Law of China on Partnerships Ⅱ

　　Section 3 Management of Partnership Affairs

　　Article 26 All partners shall enjoy equal right in the management of partnership affairs.

　　One or more partners may, in accordance with the partnership agreement or through decision by all the partners, be authorized to represent the partnership in its relations with people outside the partnership and to manage partnership affairs.

　　Where a legal person or any other organization manages partnership affairs in the capacity of a partner, it shall send its representative to manage such affairs.

　　Article 27 Where one or more partners are authorized to manage partnership affairs, as provided for in the second paragraph of Article 26 of this Law, no other partners shall manage such affairs.

　　The partners not managing partnership affairs shall have the right to supervise the management of such affairs by the managing partners.

　　Article 28 Where partnership affairs are managed by one or more partners, the managing partner（s） shall, at regular intervals, report to the other partners the state of management and business operations and the financial status of the partnership and the incomes derived from management of partnership affairs shall belong to the partnership and the expenses or losses entailed shall be borne by the partnership.

　　Partners shall have the right to consult such financial data as the accounting books of the partnership in order to become acquainted with the state of business operations and the financial status of the partnership.

　　Article 29 Where partners manage partnership affairs separately, one managing partner may raise objections to the management done by another. In that event, management of the affairs in question shall be suspended. If any dispute arises, a decision on the matter may be made according to the provisions in Article 30 of this Law.

　　Where a partner authorized to manage partnership affairs fails to do it according to the partnership agreement or the decision made by all the partners, the other partners may decide to revoke the authorization.

　　Article 30 Where the partners intend to adopt a resolution on a matter relating to the partnership, the method of vote stipulated in the partnership agreement shall be used. Where no such method is stipulated or clearly stipulated in the partnership agreement, the method whereby one person has one vote and a resolution is adopted by a majority vote of all the partners shall be used.

　　Where this Law provides otherwise with respect to the method of vote for a partnership, such provisions shall prevail.

　　Article 31 Unless otherwise stipulated in the partnership agreement, the following matters relating to a partnership shall be subject to consent of all the partners:

　　（1） alteration of the name of the partnership;

　　（2） alteration of the business scope or the main business premises of the partnership;

　　（3） disposal of the immovables of the partnership;

　　（4） assignment or disposal of the intellectual property rights or other property rights of the partnership;

　　（5） provision of guaranty for another person in the name of the partnership; and

　　（6） appointment of persons other than the partners as managers of the partnership.

　　Article 32 No partner may, by himself or through cooperation with another person, engage in business in competition with the partnership in which he is a partner.

　　No partner may conduct business transactions with the partnership in which he is a partner, unless otherwise stipulated in the partnership agreement or consented by all the partners.

　　No person may engage in any activities that harm the interests of the partnership in which he is a partner.

　　Article 33 The profits or losses of a partnership shall be distributed among or borne by the partners according to the partnership agreement; where such matter is not stipulated or not clearly stipulated in the partnership agreement, it shall be decided on by the partners through consultation; where consultation fails, the profits or losses shall be shared pro rata by all the partners on the basis of their actual capital contributions; where the proportions of the capital contributions made by the partners cannot be determined, the profits or losses shall be equally shared by all of them.

　　A partnership agreement may not stipulate that all the profits are distributed among part of the partners or all the losses are borne by part of the partners.

　　Article 34 A partner may, in conformity with the partnership agreement or the decision by all the partners, increase or reduce his capital contributions to the partnership.

　　Article 35 A manager appointed by a partnership shall fulfill his duties within the scope of power authorized by the partnership.

　　Where a manager appointed by a partnership causes losses to the partnership by performing his duties beyond the scope of power authorized by the partnership, or by intentional acts or through gross negligence in the course of performance of his duties, he shall be liable for the losses according to law.

　　Article 36 A partnership shall establish its financial and accounting systems in accordance with the provisions of laws and administrative regulations.

　　Section 4 Relationship of a Partnership to a Third Party

　　Article 37 A partnership may not use restrictions, which it places on the rights of the partners in managing partnership affairs and representing the partnership in its relations with people outside the partnership, against a bona fide third party.

　　Article 38 A partnership shall first pay off its debts with all of its property.

　　Article 39 Where a partnership cannot cover its debts due, the partners shall bear unlimited joint and several liability.

