chapter four legal system of economic organization

Chapter four

Legal system of economic organization

Part One

Legal system of company

Concept of the company

A company is a form of bussiness orgonization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and, usually, an aim of gaining profits. This collection, group or association of persons can be made to exist in law and then a company is itself considered a "legal person".

Concept of the company

The name company arose because, at least originally, it represented or was owned by more than one real or legal person.

Characteristics of the company

• Pensler Capital utilizes a variety of measures to evaluate the merits of each investment opportunity. Although each company and situation is unique, some of the major parameters we utilize in selecting and operating companies are:

• Top Management -- The opportunity of continued involvement by senior management is available, although Pensler Capital's broad network is capable of locating top managers, if necessary.


• Middle Management -- We have a preference for strong middle management

• Capital Structure -- The firm's existing capital structure is irrelevant and we will consider restructuring situations.

• Profitability -- We require the company to be profitable at the gross margin level. Operating profits are preferred but not required.


• Market Share -- We prefer that a company have a reasonable share in its particular niche market.

• Assets -- We prefer situations in which capital expenditures have not been deferred and there are substantial assets.

• Quality -- We prefer that the company have a reputation for quality within its industry segment.

Concept and characteristics of company law

• Corporate law (also "company" or "corporations" law) is the study of how sharehollders,directors,employees,creditors, and other stakeholders such as consumers, the community and the environment interact with one another under the internal rules of the firm. Corporate law is a part of a broadercompanies law (or law of business associations).

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Other types of business associations can includepartnerships (in the UK governed by the Partnership Act 1890), or trusts (like a pension fund), or companies limited by guarantee (like some universities or charities). Corporate law is about big business, which has separate legal peronality, with limited liability or unlimited liability for its members or shareholders,


who buy and sell their stocks depending on the performance of the board of directors. It deals with the firms that are incorporated or registered under the corporate or company law of a sovereign state or their subnational states. The four defining characteristics of the modern corporation are:


• Legal personality

• Limited liability

• Transferable shares

• Centralized management under a board structure

Limited liability company

• The establishment of a limited liability company, means the sponsor in accordance with the conditions and procedures prescribed by law Limited liability company formation, making a series of corporate legal acts.


A limited liability company shall meet the following conditions:

(1) quorum of shareholders: 1 or more than 50 people;(2) shareholders to meet the statutory minimum amount of capital invested;(3)Shareholders have jointly formulated the articles of association;(4)A company name, establishing a limited liability company organization;


(5)A fixed place of business of production and the necessary conditions for production and operation.In China, the Limited liability company can be taken two ways to set up.


The establishment of procedures for Limited liability company(1) Promoter initiated(2) Enter into the Articles of Association(3) Registration

Limited company

Inc. was set up to sponsor in accordance with the conditions and procedures prescribed by law established Co., Ltd., a series of laws making it a legal act.


Inc. shall meet the following conditions set(1)sponsor a quorum: 5 or more;(2)promoters subscribed and the public to

raise equity to meet the statutory minimum amount of capital: RMB 10 million;

(3)share issue, to organize matters in line with legal requirements;

(4)Articles of Association sponsors the development and creation by the General Assembly adopted;


(5) A company name, and establishing the requirements of organizations Inc.;

(6) A fixed place of business of production and the necessary conditions for production and operation.


Inc. established procedures

(1)To determine the company's founders

(2) Entered into the Articles of Association

(3) Subscription of shares

Corporate Bonds

Bonds means that the company issued in accordance with legal conditions and procedures, the agreement within a certain period debt securities.

• Corporate bond issuance, the main qualification

• Conditions for corporate bond issuance

• Corporate bond issuance program

Corporate Bonds

• Underwriting of corporate bonds;

• Corporate bonds to subscribe and pay debts;

• Provisioning corporate bond counterfoil book.

