Lex Mercatoria

www.lexmercatoria.org

www.jus.uio.no/lm

 scroll    toc    txt   pdf   pdf    odt    A-Z  Document Manifest   home 
 

China - Auction Law, 1996

MOFTEC

copy @ Lex Mercatoria

Rights: Copyright ©  1996 MOFTEC


Auction Law of the People's Republic of China
(Adopted at the 20th Meeting of the Standing Committee of the 8th National People's Congress on July 5, 1996)

Chapter I - General Provisions

Article 1

Article 2

Article 3

Article 4

Article 5

Article 6

Chapter II - Auction Targets

Article 6

Article 7

Article 8

Article 9

Chapter Three - Parties Involved in Auction

Section III - Auctioneers

Article 10

Article 11

Article 12

Article 13

Article 14

Article 15

Article 16

Article 17

Article 18

Article 19

Article 20

Article 21

Article 22

Article 23

Article 24

Section Two - Trustees

Article 25

Article 26

Article 27

Article 28

Article 29

Article 30

Article 31

Section Three - Bidders

Article 32

Article 33

Article 34

Article 35

Article 36

Article 37

Section Four - Buyers

Article 38

Article 39

Article 40

Chapter IV - Auction Procedures

Section One - Auction Trust

Article 41

Article 42

Article 43

Article 44

Section Two - The Auction Notice and Display

Article 45

Article 46

Article 47

Article 48

Section Three - The Implementation of Auctions

Article 49

Article 50

Article 51

Article 52

Article 53

Article 54

Article 55

Section Four - Commission

Article 56

Article 57

Chapter V - Legal Liabilities

Article 58

Article 59

Article 60

Article 61

Article 62

Article 63

Article 64

Article 65

Article 66

Chapter Six - Supplementary Articles

Article 67

Article 68

Article 69


This Law has been formulated with a view to standardizing the auction behavior, safeguarding the auction order, and protecting the legitimate rights and interests of various parties involved in auction activity.

This Law shall apply to the auction activity carried out by auction enterprises within the territory of the People's Republic of China.

Auction means the buying and selling form through which designated articles or property rights are transferred, in the form of public bidding, to those providing the highest bidding price.

Auction activity shall abide by relevant laws and administrative decrees, and follow the principle of openness, fairness, impartiality, honesty and credibility.

The State Council is responsible for managing the department in charge of the auctioning industry, which will exercise supervision over and management of the national auctioning industry.

People's governments of various provinces, autonomous regions and municipalities directly under the central government and people's governments of cities with districts are responsible for managing the departments in charge of the auctioning industry, which will exercise supervision over and management of the auctioning industry within their respective administrative regions.

Public security departments shall exercise security control over the auctioning industry as special industry.

Auction target shall be articles or the property rights owned by trustees or disposable according to law.

 Articles or property rights whose purchase and sale are prohibited by laws and administrative decrees shall not be taken as auction targets.

 Articles or property rights whose transfer is subject to the examination and approval according to law or in accordance with State Council provisions shall, before being auctioned, go through examination and approval procedures according to law.

Cultural relics consigned for sale shall, before being auctioned, be assessed and permitted according to law by the cultural administrative department where the auctioneer resides.

Should articles confiscated by the state administrative department according to law, articles used to pay taxes or fines and other kinds of articles be auctioned on consignment in accordance with State Council provisions, they shall be auctioned by the auctioneers designated by the people's governments with districts where such property lies.

The auction of articles confiscated by a people's court according to law, articles used to pay fines and found articles that cannot be returned are subject to the stipulation of the above paragraph.

An auctioneer is an enterprise legal person that has been established to engage in auction activity in accordance with this Law and the Corporate Law of the People's Republic of China.

An auction enterprise may be set up in a city with districts. The establishment of an auction enterprise is subject to the examination and approval by the department in charge of managing the auctioning industry as authorized by the people government of a province, an autonomous region and a municipality directly under the central government where it is located, and shall apply and register with the administrative department for industry and commerce receive a business license.

Whoever establishes an auction enterprise shall meet the following requirements:

(1) Having a registered capital of at least one million yuan;

(2) Having his own name, organizational setup, residence and articles of association;

(3) Having auctioneers and other staff qualified for the auctioning business;

(4) Having formulated rules on the auction business that comply with this Law and the stipulations of other relevant laws;

(5) Having the permit on a special industry issued by the public security department;

(6) Complying with the State Council provisions regarding the development of the auctioning industry; and

(7) Meeting other requirements as prescribed by laws and administrative decrees.

