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Law of the People's Republic of China on Partnerships
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Law of the People's Republic of China on Partnerships

 

Order of the People’s Republic of China No.55

The Law of the People’s Republic of China on Partnerships, amended and adopted at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress of the People’s Republic of China on August 27, 2006, is hereby promulgated and shall go into effect as of June 1, 2007.

Hu Jintao

President of the People’s Republic of China

August 27, 2006

 

Law of the People’s Republic of China on Partnerships

(Adopted at the 24th Meeting of the Standing Committee of the Eighth National People’s Congress on February 23, 1997 and amended at the 23rd Meeting of the Standing Committee of the Tenth National People’s Congress on August 27, 2006)

Contents

Chapter I General Provisions

Chapter II General Partnerships

Section 1 Establishment of a Partnership

Section 2 Property of a Partnership

Section 3 Management of Partnership Affairs

Section 4 Relationship of a Partnership to a Third Party

Section 5 Entering into and Retiring from a Partnership

Section 6 Specialized General Partnerships

Chapter III Limited Liability Partnerships

Chapter IV Dissolution and Liquidation of a Partnership

Chapter V Legal Liability

Chapter VI Supplementary Provisions

 

Chapter I

General Provisions

Article 1 This Law is enacted in order to regulate the behavior of partnerships, to protect the lawful rights and interests of partnerships and the partners and creditors therein, to maintain social and economic order, and to promote the development of the socialist market economy.

Article 2 For the purposes of this Law, “partnerships” refer to both general partnerships and limited liability partnerships, both of which are established according to this Law by natural persons, legal persons or other organizations within the territory of China.

A general partnership is composed of general partners who bear unlimited joint and several liability for the debts of the partnership. Where there are special provisions in this Law on the forms of liability borne by general partners, those provisions shall prevail.

A limited liability partnership is composed of general partners and limited partners, with the former bearing unlimited joint and several liability for the debts of the partnership and the latter bearing liability for such debts respectively within the limits of the capital contributions subscribed for.

Article 3 A wholly State-owned company, a State-owned enterprise, a listed company, or a public welfare undertaking or public organization shall not become a general partner.

Article 4 A partnership agreement shall be lawfully concluded, in written form, on the basis of agreement reached by all the partners through consultation.

Article 5 The principles of free will, equality, fairness and good faith shall be observed in concluding a partnership agreement and establishing a partnership.

Article 6 The partners of a partnership shall, according to the tax regulations of the State, respectively pay taxes on the partnership’s incomes derived from production, business operation and other sources.

Article 7 A partnership and its partners shall abide by laws and administrative regulations, observe social and business ethics and shoulder social responsibility.

Article 8 The lawful property and rights and interests of a partnership and the partners therein shall be protected by law.

Article 9 For the application for establishment of a partnership, such documents as a written application for registration, a partnership agreement and the identity papers of the partners shall be submitted to the enterprise registration authority.

Where within the business scope of a partnership there is any item for which approval is required prior to registration of the partnership, as provided for by laws or administrative regulations, such approval shall be obtained according to law and the approval document shall be submitted when applying for registration.

Article 10 Where the application materials submitted for registration by an applicant are complete and conform to the statutory form, the enterprise registration authority shall, if it can, grant the registration on the spot and issue a business license.

In the absence of what is prescribed in the preceding paragraph, the enterprise registration authority shall, within 20 days from the date it receives an application for registration, decide whether or not to grant registration. If it decides to grant registration, it shall issue a business license; otherwise, it shall give a written reply and state the reasons.

Article 11 The date of issuance of the business license to a partnership shall be the date of establishment of the partnership.

Before a partnership obtains the business license, no partner therein shall engage in any partnership activities in the name of the partnership.

Article 12 Where a partnership intends to set up a branch, it shall apply for registration to the enterprise registration authority at the place where the branch is to be located, in order to obtain a business license.

Article 13 Where a registered item of a partnership needs to be altered, the managing partner shall, within 15 days from the date a decision on alteration is made or the cause for alteration arises, apply to the enterprise registration authority for registration of alteration.

