Regulation of Business Organizations in a Socialist Market Economy
Chapter 9: Offering and trading of shares in joint-stock limited companies
The term 'share' or 'share of stock' could refer to either gufen, one of the equal units of capital in a company, or gupiao, which simply means the share certificate. A joint-stock limited company (JSLC) is required by the Company Law to divide its capital into such equal units, or shares. A limited liability company (LLC) does not need - and is not required by the law - to issue shares. It can instead state the percentage of each shareholder's equity interest in the shareholders' agreement and the corporate charter. Although the issuance of shares in China became an electronic process featuring paperless and digitalized transactions a long time ago, the Company Law still defines gupiao or share certificate as if we were still in the age of paper-based transactions. Thus, 'the shares of a company shall take the form of share certificates, which are vouchers issued by the company to certify the shares held by their holders'. Further, 'share certificates shall be in paper form or other forms prescribed by [securities regulatory authorities]'. A share certificate 'shall clearly state the following particulars: (1) the name of the company; (2) the date of establishment of the company; (3) the class and face value of the share certificate and the number of shares it represents; and (4) the serial number of the share certificate'. In the age when securities issuance and trading are fully computerized, one would wonder to what extent these rules still make sense.
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