Introduction
01 Case Information
Case Introduction:
Pursuant to the Company Law of China, the profit distribution plan of a limited liability company shall be formulated by the company's board of directors (Article 67), and then deliberated on by its shareholders' meeting (Article 59). For a company limited by shares, its profit distribution methods shall be specifically stipulated in accordance with its articles of association (Article 95). Article 210 of the Company Law further requires that, prior to profit distribution, the company shall first set aside 10% of its profits as the company's statutory common reserve. The company may cease to make such set-aside when the accumulative amount of its statutory common reserve accounts for more than 50% of its registered capital. The company's statutory common reserve and current year profits shall first be used to offset the company's losses from previous years. Thereafter, upon a resolution of the shareholders' meeting (or general meeting of shareholders for a company limited by shares), the company may further set aside a discretionary common reserve from its after-tax profits. After all losses are offset and all required common reserves are fully set aside, the company may distribute the remaining profits. A limited liability company shall distribute profits in proportion to the capital contributions actually paid by its shareholders; where distribution is not made in such proportion, consent of all shareholders shall be obtained. A company limited by shares shall distribute profits in proportion to the shares held by its shareholders, unless otherwise stipulated in its articles of association.