Chapter II

General Partnerships

Section 1 Establishment of a Partnership

Article 14 For establishment of a partnership, the following conditions shall be met:

(1) having two or more partners. If a partner is a natural person, he shall have full capacity for civil conduct;

(2) having a written partnership agreement;

(3) having capital subscribed for or actually contributed by partners;

(4) having a name for the partnership as well as production and business premises; and

(5) other conditions provided for by laws and administrative regulations.

Article 15 The words “general partnership” shall be clearly indicated in the name of a partnership.

Article 16 A partner may make capital contributions in cash or in kind, or in the form of intellectual property rights, land-use right or other property rights, or labor services.

Where a partner makes capital contributions in kind or in the form of intellectual property rights, land-use right or other property rights, the value of which needs to be assessed, the value may be determined by all the partners through consultation, or be assessed by a statutory assessment institution authorized by all the partners.

Where a partner makes capital contributions in the form of labor services, the method of assessment shall be determined by all the partners through consultation and be clearly stated in the partnership agreement.

Article 17 A partner shall fulfill the obligation of capital contributions in compliance with the form, amount and time limit for contribution, as are specified in the partnership agreement.

Where capital contributions are made with non-monetary property and, according to the provisions of laws or administrative regulations, formalities for transfer of the said property need to be completed, such formalities shall be completed according to law.

Article 18 In a partnership agreement, the following items shall be stated clearly:

(1) the name of the partnership and the location of its principal premises for business;

(2) the objectives of partnership and the scope of business of the partnership;

(3) the names or titles, and domiciles of the partners;

(4) the form, amount and time limit for capital contributions to be made by the partners;

(5) the way of distributing profits and sharing losses;

(6) the management of partnership affairs;

(7) the entering into and retiring from the partnership;

(8) the method of dispute settlement;

(9) the dissolution and liquidation of the partnership; and

(10) the liability for breech of agreement.

Article 19 A partnership agreement shall become effective after all the partners have signed or affixed their seals to it. A partner shall enjoy rights and undertake liabilities in accordance with the partnership agreement.

Amendment and supplement to the partnership agreement shall be subject to agreement reached by all the partners, unless otherwise stipulated in the partnership agreement.

For a matter which is not included in the partnership agreement or which is not clearly stated in the agreement, it shall be decided on by the partners through consultation; where consultation fails, it shall be handled according to the provisions of this Law and of other laws or administrative regulations.

Section 2 Property of a Partnership

Article 20 All the capital contributions made by the partners, the incomes derived, and other property lawfully obtained, in the name of the partnership constitute the property of the partnership.

Article 21 Prior to liquidation of a partnership, no partner may request to divide the property of the partnership, unless otherwise provided for in this Law.

Where, prior to liquidation of a partnership, a partner privately transfers or disposes of the property of the partnership, the partnership shall not set it up against a bona fide third party.

Article 22 When a partner intends to assign all or part of his shares of the partnership property to anyone other than the partners therein, he shall obtain consent of all the other partners, unless otherwise stipulated in the partnership agreement.

When a partner intends to assign all or part of his shares of the partnership property to another partner, he shall notify the rest of the partners.

Article 23 Where a partner assigns his shares of the partnership property to anyone other than the partners therein, the other partners shall, under equal conditions, enjoy first priority in purchasing his shares, unless otherwise stipulated in the partnership agreement.

Article 24 When anyone other than the partners lawfully obtains a partner’s assigned shares of property of a partnership, he shall, upon amendment made to the partnership agreement, become a partner in the partnership, and enjoy the rights and undertake the liabilities in accordance with this Law and the amended partnership agreement.

Article 25 Where a partner intends to put his shares of property in a partnership to pledge, he shall obtain consent of all the other partners; without such consent, his act in question shall be invalid and, if losses are caused to a bona fide third party, he shall be liable for the losses according to law.

Section 3 Management of Partnership Affairs

Article 26 All partners shall enjoy equal right in the management of partnership affairs.

One or more partners may, in accordance with the partnership agreement or through decision by all the partners, be authorized to represent the partnership in its relations with people outside the partnership and to manage partnership affairs.

Where a legal person or any other organization manages partnership affairs in the capacity of a partner, it shall send its representative to manage such affairs.

