Partnership Law of the People's Republic of China
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Chapter One: General Provisions

 

Article 1 This Law is formulated in order to standardize the conduct of partnerships, to protect the lawful rights and interests of partnerships and the partners therein, to safeguard social and economic order, and to promote the development of socialist market economy.

 

Article 2 The partnership referred to herein shall mean a for-profit association established within China in accordance herewith pursuant to the partnership agreement concluded by all the partners, whereby the partners jointly contribute capital, jointly operate the business, jointly share in the incomes and the risks, and are jointly and severally liable for the debts of the partnership.

 

Article 3 The partnership agreement shall be executed in writing in accordance with the law by all the partners upon their agreement after consultation.

 

Article 4 Conclusion of the partnership agreement and establishment of the partnership shall be under the principles of self-willingness, equality, fairness, and good faith.

 

Article 5 The designation of the partnership may not contain the words "Limited" or "Limited Liability."

 

Article 6 In carrying on its business, the partnership shall observe the law, administrative regulations, and observe the ethics in its industry.

 

Article 7 The property and lawful rights and interests of the partnership and the partners therein are protected by law.

 

Chapter Two: Establishment Of The Partnership

 

Article 8 For the establishment of the partnership, the following conditions shall be met:

 

(i) There are two or more partners, all of whom are capable of assuming unlimited liability in accordance with the law;

 

(ii) There is a written partnership agreement;

 

(iii) There is actual capital contributed by the respective partners;

 

(iv) There is a designation for the partnership;

 

(v) There is a place of business and the necessary conditions for the operation of the partnership.

 

Article 9 Partners must be persons with full capacity for civil acts.

 

Article 10 No person who is prohibited by law or administrative regulations to engage in for-profit activities may be a partner in the partnership.

 

Article 11 A partner may make capital contribution in cash, tangible goods, land use rights, intellectual property, or other proprietary rights; the capital contribution referred to above shall be the lawful property and proprietary rights of the partners.

 

Where the value of an item of capital contribution needs to be determined, it may be determined pursuant to agreement by the partners after consultation among them, or an appraisal may be conducted thereon by an legally designated appraisal agency appointed by all the partners.

 

Where there is an agreement after consultation among the partners, a partner may make capital contribution in the form of service, and the appraisal method shall be determined by all the partners after consultation among them.

 

Article 12 Partners shall fulfill their obligations in respect of capital contribution in accordance with the method for, amount of, and time limit for, making capital contribution as prescribed in the partnership agreement.

 

The capital actually contributed by a partner in accordance with the partnership agreement shall be the partner's capital contribution.

 

Article 13 The partnership agreement shall set forth the following:

 

(i) Designation of the partnership and the address of its principal place of operation;

 

(ii) The purpose and business scope of the partnership;

 

(iii) The names and domiciles of the partners;

 

(iv) The method for, amount of, and time limit for, making capital contribution by each partner;

 

(v) The method for profit distribution and loss allocation;

 

(vi) The conduct of partnership affairs;

 

(vii) Participation and withdrawal from the partnership;

 

(viii) Dissolution and liquidation of the partnership;

 

(ix) Liability for breach of contract.

 

The partnership agreement may prescribe a term for the partnership and the method for the resolution of dispute among the partners.

 

Article 14 The partnership agreement shall become effective upon the signature or impressing of chops thereon by all the partners. The partners shall have the rights and bear the liabilities as prescribed in the partnership agreement.

 

The partnership agreement may be amended or supplemented after agreement is reached by all the partners after consultation among them.

 

Article 15 For the application for registration for the establishment of the partnership, the registration application, partnership agreement, the identification documents of the partners, etc., shall be submitted to the enterprise registration authority.

Where approval by the relevant authorities is required by law or administrative regulations, the approval document shall also be submitted when applying for establishment registration.

