Legal Report on the Reform of State-Owned Enterprises · 1

Author: Qian Weiqing
Publisher:
Publish Date: 2004-08-01
Features: The reform of state-owned enterprises should adopt different legal forms. State-owned enterprises in industries and fields that do not require state economic control should transfer their state-owned shares to natural persons and corporate legal entities other than state-owned enterprises, achieving complete equity diversification. The fundamental approach to reforming state-owned enterprises is to transform them through a sound corporate legal system. The fundamental characteristic of a sound corporate legal system is: the separation of shareholders' property from corporate property; shareholders bearing limited liability; and the company having legal personality. The development of a company depends on a sound and complete corporate governance structure, which aims to achieve corporate interests and, in turn, the long-term interests of shareholders, by establishing and improving the company's incentive and supervision mechanisms. "Debt conversion into equity" must be combined with the transformation of state-owned enterprises into companies, and attention must be paid to the risk of bad debts turning into bad equities.