Regulation of China on Urban Collectively-Owned Enterprises (2016 Revision)

· Document Number：Order No. 666 of the State Council

· Area of Law： Enterprises

· Level of Authority： Administrative Regulations

· Date issued：02-06-2016

· Effective Date：01-01-1992

· Status： Effective

· Issuing Authority： State Council

Regulation of China on Urban Collectively-Owned Enterprises 
(Issued by Order No. 88 of the State Council of the People's Republic of China on September 9, 1991; amended in accordance with the Decision of the State Council on Abolishing and Amending Some Administration Regulations by Order No. 588 of the State Council on January 8, 2011 for the first time; and amended in accordance with the Decision of the State Council on Amending Some Administrative Regulations on February 6, 2016 for the second time)
Chapter I General Provisions
Article 1 This Regulation is enacted for purposes of ensuring the consolidation and development of urban collectively-owned economy, defining the rights and obligations of urban collectively-owned enterprises and protecting their lawful rights and interests.
Article 2 This Regulation applies to urban collectively-owned enterprises in all industries and in all forms of organization, with the exception of enterprises collectively established by farmers in rural areas.
Article 3 Urban collectively-owned economy is a basic constituent part of China's socialist public economy and the state encourages and supports the development of urban collectively-owned economy.
Article 4 Urban collectively-owned enterprises (hereinafter referred to as "collective enterprises") are socialist economic organizations, of which the property is collectively owned by the working masses, subject to joint work, with distribution according to work as the principal distribution method.
"Collectively owned by the working masses" as referred to in the preceding paragraph shall conform to any of the following provisions:
(1) Collectively owned by the working masses of the said collective enterprise.
(2) Collectively owned by the working masses within the united economic organizations of the collective enterprise.
(3) collective enterprises consisting two or more investing entities, in which the property collectively owned by the working masses in the foregoing item (1) and item (2) shall be in a dominating position. The term "dominating position" as mentioned in the present item means that the proportion of the property collectively owned by the working masses to the total property of the enterprise shall be generally not less than 51%, provided that under special circumstances the proportion may, upon the approval of the original approval department, be appropriately decreased.
Article 5 A collective enterprise shall abide by the principle of voluntary incorporation, self-funding, independent accounting, responsibility for its own profit and loss, independent business operation, democratic management, collective accumulation, independent control, distribution according to work and distribution of dividends by shares.
A collective enterprise shall advocate the spirit of hard work and building the country with diligence and thrift, and stick to the path of mutual assistance, cooperation and common prosperity.
Article 6 A collective enterprise shall obtain the qualification of a legal person and bear independently its own civil responsibility with its whole property.
The property, lawful rights and interests of a collective enterprise shall be protected by the state law and shall not be infringed upon.
Article 7 The tasks of a collective enterprise are to, based on the need of the market and society, under the guidance of the state plans, develop production of goods, expand distribution of goods, provide social services, create wealth, increase accumulation, constantly improve social and economic effectiveness, and contribute to the prosperity of socialist economy.
Article 8 Employees of a collective enterprise, as owners of the enterprise, shall exercise the power of managing the enterprise pursuant to the laws and regulations, and the bylaw of the collective enterprise. The lawful rights and interests of the employees of collective enterprises shall be protected by the law.
Article 9 A collective enterprise shall be subject to democratic management pursuant to the law. The employees' (employee representatives') assembly is the authority of the collective enterprise, elects and removes enterprise executives, and decides on major issues on operation and management.
A collective enterprise shall be subject to the factory director (manager) accountability system.
The right of democratic management of employees of collective enterprises and the exercise of functions by factory directors (managers) in accordance with the law are both protected by the law.
Article 10 The grassroots organizations of the Communist Party of China (CPC) at collective enterprises, as the center of political leadership, shall take the lead in the ideological and political work of enterprises, and ensure and supervise the implementation of the state policies in the enterprises.
Article 11 The trade union in a collective enterprise shall safeguard the lawful rights and interests of the employees, conduct its work independently according to the law, organize the employees to participate in democratic management and democratic supervision.
Chapter II Establishment, Modification and Termination of Collective Enterprises
Article 12 The establishment of a collective enterprise must meet the following conditions:
(1) Having a name, organizational structure and bylaw.