 

Article 16 The enterprise registration authority shall make its decision to grant registration or not to grant registration within 30 days of the receipt of the documents for establishment registration. For an application meeting the conditions prescribed herein, registration shall be granted, and a business license shall be issued; for an application failing to meet the conditions prescribed herein, registration shall not be granted, and a written response explaining the reason(s) for denial shall be issued.

 

Article 17 The date of issue of the business license for the partnership shall be the date of establishment thereof.

 

Prior to the issue of a business license for the partnership, no partner may conduct business in the name of the partnership.

 

Article 18 Where the partnership applies to establish a branch, the partnership shall apply to the enterprise registration authority of the place where the branch will be located for registration, and a business license shall be issued.

 

Chapter Three: Partnership Property

 

Article 19 In the duration of the partnership, the capital contribution made by the partners and the income received in the name of the partnership shall all be property of the partnership.

 

Partnership property shall be jointly managed and used by all the partners in accordance herewith.

 

Article 20 Prior to liquidation of the partnership, the partners may not request for the division of partnership property, except otherwise provided herein.

 

Where the partners transfer or dispose of partnership property on their own prior to the liquidation of the partnership, the partnership may not assert such transfer or disposal as a defense to claims by third persons who are in good faith and are without knowledge of such transfer or disposition.

 

Article 21 In the duration of the partnership, transfer of his share of property in the partnership by a partner to a person other than a partner, whether in whole or in part, shall be subject to unanimous consent by all the partners.

 

In the event of transfer of share of property in the partnership between the partners, whether in whole or in part, the other partners shall be notified.

 

Article 22 Where a partner is to transfer his share of property in accordance with the law, the other partners shall have the preemptive right of purchase under the same conditions.

 

Article 23 Where upon consent by all the partners, a person other than a partner is to be assigned the share of property in the partnership in accordance with the law, after amendment of the partnership agreement, the assignee shall become a partner in the partnership, and shall have the rights and bear the liabilities in accordance with the amended partnership agreement.

 

Article 24 Where a partner is to pledge his share of property in the partnership, unanimous consent by all the partners shall be required.

 

Where a partner pledges his share of property in the partnership without unanimous consent by all the partners, such act shall be invalid, or be treated as withdrawal from the partnership; If any loss is caused to the other partners, such partner shall be liable for damages in accordance with the law.

 

Chapter Four: Conduct Of Partnership Affairs

 

Article 25 Each partner shall enjoy equal rights with respect to the conduct of partnership affairs, provided that the partnership affairs may be conducted jointly by all the partners, or one or more partners may be appointed to conduct the partnership affairs pursuant to the partnership agreement or the decision by all the partners.

 

The partner(s) conducting partnership affairs shall act in the behalf of the partnership in dealing with outside parties.

 

Article 26 Where one or more partners is appointed to conduct partnership affairs pursuant to the provisions in the previous article, the other partners shall no longer conduct partnership affairs.

 

The partners who do not participate in the conduct of partnership affairs shall be entitled to monitor the partner(s) who conducts partnership affairs, and review the status of the partnership affairs conducted thereby.

 

Article 27 Where partnership affairs are conducted by one or more partners, they shall report the status of the partnership affairs conducted thereby, and the operating and financial conditions of the partnership to the other partners who do not participate in the conduct of partnership affairs, and all incomes generated from their conduct of partnership affairs shall belong to all the partners, and the losses or civil liabilities incurred therefrom shall be borne by all the partners.

 

Article 28 A partner shall be entitled to inspect partnership books for the purpose of understanding the operating and financial conditions of the partnership.

 

Unless otherwise provided herein or in the partnership agreement, where the partners decide upon matters relating to the partnership in accordance with the law or the partnership agreement, the voting method of one vote for each partner may be adopted if unanimously agreed upon by all the partners.

 

Article 29 Where the partnership agreement or a decision made by all partners provides that partners shall conduct partnership affairs individually, a partner may object to the conduct of a partnership affair by any of the other partners. Where an objection is raised, the execution of such affair shall be suspended. If there is a dispute, such dispute may be decided by all the partners.

