Chapter III

Incorporation and Organizational Structure of Joint Stock Limited Companies

Section 1

Incorporation

Article 73 To incorporate a joint stock limited company, the following conditions must be satisfied:

(1) the number of sponsors shall conform to the statutory number;

(2) the share capital subscribed for by the sponsors and raised from the general public shall reach the statutory minimum amount of capital;

(3) the issuance of shares and preparations for incorporation shall be in conformity with the provisions of law;

(4) the articles of association of the company shall be formulated by the sponsors and adopted at the inaugural meeting; (5) the company shall have a name and an organizational structure required for the incorporation of a joint stock limited company; and

(6) the company shall have fixed premises and the necessary conditions for production and operation.

Article 74 Joint stock limited companies may be incorporated by means of sponsorship or by means of share offer.

“Incorporation by means of sponsorship” means incorporation of a company by means of subscription by the sponsors for all the shares to be issued by the company.

“Incorporation by means of share offer” means incorporation of a company by means of subscription by the sponsors for a portion of the shares to be issued by the company and offer of the rest to the general public.

Article 75 To incorporate a joint stock limited company, there shall be five or more sponsors, of which more than half must have their domicile within the territory of the People’s Republic of China.

Where a State-owned enterprise is restructured as a joint stock limited company, there may be less than five sponsors, however, such a company shall be incorporated by means of share offer.

Article 76 The sponsors of a joint stock limited company must subscribe in accordance with this Law for the shares to be subscribed for by them, and shall undertake the matters concerning the preparation for the incorporation of the company.

Article 77 The incorporation of a joint stock limited company must be subject to the approval of a department authorized by the State Council or of a people’s government at the provincial level.

Article 78 The registered capital of a joint stock limited company shall be the total amount of paid-up share capital as registered with the company registration authority.

The minimum registered capital of a joint stock limited company shall be RMB 10,000,000 yuan. If the minimum registered capital of a joint stock limited company needs to be higher than the aforesaid amount, it shall be stipulated separately by laws or administrative regulations.

Article 79 The articles of association of a joint stock limited company shall specify the following items:

(1) the name and domicile of the company;

(2) the scope of business of the company;

(3) the method of incorporation of the company;

(4) the total number of shares, the amount of each share and the registered capital of the company;

(5) the names or titles of the sponsors and the numbers of shares subscribed for by the sponsors;

(6) the rights and obligations of the shareholders;

(7) the compositition, functions and powers, the term of office and the deliberation rules of the board of directors;

(8) the legal representative of the company;

(9) the composition, functions and powers, the term of office and the deliberation rules of the supervisory board;

(10) methods for the distribution of the company’s profit;

(11) the reasons for dissolution of the company and liquidation method;

(12) methods for notices and announcements of the company; and

(13) other matters that the shareholders’ general meeting deems necessary to be specified.

Article 80 The sponsors may make their capital contributions in cash, or with material objects, industrial property rights, non-patented technology or land-use rights at their appraised value. Material objects, industrial property rights, non-patented technology or land-use rights contributed as capital must be appraised and valued, and such property must be verified and converted into shares. Such contributions may not be over-valued or under-valued. The appraisal and valuation of land-use rights shall be conducted in accordance with the provisions of laws and administrative regulations.

The amount of capital contributions made by sponsors in the form of industrial property rights and non-patented technology shall not exceed twenty percent of the registered capital of a joint stock limited company.

Article 81 Where a State-owned enterprise is restructured as a joint stock limited company, it shall be strictly prohibited to convert the State-owned assets into shares at a depressed price or to sell off them at a depressed price, or to distribute them to individuals without charge.

Article 82 Where a joint stock limited company is incorporated by means of sponsorship, the sponsors shall pay in full for their shares immediately after confirming in writing their subscription of the shares to be issued according to the articles of association of the company. If material objects, industrial property rights, non-patented technology or land-use rights are invested as payment for shares, the sponsors shall undertake the transfer procedures for property rights therein in accordance with law.