　　Article 40 Where the amount of debts paid off by a partner, due to his unlimited joint and several liability, exceeds the proportion of the losses he should bear as prescribed in the first paragraph of Article 33 of this Law, he shall have the right to claim recovery from the other partners.

　　Article 41 Where a partner happens to owe debts which are unrelated to the partnership, the creditor concerned may not use his claim against the said partner to offset the debts he owes to the partnership, nor may he exercise in subrogation the rights enjoyed by the said partner in the partnership.

　　Article 42 Where a partner's personal property is not sufficient to pay off his debts unrelated to the partnership, he may use the proceeds distributed to him by the partnership to clear off his debts; and the creditor, on his part, may, according to law, apply to a people's court for compulsory execution of the partner's share of property in the partnership for the purpose.

　　Before a people's court puts into compulsory execution of the share of property of a partner, it shall notify all the other partners of the matter, who shall enjoy first priority in purchasing the partner's share of property. Where the other partners do not want to purchase such property and object to its assignment to another person, they shall, according to the provisions in Article 51 of this Law, settle accounts with the said partner for his retirement from the partnership or do so by appropriately deducting his share of property in the partnership.

　　Section 5 Entering into and Retiring from a Partnership

　　Article 43 To enter into an existing partnership, a person shall have to obtain consent of all the partners and, according to law, conclude a written agreement for entering into the partnership, unless otherwise stipulated in the existing partnership agreement.

　　When concluding an agreement with a person for his entering into the partnership, the existing partners shall truthfully make known to the new partner the state of business operations and the financial status of the partnership.

　　Article 44 The new partner shall enjoy the same rights and bear the same liability as the old partners, where the agreement for entering into the partnership stipulates otherwise, such stipulations shall prevail.

　　The new partner shall bear unlimited joint and several liability for the debts of the partnership incurred before he enters into the partnership.

　　Article 45 Where the period of time for partnership is specified in a partnership agreement, a partner may, during the existence of the partnership, retire from the partnership under any of the following situations:

　　（1） The cause for retiring stipulated in the partnership agreement arises;

　　（2） Consent of all the partners is obtained;

　　（3） The situation in which the partner finds it difficult to remain in the partnership arises; or

　　（4） Other partners seriously violate the partnership agreement in terms of their obligations.

　　Article 46 Where the period of time for partnership is not specified in a partnership agreement, a partner may retire from the partnership provided that his retirement will not adversely affect the management of the partnership's affairs, however, he shall notify the other partners 30 days in advance.

　　Article 47 If a partner retires from the partnership against the provisions in Articles 45 and 46 of this Law, he shall compensate for the losses thus caused to the partnership.

　　Article 48 A partner shall, under any of the following situations, naturally retire from the partnership:

　　（1） As a natural person in the partnership, he is deceased or is legally declared dead;

　　（2） He becomes unable to clear off his debts;

　　（3） As a legal person or other organization in the partnership, its business license is revoked, or it is ordered to close down or dissolve, or is declared bankrupt;

　　（4） He or it no longer possesses the qualifications which a partner is required to possess by law or the partnership agreement; or

　　（5） All the partner's share of property in the partnership is compulsorily executed by a people's court.

　　Where a partner is legally recognized as a person without the capacity or with limited capacity for civil conduct, upon consent of all the other partners, he may become a limited partner according to law and the general partnership shall be transformed into a limited liability partnership according to law. Where the other partners fail to reach a consensus on the matter, the partner in question shall retire from the partnership.

　　The retirement shall take effect as of the date the cause for retiring actually arises.

　　Article 49 A partner may, under any of the following conditions, be expelled by a resolution unanimously adopted by the other partners:

　　（1） He fails to fulfill his obligations to make capital contributions;

　　（2） He causes losses to the partnership through intentional acts or gross negligence;

　　（3） He resorts to irregular practices in managing partnership affairs; or

　　（4） The cause stipulated in the partnership agreement arises.

　　The partner to be expelled shall be notified in writing of the resolution on his expulsion. The expulsion shall take effect on the date the person in question receives the notification, and he shall retire from the partnership thereupon.

　　If the person expelled has objections to the resolution on his expulsion, he may bring a lawsuit in a people's court within 30 days from the date he receives the notification for his expulsion.

　　Article 50 Where a partner is deceased or is legally declared dead, the successor enjoying the lawful right to inheritance of the partner's share of property in the partnership shall, in accordance with the partnership agreement or with consent of all the partners, acquire the status of a partner in the said partnership from the date succession commences.