 

Where the partner(s) appointed to conduct partnership affairs fails to conduct partnership affairs in accordance with the partnership agreement or the decision reached by all the partners, the other partners may decide to revoke the appointment.

 

Article 30 A partner may not engage in any business in competition with the business of the partnership either on his own, or in cooperation with others.

 

Unless otherwise prescribed in the partnership agreement or otherwise agreed by all the partners, a partner may not conduct any transaction with the partnership.

 

A partner may not engage in any conduct harmful to the interests of the partnership.

 

Article 31 The following matters related to the partnership shall be subject to unanimous consent by all the partners:

 

(i) Disposition of any real property of the partnership;

 

(ii) Change of partnership designation;

 

(iii) Transfer or disposal of the intellectual property or other proprietary rights of the partnership;

 

(iv) Application to the enterprise registration authority for registration for change;

 

(v) Provision of security for others in the name of the partnership;

 

(vi) Appointment of anyone other than a partner to a position of management in the partnership;

 

(vii) The relevant matters set forth in the partnership agreement.

 

Article 32 The profits or losses of the partnership shall be distributed to or borne by the partners in accordance with the ratio specified in the partnership agreement; where the partnership agreement fails to specify the ratio of profit distribution or loss allocation, the partners shall share equally in the profits and losses.

 

The partnership agreement may not provide that all profits be distributed to certain partners or that all losses be borne by certain partners.

 

Article 33 In the duration of the partnership, pursuant to the partnership agreement or the decision reached by all the partners, the partnership may increase the capital contribution in the partnership for the purpose of expanding operation or covering losses.

 

Article 34 The detailed plan for profit distribution or loss allocation for each year or for certain period shall be decided by the partners after consultation or be decided by a method prescribed in the partnership agreement.

 

Article 35 The appointed management personnel in the partnership shall perform their duties within the scope authorized by the partnership.

 

Where an appointed management personnel causes loss to the partnership as a result of conducting business beyond the scope authorized by the partnership, or due to his willful misconduct or gross negligence, he shall be liable for damages in accordance with the law.

 

Article 36 The partnership shall establish enterprise financial and accounting systems in accordance with the provisions of law and administrative regulations.

 

Article 37 The partnership shall fulfill its obligations to pay taxes in accordance with the law.

 

Chapter Five: Relationship Between The Partnership And A Third Person

 

Article 38 Any restriction imposed by the partnership on a partner with respect to the conduct of partnership affairs or the authority to act in the behalf of the partnership in dealing with outside parties may not be asserted as a defense against a third person who is in good faith and without knowledge of such restriction.

 

Article 39 The partnership shall pay its debts out of all of its property first. If the partnership property is not sufficient to pay the debts that are due, each partner shall be jointly and severally liable for payment thereof.

 

Article 40 Where the partnership property is used to pay partnership debts and there is a deficiency, in addition to his capital contribution in the partnership, each partner shall use his property to satisfy his liability for payment of partnership debts in accordance with the ratio determined pursuant to Paragraph 1 of Article 32 hereof.

 

A partner who has paid more than his share of the debts as a result of his joint and several liability shall be entitled to seek recourse against other partners.

 

Article 41 A creditor of any one of the partners in the partnership may not set off his debts owed to the partnership with his creditor's rights against such partner.

 

Article 42 Where a partner has personal debts, his creditors may not subrogate his creditor's rights against such partner for the rights which the partner may exercise in the partnership.

 

Article 43 Where the personal property of a partner is not sufficient to pay his personal debts, such partner may only use the income received from the partnership for payment of such debts; provided that the creditors thereof may, in accordance with the law, petition the People's Court to attach the partner's share of the partnership property for full payment of the debts.

 

With respect to the partner's share of property in the partnership, other partners shall have the preemptive right of assignment.

 

Chapter Six: Admission To And Withdrawal From The Partnership

 

Article 44 For the admission of a new partner to the partnership, the consent of all the partners shall be required, and a written partnership admission agreement shall be concluded.