After the sponsors make their capital contributions in full, they shall elect the board of directors and supervisory board. The board of directors shall submit to the company registration authority the documents such as approval document for the company’s incorporation, articles of association and capital verification certificate of the company, and shall apply for registration of incorporation.

Article 83 Where a joint stock limited company is incorporated by means of share offer, the sponsors shall not subscribe for less than thirty five percent of the total shares issued by the company, and the remaining shares shall be offered to the general public.

Article 84 When offering shares to the general public for subscription, the sponsors must submit to the securities administration department under the State Council an application for share offer along with the following main documents:

(1) the approval documents for the incorporation of the company;

(2) the articles of association of the company;

(3) a business forecast;

(4) the names or titles of the sponsors, the number of shares subscribed for by the sponsors, the forms of capital contributions and the capital verification certificate;

(5) the prospectus on share offer;

(6) the name and address of the bank accepting subscription money on behalf of the company; and

(7) the name of the underwriters and related agreements.

The sponsors shall not offer shares to the general public without the approval of the securities administration department under the State Council.

Article 85 A joint stock limited company may, with the approval of the securities administration department under the State Council, offer its shares to the general public outside the territory of the People’s Republic of China. The specific measures therefor shall be specially stipulated by the State Council.

Article 86 The securities administration department under the State Council shall approve the applications for share offer which conform to the provisions of this Law, and disapprove the applications which fail to conform to the provisions of this Law.

If an approval is found to be inconsistent with the provisions of this Law after it has been granted, such approval shall be revoked. If the share offer has not yet been made, the offer shall be halted; if the share offer has already been made, the subscribers may claim a refund from the sponsors according to their paid-up subscriptions plus bank deposit interest calculated for the same period.

Article 87 A prospectus on share offer shall have the articles of association of the company formulated by the sponsors attached, and shall specify the following:

(1) the number of shares subscribed for by the sponsors;

(2) the face value and the issue price of each share;

(3) the total number of bearer shares issued;

(4) the rights and obligations of the subscribers; and

(5) the term of the share offer and a statement to the effect that subscribers may withdraw their share subscriptions if all the shares are not taken up within the time limit.

Article 88 Where shares are to be offered to the general public, the sponsors must publish the company’s prospectus on share offer and prepare subscription forms. The subscription forms shall contain the items listed in the preceding article, and the subscribers shall fill in the number of shares subscribed for, the amount of money contributed to, and their respective domiciles on the forms, and shall sign and seal such forms. The subscribers shall pay their subscription money in accordance with the number of shares subscribed for.

Article 89 When sponsors offer shares to the public, the shares shall be distributed by a securities agency established according to law, with which a distribution agreement shall be concluded.

Article 90 Where shares are to be offered to the public, the sponsors shall enter into an agreement with a bank on the collection of subscription money on behalf of the company.

The bank entrusted with collecting the subscription money shall, in accordance with its agreement, collect and keep the subscription money, issue receipts to the subscribers for their payments, and bear an obligation to issue certification of receipt of subscription money to the relevant departments.

Article 91 After payment in full of the subscription money for all shares is made, a statutory capital verification institution shall be commissioned to conduct a verification of the funds and produce a verification certificate. The sponsors shall, within thirty days thereafter, convene and preside over an inaugural meeting composed of all the subscribers.

If the number of shares has not been fully subscribed for within the time limit specified in the prospectus on share offer or, after payment in full of the subscription money for the total share is made, or if sponsors fail to hold an inaugural meeting within thirty days thereafter, the subscribers may claim a refund from the sponsors according to the paid-up share subscription money plus bank deposit interest calculated for the same period.

Article 92 The sponsors shall notify each subscriber of the date of the inaugural meeting or make a public announcement fifteen days prior to the convening of the meeting. The inaugural meeting may be convened only if subscribers representing fifty percent or more of the total shares issued are present.

