Corporate Law at China
Corporate Law in China refers to the legal framework that governs the formation, operation, governance, and dissolution of companies within the People's Republic of China (PRC). This legal structure is essential for both domestic and foreign businesses operating in China.
Here is an overview of Corporate Law in China:
1. Main Legal Sources
Company Law of the People's Republic of China (最新《公司法》, amended in 2023, effective from July 1, 2024): The foundational statute regulating companies.
Foreign Investment Law (2019): Governs how foreign companies can operate in China.
Civil Code (2021): Contains general principles related to contracts, property, and obligations.
Securities Law (amended 2020): Regulates public offerings, securities exchanges, and listed companies.
Enterprise Bankruptcy Law (2007): Governs insolvency and liquidation.
2. Types of Business Entities
Limited Liability Company (LLC) (有限责任公司): Most common for both domestic and foreign companies.
Joint Stock Company (股份有限公司): Usually for larger businesses; can issue shares to the public.
Wholly Foreign-Owned Enterprise (WFOE): Now generally regulated under the Foreign Investment Law.
Partnership Enterprises (合伙企业): Can be general or limited partnerships.
3. Key Corporate Governance Requirements
Board of Directors: Required for most companies. Number and structure depend on size.
Supervisory Board or Supervisor: Monitors the directors; mandatory for LLCs.
Registered Capital: No minimum capital for most companies post-2014 reform.
Shareholder Responsibilities: Clear rules on capital contribution and decision-making authority.
Annual Reporting: All companies must submit an annual report to authorities.
4. Foreign Investment Regulation
Negative List Approach: Foreign investments are prohibited or restricted in certain sectors listed by the State Council.
Equal Treatment: Foreign companies enjoy equal treatment as domestic companies outside the negative list.
Filing and Approval: Foreign investments generally only need filing (not approval), unless in sensitive industries.
5. Compliance and Enforcement
The State Administration for Market Regulation (SAMR) supervises company registration and compliance.
China Securities Regulatory Commission (CSRC) oversees public companies and securities markets.
Enforcement is strict on financial disclosure, anti-monopoly practices, cybersecurity, and data protection.
6. Recent Developments
2023 Company Law Amendments: Effective from July 1, 2024, focusing on:
Stricter capital contribution requirements
Stronger duties for directors and supervisors
New rules on corporate governance and shareholder rights
7. Challenges for Businesses
Navigating local and national regulations
Ensuring IP protection
Adapting to frequent legal updates
Managing compliance with both Chinese and international laws (e.g., data security)
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