Provisions on Democratic Management of Enterprises

Article 2: The work for democratic management of enterprises shall uphold the leadership of the party, be guided by Deng Xiaoping theory and the important thought of the “Three Represents”, intensively and thoroughly put in place an objective development outlook and unwaveringly and thoroughly implement the party's fundamental guiding policy of wholeheartedly relying on the working class.

The party organisation of an enterprise shall strengthen its leadership and support of democratic management work.

Article 3: The employee representative congress (or, here and hereafter, the employees' general meeting) is the organ by way of which employees exercise democratic management authority, and is the basic form of democratic management of enterprises.

An enterprise shall establish a democratic management system, with the employee representative congress as its basic form, based on the principles of lawfulness, orderliness, transparency and fairness, implement transparency of plant affairs and promote democratic management. Enterprises established in the form of companies (Companies) shall establish an employee director and supervisor system in accordance with the law.

An enterprise shall respect and ensure the democratic rights enjoyed by employees in accordance with the law, such as the right to know, right to participate, right to express their opinions and right of monitoring, and support participation by employees in its management activities.

Article 4: The employees of an enterprise shall respect and support the exercise by the enterprise in accordance with the law of its management functions and powers, and actively participate in the enterprise's management.

Article 5: The labour union of an enterprise shall arrange for the employees to engage in democratic management of the enterprise in accordance with the law and safeguard the employees' lawful rights and interests.

A higher-level labour union shall guide and assist an enterprise's labour union and employees in carrying out democratic management activities of the enterprise and monitor the implementation of democratic management by the enterprise.

Article 6: An enterprise's representative organisation shall promote implementation of democratic management by the enterprise and promote the healthy development of the enterprise.

Article 7: Relevant departments, such as the party discipline inspection departments and organisation departments at every level, and the state-owned assets supervision and administration authorities and supervision authorities of people's governments at every level, shall guide, inspect and monitor the work for democratic management of enterprises within their respective purviews.

Part Two: Employee representative congress system

Section One: The organisation system and the functions and powers of employee representative congresses

Article 8: Depending on the number of its employees, an enterprise may determine whether to convene a meeting of the employee representative congress or an employees' general meeting.

If an enterprise convenes a meeting of the employee representative congress, the number of employee representatives shall not be less than 5% of the total number of employees and, at minimum, shall not be less than 30 persons. If the number of employee representatives exceeds 100 persons, the number of representatives exceeding that number may be determined by the enterprise and the labour union through consultations.

Article 9: The representatives to the employee representative congress shall consist of workers, technical personnel, management personnel, senior officers of the enterprise and other types of employees. In general, the number of managers at mid level and above, and senior officers, may not exceed 20% of the total number of employee representatives. If an enterprise has female employees or employees placed by a temp agency, there shall be an appropriate percentage of female employees or temporary employees among the employee representatives.

Article 10: The term of service of each session of the employee representative congress shall be three to five years. The specific term of service shall be determined by the employee representative congress based on the actual circumstances of the employer.

If the succession of a session of the employee representative congress needs to be brought forward or postponed, the decision thereon shall be made by the employee representative congress or its authorised organisation.

Article 11: As required, the employee representative congress may establish a number of special committees (units) responsible for handling matters assigned to them by the employee representative congress. The candidates for members of such special committees (units) must be vetted and approved by the employee representative congress.

Article 12: Employee representatives shall comprise delegations based on basic-level electoral units and elect chief delegates. A joint meeting of chief delegates of the employee representative congress and persons in charge of the special committees (units) may be established that, as authorised by the employee representative congress, shall be responsible for handling important issues that require resolution at short notice while the employee representative congress is adjourned and that shall then be referred to the following meeting of the employee representative congress for confirmation.

The enterprise's labour union shall be responsible for convening the joint meeting. Depending on the agenda of the meeting, the joint meeting may invite senior officers of the enterprise or other relevant persons to attend.

