(Adopted at the 11th Meeting of the Standing Committee of the Ninth National People's Congress on August 30, 1999 and promulgated by Order No. 20 of the President of the People’s Republic of China on August 30, 1999)

Contents

Chapter I General Provisions

Chapter II Establishment of Individual Proprietorship Enterprises

Chapter III Investors and Business Management of Individual Proprietorship Enterprises

Chapter IV Dissolution and Liquidation of Individual Proprietorship Enterprises

Chapter V Legal Responsibilities

Chapter VI Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is enacted in accordance with the Constitution with a view to regulating activities of individual proprietorship enterprises, protecting the legitimate rights and interests of investors and creditors of individual proprietorship enterprises, maintaining the socio-economic order and promoting the development of the socialist market economy in China.

Article 2 The individual proprietorship enterprise referred to by this Law means a business entity which, in accordance with this Law, is established within China and invested in by one natural person and the property of which is personally owned by the investor who shall assume unlimited liabilities for the debts of the enterprise with his own property.

Article 3 The domicile of an individual proprietorship enterprise shall be the place where its major business office is located.

Article 4 Individual proprietorship enterprises must abide by law and administrative regulations in their business operations, comply with the principle of honest and good-faith, and may not harm public interests.

Individual proprietorship enterprises shall fulfill the obligation of tax payment according to law.

Article 5 The State shall protect the property and other legitimate rights and interests of individual proprietorship enterprises according to law.

Article 6 Individual proprietorship enterprises shall employ personnel according to law. The legitimate rights and interests of the employees of individual proprietorship enterprises shall be protected by law.

Employees of individual proprietorship enterprises shall establish their trade unions according to law which shall display their activities according to law.

Article 7 The members of the Chinese Communist Party among the employees of individual proprietorship enterprises shall conduct their activities in accordance with the Constitution of the Chinese Communist Party.

Chapter II Establishment of Individual Proprietorship Enterprises

Article 8 In establishing an individual proprietorship enterprise, the following requirements shall met:

(1) the investor being one natural person;

(2) having a legal enterprise name;

(3) having a capital to contributed by the investor;

(4) having a fix place for its production and business operation with necessary conditions therefor; and

(5) having necessary personnel.

Article 9 In applying for the establishment of an individual proprietorship enterprise, the investor or his entrusted agent shall submit to the registration authority of the locality where the individual proprietorship enterprise is to be situated such documents as a formal application for the establishment of the individual proprietorship enterprise, a document certifying the investor's status and a document permitting the use of production and business operation. Where the application for the establishment of an individual proprietorship enterprise is entrusted to an agent, the agent shall produce the power of attorney issued by the investor and a document certifying his legitimacy as an agent.

Individual proprietorship enterprises may not engage in any business prohibited by law or administrative regulations. For the establishment of an individual proprietorship enterprise the business of which is subject to approval by a competent authority according to law or administrative regulations, the document of approval issued by the competent authority shall be submitted when applying for the establishment.

Article 10 The application for the establishment of an individual proprietorship enterprise shall specify the following particulars:

(1) the name and domicile of the individual proprietorship enterprise;

(2) the name and domicile of the investor;

(3) the amount of capital to be contributed by the investor and the mode of capital contributor; and

(4) the scope of business of the individual proprietorship enterprise.

Article 11 The name of an individual proprietorship enterprise shall be consistent with the form of its liabilities and the business it will undertake.

Article 12 The registration authority shall, within 15 days counted from the date of receiving a written application for the establishment of an individual proprietorship enterprise, permits the registration where the requirements defined by this Law are met and grant to the applicant a business license or shall deny the registration where the requirements defined by this Law are not met and give the applicant a written reply to state the reasons therefor.

Article 13 The date of issuance of the business licence to an individual proprietorship enterprise shall be the date of its establishment.

The investor of an individual proprietorship enterprise may not conduct any business under the name of the enterprise before obtaining the business license for the enterprise.

Article 14 Where an individual proprietorship enterprise plans to establish a branch, its investor or his entrusted agent shall apply for the registration to a competent registration authority in the locality where the branch is to be established, and shall obtain a business licence for the branch.

After the establishment of a branch is approved and registered, its registration shall be reported for the record to the original registration authority of the individual proprietorship enterprise to which the branch is affiliated.

The civil liabilities of a branch shall be assumed by the individual proprietorship enterprise that has established it.

Article 15 Where a registered matter of an individual proprietorship enterprise is to be changed in the period of its continued existence, a registration change shall be applied for to the relevant registration authority according to law within 15 days counted from the date of decision on the change.