 

When the partnership admission agreement is concluded, the original partners shall inform the new partner the original partnership's operating and financial conditions.

 

Article 45 The new partner who has been admitted to the partnership shall have equal rights, and share equal liabilities with the original partners. Provided, however, if the partnership admission agreement provides otherwise, such provision shall prevail.

 

The new partner who has been admitted to the partnership shall be jointly and severally liable for the liabilities incurred by the partnership prior to his admission.

 

Article 46 Where the partnership agreement prescribes an operating term for the partnership, a partner may withdraw from the partnership in any of the following circumstances:

 

(i) A cause for withdrawal prescribed in the partnership agreement has occurred;

 

(ii) The withdrawal is consented by all the partners;

 

(iii) A cause has occurred which renders the partner's continued participation in the partnership difficult;

 

(iv) Other partners have seriously breached their duties prescribed in the partnership agreement.

 

Article 47 Where the partnership agreement does not prescribe an operating term for the partnership, a partner may withdraw from the partnership if such withdrawal will not adversely impact on the conduct of the partnership affairs, provided that the other partners shall be notified 30 days in advance.

 

Article 48 Where a partner withdraws from the partnership unilaterally in violation of the previous two articles, such partner shall compensate the other partners for the losses they have suffered as a result.

 

Article 49 In any of the following circumstances, it is mandatory that a partner withdraws from the partnership:

 

(i) The partner is deceased or is adjudged to be deceased;

 

(ii) The partner is adjudged to be without capacity for civil act;

 

(iii) The partner is personally insolvent;

 

(iv) All of the partner's share of property in the partnership has been attached by the People's Court;

 

The effective date of withdrawal from the partnership shall be the actual date of occurrence of any of the circumstances enumerated in the previous paragraph.

 

Article 50 Where a partner falls into any of the following categories, he may be expelled from the partnership by a resolution adopted after unanimous agreement is reached by the other partners:

 

(i) The partner fails to fulfill his obligations in respect of making capital contribution;

 

(ii) The partner has caused loss to the partnership due to his willful misconduct or gross negligence;

 

(iii) The partner engages in improper conduct while conducting partnership affairs;

 

(iv) Other causes specified in the partnership agreement.

 

The resolution to expel a partner shall be delivered to the partner in writing. The expulsion shall become effective as of the date of receipt of notice of expulsion, and the expelled partner shall withdraw from the partnership.

 

Where the expelled partner objects to the resolution for expulsion, he may bring a suit to the People's Court within 30 days of the date of receipt of the notice of expulsion.

 

Article 51 Where a partner is deceased or is adjudged to be deceased, the heir(s) who has the legal right of inheritance to the partner's share of property in the partnership, in accordance with the provision in the partnership agreement or with the consent of all partners, shall obtain the status of a partner in the partnership as of the date of inheritance.

 

Where the legal heir(s) does not intend to become a partner in the partnership, the partnership shall redeem the share of property in the partnership which is legally inherited by such heir(s).

 

Where the legal heir(s) is a minor, with the consent of all the other partners, the guardian thereof may exercise his rights in his behalf during the period of his minority.

 

Article 52 Where a partner withdraws from the partnership, the other partners shall conduct settlement therewith in light of the conditions of the partnership property at the time of withdrawal, and redeem the withdrawing partner's share of the property.

 

Where there are pending partnership affairs at the time of withdrawal, the settlement shall be conducted upon the completion of the partnership affairs.

 

Article 53 The method for redeeming the withdrawing partner's share of partnership property shall be prescribed in the partnership agreement or decided by all the partners, and can be either distribution of cash, or distribution of tangible goods.

 

Article 54 A withdrawing partner shall be jointly and severally liable for the debts of the partnership incurred prior to his withdrawal, as are all the other partners.

