2.2.1 Company limited by shares

By definition in the Company Law 2006, a company limited by shares (or a joint stock limited company) is a company whose shareholders are liable towards the company to the extent of their respective shareholdings. This type of company is further divided into two subgroups, non-listed companies and listed companies. The shares of a non-listed company can be offered to the public but cannot be traded publicly on a stock exchange. Shares of a listed company can be offered to the public as well as traded on stock exchanges. For this reason, listed companies are subject to stricter rules. The dividing line between listed companies and non-listed companies in this group is whether the company publicly trades its shares on the stock exchange. The division between a company limited by shares and a limited liability company in China, besides the possibility to offer shares to the public, also depends on the number of shareholders. A company with more than 50 shareholders is required to be registered as a company limited by shares.

The major requirement for a company limited by shares is the net capitalization of RMB 5,000,000 (roughly 500,000 euros). The initial payment must be no less than 20 per cent of the registered capital, and the rest must be paid in full by the sponsors within 2 years of the company's establishment. Promoters of the company must be 2-200 people. A single member public company is not allowed.1 Furthermore, a public company must set up a two-tier governance structure, namely a board of directors and a supervisory board. In the case of a listed company, besides a board of directors and a supervisory board, there must be independent directors as well, resulting in a three-tier structure.2