Should an auction enterprise handle the auction of cultural relics, it shall have a registered capital of at least 10 million yuan and have personnel with the professional expertise of relics auction.

Auction activity shall be presided over by an auctioneer.

An auctioneer shall meet the following requirements:

(1) Having a university or college education and professional expertise of auction;

(2) Having worked in an auctioning enterprise for more than two years; and

(3) Having a moral integrity.

Those who have been dismissed from their posts and those for whom five years have not passed since their auctioneer certificates were revoked, or those who have been meted out criminal punishment for deliberately committing a crime may not serve as auctioneers.

The examinations for the qualification of auctioneers shall be organized exclusively by the auction Industry Association. Those passing the examinations shall be issued auctioneer qualification certificates by the Auctioning Industry Association.

The Auctioning Industry Association is a mass organization legal person established according to law and a self-disciplining organization in the auctioning industry. The Auctioning Industry Association shall exercise supervision over auction enterprises and auctioneers in accordance with this Law and its articles of Association.

An auctioneer has the right to ask the trustee to state the source and drawbacks of auction targets.

The auctioneer shall state the drawbacks of auction targets to the bidders.

An auctioneer has the obligation of taking care of articles submitted by the trustee for auction.

Upon accepting trust, an auctioneer shall not trust other auctioneers for auction unless approved by the trustee.

Should a trustee or a buyer ask to keep secret of his or her identity, the auctioneer shall keep secret for him or her.

An auctioneer and other personnel shall not, in the capacity of bidders, participate in the auction activity organized by them, and shall not trust others to bid for them.

An auctioneer shall not auction his or her own articles or property rights in the auction activity organized by him or her.

After an auction is completed, the auctioneer shall, as agreed upon, pay the sum of money of the auction targets to the trustee, and shall, as agreed upon, transfer the auction targets to the buyer.

An trustee means a citizen, a legal person or an organization trusting the auctioneer to auction his or her articles or property rights.

Trustees may independently handle trust auction procedures, and may also ask their agents to handle trust auction procedures for them.

An trustee shall state the source and drawbacks of his or her auction targets to the auctioneer.

An trustee has the right to set the retentive price of an auction target to the auctioneer.

Should the auction of state-owned assets require the evaluation according to law or in accordance with State Council provisions, such assets shall be evaluated by an evaluation agency established according to law and the retentive price of an auction target shall be set in line with the evaluation result.

Before an auction begins, an trustee may withdraw his or her auction targets. Should a trustee withdraw his or her auction targets, he or she shall pay costs as agreed upon to the auctioneer. In the absence of an agreement, he or she shall pay the auctioneer reasonable costs paid for an auction.

Trustees shall not participate in bidding or trust others to providing bidding for them.

Should an auction target be transferred as agreed upon, after the auction is completed, the trustee shall transfer the auction target to the buyer.

A bidder means a citizen, a legal person or an organization participating in bidding for auction targets.

should laws and administrative decrees spell out stipulations on buying and selling requirements for auction targets, any bidder shall meet the prescribed requirements.

Bidders may participate in bidding on their own, or may trust their agents to participate in bidding for them.

A bidder has the right to know the drawbacks of an auction target, to check the said auction target and consult relevant auction data.

Once the bidding price is announced, a bidder shall not withdraw it. When other bidders providing higher bidding prices, his bidding price shall no longer be valid.

Bidders shall not viciously collaborate with other bidders and auctioneers shall not do so with auctioneers to damage the interests of others.

A buyer means a bidder who purchases an auction target with the highest bidding price.

A buyer shall pay the sum of money for an auction target as agreed upon. Whoever fails to pay such a sum as agreed upon shall bear the liabilities of breaking a contract, or with the approval of the trustee, the auctioneer may re-auction the auction target.

In the case of re-auctioning an auction target, the original buyer shall pay the commission himself or herself and the trustee shall pay for the auction for the first time. Should the price of a re-auction be lower than the price of the original auction price, the original buyer shall pay for the balance.

