Company Law in China

published on 14 April 2022 | reading time approx. 2 minutes

by Xiaolin Zhao and Christina Gigler

The “Revision Draft” of the Company Law  was promulgated for public comments by the end of 2021. The draft provides for significant revisions in many aspects. In our series of articles, we would like to give you an initial insight into the most important changes to the company's capital and concerning the company’s personnel, including the members of the board of directors and board of supervisors. We conclude our series with a summary of other aspects, such as the right to information and the revocation of resolutions.

Our articles inform you about the planned changes in the following areas:

1. Major changes concerning company capital

• Expiry acceleration for contribution term of registered capital »
• Share deprivation of defaulting shareholders »
• Equity transfer to a non-shareholder »
• Binary procedural structure of capital reduction »
• Legal consequence for surreptitious capital withdrawal »
• Outlook »

2. Major changes concerning company’s management personnel

• Creation of audit committee under board of directors »
• No upper limit in number of directors and unified requirement of employees' representatives in the board of directors »
• Clear definition of the duty of loyalty and diligence »
• Compensation liabilities of directors, supervisors and senior management personnel »
• Restrictions on affiliated transactions »
• Non-competition »
• Outlook »         

3. Company Law Revision Draft of China: Further major changes and new provisions

• Simplified company deregistration procedure »  
• Extension of shareholders' right to know »
• Resolution revocation and non-establishment »
• Major change in one-person limited liability companies »
• Stock right and creditor's right as new form of capital contribution »
• Publication of the articles of association »
• Directors as liquidation obligors »
• Time limit for profit distribution »
• Increased penalties for financial fraud »
• Outlook »