On March 15, 2017, the PRC General Provisions of Civil Law (the General Provisions) were formally adopted by the National People’s Congress (NPC). Previously, drafts of the General Provisions were submitted to NPC for three readings in June, October, and December of 2016, respectively. The General Provisions are considered the first step in the compilation of China’s first comprehensive civil code. The codification, according to a legislative proposal published by NPC in July 2016, will be completed in March 2020.

Background

China adopted the General Principles of Civil Law (the General Principles) effective since Jan. 1, 1987. The General Principles laid down the basic framework for all future civil and commercial laws of China, stipulating the ground rules regarding citizens (natural persons), legal persons (including enterprise legal persons), agencies, contracts, property rights, civil liabilities, and statutes of limitation. Since then, China has enacted separate civil statutes including, inter alia, the Contract Law, Property Law, Tort Liability Law, and the Law of the Application of Law for Foreign-Related Civil Relations. In March 2015, NPC initiated a two-step campaign to integrate China’s existing statues into one compressive civil code, and the first step is to legislate the general provisions of the code to replace the General Principles.

Important Features of the General Provisions

The General Provisions is based on the General Principles, with certain important changes as follows:

> The General Provisions classifies legal persons into three categories: for-profit legal persons, notfor-profit legal persons, and special legal persons. The General Provisions clarifies that when terminated, not-for-profit legal persons, including social organizations, foundations, and public institutions providing social services, are prohibited from making distributions to its members or initiators, and the remaining assets of such legal persons after liquidation must be used for “public interest” pursuant to its charter document or the decision of its governing authority.

> The General Provisions clarifies that entities like sole proprietorships, partnerships, and branches of legal persons lack the status of an independent legal person, and, unless otherwise stipulated by the law, the members or investors shall assume unlimited liability for the debt of such entities. Notably, the General Provisions recognizes the non-legal-person entities’ right to use their own names in civil activities (including litigation).

> The General Provision,s for the first time, recognizes “virtual assets” as a type of property protected by the law. The legislature deemed the change to be a response to the call of the “era of Internet and big data.” Despite that the meaning of such “virtual assets” is not clarified under the General Provisions, comments have already been made that the change imparts legitimacy towards various digital assets, including Bitcoins.

> The General Provisions extends the statute of limitation for civil claims from 2 years to 3 years and the extended term may apply to all general tort and contractual claims. The legislature has attributed the change to the increasingly complicated transactions that have occurred in recent years. The General Provisions also clarifies that any waiver of the statute of limitation defense in advance is invalid and unenforceable.

> The General Provisions provides that personal information of natural persons is protected by law and where any organization or individual needs to obtain someone else's personal information, they must obtain it in accordance with law and ensure information security. Further, personal information must not be collected, used, processed, transferred, bought, or sold in an unlawful manner.

- General Provisions of Civil Law

- 中华人民共和国民法总则

- Issuing authority: National People’s Congress

- Date of issuance: March 15, 2017

- Effective date: N/A