Article 27 Where one or more partners are authorized to manage partnership affairs, as provided for in the second paragraph of Article 26 of this Law, no other partners shall manage such affairs.

The partners not managing partnership affairs shall have the right to supervise the management of such affairs by the managing partners.

Article 28 Where partnership affairs are managed by one or more partners, the managing partner(s) shall, at regular intervals, report to the other partners the state of management and business operations and the financial status of the partnership and the incomes derived from management of partnership affairs shall belong to the partnership and the expenses or losses entailed shall be borne by the partnership.

Partners shall have the right to consult such financial data as the accounting books of the partnership in order to become acquainted with the state of business operations and the financial status of the partnership.

Article 29 Where partners manage partnership affairs separately, one managing partner may raise objections to the management done by another. In that event, management of the affairs in question shall be suspended. If any dispute arises, a decision on the matter may be made according to the provisions in Article 30 of this Law.

Where a partner authorized to manage partnership affairs fails to do it according to the partnership agreement or the decision made by all the partners, the other partners may decide to revoke the authorization.

Article 30 Where the partners intend to adopt a resolution on a matter relating to the partnership, the method of vote stipulated in the partnership agreement shall be used. Where no such method is stipulated or clearly stipulated in the partnership agreement, the method whereby one person has one vote and a resolution is adopted by a majority vote of all the partners shall be used.

Where this Law provides otherwise with respect to the method of vote for a partnership, such provisions shall prevail.

Article 31 Unless otherwise stipulated in the partnership agreement, the following matters relating to a partnership shall be subject to consent of all the partners:

(1) alteration of the name of the partnership;

(2) alteration of the business scope or the main business premises of the partnership;

(3) disposal of the immovables of the partnership;

(4) assignment or disposal of the intellectual property rights or other property rights of the partnership;

(5) provision of guaranty for another person in the name of the partnership; and

(6) appointment of persons other than the partners as managers of the partnership.

Article 32 No partner may, by himself or through cooperation with another person, engage in business in competition with the partnership in which he is a partner.

No partner may conduct business transactions with the partnership in which he is a partner, unless otherwise stipulated in the partnership agreement or consented by all the partners.

No person may engage in any activities that harm the interests of the partnership in which he is a partner.

Article 33 The profits or losses of a partnership shall be distributed among or borne by the partners according to the partnership agreement; where such matter is not stipulated or not clearly stipulated in the partnership agreement, it shall be decided on by the partners through consultation; where consultation fails, the profits or losses shall be shared pro rata by all the partners on the basis of their actual capital contributions; where the proportions of the capital contributions made by the partners cannot be determined, the profits or losses shall be equally shared by all of them.

A partnership agreement may not stipulate that all the profits are distributed among part of the partners or all the losses are borne by part of the partners.

Article 34 A partner may, in conformity with the partnership agreement or the decision by all the partners, increase or reduce his capital contributions to the partnership.

Article 35 A manager appointed by a partnership shall fulfill his duties within the scope of power authorized by the partnership.

Where a manager appointed by a partnership causes losses to the partnership by performing his duties beyond the scope of power authorized by the partnership, or by intentional acts or through gross negligence in the course of performance of his duties, he shall be liable for the losses according to law.

Article 36 A partnership shall establish its financial and accounting systems in accordance with the provisions of laws and administrative regulations.

Section 4 Relationship of a Partnership to a Third Party

Article 37 A partnership may not use restrictions, which it places on the rights of the partners in managing partnership affairs and representing the partnership in its relations with people outside the partnership, against a bona fide third party.

Article 38 A partnership shall first pay off its debts with all of its property.

Article 39 Where a partnership cannot cover its debts due, the partners shall bear unlimited joint and several liability.

Article 40 Where the amount of debts paid off by a partner, due to his unlimited joint and several liability, exceeds the proportion of the losses he should bear as prescribed in the first paragraph of Article 33 of this Law, he shall have the right to claim recovery from the other partners.

Article 41 Where a partner happens to owe debts which are unrelated to the partnership, the creditor concerned may not use his claim against the said partner to offset the debts he owes to the partnership, nor may he exercise in subrogation the rights enjoyed by the said partner in the partnership.

