Question 1: from the aspect of civil liabilities, under certain circumstances, the General Manager may be needed to bear certain compensation liability for losses of the company due to illegal behavior of senior management personnel of the Company? Unless the General Manager is able to prove that he does not know such behavior and has no fault or negligence.

As senior management personnel of the Company, the object of a General Manager’s responsibility includes three aspects:

1) The responsibility to Shareholders of the Company includes but is not limited to:

According to Article 12 of <Corporate Law> Judicial Interpretation (Fourth), in the event that senior management personnel of the Company do not legally perform their duties, which leads the Company failing to produce or preserve documents such as articles of association, minutes of shareholders' meetings, resolutions of the board of directors and board of supervisors, financial reports and the accounts of the Company and brings losses to Shareholders, the Shareholders have the right to claim civil liabilities to the senior management personnel with corresponding responsibility to the Company.

According to Article 152 of <Corporate Law>, in the event that senior management personnel violate the provisions of laws, regulations or articles of association of the Company and infringe interests of the Shareholders, the Shareholders may file a lawsuit to a people’s court.

2) The responsibility to the Company includes but is not limited to:

According to Article 21 of <Corporate Law>, senior management personnel of the Company shall not use their relationship to cause damages to the Company’s interests; otherwise, if the Company suffers losses arisen hereby, such personnel shall bear the compensation liability.

According to Article 147 of <Corporate Law>, senior management personnel of the Company shall comply with provisions of laws, regulations and articles of association of the Company and bear fiduciary duties towards the Company, and shall not abuse their duties and rights to receive bribes or other illegal income as well as not convert company assets.

According to Article 149 of <Corporate Law>, senior management personnel who violate provisions of laws, regulations and articles of association of the Company during his performance of duties causing the Company to suffer damages shall bear the compensation liability.

3) The responsibility to external relative person: 

If you only serve as the General Manager of the company, you are not the Legal Representative of the Company, since, in general concept, the post of “General Manager” is deemed as having rights to act on behalf of the Company and to manage the Company and its personnel, if he conducts any legal action by himself or it may be proved that the behavior of other senior management personnel of the Company has relation with him or under his management, even if he is just the nominal General Manager or there is internal agreement, such agreement is unable to bring legal effect to external relative persons.

Question 2: from the aspect of administrative liabilities, under certain circumstances, whether the General Manager may be needed to bear administrative liabilities of the Company’s illegal behavior? Unless the General Manager is able to prove that he does not know such behavior and has no fault or negligence.

Since the scope of administrative liabilities is more extensive, for the Company’s illegal behavior, the Legal Representative, principal person in charge, or person directly responsible for the Company may all bear corresponding administrative liabilities. Whereas, in general concept, “General Manager” is deemed as the principal person in charge of the Company, he cannot claim that he shall not bear liabilities just for the reason that he is unaware of the Company's behavior. Instead, he shall prove that he does not bear any duty of management to the Company and, in fact, not conduct any management behavior. Otherwise, he may be needed to bear corresponding liabilities due to not performing his duties.

Question 3: from the aspect of criminal liabilities, as to crimes acted by the Company such as the crime of producing and selling fake and inferior products, tax evasion, the violation of the trademark law and the crime of illegal operation, whether the General Manager should bear criminal liabilities.

According to Article 31 of <Criminal Law>, if a unit commits a crime, the unit shall be fined, and the person in charge and other persons who are directly responsible for the crime shall be sentenced to punishment. Among the crimes stipulated in <criminal law> that a unit is able to commit a crime, most of the penalties are both for the unit itself as well as the directly responsible person in charge and other persons directly responsible for the crime. Under such circumstance, the General Manager is not bound to assume corresponding liabilities. Instead, it is necessary to analyze and judge whether the General Manager belongs to the category of "directly responsible person in charge and other directly responsible persons" in accordance with the specific circumstances and evidence. However, the General Manager still has the risk of bearing corresponding liabilities.

Question 4: if employee death or company fire occurs in the Company, whether the General Manager should bear criminal or civil liabilities?

Employee death and company fire both belong to issues of safety in production. According to Article 5 of <Laws on safety in Production of People’s Republic of China>, the principal person in charge of the production and operation unit shall be fully responsible for the work of safety in production of the unit. In Article 3 of <Provisions on Fines and Penalties for Production Safety Accidents (Trial)>, it specifies that the principal person in charge of production safety accidents refers to chairman or General Manager of a limited liability company or company limited by share. Meanwhile, all above laws and regulations specify that, under various circumstances that not complying with requirements of safety in production, the principal person in charge shall bear administrative liabilities such as fines. If it constitutes crime of responsibility for major safety accidents, corresponding criminal liabilities may be involved.

At the same time, Article 16 of <Fire Protection Law> clearly provides enterprises shall perform the duty of fire safety, and the principal person in charge of the unit is also the responsible person for fire safety of such unit. Article 67 provides, if enterprises violate Articles of this Law such as Article 16 and do not make corrections within time limit, the directly responsible person in charge and other directly responsible persons will be given punishment or warning.

Question 5: when the Company goes into bankruptcy, is applied for enforcement or has tax arrears, under certain circumstances, whether the judicial or administrative authorities will take some enforcement measures to the General Manager.

According to Article 44 of <Law on the Administration of Tax Collection>, where a taxpayer or its Legal Representative, who defaults on tax payment, needs to leave the territory of China, he shall pay the amount of tax payable and the surcharge thereon or provide a guaranty to the tax authorities before leaving the territory. If neither the tax payable nor the surcharge thereon are paid, nor a guaranty is provided, the tax authorities may notify the authority for exit administration to prevent him from leaving the territory. Under this circumstance, the person who is subject to corresponding restrictions is generally only the Legal Representative.

According to relevant laws, regulations and judicial interpretations of China, if the person who is enforced by a civil judgment is a company, its Legal Representative, principal person in charge or directly responsible person impacting on debt performance may be restricted to leave the territory. 

If the company has been taken measures to limit consumption, its Legal Representative, principal person in charge, directly responsible person impacting on debt performance and actually controlling person shall not conduct high consumption and non-life and work necessary consumption, including but not limited to the purchase of real estate, luxury decoration housing, children attending high charges private schools, travel, vacation, or purchase of non-operating required vehicle etc.

If the company has the ability to perform the judgment but refuses to perform, the company may be recorded in the list of dishonest debtors, and, among the information in such list which published to the community, it includes the name of Legal Representative or person in charge, and the reputation or credit of the person to be published may be influenced as well.

According to Article 125 of <Bankruptcy Law>, in the event that senior management personnel of enterprises violate their fiduciary duties causing the enterprises bankrupt, they shall bear civil liabilities in accordance with laws and shall not act as directors, supervisors or senior management personnel in any enterprise within 3 years from the date of the end of bankruptcy proceedings.

Question 6: whether the private property of GM in Germany will be used as property of the Chinese Company to pay for the debts? 

According to provisions of <Corporate Law> of China, a limited liability company shall bear responsibilities independently based on the company’s property. The Shareholders of a limited liability company are also liable to the company's debts only within the limit of their capital contribution, unless there is a mixture of the property of the company and the property of the Shareholders. Since the General Manager is only as senior management personnel, not the Shareholder, he has no need to bear responsibilities for the Company’s debts with his own property.