stipulated in the partnership agreement occurs; (2) all partners unanimously agree; (3) the cause for the partner’s withdrawal as stipulated by law occurs; or (4) other partners seriously violate their obligations under the partnership agreement.
Article 45 Where the partnership agreement does not stipulate the duration of the partnership, a partner may withdraw from the partnership without adversely affecting the execution of partnership affairs, provided that he notifies the other partners 30 days in advance.
Article 46 Where a partner withdraws from the partnership in violation of the provisions of Articles 44 and 45 of this Law, he shall compensate the partnership enterprise for the losses caused.
Article 47 In any of the following circumstances, a partner shall naturally withdraw from the partnership: (1) the death of a natural person partner, or the legal declaration of his death; (2) the loss of solvency; (3) the loss of the relevant qualifications by a legal person or other organization partner; (4) the partner’s entire share of property in the partnership enterprise is enforced by the people’s court; or (5) other circumstances prescribed by law or stipulated in the partnership agreement. The withdrawal in the circumstances specified in the preceding paragraph shall take effect on the date of actual occurrence of the withdrawal cause.
Article 48 Where a partner is declared by a people’s court to be a person with no capacity for civil conduct or a person with limited capacity for civil conduct, with the unanimous consent of the other partners, he may be converted from a general partner to a limited partner in accordance with law, and the partnership enterprise may be converted to a limited liability partnership enterprise. Where the other partners fail to reach unanimous consent, the partner with no or limited capacity for civil conduct shall withdraw from the partnership. The withdrawal shall take effect on the date of the withdrawal cause.
Article 49 Where a partner dies or is legally declared dead, the successor who inherits the partner’s share of property in the partnership enterprise in accordance with law shall acquire the partner status in the partnership enterprise in accordance with the partnership agreement or with the unanimous consent of all partners, and shall enjoy rights and assume obligations in accordance with law from the date of commencement of succession. In any of the following circumstances, the partnership enterprise shall return the partner’s share of property in the partnership enterprise to the successor of the partner: (1) the successor is unwilling to become a partner; (2) the successor does not have the relevant qualifications prescribed by law or stipulated in the partnership agreement; or (3) other circumstances stipulated in the partnership agreement where the successor cannot become a partner. Where the successor of a deceased partner is a person with no capacity for civil conduct or a person with limited capacity for civil conduct, with the unanimous consent of all partners, he may become a limited partner in accordance with law, and the general partnership enterprise shall be converted to a limited liability partnership enterprise in accordance with law. Where all partners fail to reach unanimous consent, the partnership enterprise shall return the inherited share of property to the successor.
Article 50 Upon withdrawal from the partnership, the withdrawing partner’s share of property in the partnership enterprise shall be settled in accordance with the provisions of the partnership agreement or the decision of all partners, and the property share shall be returned in currency or in kind. When a partner withdraws from the partnership, he shall assume joint and several liability for the debts incurred by the partnership enterprise before his withdrawal at the time of withdrawal.
Article 51 When a partner withdraws from the partnership, where the property of the partnership enterprise is less than its debts, the withdrawing partner shall share the losses in accordance with the provisions of the first paragraph of Article 32 of this Law.
Chapter VII: Dissolution and Liquidation
Article 52 A partnership enterprise shall be dissolved in any of the following circumstances: (1) the expiration of the partnership term stipulated in the partnership agreement, and the partners decide not to continue the business; (2) the occurrence of the cause for dissolution stipulated in the partnership agreement; (3) all partners decide to dissolve; (4) the number of partners falls below the statutory number for 30 days; (5) the partnership purpose stipulated in the partnership agreement has been achieved or cannot be achieved; (6) the business license is revoked, the partnership enterprise is ordered to close down, or is revoked in accordance with law; or (7) other reasons prescribed by laws and administrative regulations.
Article 53 Where a partnership enterprise is dissolved, a liquidator shall be appointed to carry out liquidation. The liquidator shall be assumed by all partners; with the consent of more than half of all partners, one or more partners may be appointed, or a third party may be appointed to serve as the liquidator within 15 days after the occurrence of the cause for dissolution. Where a liquidator has not been appointed within 15 days, the partners or other interested parties may apply to the people’s court for the appointment of a liquidator.