Article 42 Where a partner’s personal property is not sufficient to pay off his debts unrelated to the partnership, he may use the proceeds distributed to him by the partnership to clear off his debts; and the creditor, on his part, may, according to law, apply to a people’s court for compulsory execution of the partner’s share of property in the partnership for the purpose.

Before a people’s court puts into compulsory execution of the share of property of a partner, it shall notify all the other partners of the matter, who shall enjoy first priority in purchasing the partner’s share of property. Where the other partners do not want to purchase such property and object to its assignment to another person, they shall, according to the provisions in Article 51 of this Law, settle accounts with the said partner for his retirement from the partnership or do so by appropriately deducting his share of property in the partnership.

Section 5 Entering into and Retiring from a Partnership

Article 43 To enter into an existing partnership, a person shall have to obtain consent of all the partners and, according to law, conclude a written agreement for entering into the partnership, unless otherwise stipulated in the existing partnership agreement.

When concluding an agreement with a person for his entering into the partnership, the existing partners shall truthfully make known to the new partner the state of business operations and the financial status of the partnership.

Article 44 The new partner shall enjoy the same rights and bear the same liability as the old partners, where the agreement for entering into the partnership stipulates otherwise, such stipulations shall prevail.

The new partner shall bear unlimited joint and several liability for the debts of the partnership incurred before he enters into the partnership.

Article 45 Where the period of time for partnership is specified in a partnership agreement, a partner may, during the existence of the partnership, retire from the partnership under any of the following situations:

(1) The cause for retiring stipulated in the partnership agreement arises;

(2) Consent of all the partners is obtained;

(3) The situation in which the partner finds it difficult to remain in the partnership arises; or

(4) Other partners seriously violate the partnership agreement in terms of their obligations.

Article 46 Where the period of time for partnership is not specified in a partnership agreement, a partner may retire from the partnership provided that his retirement will not adversely affect the management of the partnership’s affairs, however, he shall notify the other partners 30 days in advance.

Article 47 If a partner retires from the partnership against the provisions in Articles 45 and 46 of this Law, he shall compensate for the losses thus caused to the partnership.

Article 48 A partner shall, under any of the following situations, naturally retire from the partnership:

(1) As a natural person in the partnership, he is deceased or is legally declared dead;

(2) He becomes unable to clear off his debts;

(3) As a legal person or other organization in the partnership, its business license is revoked, or it is ordered to close down or dissolve, or is declared bankrupt;

(4) He or it no longer possesses the qualifications which a partner is required to possess by law or the partnership agreement; or

(5) All the partner’s share of property in the partnership is compulsorily executed by a people’s court.

Where a partner is legally recognized as a person without the capacity or with limited capacity for civil conduct, upon consent of all the other partners, he may become a limited partner according to law and the general partnership shall be transformed into a limited liability partnership according to law. Where the other partners fail to reach a consensus on the matter, the partner in question shall retire from the partnership.

The retirement shall take effect as of the date the cause for retiring actually arises.

Article 49 A partner may, under any of the following conditions, be expelled by a resolution unanimously adopted by the other partners:

(1) He fails to fulfill his obligations to make capital contributions;

(2) He causes losses to the partnership through intentional acts or gross negligence;

(3) He resorts to irregular practices in managing partnership affairs; or

(4) The cause stipulated in the partnership agreement arises.

The partner to be expelled shall be notified in writing of the resolution on his expulsion. The expulsion shall take effect on the date the person in question receives the notification, and he shall retire from the partnership thereupon.

If the person expelled has objections to the resolution on his expulsion, he may bring a lawsuit in a people’s court within 30 days from the date he receives the notification for his expulsion.

Article 50 Where a partner is deceased or is legally declared dead, the successor enjoying the lawful right to inheritance of the partner’s share of property in the partnership shall, in accordance with the partnership agreement or with consent of all the partners, acquire the status of a partner in the said partnership from the date succession commences.

