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The enterprises' reciprocating the society through donations has produced a positive impact on the forming of a friendly social morale, the fostering of good social ethics and the promotion of the building of the socialist spiritual civilization. In order to regulate the acts of making donations by various kinds of enterprises, to strengthen the financial administration of the enterprises, to safeguard the rights and interests of the owners and to promote the development of the public welfare undertakings, and in accordance with the relevant provisions of the Law of the People's Republic of China on Donation for Public Welfare Undertakings and the General Financial Rules for Enterprises, several issues concerning the financial administration of donations made by enterprises are notified as follows: I. DEFINITION AND WAYS OF MAKING DONATION Making donations shall refer to the act of an enterprise to donate, on a voluntary and gratis basis, the legal properties under its disposition to the legal donee to use in the public welfare undertakings with no direct relation to production and operation activities. An enterprise shall, in conformity with the Law of the People's Republic of China on Donations for Public Welfare Undertakings and other relevant laws and regulations, make donation through the pubic welfare social organization and welfare and non-profit public institutions that are established according to law, or through the people's government at the county level or above, or the departments thereof. Under special circumstances, the donation may also be made through legitimate news media etc. II. PRINCIPLES AND REQUIREMENTS FOR MAKING DONATIONS An enterprise shall abide by the following principles and requirements in making donations: (1) Being voluntary and gratis. After making the donation, the enterprise may not ask the donee to create convenient conditions in the aspects of financing, market access, administrative license, and possession of other resources, and thus lead to unfair competition on the market; (2) Clear right and responsibility. The enterprise operator or other employees may not donate in their own names the properties owned by the enterprise, and the enterprise making the donation shall have the right to ask the donee to realize its proper donation will; (3) Making donations within their capacities. Where the enterprise is in deficit, or any deficit will result from making the donation, or the donation will affect the normal production and operation, the enterprise shall not make donation as a general principle, except under special circumstances; and (4) Being honest and trustworthy. Where an enterprise has decided according to internal rules of procedure and promised to the public or the donee to make the donation, it shall perform its promise honestly. III. TYPES AND OBJECTS OF MAKING DONATIONS An enterprise may make donations according to the following types: (1) Public welfare donations, namely the donations made to education, science, culture, medical care, and sports undertakings, and to environmental protection and construction of public facilities; (2) Relief donations, namely the donations made to areas suffering natural disasters, or the former revolutionary base areas, areas inhabited by minority nationalities, remote and border areas and poverty-stricken areas determined by the state, and to the social organizations such as charity associations, the Red Cross, associations of the disabled, and youth foundations, or social vulnerable groups and individuals to use in production, living relief and assistance; (3) Other donations, namely the donations other than those mentioned above the enterprises made to other public welfare undertakings for the purpose of humanitarianism or promotion of social development and advance. IV. SCOPE OF MAKING DONATIONS The properties that an enterprise can make donations with include cash, stocked commodities and other materials. And the enterprise may not make donations with the major fixed assets needed for production and operation, the equity and creditor's rights it holds, the reserve materials with special permission of the state, the finance allocation of the state, the properties entrusted for management, the properties on which guarantees have been created, the properties of which the ownership is unclear, or the commodities or materials that are deteriorated, broken, outdated or discarded as useless. The beneficiary of the donation made by an enterprise shall be entities other than that enterprise, social vulnerable groups and individuals. And an enterprise may not make donations to any entity that controls or is controlled by the enterprise in the aspect of operation or finance. Where an enterprise, for the purpose of making profits, initiates by itself or in conjunction with others the operation entities of education, culture, public health, sports, science, or environmental protection, such entities shall be managed as investment. Where an enterprise makes any patronage expenditures for the purpose of publicizing the enterprise's image or promoting its products, such expenditures shall be managed as advertisement expenses. The enterprise shall refuse, according to law, the patronage forcibly ordered by any relevant government department, agency, organization or individual. V. INTERNAL MANAGEMENT PROCEDURES FOR MAKING DONATION Where an enterprise makes a donation, the handling department and personnel shall present a donation report, which shall cover the following aspects: the cause, object, way, method, and responsible party of the donation, composition and amount of the donation