Chapter III Investors and Business Management of Individual Proprietorship Enterprises

Article 16 Whoever is prohibited by law or administrative regulations from operating profit-making business, may not apply for the establishment of an individual proprietorship enterprise in the capacity of an investor.

Article 17 The investor of an individual proprietorship enterprise enjoys the ownership of the property of the enterprise according to law, and the relevant rights may be transferred or inherited according to law.

Article 18 The investor of an individual proprietorship enterprise who, while applying for registering the establishment of the enterprise, clearly indicates that the common property of his family is the capital contributed shall assume unlimited liabilities for the debts of the enterprise with the common property of his family according to law.

Article 19 The investor of an individual proprietorship may manage the enterprise business by himself, or may commission or employ any other person with civil capacity to take charge of the management of the enterprise business.

Where the investor of an individual proprietorship enterprise commissions or employs another person to manage the enterprise business, he shall conclude with the person commissioned or employed a written contract to specify the business commissioned and the scope of authorization.

The person commissioned or employed shall fulfill the obligation of honesty, good-faith and diligence, and shall manage the business of the relevant individual proprietorship enterprise in accordance with the contract signed with its investor.

The restriction put by the investor of an individual proprietorship enterprise on the power of the person commissioned or employed may not oppose a bona fide party.

Article 20 Any person commissioned or employed by the investor of an individual proprietorship enterprise to manage the enterprise business may not commit any of the following acts:

(1) to seek or take bribes by taking advantage of his position;

(2) to embezzle enterprise property by taking advantage of his position or work;

(3) to misappropriate enterprise funds for personal use, or to lend such funds to other persons;

(4) to open a bank account for depositing enterprise funds in his own name or in any others name without authorization;

(5) to provide guarantee with enterprise property without authorization;

(6) to undertake a business that competes with the enterprise without consent of the investor;

(7) to conclude a contract or to trade with the enterprise itself without consent of the investor;

(8) to transfer the trademark or other intellectual property rights of the enterprise to others for their use without consent of the investor;

(9) to divulge business secret of the enterprise; or

(10) any other acts prohibited by law or administrative regulations.

Article 21 Individual proprietorship enterprises shall establish their account books and practice accounting according to law.

Article 22 Where individual proprietorship enterprises employ workers, they shall conclude labour contracts with the workers according to law, ensure their labour safety, and pay them salaries on time and in full.

Article 23 Individual proprietorship enterprises shall, in accordance with relevant regulations of the State, participate in social insurance programs and pay social insurance premiums for their employees.

Article 24 Individual proprietorship enterprises may apply for loans and obtain the right to use land according to law and enjoy other rights defined by law and administrative regulations.

Article 25 No institutions or individuals may force individual proprietorship enterprises to provide financial resources, material resources or manpower by any means in violation of law or administrative regulations. Individual proprietorship enterprises have the right to reject any acts meant to force them to provide financial resources, material resources or manpower in violation of law.

Chapter IV Dissolution and Liquidation of Individual Proprietorship Enterprises

Article 26 An individual proprietorship enterprise shall be dissolved in any of the following circumstances:

(1) the decision of the investor to dissolve the enterprise;

(2) the death of the investor or the announcement of his death without an heir or with the decision of his heir to waive the right to inheritance;

(3) revocation of its business license according to law; or

(4) other circumstances as defined by law or administrative regulations.

Article 27 When an individual proprietorship enterprise is dissolved, its liquidation shall be done either by the investor himself or by a liquidator designated by a People's Court at the request of its creditors.

Where the liquidation is done by he investor himself, he shall notify the creditors in writing 15 days before the liquidation. If it is impossible to notify the creditors, he shall make a public announcement. The creditors shall declare their claims within 30 days counted from the date of receiving the notification, or within 60 days counted from the date of the public announcement in the absence of a notification.

Article 28 After an individual proprietorship enterprise is dissolved, its original investor shall still be liable to pay the debts of the enterprise incurred during the period of its continued existence. However, where creditors do not claim the refund by the debtor within a period of five years, such liabilities shall vanish.

Article 29 After the dissolution of an individual proprietorship enterprise, its property shall be liquidated in the following order:

(1) the salaries and the social insurance premiums owed to its employees;

(2) the taxes due; and

(3) other debts.

Article 30 In the period of its liquidation, the individual proprietorship enterprise may not operate any business irrelevant to the purpose of liquidation. Before its property is liquidated in accordance with the preceding Article, the investor may not transfer or hide his property.

Article 31 Where the property of an individual proprietorship enterprise is insufficient for the liquidation, the investor shall pay off the debts with his other property.

