A case on Chinese Company Law: Faye

Case introduction A,B and C decided to incorporate a Joint Stock Limited Company in Shanghai. They designed the articles of association, made their capital contribution to the company, which made them initiators.

Case introduction But the company was not completely established, which was called the company (to-be-incorporated). At that time, A made pre-incorporation transaction with D in the name of the company (to-be-incorporated), bought some office supplies.

Question If the company was successfully established, should the company pay for the pre-incorporated transaction?

Answer Yes, the company should take the contract liability. According to the Provisions of the Supreme People's Court on Certain Issues Concerning the Application of the Company Law ( ⅲ )

Question If the company was not successfully established, who should pay for the office supplies?

Answer A,B and C, the initiators, should bear joint liabilities for the debts. See article 95

Article 95The initiators of a joint stock limited company shall bear the following responsibilities: (1) In the case of failure to establish the company, bearing joint liabilities for the debts and expenses resulted from the pre- establishment activities; (2) In the case of failure to establish the company, bearing joint liabilities for refunding the paid-in capital as well as the interests thereof computed at the bank interest rate for the same period; and (3) If the company's interest is injured in the course of its establishment due to the negligence of the initiators, being liable for making compensations to the company.

A multiple choice question A,B,C and D established a Joint Stock Limited Company, after the establishment, they argued about several fees, which of the following should be paid by the initiator.

A multiple choice question A. The money spent by A used to hold a banquet for the incorporation. B. The money spent by B used to assess his non-monetary properties as capital contributions C. The money spent by C used to research the market for the company. D. The damages that preparatory group paid to the owner of the office, because D made negligent arson by littering a cigarette end.

Answer D A,B and C, the initiators, did things for the incorporation of the company, so when the company was successfully established, the company should pay for the fees.

Answer However, preparatory group paid the damages to the office owner because of D’s own mistake. According to article 95(3),D should be liable for making compensations to the company.

That’s all for this time Thanks~~