properties, as well as the procedures for handover of the donation properties. The finance department of the enterprise shall examine the donation scheme, and shall analyze the impact of the donation expenditure on the financial status and operation result of the enterprise, and after presenting the examination opinions, the finance department shall submit the scheme to the board of directors or the executive meeting of the manager (factory director) of the enterprise for review and decision according to the internal management system. With respect to major donations, a state-owned enterprise or state-controlling enterprise shall submit the scheme to the workers' congress for review, and the scheme shall be put on record with the entity holding the state-owned assets before being put into implementation; a corporate enterprise shall execute pursuant to the Company Law of the People's Republic of China and the relevant provisions of the articles of incorporation of the company. VI. FINANCIAL HANDLING FOR MAKING DONATIONS When making a donation, an enterprise shall control the expenditure within its financial budget, execute pursuant to the approved scheme, and file tax returns of the tax deduction pursuant to the taxation laws and regulations of the state. The donation expenditure actually occurring to an enterprise shall be confirmed on the ground of the donation receipt or the list of donation assets issued by the donee and uniformly printed (under the supervision) by the finance department at the provincial level or above; with respect to the donation made to social vulnerable groups and individuals for disaster or poverty relief, where it is impossible to get the donation receipt uniformly printed (under the supervision) by the finance department at the provincial level or above, such donation shall be confirmed on the ground of the certificate issued by the basic-level government or organization of the town, street, or village, and the donation report approved by the legal principal of the enterprise. The expenses incurred by an enterprise in providing transport, keeping, and holding donation ceremony, for making donation shall be handled as period expenses, and may not be paid on credit. The personnel in charge of making donations and other directly responsible personnel of the enterprise may not demand or accept any rebate, commission, information fee, or service fee from the donee or beneficiary. Where an enterprise, upon deliberation of the board of directors or the executive meeting of the manager (factory director), hands over the traffic, communication, water supply, power supply or other public facility it constructed to the local people's government or the relevant department on a gratis basis, in case of a state-owned or state-controlling enterprise, such transfer shall be submitted for approval to the entity holding the state-owned assets. In case of a corporate enterprise, such handover shall be subject to the approval provided for by the Company Law of the People's Republic of China and the articles of incorporation of the company; the capital accumulation fund of the enterprise may be reduced upon ratification, and the enterprise shall sign the relevant agreement with the receiver, and the two parties shall go through the formalities for asset handover. Where the properties owned by an enterprise are expropriated by the local people's government at the county level or above or the people's armed force organization as a result of force majeure such as war or natural disaster, the balance after deduction of the compensation made by the local government or people's armed organizations shall be handled as asset loss. VII. SUPERVISION AND ADMINISTRATION OF MAKING DONATIONS The internal audit (supervisory) agency or finance department of an enterprise shall inspect the acts of making donations by the enterprise, shall supervise the handling department and the relevant personnel thereof to execute strictly in accordance with the internal rules of procedure of the enterprise, and shall stop any act of arbitrary donation. An enterprise shall refuse the donations coerced by any department, agency or organization, and the enterprise shall prosecute such coerced donations to the relevant departments of economy and trade, planning (price), finance, supervision, rectification or auditing, pursuant to the Decision of the Central Party and the State Council on Handling the Problems of Arbitrary Charges, Fines and Apportions Levied on Enterprises (No.14 [1997] of the Central Party). An enterprise shall faithfully disclose the donation it has made in the financial auditing report, and the registered accountant shall lay stress on that issue in auditing the financial auditing report of the enterprise. The entity holding the state-owned assets of an enterprise has the right to inspect and supervise the donation made by that enterprise it controls. With respect to the donation made by the enterprise without the prescribed procedures, or the donation made beyond the scope of public welfare or relief provided for in this Circular, or the illegal donation made by abusing the power to seek private benefits, or seeking private benefits in the enterprise's name, or transferring the enterprise assets, the entity holding the state-owned assets of that enterprise shall investigate for the liabilities of the directly responsible persons-in-charge and other directly responsible personnel. If there is any suspect of crime, the case shall be transferred to the judicial organ for criminal liabilities according to law. VIII. This Circular shall come into force on May 1, 2003. |
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