The following functions and powers shall be exercised at an inaugural meeting:

(1) to examine the sponsors’ report on the preparation for the incorporation of the company;

(2) to adopt the articles of association of the company;

(3) to elect members of the board of directors;

(4) to elect members of the supervisory board;

(5) to examine and verify the expenses incurred in the incorporation of the company;

(6) to examine and verify the valuation of the property used by the sponsors to pay for subscription money; and

(7) to resolve not to incorporate the company in the event that a force majeure or major changes in business operation conditions may directly affect the incorporation of the company.

The resolution made at the inaugural meeting on the issues listed in the preceding paragraph must be approved by subscribers attending the meeting who represent more than half of the voting rights.

Article 93 Sponsors and subscribers may not withdraw their share capital after paying their subscription money or making their capital contributions as substitutes for subscription money, except where the total share issue is not fully subscribed for within the time limit or the sponsors fail to convene the inaugural meeting according to the schedule, or the inaugural meeting resolves not to incorporate the company.

Article 94 The board of directors shall, within thirty days after the inaugural meeting, submit the following documents to the company registration authority and apply for registration of the incorporation of the company:

(1) the approval documents issued by the relevant department in charge;

(2) the minutes of the inaugural meeting;

(3) the articles of association of the company;

(4) the financial audit report on the preparation of the incorporation of the company; (5) the capital verification certificate;

(6) the names and domiciles of the members of the board of directors and the supervisory board; and

(7) the name and domicile of the legal representative.

Article 95 The company registration authority shall, within thirty days after receipt of an application for the incorporation of a joint stock limited company, make a decision whether or not to register the company. A company complying with the provisions of this Law shall be registered and a company business licence shall be issued thereto. A company failing to comply with the provisions of this Law shall not be registered.

The date of issuance of a company business licence shall be the date of the incorporation of the company. Once a company is incorporated, an announcement shall be made.

A joint stock limited company incorporated by means of share offer shall, after its registration for incorporation, report its share subscription to the securities administration department under the State Council for the record.

Article 96 Where branches are established simultaneously with the incorporation of a joint stock limited company, the company shall submit applications for registration of the establishment of the branches to, and obtain business licenses of the branches from, the company registration authority.

Where branches are established after the incorporation of a joint stock limited company, the legal representative of the company shall submit applications for registration of the branches to, and obtain business licences of the branches from, the company registration authority.

Article 97 The sponsors of a joint stock limited company shall bear the following responsibilities:

(1) in the event of the company failing to be incorporated, joint and several liabilities for all debts and expenses incurred in the act of the incorporation;

(2) in the event of the company failing to be incorporated, joint and several liabilities for refunding to the subscribers the paid-up subscription money plus bank deposit interest calculated for the same period of time; and

(3) in the event of the interests of the company being impaired during the course of its incorporation due to the fault of the sponsors, liability for compensation to the company.

Article 98 If a limited liability company is to be converted into a joint stock limited company, it shall satisfy the requirements for a joint stock limited company stipulated by this Law and the conversion shall be handled in accordance with the procedures stipulated in this Law for the incorporation of a joint stock limited company.

Article 99 Where a limited liability company is, after approval, converted into a joint stock limited company in accordance with law, the total amount of its shares converted shall be equal to the amount of its net assets. Where a limited liability company that is, after approval, converted into a joint stock limited company in accordance with law offers shares to the general public for the purpose of increasing its capital, it shall be handled in accordance with the provisions of this Law in respect of the share offer to the public. Article 100 Where a limited liability company is converted into a joint stock limited company in accordance with law, the claims and debts of the original limited liability company shall be succeeded to by the joint stock limited company into which it is converted.

Article 101 A joint stock limited company shall have its articles of association, roster of the shareholders, minutes of the shareholders’ general meetings and financial and accounting statements kept at the company.

Section 2

Shareholders’ General Meetings

Article 102 A joint stock limited company shall form a shareholders’ general meeting which shall be composed of all the shareholders. The shareholders’ general meeting is the organ of power of the company and shall exercies its functions and powers in accordance with this Law.