(2) Having fixed site for production and business operation, necessary facilities and safety and hygienic conditions conforming to the provisions.
(3) Having capital and personnel satisfying the requirements of the state and commensurate with the size of its operations and services.
(4) Having a definite business scope.
(5) Being able to bear the civil liabilities independently.
(6) Having other requirements as provided by the laws or regulations.
Article 13 The bylaw of a collective enterprise must include the following items:
(1) Name and domicile of the enterprise.
(2) Business scope and mode of operation.
(3) Registered capital.
(4) Source of funds and investment mode.
(5) Mode of distribution of income.
(6) Organizational structure and powers as well as rules of procedure.
(7) Conditions and procedures for employees to join and quit the enterprise.
(8) Rights and obligations of employees.
(9) Selection procedure of the legal representative and the scope of his power.
(10) Conditions and procedures of the termination of the enterprise.
(11) Procedures for the revision of the bylaw.
(12) Date of establishment of the bylaw.
(13) Other matters that need to be defined.
Article 14 The formation of a collectively-owned enterprise shall be subject to the approval of the approving department prescribed by the people's government of the province, autonomous region, or municipality directly under the Central Government.
If the approval department for the establishment of collective enterprises is otherwise provided in the laws and regulations, such laws and regulations shall prevail.
A collective enterprise shall carry out its production and business operation activities within the approved and registered business scope.
Article 15 The merger, split, cease of business or relocation of a collective enterprise, or the modification of major registered matters, shall conform to the relevant state provisions, and the enterprise shall file an application with the original approval department for approval.
Article 16 In respect of the merger and split of a collective enterprise, all the relevant parties shall, abiding by the principle of voluntariness and equality, enter into an agreement in accordance with the law, effectively handle claims and debts, other relations in property and historical issues, and properly resettle the personnel of the enterprise.
The rights and obligations of a collective enterprise prior to the merger or split shall be enjoyed or borne by the legal person after the merger or split.
Article 17 A collective enterprise shall be terminated in case of any of the following reasons:
(1) The enterprise is unable to continue its business operation and applies for dissolution, which is approved by the original approval department.
(2) It is dissolved in accordance with the law.
(3) It is declared bankrupt in accordance with the law.
(4) Other reasons.
Article 18 In the case of the termination of an enterprise, the property of the enterprise shall be liquidated pursuant to the relevant state provisions. The enterprise shall repay all debts and fees according to the following order.
(1) All fees needed in the liquidation.
(2) Overdue wages of the employees and labor insurance expenses.
(3) Taxes and duties due.
(4) Loans of banks and credit cooperatives as well as other debts.
Where the property is insufficient to meet the repayment claims of the same order of priority, it shall be distributed on a pro-rata basis.
Article 19 The remaining property of the collective enterprise upon liquidation shall be disposed of according to the following measures:
(1) If there is equity investment made by the state, entities other than the enterprise and individuals as well as the employees of the enterprise, they shall be repaid with the remaining property of the enterprise based on the ratio of the amount of their equity investment to the total assets of the enterprise.
(2) The rest property, if any, shall be used by the superior administrative department of the enterprise for the payment of fees for the job waiting and pension remedy, employment resettlement, occupational training, etc. of the employees of the enterprise, and the property shall be used for its specified purpose and shall not be misappropriated for other purposes.
Article 20 In respect of the termination of a collective enterprise, the cancellation of registration shall be handled and announced pursuant to the Regulation of the People's Republic of China on the Administration of the Registration of Enterprise Legal Persons.
Chapter III Rights and Obligations of Collective Enterprises
Article 21 A collective enterprise shall, within the scope as provided for in the state laws and regulations, enjoy the following rights:
(1) The right to possess, use, profit from and dispose of its whole property, and refuse any form of transfer.
(2) Independently arranging production, business operation and service activities.
(3) The enterprise has the right to independently determine the prices of its products and the charges for its services, except for those which, as stipulated by the state, are under the control of the price authorities and the relevant competent departments.
(4) The enterprise has the right, according to the provisions of the state, to negotiate with foreign companies and enter into contracts, and withdraw and use the shared foreign exchange revenues.
