China WFOE Registration Guide (9) - Supervisor/Board of Supervisors

1. Responsibilities and Powers of Supervisor/Board of supervisors

A limited liability company may set up a board of supervisors, which shall comprise at least 3 persons. A limited liability company, which has relatively less shareholders or is relatively small in scale, may have 1 or 2 supervisors, and does not have to establish a board of supervisors. The supervisor is also appointed by the investor.

The board of supervisors or supervisor of a company with no board of supervisors may exercise the following authorities:

(1) checking the financial affairs of the company;

(2) supervising the duty-related acts of the directors and senior managers, and bringing forward proposals on the removal of any director or senior manager who violates any law, administrative regulation, the articles of association or any resolution of the shareholders?meeting;

(3) demanding any director or senior manager to make corrections if his act has injured the interests of the company;

(4) proposing to convening temporary shareholders?meetings, and convening and presiding over shareholders?meetings when the board of directors does not exercise the functions of convening and presiding over the shareholders?meetings as prescribed in this Law;

(5) bringing forward proposals at shareholders?meetings;

(6) initiating actions against directors or senior managers according to Company Law; and

(7) other duties as prescribed by the articles of association.

2. Qualifications Requirement for Senior Officers

Article 147 of the Company Law of the PRC  provides anyone who is under any of the following circumstances shall not take the post of a director, supervisor or senior manager of a company:

(1) Being without or with limited capacity of civil conduct;

(2) has been sentenced to any criminal penalty due to an offence of corruption, bribery, encroachment of property, misappropriation of property or disrupting the economic order of the socialist market economy and 5 years have not passed since the completion date of the execution of the penalty; or has ever been deprived of his political rights due to any crime and 3 years have not passed since the completion date of the execution of the penalty;

(3) Where he was a former director, factory director or manager of a company or enterprise which was bankrupt and liquidated, and was personally liable for the bankruptcy of such company or enterprise, three years have not passed since the date of completion of the bankruptcy and liquidation of the company or enterprise;

 (4) Where he was the legal representative of a company or enterprise, and the business license of this company or enterprise was revoked and this company or enterprise was ordered to close due to violation of the law, and he is personally liable for the revocation, three years have not passed since the date of the revocation of the business license thereof;

 (5) Has a relatively large amount of debt which is due but un-cleared.

In case a company elects or appoints any director or supervisor, or hires any senior manager by violating the provisions in the preceding paragraph, the election, appointment or hiring shall be invalidated. In case any director, supervisor or senior manager, during his term of office, is under any of the circumstances as mentioned in the preceding paragraph, the company shall dismiss him from his post.