 

Article 55 When a partner withdraws from the partnership, if the partnership property is less than the partnership liabilities, the withdrawing partner shall share the loss in accordance with Paragraph 1 of Article 32 hereof.

 

Article 56 Where the registered items have changed or need to be re-registered due to withdrawal or admission of partners, amendment of the partnership agreement, etc. , the relevant registration shall be conducted with the enterprise registration authority within 15 days of the date of the decision for change or the occurrence of the change.

 

Chapter Seven: Dissolution And Liquidation Of The Partnership

 

Article 57 The partnership shall be dissolved in any of the following circumstances:

 

(i) The partnership term prescribed by the partnership agreement has expired and the partners are unwilling to continue the operation of the partnership;

 

(ii) A cause for dissolution stipulated in the partnership has occurred.

 

(iii) All the partners decide to dissolve the partnership;

 

(iv) The number of partners no longer meets legal requirement;

 

(v) The partnership purpose prescribed by the partnership agreement has been accomplished, or is not capable of being accomplished;

 

(vi) The business license of the partnership is revoked in accordance with the law;

 

 (vii) Any other cause for dissolution of the partnership as stipulated by law or administrative regulations has occurred.

 

Article 58 Upon dissolution of the partnership, liquidation shall be conducted, and the creditors shall be notified through notice or public announcement.

 

Article 59 Where the partnership is dissolved, the liquidating members shall be composed of all the partners; where not all the partners are able to serve as liquidating members, upon consent by a majority of the partners, one or more partners may be designated, or a third person may be appointed, to serve as the liquidating member(s) within 15 days of the dissolution of the partnership.

 

Failure to appoint the liquidating member(s) shall entitle the partners or other interested persons to petition the People's Court for appointment of the liquidating member(s).

 

Article 60 The liquidating member(s) shall carry on the following affairs during the liquidation:

 

(i) Identifying the partnership assets, and preparing a balance sheet and a schedule of assets separately;

 

(ii) Settling unfinished partnership affairs which are related to liquidation;

 

(iii) Making full payment of taxes owed;

 

(iv) Sorting out the partnership's creditor's rights, and debtor's liabilities;

 

(v) Disposing of the remaining assets of the partnership after full payment of debts;

 

(vi) Participating in civil suits in the behalf of the partnership.

 

Article 61 After payment of liquidating expenses, the remaining property shall be distributed in the following order:

 

(i) The wages and labor insurance expense owed to the workers hired by the partnership.

 

(ii) Taxes owed by the partnership;

 

(iii) Debts owed by the partnership;

 

(iv) Redemption of the capital contribution by the partners.

 

If there is a surplus of partnership property after payments have been made in the above order, the surplus shall be distributed in accordance with the ratio prescribed in Paragraph 1 of Article 32 hereof.

 

Article 62 During the partnership liquidation, if the total partnership property is not sufficient to satisfy its debts, the situation shall be handled in accordance with the provisions in Article 39 and Article 40 hereof.

 

Article 63 Upon dissolution of the partnership, the original partners shall be jointly and severally liable for the debts incurred by the partnership in its duration, provided that the liability shall terminate if the creditors fail to make a claim against the debtors within 5 years.

 

Article 64 Upon completion of the liquidation, a liquidation report shall be prepared, and after all the partners have signed or impressed their chops thereon, the liquidation report shall be filed with the enterprise registration authority with 15 days, and the de-registration of the partnership shall be carried out therewith.

 

Chapter Eight: Legal Liabilities

 

Article 65 If the enterprise registration is obtained by submission of false documents or by other fraudulent means in violation hereof, rectification shall be ordered, and a fine of not more than 5,000 Yuan may be imposed; where the circumstance is serious, the enterprise registration shall be canceled.

 

Article 66 If the word "Limited" or "Limited Liability" is used in the designation of the partnership in violation hereof, rectification within a prescribed time limit shall be ordered, and a fine of not more than 2,000 Yuan may be imposed.

