China’s First Law on Rural Collective Economic Organizations
Published 4 July 2024
Xia Yu
On 28 June 2024, the Standing Committee of China’s National People’s Congress adopted the Law on Rural Collective Economic Organizations (“Law”), which is China’s first law on rural collective economy organizations, and will come into effect on 1 May 2025. The rural collective economy is one of the important forms of China’s public ownership economy stipulated in China’s Constitution, while rural collective economy organization (“RCEO”) is responsible for managing forests, mountains, grasslands, wastelands, and tidal flats owned by rural collective members. Article 8 of the Constitution provides that the RCEO members have the right to operate private lands, private mountains, family businesses and raise private livestock. The Law consists of eight chapters and 67 articles, mainly involving provisions on RCEOs, and their members and assets.
According to the Law, RCEOs are regional economic organizations that are established based on collective ownership of land and exercise ownership rights on behalf of their members. The organizations are mainly engaged in family contracting and management, but in certain matters, such as rural land contracting, homestead use, collective construction land use, transfer, and leasing, the organizations are responsible for unified management. The Law requires that the RCEOs have Articles of Association and be registered as special legal persons. They can establish or participate in the establishment of companies and be liable for their debts to the extent of their investment. However, they are not subject to China’s laws on bankruptcy.
The general meeting of all members is the power organ of the RCEOs. The general meeting is responsible for deciding major matters of the organization, including formulating Articles of Association, confirming the identity of its members, the appointment of directors and supervisors, approving various plans in terms of the organization’s development, finance, income distribution, the use of construction land, the allocation of land compensation fees, investment, the merger and division of the organization. The general meeting shall be held at least once a year, and more than two-thirds of the members shall participate in the meeting in person, by video, or by proxy. For the RCEOs with a large number of members, they may establish member representative meetings to exercise some of the powers of the general meeting. The executive body of the RCEOs is the board of directors. The chairman of the board is the legal representative of the organization. In addition, there is also a board of supervisors to supervise the board of directors and the member representative meeting. Such a structure and operating mechanism of the RCEOs are similar to those provided in China’s Company Law. The difference is that the RCEO’s member representatives and directors can be re-elected, and can also serve as local village leaders. This may lead to excessive concentration of power, which is not conducive to protecting the interests of the RCEO members.
Chapter II of the Law is the provisions of the RCEO members. It states that the RCEO members are residents who have or have been registered in an RCEO and have formed a stable relationship with the organization, and whose basic living security is the land and other properties collectively owned by the members of the organization. The members have the right to elect and be elected as member representatives, directors, or supervisors; to attend the general meeting of all members and member representative meetings; to review and copy the RCEO’s financial accounting reports and meeting minutes; to contract rural land contracted by the organization; to gain collective income and land compensation fees when collective land is expropriated. Their membership may be lost due to voluntary withdrawal, death, loss of nationality, having obtained membership in another RCEO, or becoming a civil servant. However, their membership will not be lost due to schooling, military service, employment, business, divorce, widowhood, or imprisonment.
The RCEO’s collective property is collectively owned by its members, but its ownership is collectively exercised by the RCEO on behalf of its members. According to the Law, the collective property mainly includes collectively owned land and forests, mountains, grasslands, wastelands, and tidal flats; buildings, production facilities, farmland water conservancy facilities; facilities on education, science and technology, culture, health, sports, transportation, and rural human settlement environment infrastructure; funds; intangible assets; property formed by accepting state support, social donations, and tax exemptions; and investment interests and rights from collective investment. Among them, cultivated land, forest land, and grassland should be contracted and operated following China’s Law on the Contracting of Rural Land. For other rural lands that should be contracted by families, the RCEOs can directly organize and operate, implement contracted operations, or operate by leasing land operation rights or investing in shares. The income of the year shall be used to withdraw the public welfare fund under the Article of Association, and the remaining can be distributed to the members. The RCEOs shall establish systems for the inventory, storage, use, disposal, and disclosure of collective property, and conduct financial management and accounting by relevant financial accounting systems.
In addition to the above provisions, the Law also involves support measures for the RCEOs, dispute resolution, and legal liability. The support measures, such as tax incentives and support in terms of funds, finance, talent, and infrastructure, are mainly used to support in development of new rural collective economies and the RCEOs in underdeveloped areas, old revolutionary areas, ethnic areas, and border areas. The Law encourages the RCEOs to explore diversified ways to develop a new rural collective economy through resource contracting, property leasing, intermediary services, and business property equity participation. For disputes over the confirmation of membership or internal management, operation, or profit distribution, the parties may request mediation, apply for arbitration, or directly file a lawsuit. For organizational decisions that infringe on the rights and interests of members, the infringed members may request the court to revoke them; for acts that infringe on the rights and interests of the organization, the organization may file a lawsuit.