Article 13: The employee representative congress shall exercise the following functions and powers:

(1) to listen to reports from the main responsible persons of the enterprise on enterprise development plans, annual production, business and management, enterprise reform and the formulation of important rules and regulations, the execution and performance of temporary staff contracts, employment contracts and collective contracts by the enterprise, work safety in the enterprise, payment of social insurance premiums and contributions to the housing fund by the enterprise, etc. and express its opinions and make suggestions thereon;

to consider rules and regulations or plans for material matters that have a direct bearing on the immediate interests of workers, such as work remuneration, working hours, rest, leave, work safety and hygiene, insurance and benefits, employee training, work discipline and work quota management, formulated, amended or decided on by the enterprise, and express its opinions and make suggestions thereon;

(2) to consider and adopt important matters such as drafts of the collective contracts, plans for use of the employee welfare fund allocated in accordance with relevant state provisions, plans for adjustments of the percentages and times for payment of the contributions to the housing fund and social insurance premiums, and recommended candidates for model workers;

(3) to elect or dismiss the directors and supervisors who represent the employees, elect the employee representatives to the creditors' meeting and creditors' committee should the enterprise enter bankruptcy proceedings in accordance with the law and, as authorised, recommend or elect business and management personnel of the enterprise;

(4) to review and monitor the implementation of labour laws and regulations and enterprise labour rules and regulations by the enterprise, democratically evaluate the enterprise's senior officers and put forth proposals on their rewarding and punishment; and

(5) other functions and powers as specified in laws and regulations.

Article 14: The employee representative congress of a state-owned enterprise or enterprise in which the state has a controlling interest shall, in addition to the functions and powers set forth in Article 13, exercise the following functions and powers:

(1) to listen to and consider reports from the main persons responsible for business and management of the enterprise on enterprise investments and significant technical transformations, financial budgets and final accounts, use of enterprise business entertainment funds, etc. and plans for the evaluation and hiring for professional technical positions, use of the enterprise's reserve funds, change in the form of the enterprise, etc. and express its opinions and make suggestions thereon;

(2) to consider and adopt the plans for the reduction, streaming and resettlement of employees in enterprise merger, division, change of form, dissolution or bankruptcy implementation plans; and

(3) other functions and powers as specified in laws, administrative regulations and administrative rules.

Article 15: Small and medium-sized enterprises in a certain area below the county level or in industries of a similar nature that do not individually satisfy the conditions for establishing an employee representative congress system may, through the election of representatives, jointly establish an area (industry) employee representative congress system to carry out democratic management activities of enterprises.

The labour unions shall be responsible for arranging the establishment of the area (industry) employee representative congress system. The area (industry) labour union, as the working organ of the area (industry) employee representative congress, shall be responsible for the day-to-day work.

Article 16: The headquarters of a group enterprise and its various branch companies, branch plants, workshops and other (sub-)branches may elect a certain percentage of employee representatives to convene meetings of the enterprise group's employee representative congress and implement democratic management of enterprises.

The headquarters of a group enterprise and its various branch companies, branch plants, workshops and other (sub-)branches shall establish employee representative congress systems and individually carry out democratic management activities within their respective purviews.

Section Two: Working system for employee representative congresses

Article 17: Meetings of the employee representative congress shall be held at least once per year. Plenary meetings of the employee representative congress must be attended by at least two-thirds of the employee representatives.

Article 18: The subjects of discussion at, and motions before, the employee representative congress shall be determined by the labour union with the enterprise through consultations after listening to the opinions of the employees and shall be served on the employee representatives in writing seven days before the meeting is held.

Article 19: The employee representative congress may establish a presidium to preside over meetings. The list of candidates for members of the presidium shall be proposed in consultations between the enterprise's labour union and the delegations to the employee representative congress and shall be voted on and adopted at a preparatory meeting of the employee representative congress. Workers, technical personnel and management personnel shall make up at least 50% of them.

Article 20: Employee representative congress elections and votes on relevant matters must comply with the principle of majority rules and be adopted by more than one-half of all of the employee representatives. Votes on important matters shall be conducted individually for each matter by secret ballot.

Article 21: The resolutions and matters considered and adopted in accordance with the law by the employee representative congress within its purview are binding, and may not be modified or revoked without the consent of the employee representative congress.

Matters that an enterprise is required to refer to the employee representative congress for consideration, adoption and decision shall be invalid unless considered, adopted or decided by the statutory procedure.