Article 32 After the liquidation of an individual proprietorship enterprise is ended, the investor or the liquidator designated by a People's Court shall work out a liquidation report and have its registration cancelled by registration authority within a period of 15 days.

Chapter V Legal Responsibilities

Article 33 In case of a violation of the provisions of this Law by submitting false documents or taking other fraudulent means to obtain the registration of an individual proprietorship enterprise, due correction shall be ordered, and a fine of not more than 5,000 yuan shall be imposed; and the business license shall be concurrently revoked if the case is serious.

Article 34 In case of a violation of the provision of this Law by giving a name inconsistent with the name registered at the competent registration authority, a correction shall be ordered within a prescribed period of time, and a fine of not more than 2,000 yuan shall be imposed.

Article 35 In case of altering , leasing or transferring the business of an individual proprietorship enterprise, correction shall be ordered, the illegal gains shall be confiscated, and a fine of not more than 3,000 yuan shall be imposed; and the business license shall be revoked if the case is serious.

In case of forgery of a business license, the suspension of the business operation shall be ordered, the illegal gains shall be confiscated, and a fine of not more than 5,000 yuan shall be imposed ; and criminal responsibility shall be investigated according to law if the case constitutes a crime.

Article 36 Where an individual proprietorship enterprise fails to start its business operation over six months following its establishment without justification, or suspends its business operation by itself over six months after its opening, its business license shall be revoked.

Article 37 In case of a violation of the provisions of this Law by operating business in the name of an individual proprietorship enterprise without obtaining a business license, suspension of the business operation shall be ordered and a fine of not more than 3.000 yuan shall be imposed.

In case of failure to apply for a registration change about the change in registered matters of an individual proprietorship enterprise, due registration change within a prescribed period of time shall be ordered; in case of failure to apply for the registration change within the prescribed period of time, a fine of not more than 2,000 yuan shall be imposed.

Article 38 Where any person commissioned or employed by an investor to manage his individual proprietorship enterprise breaks the contract concluded by the two parties causing thus damage to the investor, the person shall assume the civil liability for damage.

Article 39 Any individual proprietorship enterprise that, in violation of the provisions of this Law, infringes upon legitimate rights and interests of its employees, fails to ensure the labour safety for its employees or fails to pay their social insurance premiums shall be punished in accordance with the law or the relevant administrative regulations, and the liability therefor shall be investigated.

Article 40 When a person commissioned or employed by an investor violates the provisions of Article 20 of this Law, if the case is embezzlement of enterprises property or infringement of enterprise property rights or interests, the return of the property embezzled shall be ordered; if the case involves illegal gains, the illegal gains shall be confiscated; and if the case constitutes a crime, criminal responsibility shall be investigated according to law.

Article 41 Any violation of law or administrative regulations by individual proprietorship enterprises to provide financial resources, material resources or manpower shall be punished in accordance with the relevant law or administrative regulations, and the liability of the persons responsible therefor shall be investigated.

Article 42 Where an individual proprietorship enterprise and its investor hide or transfer property before or during the period of liquidation to evade liabilities, the property hidden or transferred shall be retrieved according to law, and punishment shall be given in accordance with the relevant regulations; if the case constitutes a crime, criminal responsibility shall be investigated according to law.

Article 43 When an investor violates the provisions of this Law and thus holds civil liability for damage and has to pay fines or forfeits as well, if his property is insufficient to cover the payment, or if he has been sentenced to the confiscation of his property, he shall meet the civil liability for damage first.

Article 44 Where a registration authority permits the registration of an individual proprietorship enterprise that does not meet the registration requirements defined by this Law, or denies the registration of an individual proprietorship enterprise that meets the registration requirements defined by this Law, the person directly responsible therefor shall be given administrative punishment according to law; if the case constitutes a crime, criminal responsibility shall be investigated according to law.

Article 45 Where the person in charge of a department superior to a registration authority forcibly orders the interested registration authority to permit the registration of an individual proprietorship enterprise that does not meet the registration requirements defined by this Law, or forcibly orders it to deny the registration of an individual proprietorship that meets the registration requirements defined by this Law, or covers up its unlawful registration acts, the person directly responsible therefor shall be given administrative punishment according to law; and if the case constitutes a crime, criminal responsibility shall be investigated according to law.

Article 46 Where a registration authority denies the registration of an application that meets the legal requirements or fails to give a reply beyond the legally prescribed time limit, the party concerned may apply for an administrative reconsideration or file an administrative lawsuit in accordance with the law.

Chapter VI Supplementary Provisions

Article 47 This Law shall not apply to the foreign-capital enterprises in China.

Article 48 This Law shall go into effect as of January 1, 2000.