Article 103 The shareholders’ general meeting shall exercise the following functions and powers:

(1) to decide upon policies on business operation and investment plans of the company;

(2) to elect and replace members of the board of directors and to decide upon matters concerning the remuneration of the directors;

(3) to elect and replace the supervisors who are representatives of the shareholders and to decide upon matters concerning the remuneration of the supervisors;

(4) to examine and approve reports of the board of directors;

(5) to examine and approve reports of the supervisory board;

(6) to examine and approve plans of the company’s fiscal financial budget and final accounts;

(7) to examine and approve plans for company’s profit distribution and making up losses;

(8) to make resolutions on the increase or reduction of the registered capital of the company;

(9) to adopt resolutions on the issuance of company bonds;

(10) to adopt resolutions on matters such as the merger, division, dissolution and liquidation of the company; and

(11) to amend the articles of association of the company.

Article 104 The annual meeting of the shareholders’ general meeting shall be convened once a year. An interim shareholders’general meeting shall be convened within two months if any of the following situations occurs:

(1) if the number of directors is less than the number stipulated by this Law, or less than two-thirds of the number required by the articles of association of the company;

(2) if the amount of the company’s losses that have not been made up reaches one-third of its total share capital;

(3) if shareholders holding ten percent or more of the company’s shares request to convene a shareholders’ meeting;

(4) if the board of directors deems it necessary; and

(5) if the supervisory board proposes that such a meeting be convened.

Article 105 A shareholders’ general meeting shall be convened by the board of directors in accordance with the provisions of this Law and presided over by the chairman of the board. Where the chairman is unable to perform his duties due to special reasons, the vice-chairman or other director designated by the chairman may preside over such meetings. Shareholders shall be notified of the matters to be considered at a shareholders general meeting thirty days prior to the holding of such a meeting. At interim shareholders’ general meetings, no resolutions may be adopted in respect of matters not included in the notice.

Where bearer shares are to be issued, a public announcement shall be made in respect of the matters mentioned in the preceding paragraph forty-five days prior to the holding of such a meeting.

Holders of bearer shares attending the shareholders’ general meeting shall deposit their share certificates with the company for the period from five days prior to the holding of the meeting until the end of the meeting.

Article 106 Shareholders attending a shareholders’ general meeting shall have the right to one vote for each share held.

A resolution of the shareholders general meeting must be passed by more than one half of the voting rights held by the shareholders present at the meeting. Resolutions on the merger, division or dissolution of the company adopted by the shareholders’ general meeting must require more than two-thirds of the voting rights held by the shareholders present at the meeting.

Article 107 Amendments to the articles of association of the company must be adopted by more than two-thirds of the voting rights held by the shareholders present at the shareholders’ general meeting.

Article 108 A shareholder may entrust a proxy to attend the shareholders’ general meeting on his behalf. The proxy shall present the shareholders’ power of attorney to the company and exercise voting rights within the scope of authorization.

Article 109 Resolutions on matters discussed at a shareholders’ general meeting shall be minuted down. The directors attending the meeting shall sign the minutes. The minutes of the meeting shall be kept together with the roster of the signatures of the shareholders attending the meeting and the powers of attorney of attending proxies.

Article 110 Shareholders shall have the right to examine the articles of association of the company, the minutes of the shareholders’ general meetings and the financial and accounting statements, and to make suggestions or inquiries about the business operation of the company.

Article 111 Where a resolution of the shareholders’ general meeting or of the board of directors violates laws or administrative regulations or infringes the lawful rights and interests of the shareholders, the shareholders concerned shall have the right to bring a lawsuit in a people’s court demanding that such illegal or infringing action be stopped. Section 3

Board of Directors, and the Manager

Article 112 A joint stock limited company shall have a board of directors composed of five to nineteen members.

The board of directors shall be responsible to the shareholders’ general meeting and exercise the following functions and powers:

(1) to convene the shareholders’ general meeting and to report on its work to the shareholders’ general meeting;

(2) to implement resolutions passed at the shareholders’ general meetings;

(3) to decide on the business operation plans and the investment plans of the company;

(4) to formulate the fiscal financial budgets and the final accounts of the company;

(5) to formulate plans for the profit distribution and making up losses of the company;

(6) to formulate plans for increasing or reducing the registered capital of the company and plans for the issue of company bonds;

(7) to formulate plans for the merger, division and dissolution of the company;

(8) to decide on the establishment of the internal management of the company;

(9) to engage or dismiss the manager and, upon recommendation of the manager, to engage or dismiss the deputy manager(s) and the persons in charge of the financial affairs of the company, and to decide on matters concerning their remuneration; and

(10) to formulate the basic managment system of the company.