Article 22: The committee of an enterprise's labour union is the working organ of the employee representative congress, is responsible for the day-to-day work of the employee representative congress and performs the following duties:

(1) to propose the plans for the election of representatives to the employee representative congress and arrange for the election of employee representatives and chief delegates by the employees;

(2) to solicit motions from the employee representatives and propose subjects of discussion for meetings of the employee representative congress;

(3) to be responsible for the preparation and organisation of meetings of the employee representative congress and propose the agenda for meetings of the employee representative congress;

(4) to propose plans for the formation of the presidium of the employee representative congress and the proposed list of persons therefor; to propose plans for the establishment of special committees and the proposed lists of persons therefor;

(5) to report to the employee representative congress on the implementation of the resolutions of the employee representative congress and the handling of the motions before the employee representative congress, the implementation of transparency of plant affairs, etc.;

(6) to be responsible for arranging for the conduct of monitoring activities such as inspection tours, examinations and inquiries by the special committees and employee representatives of the implementation of the resolutions of the employee representative congress and the handling of the motions before the employee representative congress, the implementation of transparency of plant affairs, etc. while the employee representative congress is adjourned;

(7) to accept complaints and suggestions from the employee representatives and safeguard the lawful rights and interests of employee representatives;

(8) to publicise democratic management to the employees and educate them therein, and arrange for study by and training for employee representatives so as to enhance their quality; and

(9) to establish and manage the work files of the employee representative congress.

Section Three: Election of employee representatives and their rights and obligations

Article 23: Employees who have executed an employment contract and established an employment relationship with the enterprise and those that have a de facto employment relationship with the enterprise have the right to elect and be elected as representatives to the employee representative congress.

The representative qualifications of an employee representative whose employment relationship ends or is terminated in accordance with the law shall terminate automatically.

Article 24: The basic electoral units for employee representatives shall be the teams, groups, work sections, workshops, administrative offices, etc. and employee representatives shall be elected directly by the employees. The employee representatives of relatively large enterprises or those with relatively numerous management levels may be elected by the representatives to the lower-level employee representative congress.

Article 25: To elect or dismiss an employee representative, a meeting of all of the employees in the electoral unit shall be convened, and at least two-thirds of the employees shall be present at the meeting. A decision electing or dismissing an employee representative shall be valid only if adopted by more than one half of all the employees.

Article 26: Employee representatives are subject to a permanent tenure system and the term of service of an employee representative shall be equivalent to the term of the session of the employee representative congress and renewable if he or she is re-elected.

If a vacancy in the position of employee representative arises, the original electoral unit shall hold a by-election in accordance with the prescribed conditions and by the prescribed procedure in a timely manner.

Article 27: An employee representative shall be accountable and report on his or her work to the employees in his or electoral unit, and shall subject himself or herself to monitoring by the employees in such electoral unit.

Article 28: An employee representative shall have the following rights:

(1) the right of election, the right to be elected and the right to vote;

(2) to attend meetings of the employee representative congress and participate in the democratic management activities arranged by its work organs;

(3) to evaluate and question senior officers of the enterprise; and

(4) to monitor and inspect the implementation of resolutions of the employee representative congress while the employee representative congress is adjourned.

Article 29: An employee representative shall perform the following obligations:

(1) to abide by laws and regulations and the enterprise's rules and regulations, enhance his or her own quality and actively participate in democratic management of the enterprise;

(2) to perform the duties of an employee representative in accordance with the law, listen to the opinions and suggestions of employees on the enterprise's production, business and management and their opinions and demands in respect of issues of immediate interest to them, and objectively and truthfully report the same to the enterprise;

(3) to participate in the various activities organised by the employee representative congress, implement the resolutions adopted by the employee representative congress and complete the tasks assigned by the employee representative congress;

(4) to report to the employees in his or her electoral unit on his or her participation in activities of the employee representative congress and his or her performance of his or her duties, and subject himself or herself to evaluation and monitoring by the employees; and

(5) to maintain the confidentiality of the enterprise's trade secrets and confidential matters relating to intellectual property.