A partnership shall, under any of the following conditions, return to the successor the share of property of the deceased partner in the partnership:

(1) The successor is not willing to become a partner;

(2) The successor does not have the qualifications of a partner, as is required by laws or the partnership agreement; or

(3) Other conditions under which a successor cannot become a partner, as is stipulated in the partnership agreement.

Where the successor to a deceased partner is a person without the capacity or with limited capacity for civil conduct, upon consent of all the other partners, he may become a limited partner according to law, and the general partnership shall be transformed into a limited liability partnership according to law. Where the other partners fail to reach a consensus on the matter, the partnership shall return to the successor in question the share of property of the deceased partner.

Article 51 Where a partner retires from a partnership, the other partners shall settle accounts with him in light of the property status of the partnership at the time of his retiring and return his share of property to him. Where the retiring partner is liable for the losses caused to the partnership, the amount for the compensation payable shall be deducted from his share of property.

If there are partnership affairs still outstanding at the time of his retiring, the accounts shall be settled afterwards.

Article 52 The method for return of the retiring partner’s share of property in the partnership shall be specified in the partnership agreement or determined by all the partners. It may be returned in cash or in kind.

Article 53 The retiring partner shall bear unlimited joint and several liability for the debts the partnership comes to owe due to causes that arise prior to his retirement.

Article 54 Where the property of a partnership is less than its debts at the time when a partner retires, the retiring partner shall share the losses in accordance with the provisions in the first paragraph of Article 33 of this Law.

Section 6 Specialized General Partnerships

Article 55 A professional entity that provides paid services to its clients with specialized knowledge and skills may form a specialized general partnership.

A specialized general partnership is a general partnership whose partners bear liability according to the provisions in Article 57 of this Law.

The provisions in this Section shall be applicable to specialized general partnerships; where for matters there are no provisions in this Section to govern, the provisions from Section 1 through 5 of this Chapter shall be applicable.

Article 56 The words “specialized general partnership” shall be included in the name of a specialized general partnership.

Article 57 Where a partnership incurs debts through the intentional acts or gross negligence on the part of one or more partners in business activities, he or they shall bear unlimited liability or unlimited joint and several liability, and the other partners shall bear limited liability based on the share of property they each have in the partnership.

All the partners of a partnership shall bear unlimited joint and several liability for the debts the partnership incurs not through the intentional acts or gross negligence on the part of a partner in his business activities and for the other debts incurred by the partnership.

Article 58 Where a partnership incurs debts due to a partner’s intentional acts or gross negligence in his business activities, after the debts are paid off with the property of the partnership, the said partner shall, in accordance with what is stipulated in the partnership agreement, be liable for the losses of the partnership.

Article 59 A specialized general partnership shall set up a fund against malpractice risks and purchase professional liability insurance.

The fund against malpractice risks shall be used for paying the debts incurred by partners in their business activities. A separate account for such fund shall be opened and be managed separately. The specific management measures shall be formulated by the State Council.

Chapter III

Limited Liability Partnerships

Article 60 The provisions of this Chapter shall be applicable to limited liability partnerships and their partners; where for matters there are no provisions in this Chapter to govern, the provisions governing general partnerships and their partners from Section 1 through 5 of Chapter II of this Law shall be applicable.

Article 61 A limited liability partnership shall be formed by not less than two but not more than fifty partners, unless otherwise provided for by law.

There shall be at least one general partner in a limited liability partnership.

Article 62 The words “limited liability partnership” shall be indicated in the name of a limited liability partnership.

Article 63 Apart from the ones proscribed in Article 18 of this Law, the partnership agreement shall include the following items:

(1) the names or titles and domiciles of the general partners and limited partners;

(2) the qualifications for the managing partners and the procedure for their selection;

(3) the limits of power of the managing partners and method for disposition of breaches of partnership agreement;

(4) the conditions for expelling a managing partner and the procedure for replacement;

(5) the conditions and procedure for entering into and retiring from the limited liability partnership, and the related liabilities; and

(6) the procedure for a limited partner to become a general partner, and vice versa.

Article 64 A limited partner may make capital contributions in cash or in kind, with intellectual property rights, land-use right, or other property rights, the values of which are assessed.

A limited partner shall not make capital contributions in the form of labor services.