(5) Applying to the relevant specialized banks for loans pursuant to the state credit policies.
(6) Determining the form of the economic responsibility system, form of wage and award, and measures for distributing dividends suitable for the enterprise pursuant to the state provisions.
(7) Enjoying all preferential treatment as provided for in the state policies.
(8) Raising funds from and issuing shares to employees as well as other enterprises, public institutions and individuals, engaging in joint operations with other enterprises or institutions, investing in other enterprises or institutions and holding shares of other enterprises.
(9) Deciding according to the state provisions the organizational structure, staffing, form of work organization and employment measures, and employing and dismissing employees.
(10) Rewarding and punishing employees.
Article 22 A collective enterprise shall bear the following obligations:
(1) Abiding by the state laws and regulations and accepting the guidance of the state plans.
(2) Paying tax and fees in accordance with the law.
(3) Performing contracts in accordance with the law.
(4) Improving business operations and management, advancing technology progress, and raising economic effectiveness.
(5) Guaranteeing the quality of its products and services and being responsible to users and consumers.
(6) Implementing the work safety system and carrying out the measures for labor protection and environmental protection.
(7) Effectively ensuring safety control inside the enterprise.
(8) Safeguarding the lawful rights and interests of employees, respecting the rights of democratic management of employees, improving work conditions, effectively conducting family planning work and improving the material and cultural life of employees.
(9) Strengthening ideological and political education, legal education, national defense education, scientific and cultural education as well as technical and vocational training for employees so as to raise their quality.
Article 23 A collective enterprise is entitled, according to the state provisions, to voluntarily establish, join or quit united economic organizations of collective enterprises and, pursuant to the bylaw of the united economic organizations, enjoy rights and undertake obligations.
Chapter IV Employees and the Employees' (Employee Representatives') Assembly
Article 24 Where a person files an application, admit and observe the bylaw of the collective enterprise, and is employed by the enterprise, he may become the employee of the collective enterprise.
Article 25 An employee shall, pursuant to the laws and regulations, enjoy the following rights in the collective enterprise:
(1) The right to elect and to stand for election for management offices of the enterprise at all levels.
(2) Participating in democratic management of the enterprise and supervising all activities of the enterprise and the work of the management personnel.
(3) Participating in work and enjoying the rights of remuneration of labor, labor protection, labor insurance, medical care and health, rest and vacation.
(4) Receiving vocational technical education and training and competing for business technical titles according to the state provisions.
(5) Resigning.
(6) Enjoying such treatment as retirement and old age pension.
(7) Other rights.
Article 26 An employee shall perform the following duties:
(1) Observing the state laws and regulations as well as the rules, systems and labor disciplines of the collective enterprise, working with the attitude of owners of the enterprise, and effectively conducting his work.
(2) Implementing the resolutions of the employees' (employee representatives') assembly and completing tasks.
(3) Protecting the collective interests of the enterprise.
(4) Making efforts to learn politics, culture and sci-tech knowledge, and constantly improve his quality.
(5) Other obligations as provided for by the laws and regulations as well as the bylaw of the enterprise.
Article 27 Collective enterprises must establish and improve the employees' (representatives') assemblies:
(1) A collective enterprise with less than 100 employees shall establish an employees' assembly system.
(2) A collective enterprise with more than 300 employees shall establish an employee representatives' assembly system.
(3) A collective enterprise with more than 100 but less than 300 employees shall establish an employees' assembly or an employee representatives' assembly system at the option of the enterprise.
The representatives of the employee representatives' assembly shall be elected by employees. A representative is an employee with progressive thoughts, who works actively, has good relationships with other employees and has the ability to participate in democratic management.
Article 28 The employees' (employee representatives') assembly of a collective enterprise shall, within the scope as provided for in the state laws and regulations, exercise the following functions and powers:
(1) Formulating and amending the bylaw of the collective enterprise.
(2) Electing, removing, employing and dismissing factory manager (manager) and deputy factory manager (deputy manager).
(3) Deliberating all proposals submitted by factory manager (manager) and deciding on the major issues on the operations and management of the enterprise.
