2017.3.15
James Cheng
On March 15, 2017, the National People’s Congress promulgated the General Provisions of the Civil Law of the People’s Republic of China (the “General Provisions”), which will go into effect on October 1, 2017. Consisting of 11 chapters, the General Provisions contain a total of 206 articles covering the basic provisions, natural persons, legal persons, unincorporated organizations, rights in civil matters, legal acts in civil matters, agency, civil liabilities, statute of limitations, term calculation and supplemental provisions. In contrast to the General Principles of the Civil Law of the People’s Republic of China (the “General Principles”), there are more changes to the General Provisions. These amendments are briefly summarized in this article.
Highlight 1: a system for fetus rights. Article 16 of the General Provisions provides that a fetus shall be deemed to have legal capacity for civil rights in matters involving the protection of a fetus’s right, such as inheritance and acceptance of gifts, provided that a stillborn fetus would be considered to have no legal capacity for civil rights ab initio. Although Article 28 of the Inheritance Law provides that in the division of estate, the fetus’s share shall be considered and set aside, such protection is limited, and the scope of a fetus’s interests under the General Provisions is broader.
Highlight 2: the age of a minor whose capacity to engage in a civil act is restricted is reduced from ten to eight. Article 19 of the General Principles provides that minors above the age of eight shall have restricted capacity to act, and a legal act under civil law requires either the legal guardian to act in the minor’s stead or the consent of the legal guardian, but such minors may independently engage in legal acts solely to acquire an interest, or civil legal acts appropriate to their age and intelligence.
Highlight 3: the targets of custody are expanded and improved. Articles 16 and 17 of the General Principles merely provide for the custody of minors and the mentally ill, while Article 20 of the General Provisions provides that minors under the age of eight do not have capacity to engage in a civil act, and their legal guardian shall engage in the act in their stead. Meanwhile, Article 21 provides that adults who cannot recognize their behavior are people without capacity to act, and their legal guardian shall act in their stead. The General Provisions specifically include some minors who are mentally fine but have retardation under the scope of protection to better protect the disadvantaged.
Highlight 4: a voluntary custody system is created. Article 33 of the General Provisions provides that an adult with full civil capacity may confirm his/her guardian in writing by consulting his/her close relatives or other individuals or organizations who are willing to serve as the guardian in advance. The guardian confirmed through such consultation will perform the duty of a guardian when such adult loses or partially loses civil capacity. As a result, adults may now select an individual or organization they trust as their guardian in advance when they are still mentally competent, thereby providing better protection to the interest of the wards.
Highlight 5: the concept of “liquidation administrator” is clarified for the first time to provide for persons that may serve as liquidation administrator. Article 70 of the General Provisions provides that in the dissolution of a legal person, except where a merger or division is involved, the liquidation administrator shall timely form a liquidation group to carry out liquidation. The directors or administrators who are members of the executive body or decision-making body of a legal personal shall serve as the liquidation administrators unless otherwise provided for under laws or administrative regulations. Liquidation administrators whose failure to timely engage the liquidation process caused damages shall assume civil liabilities, and the competent authority or an interested party may apply to a people’s court for designating relevant persons to set up a liquidation group to conduct the liquidation. In comparison, Article 183 of the Company Law provides that the liquidation group of a limited liability company shall consist of shareholders, and that the liquidation group of a company limited by shares shall consist of its directors or persons confirmed by its shareholders’ meeting, therefore, the inconsistency between General Provisions and the Company Law still require interpretation by legislators in the future.
Highlight 6: a new category of legal persons is created called “special legal persons”. Under the General Principles, legal persons are categorized as corporate legal persons, government institutions and social organizations, while Chapter 3 of the General Provisions categorize divides legal persons based on purpose and are thus categorized as profit-seeking legal persons, not-for-profit legal persons and special legal persons. A profit-seeking legal person, which includes limited liability companies, companies limited by shares and other corporate legal persons, refers to a legal person set up for the purpose of generating and distributing profits to capital contributors such as shareholders, while a not-for-profit legal person, which includes institutions, social organizations, foundations, etc., refers to a legal person set up for public interest purposes or other non-profit objectives and does not distribute profits to its capital contributors, founders or members. To address the issue that grassroots autonomous organizations could not smoothly engage in civil acts because their character under civil law has not been set down in the past, “special legal persons” are added in the General Provisions to primarily include institutional legal persons and cooperative economic organization in rural areas or between rural areas and urban areas.
Highlight 7: “unincorporated organization” is now added as an entity in civil law. An unincorporated organization is an organization which does not have legal person status but may still engage in civil acts in its own name, including sole proprietorships, partnerships and professional service entities that do not have a legal person status. It is worth noting that Article 104 of the General Provisions stipulates the manners in which debts are assumed by unincorporated organizations and provides that if the assets of an unincorporated organization are insufficient to pay off the debts, the capital contributor or founders thereof shall assume unlimited liabilities. However, if the law has already separately provided otherwise, those provision(s) shall prevail.
Highlight 8: personal information is protected by law. Article 111 of the General Provisions provides that the personal information of a natural person shall be protected by law. Any organization or individual who needs to obtain personal information of others shall do so legally and ensure the security of the information, shall not illegally collect, use, process or transmit personal information of others and shall not illegally sell, provide or publicly disclose personal information of others.
Highlight 9: A provision is added regarding the protection of virtual property. Article 127 of the General Provisions provides that where the law has already prescribed for the protection of data and virtual property, such provision(s) shall prevail, which means that virtual property such as Q Coin and game equipment are protectable by law.
Highlight 10: New provisions regarding third-party fraud or coercion are added. Article 149 of the General Provisions provides that in case of third-party fraud which causes one party to engage in a civil act against his/her true intent, and if the counterparty is aware or should be aware of such fraud, the defrauded party has the right to apply to a people’s court or arbitration institution to set aside the act. Article 150 provides that if one party or any third party causes a counterparty to engage in a civil act against his/her true intent by coercive means, the coerced party has the right to apply to a people’s court or arbitration institution to set aside the act. In addition, Article 152 sets the duration of the right of revocation, to five years at the longest. In case of a material misunderstanding, the right of revocation shall be exercised in three months. In case of coercion or other reasons, the statute of limitation shall be one year.
Highlight 11: A “Good Samaritan” provision is added. Article 184 of the General Provisions provides that if a rescuer causes injury to the rescued individual in the course of a voluntary emergency rescue, the rescuer will not be held civilly liable. However, the General Provisions now immunizes against civil liability regardless of whether there is intentional or reckless behavior on the part of the rescuer. Whether such rule is appropriate remains to be seen.
Highlight 12: New provisions concerning the statute of limitations. Article 188 of the General Provisions extends the statute of limitations from two years to three years for civil litigation. Article 191 provides that the statute of limitations for compensation claims of a sexually assaulted minor shall commence on the day the victim reaches the age of eighteen to better protect the rights and interests of minors. In addition, Article 194 of provides for five circumstances where the statute of limitations is suspended. If a statute of limitations is suspended for statutory reasons, the statute of limitations shall expire six months after the cause of suspension ends. Article 196 of the General Provisions provides for the following four circumstances where the statute of limitations does not apply, including: (1) request to stop infringement or eliminate danger; (2) request lodged by the rights holder of real estate and registered chattels to return property; (3) request for payment of support money or alimony; and (4) other claims where the statute of limitations is inapplicable pursuant to law.
It is worth noting that the implementation of the General Provisions does not supersede the General Principles. In case of any discrepancy between the two, the General Provisions shall prevail as they are the newer law.