Article 65 A limited partner shall make his capital contributions in full and on schedule, as are agreed upon in the partnership agreement; if he fails to do so, he shall be obligated to make up the difference and bear liability to the other partners for breach of agreement.

Article 66 Among the items to be registered by a limited liability partnership shall be included the names or titles of the limited partners and the amount of capital contributions subscribed for by each of them.

Article 67 The affairs of a limited liability partnership shall be managed by the general partners of the partnership. The managing partners may demand that payment for management of affairs and the way of drawing such payment be stipulated in the partnership agreement.

Article 68 A limited partner of a limited liability partnership shall not manage partnership affairs or represent the partnership in its relations with people outside the partnership.

The following acts of a limited partner shall not be deemed to be management of partnership affairs:

(1) to participate in deciding on a general partner’s entering into or retiring from the partnership;

(2) to raise suggestions concerning the operation and management of the partnership;

(3) to participate in the selection of a public accounting firm responsible for providing auditing services to the partnership;

(4) to obtain the audited financial statements of the partnership;

(5) where his personal interests are involved, to consult the financial materials of the partnership such as the accounting books;

(6) when his interests in the partnership are infringed upon, to claim his rights from the partners who are liable or to initiate a lawsuit;

(7) when the managing partners neglect to exercise their rights, to urge them to do so, or to initiate a lawsuit in his own name for the benefit of the partnership; and

(8) to provide guaranty for the partnership according to law.

Article 69 A limited liability partnership shall not distribute all the profits to part of the partners, unless otherwise stipulated in the partnership agreement.

Article 70 A limited partner of a limited liability partnership may conduct transactions with the partnership, unless otherwise stipulated in the partnership agreement.

Article 71 A limited partner of a limited liability partnership may, by himself or in cooperation with others, engage in business in competition with the partnership, unless otherwise stipulated in the partnership agreement.

Article 72 A limited partner may pledge his share of property in the limited liability partnership, unless otherwise stipulated in the partnership agreement.

Article 73 A limited partner may, in accordance with the partnership agreement, assign his share of property in the limited liability partnership to persons other than the partners of the partnership, provided that he notifies the other partners 30 day in advance.

Article 74 Where a limited partner’s personal property is insufficient to pay off his debts unrelated to the limited liability partnership, he may use his share of income from the limited liability partnership to pay off such debts; and the creditor may, according to law, request the people’s court to compulsorily execute the partner’s share of property in the limited liability partnership for payment.

Where a people’s court compulsorily executes the share of property of a limited partner in a limited liability partnership, it shall notify all the partners. Under equal conditions, the other partners shall have first priority to purchase the property in question.

Article 75 A limited liability partnership shall be dissolved when there are only limited partners left in the partnership; and it shall be transformed into a general partnership when there are only general partners left.

Article 76 Where a third party is justified in believing that a limited partner is a general partner and transacts a deal with him, the limited partner in question shall bear the same liability for the deal as a general partner does.

Where without authorization a limited partner transacts a deal with another person in the name of the limited liability partnership and thus causes losses to the partnership or other partners, the said partner shall be liable for the losses.

Article 77 A new limited partner shall, within the amount of the capital contributions subscribed for by him, be liable for the debts the limited liability partnership incurs prior to his entering into the partnership.

Article 78 A limited partner shall naturally retire from the partnership under any of the situations prescribed in Subparagraphs (1) and (3) through (5) of the first paragraph in Article 48 of this Law.

Article 79 When during the existence of a limited liability partnership, a limited partner who is a natural person loses the capacity for civil conduct, the other partners shall not demand that he retire from the partnership for that reason.

Article 80 When a limited partner who is a natural person is deceased or legally declared dead, or a limited partner which is a legal person or other organization is terminated, the successor or the successor in title may obtain the status of the aforementioned limited partner in the partnership according to law.

Article 81 After a limited partner retires from a limited liability partnership, he shall be liable, with the property he takes back from the limited liability partnership upon his retirement, for the debts the partnership comes to owe due to causes that arise prior to his retirement from the partnership.

Article 82 Unless otherwise stipulated in the partnership agreement, a general partner to become a limited partner or vice versa shall be subject to consent of all the partners.