Liability

• Promoters, shareholders, the company violated the "Company Law" legal responsibility

• The company's directors, managers, supervisors violated the "Company Law" legal responsibility

• Liquidation group, agency violated the "Company Law" legal responsibility

Liability

• State organs and their staff who violate the "Company Law" legal responsibility

Part Two

Legal system of public enterprises

Legal system of state-owned enterprises

A legal entity that is created by the government in order to partake in commercial activities on the government's behalf. A state-owned enterprise (SOE) can be either wholly or partially owned by a government and is typically earmarked to participate in commercial activi

Legal system of collectively owned enterprises

Collectively-owned enterprises (COEs) with ambiguous property rights experienced a rise and fall in the past decades of reform. The share of industrial output contributed by collectively-owned enterprises increased from 22.37% in 1978 to 39.39% in 1996 and then had a precipitous fall to 6.65% by 2003 (China Statistical Yearbook, various years). This rise and fall of China’s collectively-owned enterprises has led to intensive debates about the costs and benefits of government ownership, and the determinants of privatization.

Part Three

Legal system of sole proprietorship and

partnership

Legal system of sole proprietorship

• A sole proprietorship, also known as a sole trader or simply a proprietorship, is a type of bussiness entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts.

Legal system of sole proprietorship

• Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. This means that the owner has no less liability than if they were acting as an individual instead of as a business. It is a "sole" proprietorship in contrast with partnerships.

Legal system of partnership

• A partnership is an arrangement where parties agree to cooperate to advance their mutual interests.

• Partnerships present the involved parties with special challenges that must be navigated unto agreement. Overarching goals, levels of give-and-take, areas of responsibility, lines of authority and succession, how success is evaluated and distributed, and often a


• variety of other factors must all be negotiated. Once agreement is reached, the partnership is typically enforceable by civil law, especially if well documented. Partners who wish to make their agreement particularly explicit and enforceable typically draw uparticles of partnership.


• While partnerships stand to amplify mutual interests and success, some are considered ethically problematic. When a politician, for example, partners with a corporation to advance the corporation's interest in exchange for some benefit, a conflict of interest results. Outcomes for the public good may suffer.

Part Four

Legal system for foreign-invested enterpris

Overview of foreign-invested enterprises

Any one of a number of legal structures under which a company can participate in the foreign economy. FIEs tend to have tight government regulation at nearly every important business juncture, which limits the efficiency at which any foreign company can profit from foreign ventures as well as the amount of control that a foreign parent has over the FIE.

The establishment of foreign-invested enterprises

• We assist foreign clients in establishing and expanding their presence in China through establishing foreign invested enterprises (FIEs). These can take a wide variety of legal forms depending on the client's needs, such as equity joint ventures, contractual joint ventures, wholly-foreign-owned enterprises or as sino-foreign or wholly-foreign-invested joint stock companies.


• We also assist many Chinese state-owned or private enterprises in attracting foreign investors and in cooperating with their foreign partners in the ongoing management of the enterprise. We have been involved in the establishment of FIEs in virtually every possible business sector, including pharmaceuticals, environmental, automotive, energy, construction, e-commerce,


• chemicals, conference and exhibitions, infrastructure, power, distribution, machinery, building materials, transportation among others.

Funds of enterprises with foreign investment

• Although fund managers may form private equity funds of funds in China that have non-Chinese investors (hereinafter referred to as “foreign-invested fund of funds” or “FIE FoFs”), they need to be aware of certain currency conversion issues that may apply based on how the FIE FoF operates.


• Foreign-invested funds of funds may be subject to currency conversion issues that do not affect other onshore, or China-based, foreign-invested investment funds because the Administration Regulations on Foreign-Invested Venture Capital Enterprises issued in 2003 (the “FIVCE Regulations”),


• which are the only comprehensive regulations pertaining to foreign-invested investment funds in China, did not explicitly contemplate the establishment of FIE FoFs. For more information regarding the FIVCE Regulations, please see introduction to RMB funds.

Organization of foreign-invested enterprises

• (1)Foreign-invested enterprises' plan(2)Foreign-invested enterprises to purchase materials(3)The product sales of foreign-invested enterprises (4)foreign-invested enterprise's financial accounting system(5)Distribution of profits of enterprises with foreign investment

Organization of foreign-invested enterprises

• (6)Labor management of foreign invested enterprises(7)Foreign-invested enterprises to resolve disputes

Termination of foreign-invested enterprises

(1) In cases of serious loss, inability to continue business;(2) Fails to fulfill the joint venture agreement, contract and articles of association obligations, resulting in an inability to conduct business;(3) Due to natural disasters, war and other force majeure suffered serious losses and can not continue to operate;

Termination of foreign-invested enterprises

(4)Companies did not achieve its business purposes, but no promising;(5)Enterprise contract and articles of association of the other reasons for dissolution has occurred.