 

Article 67 If business is conducted in the name of the partnership while its business license is not issued, such business shall be ordered to cease operation, and a fine of not more than 5,000 Yuan may be imposed.

 

If the partnership fails to conduct the relevant registration for change in accordance herewith when a registered item has changed, registration within a prescribed time limit shall be ordered; if the partnership fails to conduct the registration after the prescribed time limit has expired, a fine of 2,000 Yuan shall be imposed.

 

Article 68 If in the course of conducting partnership affairs, a partner appropriates to himself the interest which shall belong to the partnership, or convert the partnership property by other means, such partner shall be ordered to revert the interest or the property back to the partnership; if any loss is caused to the partnership or other partners, such partner shall be liable for damages in accordance with the law; where such action constitutes a crime, criminal liability shall be pursued in accordance with the law.

 

Article 69 If a partner, without authorization, conducts a partnership affair which is subject to consent by all the partners as stipulated herein or in the partnership agreement, and causes loss to the partnership and other partners, such partner shall be liable for damages in accordance with the law.

 

Article 70 If a partner who is not authorized to conduct partnership affairs conducts partnership affairs without authorization, causing loss to the partnership and other partners, such partner shall be liable for damages in accordance with the law.

 

Article 71 If a partner engages in business in competition with the partnership, or engages in any transaction with the partnership in violation of Article 30 hereof, causing losses to the partnership and other partners, such partner shall be liable for damages in accordance with the law.

 

Article 72 If a worker employed by the partnership usurps his working privileges to illegally appropriate partnership property to himself, or appropriate partnership funds for personal use, such person shall be civilly liable in accordance with the law; where such action constitutes a crime, criminal liability shall be pursued in accordance with the law.

 

Article 73 If the liquidating member fails to submit a liquidation report to the enterprise registration authority in accordance with the provisions hereof, or submits a liquidation report which conceals any material fact, or has any material omission, rectification shall be ordered.

 

Article 74 If while serving as a liquidating member, a partner seeks illegal income or convert partnership property while conducting liquidating affairs, such person shall be ordered to revert such income or converted property back to the partnership, and shall be liable for damages in accordance with the law; where such action constitutes a crime, criminal liability shall be pursued in accordance with the law.

 

If a liquidating member appointed by the partnership commits any act referred to in the previous paragraph, such person shall be ordered to revert such income or converted property back to the partnership, and shall be liable for damages in accordance with the law; where such action constitutes a crime, criminal liability shall be pursued in accordance with the law.

 

Article 75 If in violation hereof, the liquidating member(s) conceals or transfers partnership property, makes false records in the balance sheet or schedule of assets, or distributes partnership property prior to full payment of debts, rectification shall be ordered; where creditors' interests are harmed, such person shall be liable for damages in accordance with the law; where such action constitutes a crime, criminal liability shall be pursued in accordance with the law.

 

Article 76 If a partner breaches the partnership agreement, he shall be liable for breach of contract in accordance with the law.

 

Where there is a dispute among the partners concerning the performance of the partnership agreement, the partners may resolve the dispute through consultation or mediation. If the partners are unwilling to resolve the dispute through consultation or mediation, or consultation or mediation has failed, the dispute may be submitted to an arbitration institution for arbitration in accordance with the arbitration clause in the partnership agreement or a written arbitration agreement concluded after the occurrence of the dispute. Where the parties did not set forth an arbitration clause in the partnership agreement, and the parties failed to reach an arbitration agreement after the occurrence of the dispute, a suit may be brought to the People's Court.

 

Article 77 If the relevant administrative authorities and the personnel thereof, in violation of the provisions hereof, engage in abuse of authority, in improper conducts for personal gains, in acceptance of bribes, harming the lawful rights and interests of the partnership, administrative penalty shall be imposed in accordance with the law; where such action constitutes a crime, criminal liability shall be pursued in accordance with the law.

 

Chapter Nine: Supplementary Provisions

 

Article 78 This Law shall become operative as of August 1, 1997.

 




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