Article 83 Where a limited partner becomes a general partner, he shall bear unlimited joint and several liability for the debts the partnership incurs during the period he is a limited partner.

Article 84 Where a general partner becomes a limited partner, he shall bear unlimited joint and several liability for the debts the partnership incurs during the period he is a general partner.

Chapter IV

Dissolution and Liquidation of a Partnership

Article 85 A partnership shall be dissolved in one of the following situations:

(1) At the expiration of the period of time for partnership, the partners decide not to continue operation;

(2) The cause for dissolution specified in the partnership agreement arises;

(3) All the partners decide to dissolve;

(4) The number of partners does not meet the statutory requirement for 30 days;

(5) The objectives of partnership specified in the partnership agreement have been achieved or it is impossible to achieve them;

(6) Its business license is revoked, or it is ordered to close down or is dissolved, according to law; or

(7) Other reasons provided for by laws or administrative regulations arise.

Article 86 Where a partnership is dissolved, it shall be liquidated by liquidators.

All of the partners shall serve as liquidators or, upon agreement by the majority of all the partners, one or more partners may be designated, or a third person may be authorized, to act as liquidators within 15 days after the cause for dissolution of the partnership arises.

Where no liquidators are decided on within 15 days after the cause for dissolution of the partnership arises, the partners or other interested parties may apply to a people’s court for designation of liquidators.

Article 87 During liquidation, a liquidator shall manage the following affairs:

(1) checking up on the property of the partnership and prepare a statement of assets and liabilities and an inventory of the property separately;

(2) dealing with the outstanding partnership affairs which are relevant to liquidation;

(3) paying off the taxes owed by the partnership;

(4) clearing up claims and debts;

(5) disposing of the residual property of the partnership after paying off the debts; and

(6) participating in proceedings or arbitrations on behalf of the partnership.

Article 88 A liquidator shall, within 10 days from the date a decision is made on his serving as such, notify the creditors of the intended dissolution of the partnership and shall make an announcement in a newspaper within 60 days. The creditors shall, within 30 days from the date they receive the notice, file their claims to the liquidator, and the creditors who fail to receive the notice shall do so within 45 days from the date the announcement is made.

When a creditor files a claim, he shall specify the matters related to the claim and provide the relevant document of proof. The liquidator shall register such a claim.

During the period of liquidation, the partnership shall remain in existence, however, it shall not engage in any business activities unrelated to liquidation.

Article 89 After payment with the partnership property of the liquidation expenses, the wages, social insurance premiums and statutory compensation of the employees and the taxes due and debts owed by the partnership, the residual property shall be distributed according to the provisions in the first paragraph of Article 33 of this Law.

Article 90 Upon conclusion of liquidation, the liquidator shall prepare a liquidation report and shall, after having it signed by, and affixed with the seals of, all the partners, submit it to the enterprise registration authority within 15 days and apply for cancellation of the registration of the partnership.

Article 91 After the registration of a partnership is cancelled, the former general partners shall still bear unlimited joint and several liability for the debts the partnership incurs during the period of its existence.

Article 92 Where a partnership is unable to pay off the debts due, its creditors may, according to law, apply to a people’s court for bankruptcy liquidation of the partnership, or demand that the general partners pay off such debts.

Where a partnership is declared bankrupt according to law, its general partners shall still bear unlimited joint and several liability for the debts of the partnership.

Chapter V

Legal Liability

Article 93 Where a partnership, in violation of the provisions of this Law, obtains its registration by submitting falsified documents or resorting to other fraudulent means, it shall be ordered by the enterprise registration authority to make rectification and be fined not less than RMB 5,000 yuan but not more than 50,000 yuan; if the circumstances are serious, the registration of the partnership shall be revoked and it shall, in addition, be fined not less than 50,000 yuan but not more than 200,000 yuan.

Article 94 Where a partnership, in violation of the provisions of this Law, fails to include in its name such words as “general partnership” ,“specialized general partnership” or “limited liability partnership”, it shall be ordered by the enterprise registration authority to make rectification within a time limit and be fined not less than 2,000 yuan but not more than 10,000 yuan.