Part Five

Bankruptcy legal system

Bankruptcy

• Bankruptcy is the debtor is unable to repay maturing debt, and with all its property in accordance with certain procedures and clear the debt capacity of the behavior.

• Bankruptcy has the following characteristics:(1) Bankruptcy is a special kind of debt instruments.(2) Bankruptcy in certain circumstances the use of debt means.

Bankruptcy

• (3) Fair repayment of creditors bankruptcy procedures.(4) Bankruptcy is the debt in accordance with procedures for judicial proceedings.

Bankruptcy boundary

Enterprise legal person can not discharge the debt due, and the assets are insufficient to pay off all debt

service or the apparent lack of liquidity, in accordance with the provisions of clearing the debt.

Boundaries of the real standard is bankrupt enterprise can not repay maturing debt.

Meeting of creditors

The composition of a meeting of creditors (1)Meeting of creditors should have the debtor's employees and trade union representatives, the comment on the matter.(2)Creditors' meeting has a Chairperson, who "designated" by the people's court from creditors.


• Creditors' meeting

(1) The first meeting of creditors convened by the People's Court, since the claims filing deadline expires within 15 days from the date of call.(2) After the meeting of creditors, only when the people's court deems it necessary, or managers,Creditors' committee, representing more than 1 / 4 of the "total debt" propose to convene, meeting of creditors convened.


• Resolution of a meeting of creditors

(1) The resolution of the creditors meeting, the meeting of the voting by the creditors had half through, and they represent claims accounted for "total non-property guarantee claims," the1 / 2. Except as otherwise provided by law.


(2) Resolution of the creditors that the meeting of creditors against the law, damage their interestsand can be made from the meeting of creditors within 15 days from the date of the resolution, request the court to cut determined to revoke the resolution, according to re-order the meeting of creditors a resolution.(3) Meeting of creditors to vote, "the debtor's property management plan" and "through the estate changes in price of the program "is not passed, the people's court ruling.


(4) Meeting of creditors to vote, "the distribution of the estate plan", the second vote has not yet been adopted by the people's court ruling.

Revamp

When corporate restructuring is unable to discharge the debt when due, bankruptcy is not immediately, but in the people's court under the auspices of an agreement by the debtor and creditors.Restructuring plan to develop the debtor, the debtor to continue business, and settled in full within a certain perioddepartment or part of the debt system.

Declared bankrupt

The people's court shall declare the debtor bankrupt, shall make a determination from the date of 5 days served on the debtor and managers, since the decision to make within 10 days from the date of notice given creditors, and announce it.

The end of bankruptcy proceedings

• After the end of bankruptcy proceedings, creditors through the bankruptcy settlement of claims has not been assigned no longer be discharged. Bankruptcy corporate debt is not repaid more than the responsibility of law exemption.

• However, since the bankruptcy procedure within 2 years from the date of the end,there is one of the following circumstances, creditors may request the court in accordance with bankruptcy property distribution plan for additional allocation:


(1) There should be recovered in accordance with the law of property;Bankruptcy within one year prior to the application received, the manager can exercise the right to withdraw the five categories of behavior;Accepting applications for bankruptcy within the first six months of the revocation of the individual debtor's discharge;Debtor invalid behavior;


Directors, supervisors and senior staff using their powers to obtain from the enterprise income and non-normalbusiness property occupation.

(2) that there should be bankrupt for distribution to other property.

• 2. The bankrupt's guarantor, after the end of the bankruptcy proceedings, liquidation to creditors in accordance with program is not paid the debt, according to the law continue to assume liability.

Bankruptcy responsibility

(1) responsible for the violations of bankruptcy(2) the bankruptcy of corporate responsibility In addition, other relevant laws, it is also responsible for the bankruptcy of leadership qualifications of the organization to be limited, which also has the nature of punishment.

Thanks for Your Attention

chapter four legal system of economic organization

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