(4) Deliberating and deciding on the form of the wages of the employees of the enterprise, wage adjustment plans, award and dividend plans, employees' housing distribution plans and other major matters with regard to the life and welfare of employees.
(5) Deliberating and deciding on the measures for rewarding and punishing employees of the enterprise and other important rules and systems.
(6) Other functions and powers as prescribed in the laws, regulations and the bylaw of the enterprise.
Article 29 The employees' (employee representatives') assembly shall convene regularly pursuant to the bylaw of the enterprise for at least twice a year.
Article 30 The employee representatives' assembly of a collective enterprise may establish a standing institution responsible for the work when the employee representatives' assembly is closed.
The members, establishment method, scope of functions and duties and name of the standing institution shall be determined by the employee representatives' assembly of the collective enterprise and filed with the superior administrative department for recordation.
Chapter V Factory Manager (Manager)
Article 31 A collective enterprise shall be subject to the factory director (manager) accountability system. The factory manager (manager) is responsible to the employees' (employee representatives') assembly and is the legal representative of the collective enterprise.
Article 32 A factory manager (manager) is elected or employed by the employee representatives' assembly of the enterprise. The specific measures for the election and employment shall be formulated by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government.
The factory manager (manager) of the collective enterprise invested in and established by a united economic organization of collective enterprises may be appointed and dismissed by the united economic organization.
In respect of a collective enterprise with diversified investing entities, if the investment made by the state reaches a certain proportion, its factory manager (manager) may be appointed and dismissed by the superior administrative department according to the relevant state provisions.
Article 33 A factory manager (manager) shall meet the following conditions:
(1) Understanding the relevant laws, regulations and policies, and adhering to the direction of socialist business operation of the enterprise.
(2) Being familiar with the business of the industry, good at operation and management, and having the capability of organization and leadership.
(3) Loving the collective, honest in performing his official duties, maintaining ties with the masses, and having a democratic style of work.
(4) Other conditions as set out in laws and regulations.
Article 34 A factory manager (manager) shall perform the following functions and duties within the scope as provided for by the laws and regulations:
(1) Leading and organizing routine production, business operation and administration of the enterprise.
(2) Presiding over the compilation and proposing medium and long-term development plans, annual production and business operation plans and fixed assets investment plans to the employees' (employee representatives') assembly.
(3) Presiding over the compilation and proposing plans for the organizational structure of the enterprise to the employees' (employee representatives') assembly and deciding on the plans for the adjustment of work organization.
(4) Appointing or removing, employing or dismissing the intermediate-level leading administrative officials of the enterprise according to the state provisions, except as otherwise stipulated by the law.
(5) Proposing annual financial budget, final account plans and profit distribution plans of the enterprise.
(6) Proposing enterprise's economic responsibility system plans, wage adjustment plans, plans for the measures for labor protection, measures for rewards and penalties and other important rules and regulations.
(7) Rewarding and punishing employees.
(8) When encountering special circumstances, suggesting convening the employees' (employee representatives') assembly.
(9) Other functions and powers as specified in the bylaw of the enterprise.
Article 35 A factory manager (manager) has the following duties:
(1) Implementing the policies of the Party and the state, observing the laws and regulations of the state and carrying out the resolutions of the employees' (employee representatives') assembly.
(2) Organizing employees to complete enterprise's tasks of production and business operation as well as all economic and technology indicators, advancing the enterprise's progress of technology, improving economic effectiveness and enhancing enterprise's development ability.
(3) Strictly abiding by financial and economic disciplines, adhering to democratic wealth management and disclosing items of financial accounts to the employees on a regular basis.
(4) Protecting the lawful rights and interests of the enterprise and the legitimate rights of employees in the enterprise.
(5) Effectively ensuring the living welfare of employees and gradually paying insurance of pension, unemployment, etc. of employees.
(6) Organizing and implementing the measures for safety and hygiene and realizing safe and civilized production.
(7) Regularly making work report to the employees' (employee representatives') assembly of the enterprise, listening to opinions and accepting supervision.
(8) Other duties as prescribed by the laws, regulations and the bylaw of the enterprise.
Chapter VI Property Management and Profit Distribution
Article 36 A collective enterprise shall verify assets and capital according to the present Chapter and define property ownership.