Article 95 Where an entity, in violation of the provisions of this Law, engages in partnership business in the name of a partnership or its branch without obtaining a business license, it shall be ordered by the enterprise registration authority to discontinue the business activities and be fined not less than 5,000 yuan but not more than 50,000 yuan.

Where a partnership fails to go through the procedures for altering its registration according to law when the registered items are altered, it shall be ordered by the enterprise registration authority to have the alterations registered within a time limit; if it fails to do so before the expiration of the prescribed time limit, it shall be fined not less than 2,000 yuan but not more than 20,000 yuan.

Where the managing partner of a partnership fails to apply on time for registering the alterations made by the partnership in its registered items, he shall be liable for the losses thus caused to the partnership, the other partners or a bona fide third party.

Article 96 Where a partner, when managing partnership affairs, or an employee of a partnership, by taking advantage of his position, takes into his own possession the interests that should go to the partnership or takes illegal possession of the property of the partnership by other means, he shall return such interests or property to the partnership; where he causes losses to the partnership or the other partners, he shall be liable for the losses according to law.

Article 97 Where a partner, without authorization, disposes of the affairs which may be managed by a partner only with the consent of all the partners as provided for in this Law or in the partnership agreement and thus causes losses to the partnership or the other partners, he shall be liable for the losses according to law.

Article 98 Where a partner who does not have the power to manage partnership affairs manages the affairs without authorization and thus causes losses to the partnership or the other partners, he shall be liable for the losses according to law.

Article 99 Where a partner, in violation of the provisions of this Law or of the partnership agreement, engages in business in competition with the partnership in which he is a partner or conduct business transactions with the said partnership, the income derived therefrom shall belong to the partnership; if he causes losses to the partnership or the other partners, he shall be liable for the losses according to law.

Article 100 Where a liquidator fails to submit a liquidation report to the enterprise registration authority according to the provisions of this Law, or conceals important facts or omits major information in the liquidation report submitted, he shall be ordered by the enterprise registration authority to make rectification. The expenses and losses thus entailed shall be borne by the liquidator.

Article 101 Where a liquidator, in managing the affairs of liquidation, obtains unlawful incomes or takes illegal possession of the property of the partnership, he shall return such incomes or property to the partnership; if he causes losses to the partnership or the other partners, he shall be liable for the losses according to law.

Article 102 Where a liquidator, in violation of the provisions of this Law, conceals or transfers the property of a partnership, or makes false records in the statement of assets and liabilities or the inventory of property, or distributes the partnership’s property before clearing off the debts, thus harming the interests of creditors, he shall be liable for compensation according to law.

Article 103 Where a partner violates the partnership agreement, he shall bear the liability for breach of agreement according law.

Where a dispute arises among the partners over the execution of the partnership agreement, the partners may settle it through consultation or mediation. If they are unwilling to do so or if consultation or mediation proves unsuccessful, they may apply to an arbitration agency for arbitration in accordance with the arbitration clause contained in the partnership agreement or a written arbitration agreement concluded afterwards. If no arbitration clause is contained in the partnership agreement and no written arbitration agreement is concluded afterwards, they may bring a lawsuit in a people’s court.

Article 104 Where, in violation of the provisions of this Law, a staff member of an administrative department concerned abuses his power, engages in malpractices for selfish ends, receives or accepts bribes or infringes the lawful rights and interests of a partnership, he shall be given an administrative sanction according to law.

Article 105 Where a violation of the provisions of this Law constitutes a crime, criminal liability shall be investigated according to law.

Article 106 A person who violates the provisions of this Law and should bear civil liability for compensation and pay a fine or penalty and whose property is insufficient to pay the compensation and the fine or penalty at the same time, he shall bear civil liability for compensation first.

Chapter VI

Supplementary Provisions

Article 107 Where a specialized service entity which is not an enterprise adopts the system of partnership according to relevant laws, the provisions of this Law governing the liability to be borne by the partners of a specialized general partnership may be applied to the partners of such entity.

Article 108 The measures for administration of partnerships established within the territory of China by foreign enterprises or individuals shall be formulated by the State Council.

Article 109 This Law shall go into effect as of June 1, 2007.

 

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