Special Rules for One-person Limited Company in China

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Special Rules for One-person Limited Company in China

 

One-person limited liability company as stipulated in the Company Law of the PRC refers to a limited liability company with only one natural person shareholder or legal person shareholder. Since there is only one shareholder in a one-person limited liability company, it is easy for the shareholder to abuse the independent status of corporate legal person and shareholder’s limited liability to evade debts. The Company Law of the PRC sets forth special rules in a separate section to regulate one-person limited liability company accordingly. The details are as follows:

 

  1. Investment Restriction for Natural Person

 

One natural person is only allowed to establish a one-person limited liability company, which shall not establish any more one-person limited liability company.

 

  1. No Shareholders Meeting

 

Since there is only one shareholder in a one-person limited liability company, it has no shareholders meeting. The shareholder can directly exercise its shareholder functions and powers by signing a written form decision. The convening procedures of shareholders’ meeting, shareholders’ voting procedures and other relating provisions as stipulated in the Company Law of the PRC shall not be applied under this circumstance.

 

  1. Statutory Audit

 

A one-person limited liability company shall make a financial report by the end of every fiscal year and have the report audited by an accounting firm.

 

  1. Joint and Several liability of the Shareholder

 

If the shareholder of a one-person limited liability company is unable to prove that the property of the one-person limited liability company is independent from its own property, it shall bear joint liabilities for the debts of the company.

 

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