Article 54 During the liquidation period, the liquidator shall perform the following matters: (1) sort out the property of the partnership enterprise and prepare a balance sheet and a property list; (2) handle outstanding business of the partnership enterprise unrelated to the liquidation; (3) pay outstanding taxes; (4) settle claims and debts; (5) dispose of the remaining property after paying off the debts of the partnership enterprise; and (6) participate in litigation or arbitration on behalf of the partnership enterprise.
Article 55 During the liquidation period, the partnership enterprise shall survive but shall not conduct business activities unrelated to the liquidation.
Article 56 After paying liquidation expenses, employee wages, social insurance fees, and statutory compensation, paying outstanding taxes, and paying off the debts of the partnership enterprise, the remaining property of the partnership enterprise shall be distributed in accordance with the provisions of the first paragraph of Article 32 of this Law.
Article 57 Upon the completion of liquidation, the liquidator shall prepare a liquidation report, which, after being signed or sealed by all partners or confirmed by the people’s court, shall be submitted to the enterprise registration authority within 15 days to apply for the cancellation of registration of the partnership enterprise, and the partnership enterprise shall be terminated.
Chapter VIII: Legal Liability
Article 58 Where a partnership enterprise submits false documents or adopts other fraudulent means to obtain its registration in violation of the provisions of this Law, the enterprise registration authority shall order it to make corrections and impose a fine of not less than RMB 5,000 and not more than RMB 50,000; where the circumstances are serious, the enterprise registration shall be revoked and a fine of not less than RMB 50,000 and not more than RMB 200,000 shall be imposed.
Article 59 Where a partnership enterprise fails to indicate the words “general partnership,” “special general partnership,” or “limited liability partnership” in its name in accordance with law, the enterprise registration authority shall order it to make corrections within a prescribed time limit and impose a fine of not less than RMB 2,000 and not more than RMB 10,000.
Article 60 Where a partnership enterprise fails to obtain a business license and conducts business activities in the name of the partnership enterprise without authorization, the enterprise registration authority shall order it to cease the activities and may impose a fine of not more than RMB 5,000.
Article 61 Where a partnership enterprise fails to go through the formalities for registration of change in accordance with law, the enterprise registration authority shall order it to register the change within a prescribed time limit; where it fails to do so, a fine of not less than RMB 2,000 and not more than RMB 20,000 shall be imposed.
Article 62 Where a partner executing the affairs of the partnership enterprise appropriates or otherwise illegally transfers the property of the partnership enterprise, the illegally occupied property shall be returned; where losses are caused to the partnership enterprise or other partners, he shall assume liability for compensation in accordance with law.
Article 63 Where a partner violates the provisions of this Law or the partnership agreement by engaging in business that competes with the partnership enterprise or conducting transactions with the partnership enterprise without authorization, the proceeds shall belong to the partnership enterprise; where losses are caused to the partnership enterprise or other partners, he shall assume liability for compensation in accordance with law.
Article 64 Where a liquidator conceals or transfers the property of the partnership enterprise, makes false entries in the balance sheet or property list, or distributes the property before paying off the debts during the liquidation period, he shall be ordered to make corrections; where losses are caused, he shall assume liability for compensation in accordance with law.
Article 65 Where any provisions of this Law are violated and a crime is constituted, criminal liability shall be pursued in accordance with law.
Chapter IX: Supplementary Provisions
Article 66 The establishment of partnership enterprises by foreign investors within the territory of China shall be governed by the provisions of the relevant laws and administrative regulations. Where the relevant laws and administrative regulations are silent, the provisions of this Law shall apply.
Article 67 The special provisions on the organization and conduct of limited liability partnership enterprises shall be separately prescribed by the State Council.
Article 68 This Law shall come into force on August 1, 1997. The Partnership Enterprise Law of the People’s Republic of China adopted at the 24th Session of the Standing Committee of the Eighth National People’s Congress on February 23, 1997, shall be repealed simultaneously.
Translation note: This is an unofficial English translation for reference purposes. The original Chinese text shall prevail in all legal matters.