Article 113 The board of directors shall have one chairman and may have one or two vice-chairmen. The chairman and vice-chairmen of the board of directors shall be elected by the affirmative votes of more than half of all the directors.

The chairman of the board shall be the legal representative of the company.

Article 114 The chairman of the board shall exercise the following functions and powers:

(1) to preside over shareholders’ general meetings, and to convene and preside over meetings of the board of directors;

(2) to examine the implementation of resolutions of the board of directors; and

(3) to sign the shares and the bonds of the company.

The vice-chairmen of the board shall assist the chairman of the board in his work and shall, upon designation by the chairman, exercise the chairman’s powers and functions on behalf of the chairman of the board in case the chairman is unable to perform his powers and functions.

Article 115 The term of office of the directors shall be stipulated in the articles of association of the company, but each term shall not exceed three years. A director may serve consecutive terms if reelected upon expiration of his term of office.

The shareholders’ general meeting may not, without cause, remove a director from office before the expiration of his term of office.

Article 116 Meetings of the board of directors shall be held at least twice a year. All the members of the board shall be notified of the meeting ten days prior to the holding of the meeting.

The notification method and time limit for giving notice of the convening of the interim meetings of the board of directors may be separately decided.

Article 117 A meeting of the board of directors shall be convened only if more than one half of all the directors are present. Any resolution of the board must be adopted by the affirmative votes of more than one half of all the directors.

Article 118 Meetings of the board of directors shall be attended by the directors in person. If a director is unable to attend a meeting of the board certain reasons, he may entrust another director in writing with attending the meeting on his behalf. The power of attorney shall define the scope of authorization.

Decisions on matters discussed at a meeting of the board of directors shall be minuted. Such minutes of the meeting shall be signed by the directors and clerks present.

Directors shall be responsible for resolutions passed by the board of directors. If a resolution of the board violates laws, administrative regulations or the articles of association of the company and thus causes serious losses to the company, the directors who participated in the adoption of such a resolution shall be liable for compensation to the company. However, if a director is proved to have expressed his objection to such a resolution when it was put to the vote and his objection was recorded in the minutes of the meeting, he may be exempted from such liability.

Article 119 A joint stock limited company shall have a manager, who shall be engaged or dismissed by the board of directors. The manager shall be responsible to the board of directors and shall exercise the following functions and powers:

(1) to be in charge of the production, operation and management of the company and to organize the implementation of resolutions of the board of directors;

(2) to organize the implementation of the annual business plans and investment plans of the company;

(3) to draft plans for the establishment of internal management of the company;

(4) to draft the basic management system of the company;

(5) to formulate specific rules and regulations of the company;

(6) to propose the appointment or dismissal of deputy manager(s) and the persons in charge of the financial affairs of the company;

(7) to appoint or dismiss management personnel, except those who shall be appointed or dismissed by the board of directors; and

(8) to exercise other functions and powers authorized by the articles of association of the company and by the board of directors.

The manager shall attend meetings of the board of directors as a non-voting participant.

Article 120 If necessary, the board of directors may authorize its chairman to perform part of its functions and powers when the meeting of the board is not in session.

The board of directors may decide that one of its members shall concurrently serve as the manager of the company.

Article 121 A company shall solicit in advance the opinions of the trade union and its staff and workers in studying and deciding on issues involving the immediate interests of its staff and workers such as the salary, welfare, safety in production, labour protection and labour insurance, and shall invite representatives from the trade union or from its staff and workers to attend relevant meetings as non-voting participants.

Article 122 A company shall solicit the opinions and suggestions of the trade union and its staff and workers when studying and deciding major issues in respect of the company’s production and operations or the formulation of important rules and regulations of the company.