Should a buyer fail to obtain an auction target as agreed upon, he or she has the right to demand that the auctioneer or the trustee bear the liabilities of breaking a contract.

Should a buyer fail to take back an auction target as agreed upon, he or she shall pay the storage costs arising thereafter.

Should a trustee trust an auctioneer to auction articles or property rights, he or she shall provide his or her identity certificate, or the certificate of the ownership of the auction target as required by the auctioneer, or the certificate or other data which can demonstrate that he or she can dispose of the auction target.

An auctioneer shall verify the relevant documents and data provided by his trustee. Should the auctioneer accept a trust, he or she shall sign a written contract on trust auction with the trustee.

Should an auctioneer deem it necessary to verify an auction target, he or she may do so.

Should the verification conclusion contradict the conditions of an auction target stated in an auction contract, the auctioneer has the right to demand a change or rescind the contract.

A contract on a trust auction shall contain the following:

(1) The names of the trustee and the auctioneer and their residences;

(2) The name, specification, number and quality of an auction target;

(3) The retentive price set by the trustee;

(4) The time and site of the auction;

(5) The delivery of the auction target or the time and form of transferring such an target;

(6) The form and the time limit for paying commissions;

(7) The liabilities of breaking the contract;

(8) Other matters as agreed upon by both parties.

An auctioneer shall release an auction notice seven days before the auction day.

An auction notice shall define the following matters:

(1) The time and place of the auction;

(2) Auction targets;

(3) The display time and place of auction targets;

(4) The procedures that those participating in the bidding shall handle;

(5) Other matters that need to be announced.

An auction notice shall be issued via newspapers or other mass media.

An auctioneer shall display auction targets before an auction, and provide conditions necessary for inspecting auction targets, as well as relevant data.

The display time of auction targets shall not be fewer than two days.

An auctioneer shall announce auction rules and matters needing attention before an auction.

Should an auction target have no retentive price, an auctioneer shall make this clear before an auction.

Should an auction target have the retentive price, while the highest bidding price for the auction target fails to reach the retentive price, the price shall not become valid and the auctioneer shall stop auctioning the auction target.

The highest bidding price of a bidder shall indicate the conclusion of the auction after being confirmed by the auctioneer dropping the hammer or by other open forms indicating the completion of a deal.

After an auction is completed, the buyer and auctioneer shall sign a deal conclusion letter.

While proceeding with an auction, an auctioneer shall make a written auction record. The written auction record shall be signed by the auctioneer and the recorder; in the case of the conclusion of an auction, the record shall also be signed by the buyer.

A buyer shall properly keep complete account books related to his or her business and operational activities, the written auction record and other relevant data.

The duration prescribed in the above paragraph for keeping account books, the written auction record and other relevant data shall begin to be computed from the date when the trust auction contract is terminated and shall not be fewer than five years.

Should an auction target need to handle, according to law, the procedures of change in the certificate and the transfer of property rights, the trustee and buyer shall handle necessary procedures with the relevant administrative department, on the strength of the auction completion certificate and relevant materials produced by the auctioneer.

A trustee and a buyer may jointly set the commission ratio together with an auctioneer.

If the trustee, the buyer and the auctioneer have not set the commission ratio, while the auction is completed, the auctioneer may collect commissions not in excess of five percent of the auction completion price from the trustee and buyer, respectively. The ratio of commissions to be collected shall be set in accordance with the principle of making an inverse ratio to the auction completion price.

In the absence of the completion of an auction, an auctioneer may collect charges as agreed upon from the trustee; and in the absence of any agreement, the auctioneer may collect from the trustee rational charges as auction expenses.

If the auction of articles as stipulated in Article 9 of this Law is completed, the auctioneer may collect from the buyer commissions not exceeding five percent of the auction completion price. The ratio of commissions to be collected shall be set in accordance with the principle of making an inverse ratio to the auction completion price.

In the absence of the completion of an auction, the stipulation of Section 3 of Article 56 of this Law shall apply.

Should a trustee violate the stipulation of Article 6 of this law by trusting the auction of articles or property rights of which he or she does not have the ownership or of which he or she may not dispose according to law, he or she shall bear liabilities arising thereafter according to law. Should an auctioneer clearly know that a trustee has no ownership of the articles or property rights for auction or that the trustee may not dispose such articles or property rights according to law, he or she shall bear implicative* liabilities.