Article 37 The public accumulation of a collective enterprise shall be collectively owned by the working masses of the enterprise.
Article 38 The investment made by the united economic organization of collective enterprises shall be collectively owned by the working masses within the united economic organizations.
The mutual aid and cooperation fund as established by the united economic organization of collective enterprises shall be mainly used to develop production and advance common prosperity within the organization.
Article 39 In respect of a collective enterprise as established with the support of enterprises, public institutions, social organizations, etc., the supporting funds may be disposed in accordance with any of the following measures:
(1) As the funds borrowed by the enterprise from the supporting entities, repaid by the enterprise to the supporting entities according to the measures and period as agree upon by both parties.
(2) As the investment made by the supporting entities in the enterprise, returned as profit of the enterprise on the basis of the proportion of their investment to the total assets of the enterprise.
The source of the supporting funds of the enterprises, public institutions, social organizations, etc., must conform to the relevant provisions of the state competent department of finance.
The enterprises, public institutions, social organizations, etc. and the collective enterprise they supported shall define property ownership and financial relations. No supporting entity shall intervene in the business operation and management activities of the collective enterprise and no collective enterprise shall depend on the supporting entities.
Article 40 Employees' share capital shall be owned by the individual employees.
Article 41 The investment made by entities and individuals outside the collective enterprise shall be owned by the investors.
Article 42 Employees' share capital and all types of investment attracted by the collective enterprise may be transferred or inherited by the investors in accordance with the law.
Article 43 A collective enterprise must ensure the integrity of property and reasonably use and effectively operate the property of the enterprise.
Article 44 The distribution of the profit of a collective enterprise must be guided by the principle of taking into consideration the interests of the state, the collective and individuals.
Article 45 A collective enterprise must implement the state systems with regard to finance and accounting, accept auditing supervision and strengthen the financial management in the enterprise.
Article 46 The duty-paid profit of a collective enterprise shall be independently controlled by the enterprise. The enterprise shall, according to the state provisions, determine ratios of accumulated reserve fund, public welfare fund, work dividends and share capital dividends.
Article 47 The remuneration of labor for the employees of a collective enterprise must be governed by the principle of distribution according to work. The specific distribution form and measures shall be determined independently by the enterprise.
Article 48 The share capital dividends of a collective enterprise shall be connected with the profit and loss of the enterprise. In the case of profit of the enterprise, dividends shall be distributed based on shares; and in the case of loss of the enterprise, no dividends shall be distributed before the loss is made up for.
Article 49 A collective enterprise must withdraw employees' pension, unemployment and other insurance funds according to the state provisions. The employees' pension, unemployment and other insurance funds shall, according to the state provisions, be withdrawn before the collection of income tax and deposited as special funds for special purpose.
Chapter VII Relationship between Collective Enterprises and the Government
Article 50 The people's governments at all levels shall include the development of urban collective economy into the plans for national economic and social development of the governments at all levels and give support and guidance from all aspects so as to guarantee the sound development of urban collective economy.
Article 51 The competent department of urban collective economy of the State Council is responsible for the macro guidance to and management of the national urban collective economy, and its major duties are to draft development policies, laws and regulations on urban collective economy, coordinate the major issues in the development of the national urban collective economy and organize the relevant departments to supervise and inspect the implementation of policies and regulations on collective enterprises.
Article 52 The people's governments at or above the city (including county-level cities, here and below) level shall, based on the need of the development of urban collective economy, determine the guiding department of urban collective enterprises, strengthen the policy guidance to collective enterprises, coordinate the issues in the development of the local urban collective economy, and organize the relevant departments to supervise and inspect the implementation of policies and regulations on collective enterprises.
Article 53 The relevant industrial administrative departments of the government shall, pursuant to the laws and regulations, and within their respective competence, take charge of industrial guidance and administration of the collective enterprises in their respective industries.
Article 54 The other relevant departments of the people's governments at all levels shall, in accordance with the law, supervise and provide services to collective enterprises.
Article 55 The state shall protect the legal rights and interests of collective enterprises.
Any department of the government or any other entity or individual shall not change the nature of the collective ownership system of a collective enterprise, or damage the property ownership of a collective enterprise, or apportion human resources, supplies or financial resources to collective enterprises, or intervene in the production, business operation and democratic management of a collective enterprise.