In conclusion, the Law helps to standardize the management of the RCEOs and protect the interests of the members, thus indirectly promoting the development of China’s agriculture.
According to the Law, RCEOs are regional economic organizations that are established based on collective ownership of land and exercise ownership rights on behalf of their members. The organizations are mainly engaged in family contracting and management, but in certain matters, such as rural land contracting, homestead use, collective construction land use, transfer, and leasing, the organizations are responsible for unified management. The Law requires that the RCEOs have Articles of Association and be registered as special legal persons. They can establish or participate in the establishment of companies and be liable for their debts to the extent of their investment. However, they are not subject to China’s laws on bankruptcy.
The general meeting of all members is the power organ of the RCEOs. The general meeting is responsible for deciding major matters of the organization, including formulating Articles of Association, confirming the identity of its members, the appointment of directors and supervisors, approving various plans in terms of the organization’s development, finance, income distribution, the use of construction land, the allocation of land compensation fees, investment, the merger and division of the organization. The general meeting shall be held at least once a year, and more than two-thirds of the members shall participate in the meeting in person, by video, or by proxy. For the RCEOs with a large number of members, they may establish member representative meetings to exercise some of the powers of the general meeting. The executive body of the RCEOs is the board of directors. The chairman of the board is the legal representative of the organization. In addition, there is also a board of supervisors to supervise the board of directors and the member representative meeting. Such a structure and operating mechanism of the RCEOs are similar to those provided in China’s Company Law. The difference is that the RCEO’s member representatives and directors can be re-elected, and can also serve as local village leaders. This may lead to excessive concentration of power, which is not conducive to protecting the interests of the RCEO members.
Chapter II of the Law is the provisions of the RCEO members. It states that the RCEO members are residents who have or have been registered in an RCEO and have formed a stable relationship with the organization, and whose basic living security is the land and other properties collectively owned by the members of the organization. The members have the right to elect and be elected as member representatives, directors, or supervisors; to attend the general meeting of all members and member representative meetings; to review and copy the RCEO’s financial accounting reports and meeting minutes; to contract rural land contracted by the organization; to gain collective income and land compensation fees when collective land is expropriated. Their membership may be lost due to voluntary withdrawal, death, loss of nationality, having obtained membership in another RCEO, or becoming a civil servant. However, their membership will not be lost due to schooling, military service, employment, business, divorce, widowhood, or imprisonment.
The RCEO’s collective property is collectively owned by its members, but its ownership is collectively exercised by the RCEO on behalf of its members. According to the Law, the collective property mainly includes collectively owned land and forests, mountains, grasslands, wastelands, and tidal flats; buildings, production facilities, farmland water conservancy facilities; facilities on education, science and technology, culture, health, sports, transportation, and rural human settlement environment infrastructure; funds; intangible assets; property formed by accepting state support, social donations, and tax exemptions; and investment interests and rights from collective investment. Among them, cultivated land, forest land, and grassland should be contracted and operated following China’s Law on the Contracting of Rural Land. For other rural lands that should be contracted by families, the RCEOs can directly organize and operate, implement contracted operations, or operate by leasing land operation rights or investing in shares. The income of the year shall be used to withdraw the public welfare fund under the Article of Association, and the remaining can be distributed to the members. The RCEOs shall establish systems for the inventory, storage, use, disposal, and disclosure of collective property, and conduct financial management and accounting by relevant financial accounting systems.
In addition to the above provisions, the Law also involves support measures for the RCEOs, dispute resolution, and legal liability. The support measures, such as tax incentives and support in terms of funds, finance, talent, and infrastructure, are mainly used to support in development of new rural collective economies and the RCEOs in underdeveloped areas, old revolutionary areas, ethnic areas, and border areas. The Law encourages the RCEOs to explore diversified ways to develop a new rural collective economy through resource contracting, property leasing, intermediary services, and business property equity participation. For disputes over the confirmation of membership or internal management, operation, or profit distribution, the parties may request mediation, apply for arbitration, or directly file a lawsuit. For organizational decisions that infringe on the rights and interests of members, the infringed members may request the court to revoke them; for acts that infringe on the rights and interests of the organization, the organization may file a lawsuit.
In conclusion, the Law helps to standardize the management of the RCEOs and protect the interests of the members, thus indirectly promoting the development of China’s agriculture.