Lecture on Hot Issues of the New Company Law Modification

Author: China Legal Publishing House
Publisher:
Publish Date: 2005-11-01
Features: From the historical development of company law, it is not the requirement that the development of companies adapts to the provisions of company law. On the contrary, company law is determined by company phenomena. Company law should follow rather than lead the development of companies. Company law should adapt to the development of companies and the development of the socio-economic economy. In 1993, against the backdrop of China's Constitution just establishing the principle of "the state implementing a socialist market economy," the two primary tasks of the promulgation of the Company Law were: first, to address the "company fever" that emerged in the wave of public prosperity, by regulating and standardizing various types of companies; second, to reform and develop state-owned enterprises, as the reform and development of state-owned enterprises had reached the stage where changes needed to be made in terms of corporate organization forms and property rights relationships. In this context, the formulation of the Company Law inevitably embodied a mindset of regulation and intervention, employing coercive measures to regulate companies, standardize corporate behavior, and promote the corporatization of state-owned enterprises.
As some scholars have noted, the chapter on "Establishment and Organizational Structure of Joint-Stock Limited Companies" in the Company Law contains 56 provisions, with the word "should" appearing 43 times, "must" 11 times, "may not" 17 times, and "strictly prohibited" once. In contrast, the word "may" appears only 13 times. The chapter on "Establishment and Organizational Structure of Limited Liability Companies" contains 44 provisions, with "should" appearing 23 times, "must" 3 times, "may not" 16 times, and "may" 12 times. It is evident that the Company Law contains an excessive number of mandatory provisions, with a strong regulatory tone, which has also been criticized by scholars.
Since the promulgation and implementation of the Company Law in 1993, proposals for its revision have never ceased from both academia and the practical field. On one hand, people have increasingly come to realize that in a globally competitive society, company law has increasingly become an important tool for promoting competition and development. On the other hand, company law is determined by company phenomena, and it should adapt to the development of companies and the development of the socio-economic economy. With the gradual maturation of China's socialist market economy, there is a strong desire for the Company Law to respond to the development of the socio-economic economy and become a driving force for social progress and economic advancement.
A single sword takes ten years of grinding. The 2005 new Company Law immediately gave a fresh impression! Opening the code, the first article states: "To regulate the organization and behavior of companies—". It excluded the political objective of the 1993 Company Law, "to adapt to the establishment of a modern enterprise system," and restored the original nature of company law as a private law. Subsequently, the phrases "as stipulated in the articles of association" and "except as otherwise provided in the articles of association" appeared frequently throughout the provisions, creating a foundation for the development of shareholder autonomy and corporate autonomy with a free and open attitude.
In the construction of specific systems, the introduction of new elements such as the compromise capital system, share buybacks, one-person companies, the denial of corporate personality, the protection of the rights of minority shareholders, and the fiduciary and integrity obligations of directors and supervisors not only made the construction of the company legal system more scientific but also provided a platform for aligning the company legal system with international standards. Even for "traditional items" in China's company law, such as the supervisory board system, improvements were made based on practical reflections. Not only were the supervisory board's powers to investigate the company's business status, supervise personnel, represent the company, and call special shareholder (general) meetings stipulated, but legislative guarantees were also provided to ensure the independence of the supervisory board in exercising its powers financially, offering strong support and institutional safeguards to help the supervisory board the awkward status of a "pension home" or a "rubber stamp."
All of these not only mark the gradual maturation and progress of China's company legislation but also indicate that China's company legislation is embracing the challenges of global competition with an open and free mindset, ultimately creating favorable conditions for the development of China's economy and society.
The editors have long been engaged in teaching and research on company law and comparative company law. They have participated in a large number of practical cases involving companies at the China International Economic and Trade Arbitration Commission (CIETAC), the London Arbitration Court (LCIA), and the International Center for Settlement of Investment Disputes (ICSID), and have had the opportunity to participate in several discussions on the revision of the new Company Law in 2005. Taking advantage of the promulgation of the new Company Law, and combining recent theoretical developments and debates in company law, we have organized a group of young scholars to provide in-depth explanations and analyses on several hot topics in the Company Law. The purpose is to provide readers with a comprehensive perspective on the new dynamics and developments of the 2005 Company Law, ensuring its accurate application in practice.
For each hot topic, the book is divided into three parts: terminology explanation, key disputes, and practical operations, striving to be easy to understand, relevant to practice, case-based, and thorough in explanation. Of course, due to the urgency of time and the limitations of our capabilities, this book must still contain many shortcomings. We sincerely hope that readers will provide criticism, suggestions, and feedback so that we can improve in the future.
Respectfully,
The Editors
November 2005