CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian and Liangqian Ying, JunHe LLP
5.5 Applicable Governance Requirements A Limited Liability Company Pursuant to the Company Law (as amended in 2023, and coming into force on 1 July 2024), a limited liability company shall have: • less than 50 shareholders and a shareholders’ assembly consisting of all the shareholders (or sole shareholder), which is the highest authority of the company; • a board of directors consisting of three or more directors (or one director in lieu of a board of direc - tors if there is a limited number of shareholders or the company is small), which reports to the share - holders’ assembly (or shareholder); and • a board of supervisors of no less than three supervisors (or one supervisor in lieu of a board of supervisors, or zero supervisor upon unanimous consent by all the shareholders, if there is a limited number of shareholders or the company is small), or an audit committee composed of board direc - tors to serve as the board of supervisors or the supervisor above. Board directors are appointed by the shareholders’ assembly (or shareholder). A limited liability compa - ny may have a general manager, who reports to the board, to be appointed or dismissed by decision of the board. A Limited Company by Shares A limited company by shares is incorporated by one to 200 sponsors, with at least half of them having resi - dence in the PRC, and has: • a shareholders’ assembly consisting of all share - holders, which is the highest authority of the company; • a board of directors consisting of three or more directors (or one director in lieu of a board of direc - tors if there is a limited number of shareholders or the company is small), which reports to the share - holders’ assembly (or shareholder); • a board of supervisors of no less than three supervisors (or one supervisor in lieu of a board of supervisors if there is a limited number of share - holders or the company is small), or an audit com -
mittee composed of board directors to serve as the board of supervisors or the supervisor above; and • a general manager. As in the limited liability company, board directors are appointed by the shareholders’ assembly (or share - holder), and the general manager is appointed or dis - missed by decision of the board of directors. 5.6 Annual Entity Maintenance and Accounting Compliance A company must submit the annual report for the pre - ceding year to the administration for market regulation through the corporate credit information disclosure system between 1 January and 30 June each year. No fees are required for the submission of such report. Companies are also required to prepare financial accounting reports at the end of each fiscal year, which are audited by an accounting firm. In addition to such accounting expenses, additional fees may be incurred for other financial matters as agreed in a company’s articles of association. Such fees vary depending on the location of the accounting firm and the company’s assets and financial condition. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time Leasing is the most common method to obtain the right to occupy and use any or all of a building for a limited period of time. In addition, the habitation right, if duly registered, is another method to occupy and use another person’s dwellings, generally free of charge unless otherwise agreed. The habitation right is a newly created right under the Civil Code. Methods to obtain the use right to a piece of land vary depending on the type of land. Land is classified into farmland, construction land and unused land: • farmland means land that is directly used for agri - cultural production, including cultivated land, forest land, grassland, etc;
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