　　A partnership shall, under any of the following conditions, return to the successor the share of property of the deceased partner in the partnership:

　　（1） The successor is not willing to become a partner;

　　（2） The successor does not have the qualifications of a partner, as is required by laws or the partnership agreement; or

　　（3） Other conditions under which a successor cannot become a partner, as is stipulated in the partnership agreement.

　　Where the successor to a deceased partner is a person without the capacity or with limited capacity for civil conduct, upon consent of all the other partners, he may become a limited partner according to law, and the general partnership shall be transformed into a limited liability partnership according to law. Where the other partners fail to reach a consensus on the matter, the partnership shall return to the successor in question the share of property of the deceased partner.

　　Article 51 Where a partner retires from a partnership, the other partners shall settle accounts with him in light of the property status of the partnership at the time of his retiring and return his share of property to him. Where the retiring partner is liable for the losses caused to the partnership, the amount for the compensation payable shall be deducted from his share of property.

　　If there are partnership affairs still outstanding at the time of his retiring, the accounts shall be settled afterwards.

　　Article 52 The method for return of the retiring partner's share of property in the partnership shall be specified in the partnership agreement or determined by all the partners. It may be returned in cash or in kind.

　　Article 53 The retiring partner shall bear unlimited joint and several liability for the debts the partnership comes to owe due to causes that arise prior to his retirement.

　　Article 54 Where the property of a partnership is less than its debts at the time when a partner retires, the retiring partner shall share the losses in accordance with the provisions in the first paragraph of Article 33 of this Law.

　　Section 6 Specialized General Partnerships

　　Article 55 A professional entity that provides paid services to its clients with specialized knowledge and skills may form a specialized general partnership.

　　A specialized general partnership is a general partnership whose partners bear liability according to the provisions in Article 57 of this Law.

　　The provisions in this Section shall be applicable to specialized general partnerships; where for matters there are no provisions in this Section to govern, the provisions from Section 1 through 5 of this Chapter shall be applicable.

　　Article 56 The words “specialized general partnership” shall be included in the name of a specialized general partnership.

　　Article 57 Where a partnership incurs debts through the intentional acts or gross negligence on the part of one or more partners in business activities, he or they shall bear unlimited liability or unlimited joint and several liability, and the other partners shall bear limited liability based on the share of property they each have in the partnership.

　　All the partners of a partnership shall bear unlimited joint and several liability for the debts the partnership incurs not through the intentional acts or gross negligence on the part of a partner in his business activities and for the other debts incurred by the partnership.

　　Article 58 Where a partnership incurs debts due to a partner's intentional acts or gross negligence in his business activities, after the debts are paid off with the property of the partnership, the said partner shall, in accordance with what is stipulated in the partnership agreement, be liable for the losses of the partnership.

　　Article 59 A specialized general partnership shall set up a fund against malpractice risks and purchase professional liability insurance.

　　The fund against malpractice risks shall be used for paying the debts incurred by partners in their business activities. A separate account for such fund shall be opened and be managed separately. The specific management measures shall be formulated by the State Council.

　　Chapter III

　　Limited Liability Partnerships

　　Article 60 The provisions of this Chapter shall be applicable to limited liability partnerships and their partners; where for matters there are no provisions in this Chapter to govern, the provisions governing general partnerships and their partners from Section 1 through 5 of Chapter II of this Law shall be applicable.

　　Article 61 A limited liability partnership shall be formed by not less than two but not more than fifty partners, unless otherwise provided for by law.

　　There shall be at least one general partner in a limited liability partnership.

　　Article 62 The words “limited liability partnership” shall be indicated in the name of a limited liability partnership.

　　Article 63 Apart from the ones proscribed in Article 18 of this Law, the partnership agreement shall include the following items:

　　（1） the names or titles and domiciles of the general partners and limited partners;

　　（2） the qualifications for the managing partners and the procedure for their selection;

　　（3） the limits of power of the managing partners and method for disposition of breaches of partnership agreement;

　　（4） the conditions for expelling a managing partner and the procedure for replacement;

　　（5） the conditions and procedure for entering into and retiring from the limited liability partnership, and the related liabilities; and

　　（6） the procedure for a limited partner to become a general partner, and vice versa.