Chapter VIII Legal Liability
Article 56 Where a collective enterprise commits any of the following acts, the competent department of industry and commerce shall, pursuant to the relevant laws and regulations, impose administrative penalties:
(1) Resorting to deception at registration or not applying for modification registration according to the provisions.
(2) Violating the items of registration or engaging in business activities beyond the approved and registered business scope.
(3) Spiriting funds away, concealing or privately distributing assets by means of enterprise division, merger, termination, liquidation and other activities.
(4) Any other illegal act.
Article 57 Where a collective enterprise causes property damage or body injury to users and consumers by producing and selling fake and inferior products, it shall be liable; if a crime is constituted, the leader directly responsible for the collective enterprise or other directly liable persons shall be investigated for criminal responsibility according to the law.
Article 58 Where an entity or individual, in violation of this Regulation, makes apportionment to a collective enterprise, or encroaches on or misappropriate the property of a collective enterprise, it/he must make compensation. Any directly responsible person in charge or any other directly liable person shall be given administrative sanctions by the relevant competent departments on the basis of circumstances; and if a crime is constituted, he shall be investigated for criminal liabilities.
Article 59 Where the leader of a collective enterprise abuses powers and infringes on the lawful rights and interests of employees, and the circumstances are serious, the superior administrative department shall, according to the powers of managing officials, impose an administrative sanction; and if he abuses powers, exploits his office for private gain, or retaliates against or frames employees, he shall be investigated for criminal liabilities in accordance with the law.
Article 60 Where the leader of a collective enterprise or a functionary of the relevant department of the government causes losses to the enterprise for negligence in work, the superior administrative department of the enterprise or the relevant department of the government shall, according to the powers of managing officials, impose administrative sanctions on him.
Where the leader of a collective enterprise or a functionary of the relevant department of the government causes heavy losses of property or interests of the collective enterprise for neglecting his duty, and a crime is constituted, he shall be investigated for criminal liabilities in accordance with the law.
Article 61 Where a collective enterprise contravenes the conditions of and procedures for the selection and removal of the leaders of the collective enterprise as provided for in this Regulation, the superior administrative department shall order rectification and hold directly liable persons for administrative responsibility.
Where the superior administrative department of a collective enterprise contravenes the conditions of and procedures for the selection and removal of the leaders of the collective enterprise as provided for in this Regulation, its superior administrative department at a higher level shall order rectification; and if the circumstances are serious, the directly liable persons shall be held for administrative responsibility.

Article 62 If a person disturbs the order of a collective enterprise to the extent that the production, business operation and work cannot be regularly conducted or cannot be conducted at all, the public security department shall impose a penalty on him according to the Law of the People's Republic of China on Administrative Penalties for Public Security; and if a crime has been constituted, he shall be investigated for criminal liability according to the law.

Chapter IX Supplementary Provisions
Article 63 The measures for the establishment and administration of the united economic organizations of collective enterprises shall be separately developed.
Article 64 The administration of all types of companies under the collective ownership system shall be subject to the state laws and regulations on companies.
Article 65 The public institutions of culture, education, health, scientific research, etc. under the collective ownership system in urban areas shall be subject to this Regulation by reference.
The measures for the administration of supply and marketing cooperatives shall be formulated separately.
Article 66 Labor employment service collective enterprises shall be guided by the principles as provided for by this Regulation, and governed specifically by the Provisions on the Administration of Labor Employment Service Enterprises as issued by the State Council.
The measures for the administration of welfare collective enterprises that mainly employ disabled persons shall be separately developed based on the principles of this Regulation.
Article 67 The measures for the administration of collective enterprises supported and established by the army shall be separately developed by the General Logistics Department of the Chinese People's Liberation Army based on the principles as specified in this Regulation.
Article 68 The people's governments of provinces, autonomous regions and municipalities directly under the Central Government and the competent departments of all industries of the State Council may, in accordance with this Regulation, and in light of the specific circumstances of their respectively regions and industries, formulate the detailed rules for the implementation of this Regulation.
Article 69 This Regulation shall come into force on January 1, 1992.