Latest Interpretation of Difficult Issues in the Company Law

Author: Jiang Ping, Li Guoguang, et al.
Publisher:
Publish Date: 2006-01-01
Features: The 18th meeting 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, conducts in-depth analysis and argumentation on many important issues in practice, modifies or cancels original provisions that are no longer relevant to reality, and further refines 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, it reflects the legislative philosophy adjustment from solely emphasizing capital credit to balancing capital credit and asset credit, lowering the threshold for company establishment, relaxing excessive regulation on companies, significantly reducing the minimum registered capital requirement for company establishment, broadening the restrictions on shareholder contributions, allowing for installment payments of contributions, canceling the restrictions on company reinvestment, and expanding circumstances where companies can repurchase their own shares. Second, in terms of the corporate governance structure, it improves the shareholders' meeting and board of directors system, enriches the provisions on the convening and proceedings of shareholders' meetings and board of directors meetings; enhances the powers of the supervisory committee, improves the meeting system of the supervisory committee, and strengthens the role of the supervisory committee; adds provisions for the appointment of independent directors for listed companies; and makes more specific and detailed provisions on the duties of loyalty and diligence of company directors and senior management personnel to the company, as well as the responsibilities for violating these duties. Third, it further clarifies the basic property rights structure and property rights relationships of companies enjoying legal person property rights and shareholders enjoying equity. It allows companies to arbitrarily designate one of the chairman of the board, executive director, or manager as the legal representative; establishes the standard for equity recognition, where changes in limited liability company equity take effect based on the records in the shareholder register and are subject to opposition through change registration; further strengthens the protection of workers' interests and their participation in company management, stipulating a minimum ratio of one-third of workers as supervisory committee members and the voluntary appointment of worker directors; and takes advantage of the rare opportunity of the simultaneous revision of the Company Law and the Securities Law to scientifically define their reasonable division of labor, eliminating the original legislative conflicts and overlaps. The most prominent modification is the complete recognition and adoption of one-person companies and the corporate veil lifting (denial) 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 company creditors, such a shareholder shall lose the right to be liable for the company's debts only up to their investment in the company, and instead shall bear joint and several liability for all the company's debts. After the new Company Law is promulgated, 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, amendment, and abolition of relevant legal systems, and continuing to monitor the implementation of this law to accumulate experience for the further improvement of relevant systems, have become the common tasks of relevant judicial and administrative organs. In view of this, our company has 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 Modification Expert Group, experts from the highest legislative body, senior judges from the Supreme People's Court involved in the modification of the Company Law, judicial and administrative interpretation drafting work, and relevant experts from central government departments, as well as university scholars dedicated to Company Law research and participation in Company Law modification discussions. In the specific compilation process, they adhere to the original intent of the legislation, combine with practical difficulties, and provide comprehensive, systematic, and detailed interpretations and explanations of the specific systems of the new Company Law (especially the newly established systems in this revision) and their applications, from different perspectives and levels. We believe that the publication of this series will play a positive and unique role in promoting, studying, and implementing the new Company Law.