Article 30: An employee representative shall be subject to the protection of the law in performing his or her duties, and no organisation or individual may interfere therewith or attack or take revenge on him or her.

When an employee representative participates during statutory working hours, in accordance with the law, in the employee representative congress and the various activities organised by it, the enterprise shall pay his or her work remuneration as normal, and may not dock his or her wage or other benefits.

Part Three: Plant affairs transparency system

Article 31: An enterprise shall establish and implement a plant affairs transparency system, disclose to employees by a specific procedure through the employee representative congress or otherwise significant matters in its production, business and management, rules and regulations that are of immediate interest to the employees and matters relevant to the honest and clean performance of their work by the business and management personnel, listen to its employees' opinions and subject itself to monitoring by its employees.

Article 32: The main responsible persons of an enterprise shall be the persons responsible for implementing transparency of plant affairs. An enterprise shall establish an appropriate organ or assign a person to be responsible for plant affairs transparency work.

Article 33: In implementing transparency of plant affairs, an enterprise shall comply with the principles of lawfulness, timeliness, truthfulness and conduciveness to safeguarding of employees' rights and interests and enterprise development.

In implementing transparency of plant affairs, the confidentiality of the enterprise's trade secrets and confidential matters relating to intellectual property shall be maintained.

Article 34: An enterprise shall disclose the following matters to its employees:

(1) basic details of its business and management;

(2) details on the recruitment of employees and the execution of employment contracts;

(3) collective contracts and provisions of labour rules and regulations;

(4) details on the rewarding and punishment of employees and the unilateral termination of employment contracts as well as plans for and the results of employee reductions, and the conditions for, number of people and results of, the evaluation and selection of model workers and outstanding employees;

(5) work safety and hygiene standards, details of the occurrence of safety related accidents and the results of the handling thereof;

(6) details of the payment of social insurance premiums and enterprise annuities;

(7) details of the allocation and use of employee education funds and of employee training plans and the implementation thereof;

(8) details of employment disputes and the results of the handling thereof; and

(9) other matters as specified in laws and regulations.

Article 35: In addition to disclosing relevant matters specified in Articles 13, 14 and 34, state-owned enterprises, collective enterprises and enterprises in which they have a controlling interest shall disclose the following matters:

(1) material matters, such as significant decisions and plans on investment, production, business and management, and the enterprise's medium and long-term development plans;

(2) material matters, such as annual production and business targets and details on the achievement thereof, security provided by the enterprise, details on the use of large fund amounts and the disposal of assets of high monetary value, the invitation for and submission of bids for construction projects, procurement and supply of bulk materials, details of product sales and gains/losses, details of the performance of contracted lease contracts, details on the implementation of the internal economic responsibility system, and the formulation of important rules and regulations;

(3) details of employee raises, promotions and distribution of wage and bonus income, and details of the evaluations and hiring for professional technical positions;

(4) details of the selection and employment of mid-level officers and personnel for important positions, details on the salaries, expense account spending and concurrent duties of senior officers of the enterprise, details of the implementation of integrity and self-discipline provisions, such as those for expenses and expenditures when going abroad, and the results of the democratic evaluation of the enterprise's senior officers by the employee representative congress; and

(5) other matters that, pursuant to relevant state provisions, are required to be disclosed.

Part Four: Employee director and supervisor system

Article 36: An enterprise established in the form of a company shall establish an employee director and supervisor system, support the participation by employee representatives elected by the employee representative congress as members of the board of directors and supervisory board in Company decision-making, management and supervision, represent and safeguard the lawful rights and interests of employees, and promote the healthy development of the enterprise.

Article 37: A Company shall expressly specify in accordance with the law in its articles of association the specific percentage and number of directors and supervisors who are representatives of the employees.

Article 38: Candidates for the positions of director and supervisor that are representatives of the employees shall be nominated by the Company's labour union based on self-recommendations and recommendations and after fully listening to the opinions of the employees, may only be elected if adopted by more than one-half of all of the representatives to the employee representative congress, and the same shall be reported to the labour union at the next higher level for the record.

The chairman and vice-chairman/chairmen of the labour union shall be candidates for the positions of director and supervisor that are representatives of the employees.