Should a state department violate the stipulation of Article 9 of this Law by disposing illicitly of articles that should be auctioned by an auctioneer designated by the people's government of a province, an autonomous region or a municipality directly under the central government of by the people's government of a city with districts where property lies, relevant personnel in charge who are held directly responsible and other personnel who are also held directly responsible shall be meted out administrative punishment according to law, and those who have caused losses to the state shall also bear the liability of compensation.

Whoever violates the stipulation of Article 11 of this Law by establishing an auction enterprise without approval or registration shall have his or her enterprise banned and his or her illegal incomes confiscated by the administrative department for industry and commerce, and may be given a fine that ranges from 100 percent to 500 percent of his or her illegal earnings.

Should an auctioneer and a trustee violate the stipulation of the second paragraph of Article 18 and Article 27 of this Law by failing to state the drawbacks of an auction target, thus causing a loss to a buyer, the buyer has the right to demand compensation from the auctioneer; Should the responsibility rest with the trustee, the auctioneer has the right to demand compensation from the trustee.

Should an auctioneer and a trustee state before an auction that they cannot guarantee the genuineness or fakery or the quality of an auction target, they shall not bear the liability for guaranteeing the drawbacks.

If no statement is made on the fact that an auction target has drawbacks, the procedural duration for demanding compensation shall be one year and shall begin to be computed from the date when the party concerned knows or should know that his or her right is damaged.

The procedural duration for demanding compensation for personal and property damages caused by the drawbacks of an auction target is subject to the relevant stipulations of the " Product Quality Law of the People's Republic of China" and other laws.

Should an auctioneer and other staff violate the stipulation of Article 22 of this Law by participating in bidding or trusting others to participating in bidding for them, the administrative department for industry and commerce shall give the auctioneer a warning and may impose on him or her a fine that ranges from 100 percent to 500 percent or his or her auction commissions; where cases are serious, his or her business license shall be revoked.

Should an auctioneer violate the stipulation of Article 23 of this Law by auctioning his or her articles and property rights in the auction activity organized by himself or herself, the administrative department for industry and commerce shall confiscate his or her earnings from the auction.

Should a trustee violate the stipulation of Article 30 of this Law by participating in the bidding or trusting others to participating in the bidding for him or her, the administrative department for industry and commerce may impose on the trustee a fine that is up to 30 percent of his or her auction completion price.

By violating the stipulation of Article 37 of this Law, if bidders viciously collaborate with other bidders or if bidders do so with auctioneers, thus causing losses to others, the auction shall become null and void and they shall bear the liability of compensation according to law. The administrative department for industry and commerce shall impose on the bidders participating in vicious collaboration a fine that is 10 percent to 30 percent of the highest bidding price; and impose on the auctioneers participating in vicious collaboration a fine that 10 percent to 50 percent of the highest bidding price.

By accepting commissions in violation of the stipulation of Section Four of Chapter Four of this Law concerning the ratio of commissions, an auctioneer shall return that part in excess of the reasonable amount to the trustee and the buyer. The price control department may impose on the auctioneer a fine that is 100 percent to 500 percent of the commissions.

This Law is applicable to foreigners, foreign enterprises and foreign organizations trusting auctions or participating in bidding within the territory of the People's Republic of China.

Should auction enterprises established before the implementation of this Law do not meet the requirements as prescribed in this Law, shall meet the requirements as stipulated in this Law within the prescribed time limit; those still failing to meet the prescribed requirements after the time limit shall have their registrations revoked and their business licenses taken back by the administrative department for industry and commerce. Specific implementation measures shall be formulated by the State Council separately.

This Law shall come into force from January 1, 1997.


Lex Mercatoria

www.lexmercatoria.org

www.jus.uio.no/lm

 scroll    toc    txt   pdf   pdf    odt    A-Z  Document Manifest   home 
 


Lex Mercatoria -->

( International Trade/Commercial Law & e-Commerce Monitor )

W3 since October 3 1993
1993 - 2010

started @The University of Tromsø, Norway, 1993
hosted by The University of Oslo, Norway, since 1998
in fellowship with The Institute of International Commercial Law,
Pace University, White Plains, New York, U.S.A.

Disclaimer!

© 

Ralph Amissah




Lex Mercatoria