CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe LLP
of real estate to limited liability companies and limited companies by shares. 5.3 REITs China officially launched a pilot scheme on public REITs in the infrastructure field in 2020, which was further broadened on a pilot basis, to include department stores, shopping malls, and marketplace for agricultural products. Foreign investors can initiate these vehicles subject to satisfaction of “commercial presence” require - ment and other qualification requirements, such as sound creditworthiness, robust internal con - trol system, consistent business operations, and material legal compliance in past three years. Using a REIT can improve cash flow and asset- liability ratio, and increase asset turnover ratio of an enterprise. Recently, Shanghai and Shen - zhen Stock Exchanges are, at the same time, exploring the introduction of private REITs to supplement public REITs and the first private REIT product is under way. 5.4 Minimum Capital Requirement The minimum capital for companies engaging in real estate development may not be less than CNY1 million. 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 directors if there is a limited number
of shareholders or the company is small), which reports to the shareholders’ 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 directors to serve as the board of supervisors or the supervisor above. Board directors are appointed by the share - holders’ assembly (or shareholder). A limited liability company 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 residence in the PRC, and has: • a shareholders’ assembly consisting of all shareholders, 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 directors if there is a limited number of shareholders or the company is small), which reports to the shareholders’ 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 num - ber of shareholders or the company is small), or an audit committee composed of board directors to serve as the board of supervisors or the supervisor above; and • a general manager.
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