Article 39: Senior management personnel and supervisors of the Company may not concurrently serve as directors that represent the employees; and senior management personnel and directors of the Company may not concurrently serve as supervisors that represent the employees.

Article 40: The term of service of directors and supervisors who are representatives of the employees shall be identical to that of other directors and supervisors of the Company, and renewable if such director or supervisor is re-elected.

Article 41: If a director or supervisor who is a representative of the employees fails to perform his or her duties or commits a serious fault, he or she may be dismissed if such is jointly proposed by at least one-third of the employee representatives and adopted by more than one-half of all of the representatives to the employee representative congress.

When a vacancy in the position of director or supervisor who is a representative of the employees arises, the company's labour union shall propose successor candidates in accordance with Article 37 hereof and refer the same to the employee representative congress for a democratic election.

Article 42: A director who is a representative of the employees shall exercise the following rights in accordance with the law:

(1) to attend meetings of the board of directors and exercise a director's right to be heard and right to vote;

(2) with respect to rules and regulations or significant matters that have a bearing on the immediate interests of the employees, to propose the holding of a meeting of the board of directors, reflect the reasonable demands of the employees and safeguard the lawful rights and interests of the employees;

(3) to attend in a non-voting capacity administrative working meetings of the Company relating to his or her duties and important meetings on production and business work;

(4) to require the Company's labour union and relevant departments and organs of the Company to inform him or her of relevant matters and provide relevant materials; and

(5) other rights as specified in laws, regulations and the Company's articles of association.

Article 43: A supervisor who is a representative of the employees shall exercise the following rights in accordance with the law:

(1) to attend meetings of the supervisory board and exercise a supervisor's right to be heard and right to vote;

(2) with respect to rules and regulations or significant matters that have a bearing on the immediate interests of the employees, to propose the holding of a meeting of the supervisory board;

(3) to monitor the financial position of the Company and the acts of the Company's directors and senior management personnel in performing their Company duties; to monitor and inspect the thorough implementation by the Company of laws and regulations and the Company's rules and regulations that have a bearing on the immediate interests of the employees; and the performance of employment contracts and collective contracts;

(4) to attend meetings of the board of directors in a non-voting capacity and raise questions or make proposals on matters put before the board for resolution; and to attend in a non-voting capacity administrative working meetings of the Company relating to his or her duties and important meetings on production and business work;

(5) to require the Company's labour union and relevant departments and organs of the Company to inform him or her of relevant matters and provide relevant materials; and

(6) other rights as specified in laws, regulations and the company's articles of association.

Article 44: A director or supervisor who is a representative of the employees shall perform the following obligations:

(1) to comply with laws, regulations, the Company's articles of association and its rules and regulations, maintain the confidentiality of the Company's secrets and duly perform his or her duties;

(2) to regularly listen to the opinions and suggestions of the employees and truthfully, accurately and comprehensively reflect the same to the board of directors or supervisory board;

(3) to regularly report on his or her work to the employee representative congress, implement relevant resolutions of the employee representative congress and, with respect to matters on which the employee representative congress has adopted resolutions, express opinions and exercise voting rights at meetings of the board of directors or supervisory board based on the relevant resolutions of the employee representative congress; and

(4) other obligations as specified in laws, regulations and the Company's articles of association.

Article 45: A Company shall ensure that directors and supervisors who are representatives of the employees can carry out their work in accordance with laws, regulations and its articles of association and provide them the working conditions necessary to perform their duties.

Article 46: A Company may not terminate the employment contract of a director or supervisor who is a representative of the employees during his or her term of service, except in circumstances specified by law.

Article 47: The directors and supervisors who are representatives of the employees shall enjoy identical rights and bear equivalent obligations as other directors and supervisors of the Company.

Part Five: Supplementary provisions

Article 48: Regions, relevant departments and enterprises shall formulate implementing measures based on these Provisions and promote democratic management work of enterprises.

Article 49: Collective enterprises shall implement democratic management in accordance with relevant laws and regulations such as the Regulations for Urban Collectively-owned Enterprises.

Article 50: These Provisions shall be effective as of the date of issuance.