Latest Company Law Comparative Illustration (8)

Author: Jiang Ping
Publisher:
Publish Date: 2006-04-01
Features: The 18th session of the Standing Committee of the 10th National People's Congress passed the "Company Law of the People's Republic of China" (Revised) on October 27, 2005. The new Company Law, based on the new requirements of China's social and economic development and drawing on the new achievements of company law reforms in various countries, conducted an in-depth analysis and argumentation on many important issues in practice, amending or abolishing existing provisions that were not in line with reality, and further improving effective systems and rules. The changes and innovations of the new Company Law mainly lie in the following aspects:
First, in terms of the capital system, the new Company Law reflects a legislative philosophy shift from solely emphasizing capital credit to balancing capital credit and asset credit. It lowered the threshold for company establishment, relaxed excessive regulation on companies, significantly reduced the minimum registered capital requirement for establishing a company, eased restrictions on shareholder contribution methods, allowed for installment payments for contributions, abolished restrictions on company reinvestment, and expanded circumstances under which companies could repurchase their own shares.
Second, in terms of the corporate governance structure, the new Company Law improved the shareholders' meeting and board of directors system, enriched the provisions on the convening and procedures of shareholders' meetings and board meetings; enhanced the powers of the supervisory committee, improved the meeting system of the supervisory committee, and strengthened its role; added provisions for the appointment of independent directors for listed companies; and made more specific and clear provisions on the fiduciary and diligent duties of company directors and senior management, as well as the responsibilities for violating these duties.
Third, in other aspects, the new Company Law further clarified the basic property rights structure and relationships of the company enjoying legal person property rights and shareholders enjoying equity. It allowed companies to arbitrarily designate one of the chairman of the board, executive director, or manager as the legal representative. It established the standard for equity recognition, where changes in limited liability company equity take effect based on the records in the shareholder register and are opposed by registration changes. It further strengthened the protection of workers' interests and their participation in company management, stipulating a minimum ratio of one-third of supervisory committee members to be workers and allowing the voluntary appointment of worker directors. It also seized the rare opportunity of the simultaneous revision of the Company Law and the Securities Law to scientifically define their reasonable division of labor, eliminating existing legislative conflicts and overlaps.
The most prominent revision was the complete recognition and adoption of the one-person company and the corporate veil lifting (piercing) system. When a company shareholder abuses the independence of the company's legal person status and the limited liability of shareholders to evade debts and severely harms the interests of creditors, that shareholder shall lose the right to be liable for the company's debts only up to their contribution, and instead shall bear joint and several liability for all the company's debts.
After the publication of the new Company Law, correctly understanding and fully implementing its new content, continuing to comprehensively review and study legal systems related to this law, actively researching and discussing the establishment, revision, and abolition of relevant legal systems, and continuing to monitor the implementation of this law to accumulate experience for the further improvement of related systems—all have become common tasks for relevant judicial and administrative organs.
In light of this, our publishing house organized experts and scholars from the Standing Committee of the National People's Congress, the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Public Security, the Ministry of Finance, the People's Bank of China, the State-owned Assets Supervision and Administration Commission, the General Administration of Industry and Commerce, the China Banking Regulatory Commission, the China Insurance Regulatory Commission, China University of Political Science and Law, Renmin University of China, Peking University, Tsinghua University, Beijing Normal University, the University of International Business and Economics, and other departments and units to jointly write this series of "Practical Series on the New Company Law and Related Regulations."
The authors of this series include important members of the Company Law Revision Expert Group and experts from the highest legislative body, senior judges from the Supreme People's Court involved in revising the Company Law, administrative interpretation drafting experts from central government departments, and university scholars dedicated to Company Law research and participation in Company Law revision discussions. In the specific writing process, they adhered to the legislative intent, combined with practical difficulties, and provided comprehensive, systematic, and detailed interpretations and explanations of the specific systems of the new Company Law (especially the newly established systems from this revision) from different perspectives and levels.
We believe that the publication of this series will play a positive and unique role in promoting, learning, and implementing the new Company Law.