A limited liability company formed under Chinese law is an entity type consisting of up to 50 shareholders, with each shareholder’s ownership share and liability being restricted to the extent of their own capital contributions, and the company itself is liable up to the total value of the assets invested.
Organizational Structure
Chinese LLCs by default include a board of directors, however, smaller LLCs often appoint a single executive director in place of a board of directors. In the same way, by default LLCs have a Board of Supervisors of at least 3 members, though smaller LLCs may instead choose to appoint 1 or 2 individual supervisors and forgo a supervisory board altogether. Furthermore, while Chinese regulations do not restrict the number of executive roles an LLC may have, Chinese law mandates a maximum of one statutory representative per company, which may be either the company’s chairperson, executive director, or managing director. While company directors are permitted to hold concurrent positions as executives under Chinese law, they are prohibited from serving as company supervisors and cannot be appointed as such. Additionally, it’s worth noting that Chinese law does not impose any nationality-based restrictions or requirements for the above positions, nor are there any minimum contribution requirements for Chinese nationals to hold such positions within an LLC.
Corporate Governance
Shareholders are the highest authority within a Chinese LLC and vote on representatives, with the board of directors executing business plans, and the board of supervisors providing oversight of the company’s operations. Company directors and managing directors are generally appointed by shareholders, whereas shareholders can either appoint supervisors or serve as company supervisors themselves. Additionally, shareholders have the authority to vote on the voluntary termination of an LLC. LLC termination commences once a resolution to voluntarily terminate the company is passed, and any company assets remaining after all debts are paid off are distributed proportionally among shareholders based on their capital contributions.
Further Reading
See our comprehensive resources on China’s Foreign Investment Law. and an overview of FDI regulation in our Foreign Investment Law FAQ.
Translation Guide
See: 有限责任公司