Article 123 Directors and managers shall abide by the articles of association of the company, faithfully perform their duties and protect the interests of the company, and shall not use their positions, functions and powers in the company to seek personal gains.

Provisions of Articles 57 through 63 of this Law regarding persons disqualified to serve as directors and managers, and the obligations and responsibilities of the directors and managers shall apply to directors and managers of joint stock limited companies.

Section 4

Supervisory Board

Article 124 A joint stock limited company shall have a supervisory board composed of no less than three members. The supervisory board shall elect a convener from among its members.

The supervisory board shall be composed of shareholders’ representatives and an appropriate proportion of representatives of the staff and workers of the company, and the specific proportion of such representatives shall be provided for by the articles of association of the company. The representatives of the staff and workers serving on the supervisory board shall be democratically elected by the staff and workers of the company.

Directors, managers and the persons in charge of the financial affairs of the company may not serve concurrently as supervisors.

Article 125 The term of office of the supervisors shall be three years. A supervisor may serve consecutive terms if re-elected upon expiration of his term of office.

Article 126 A supervisory board shall exercise the following functions and powers:

(1) to examine the financial affairs of the company; (2) to supervise the acts of the directors and the manager violating laws, the administrative regulations or articles of association of the company during the performance of their functions;

(3) to demand directors or the manager to make rectification if any of their acts is found to have impaired the interests of the company;

(4) to propose the convening of interim shareholders’ general meetings; and

(5) other functions and powers provided for in the articles of association of the company.

Supervisors shall attend meetings of the board of directors as non-voting participants.

Article 127 The articles of association of the company shall stipulate the method of deliberation and voting procedures of the supervisory board.

Article 128 A supervisor shall faithfully perform his duties of supervision in accordance with law, administrative regulations and the articles of association of the company.

Provisions of Articles 57 through 59 and Articles 62 through 63 of this Law regarding persons disqualified to serve as supervisors and the obligations and responsibilities of supervisors shall apply to the supervisors of joint stock limited companies.

Chapter IV

Issue and Transfer of Shares of Joint Stock Limited Companies

Section 1

Issue of Shares

Article 129 The capital of a joint stock limited company shall be divided into shares of equal value.

The shares of the company shall take the form of share certificates, which are vouchers issued by the company to certify the shares held by their shareholders.

Article 130 The issue of shares shall be in compliance with the principles of publicity, fairness and justice. The same shares must carry the same rights and the same benefits.

Shares of the same issue shall be issued on the same conditions and at the same price. A unit or an individual subscribing to shares shall pay the same price for each share.

Article 131 Shares may be issued at or above par but not below par.

The premiums generated from issuing shares above par shall be entered under the capital common reserve fund of the company.

Specific measures for the administration of issue of shares above par shall be separately stipulated by the State Council.

Article 132 Share certificates may be in paper form or in such other forms as stipulated by the securities administration department under the State Council.

The following main particulars shall be clearly stated on a share certificate:

(1) the name of the company;

(2) the date of registration of the company’s incorporation;

(3) the class of the shares, the par value and the number of shares represented by the certificate; and

(4) the serial number of the share certificate.

A share certificate shall be signed by the chairman of the board of directors and sealed with the seal of the company.

In the case of share certificates owned by sponsors, the words “sponsor’s share certificate” shall be clearly stated on the share certificates.

Article 133 Shares issued by a company to sponsors, a State-authorized investment institution or legal persons shall be registered shares which shall state the names of the sponsors, State-authorized investment institution or legal persons. Such shares may not be registered in other names, or names of their representatives.

Shares issued to the general public may be either registered shares or bearer shares.

Article 134 Where registered shares are issued, the company shall prepare a roster of the shareholders, in which the following items shall be recorded:

(1) the names or titles, and domiciles of the shareholders;

(2) the number of shares held by each shareholder;

(3) the serial numbers of the share certificates held by each shareholder; and

(4) the date on which each shareholder obtained his shares.

