2nd Company Act Judicial Implementation Rules Released By Supreme Court of P.R. China

On May 12, 2008 the Supreme Court of P.R. China released its 2^nd Implementation Rules of the Company Act (This Rule). This Rule is to regulate the corporate wind-up and liquidation only.

Under four instances herein below, holders with 10% voting power can file a complaint to wind up the their company:

(1)    No holder’s meeting or general meeting has been held for a consecutive two years and therefore company is under serious difficulty of operation;

(2)    No resolution was adopted due to absence of quorum for a consecutive two years and therefore company is under serious difficulty of management;

(3)    There is long term conflicts among directors that has not been resolved via holder’s meeting or general meeting, therefore the company is under serious difficulty of operation;

(4)    There is other serious difficulty of management; therefore continuance of operation will materially harm the interests of holder.

Should holder file complaint for company winding-up and petition for company liquidation the same time, court shall not accept the latter. Court shall sustain the attachment motion or evidence seizure motion on a company wind-up procedure should the holder offer guarantee and the judge finds that either the attachment or the seizure will not impact company’s normal operation. On company’s wind-up procedure, the company shall be listed as defendant and other holders shall be notified by the complainant or by the court. Other holders may join the procedure as joint complainant when they learned the procedure. Or other holders shall join the win-up procedure if they are subpoenaed by the court.

Court shall accept creditor’s petition for liquidation should following instances happen:

(1)    company is winded up but liquidation panel has not been organized within the compulsory deadline, therefore no liquidation job is carried out; or

(2)     though liquidation panel was organized, liquidation job has been held up intentionally; or

(3)    There is un-due/illegal liquidation that will materially harm the interest of creditor or holders.

Court shall timely nominate the member of the liquidation panel from its liquidation professional archives once creditor’s liquidation petition was accepted (Simon Lee/05-23-2008).