Where bearer shares are issued, the company shall keep a record of the number, the serial numbers and the issue date of the share certificates.

Article 135 The State Council may formulate separate regulations on the issue of other classes of shares which are not provided for in this Law.

Article 136 A joint stock limited company shall formally deliver share certificates to its shareholders immediately after the registration of its incorporation. No company may deliver share certificates to its shareholders prior to the registration of its incorporation.

Article 137 To issue new shares, a company must satisfy the following conditions:

(1) shares of the previous issue must have fully been subscribed for and at least one year has elapsed since the previous issue of shares;

(2) the company has been continuously profitable for the last three years and is able to pay dividends to its shareholders;

(3) the company is not found to have false records in the financial accounting documents in the last three years; and

(4) the forecast profit rate of the company can reach the interest rate of bank deposit for the same period of time.

A company’s distribution of new shares from the current year’s profits shall not be restricted by Subparagraph (2) of the preceding paragraph.

Article 138 Where a company issues new shares, resolutions on the following matters shall be adopted by a shareholders’ general meeting:

(1) the class and number of the new shares;

(2) the issue price of the new shares;

(3) the opening and closing dates of the new share issue; and

(4) the class and number of new shares issued to existing shareholders.

Article 139 After the shareholders’ general meeting adopts a resolution to issue new shares, the board of directors must apply to the department authorized by the State Council or to the local provincial people’s government for approval. If the new shares are to be issued to the general public, the approval of the securities administration department under the State Council must be obtained.

Article 140 When a company obtains the approval to issue new shares to the general public, it must publicly announce its prospectus on new share offer and its financial accounting statements with annexed detailed schedules, and shall prepare subscription application forms.

When a company issues new shares openly to the public, the new shares shall be distributed by a securities agency established in accordance with law, with which a distribution agreement shall be concluded.

Article 141 Where a company issues new shares, it may determine the pricing proposal for new shares based upon the circumstances of its consecutive profit gains and property value appreciations.

Article 142 Where the new share issue of a company is fully subscribed for, the company shall apply to the company registration authority for registration of the modification in its capital and make a public announcement thereafter.

Section 2

Transfer of Shares

Article 143 Shares held by shareholders may be transferred in accordance with law.

Article 144 Transfer of shares by shareholders shall be conducted through stock exchanges established in accordance with law.

Article 145 Registered shares shall be transferred by means of endorsement by the shareholders or by such other means as provided for by law and administrative regulations.

When registered shares are transferred, the company shall register the transferee’s name or title and domicile in its roster of shareholders.

No registration of modification to the roster of shareholders as stipulated in the preceding paragraph shall be made within thirty days prior to the convening of a shareholders’ general meeting or within five days prior to the date decided by the company for the distribution of dividends.

Article 146 Transfer of bearer shares shall become effective immediately after the shareholder delivers the share certificates to the transferee at a stock exchange established in accordance with law.

Article 147 Shares held by the sponsors of a company shall not be transferred within three years after the date of incorporation of the company.

Directors, supervisors and the manager shall declare their numbers of shares held by them to the company, and shall not transfer such shares during their term of office.

Article 148 The State-authorized investment institution may transfer its shares held by it in accordance with law and may purchase shares held by other shareholders. The authority to examine and approve such transfers or purchases and measures for administration thereof shall be separately provided for by laws and administrative regulations.

Article 149 A company may not purchase its own shares except where, for the purpose of reducing its capital, shares need to be cancelled, or where the company merges with another company which holds its shares.

A company must cancel the shares purchased by the company itself in accordance with the preceding paragraph within ten days, and register the change of its capital in accordance with laws and administrative regulations and make a public announcement thereafter.

A company may not accept its own shares as the subject matter of a mortgage.

Article 150 Where registered share certificates are stolen, lost or destroyed, the shareholder may, in accordance with the procedure for public notice for assertion of claims provided for in the Civil Procedure Law, request a people’s court to declare such share certificates as void.

After the voidness has been declared by a people’s court in accordance with the aforesaid procedure, the shareholder may apply to the company for a replacement of the share certificates.