CHINA Law and Practice Contributed by: James Hu, Yingjie Kang, Huihui Li, Sherry Xu, Bivio Yu and Lisa Zhao, Fangda Partners
4.3 Disclosure and Reporting Obligations Both domestic and foreign-invested companies are required to submit filings to the AMR (which functions as the company registry) when there are any changes to the company’s corporate information. This includes changes to shareholders and shareholding structure, changes to registered capital, operation operating term, business scope, registered address, directors, supervisors, legal representatives and general manag - ers. The information will, in the case of foreign-invest - ed companies, be forwarded by the AMR to the Min - istry of Commerce (MOFCOM). In addition, FIEs are required to submit additional information (ie, changes) with respect to the ultimate beneficial owners to the MOFCOM and foreign exchange control authority. The two primary stock exchanges in Mainland China are those of Shanghai and Shenzhen. Historically, only companies incorporated in Mainland China can be traded in these stock exchanges. On 15 November 2021, the third primary stock exchange in Mainland China, Beijing Stock Exchange, commenced trading. PRC companies have historically been listed on a vari - ety of overseas securities exchanges, notably NAS - DAQ or NYSE and HKSE, in addition to the Chinese stock exchanges. It is noted that, in 2023, the securi - ties regulator CSRC issued new rules which provide that PRC companies, by way of either direct or indirect overseas offerings and listings, should file with the CSRC within three business days after the application documents for Overseas Offering and Listing have been submitted to the overseas securities exchanges. Based on the latest data published by the People’s Bank of China, the principal source of funding for Chi - nese enterprises is still considered to be bank loan financing. 5.2 Securities Regulation 5. Capital Markets 5.1 Capital Markets Overview Companies listed on the securities exchanges of the PRC are subject to the Chinese Securities Law. The CSRC has oversight over the PRC securities markets and listed issuers.
a maximum of 50 shareholders, while the number of initial incorporators of a company limited by shares is limited to 200 shareholders. Foreign investors typically prefer to form LLCs in Chi - na because LLCs have greater flexibility in allocating corporate governance and shareholder rights as com - pared to a company limited by shares. On 29 December 2023, the Standing Committee of the National People’s Congress of the PRC adopted an amendment to the PRC Company Law (2023 Com - pany Law), which came into effect on 1 July 2024. The 2023 Company Law was amended with the aim to give investors more options to simplify corporate governance, strengthen shareholders’ obligations in order to provide more protection to creditors, enhance property rights protections and promote sound devel - opment of the capital market. 4.2 Relationship Between Companies and Minority Investors Shareholders of Chinese companies are protected under Chinese company law and, in the case of public companies, securities laws and the listing rules and regulations of the Chinese stock exchange on which the company is listed. Statutory shareholder protec - tions under the PRC Company Law include: • the right of shareholders to request the court to revoke company resolutions on the grounds of defective procedures; • the right to initiate a derivative lawsuit by share - holders holding 1% or more of the voting rights for more than 180 days in a company limited by shares and by any shareholder in an LLC; • the right to request repurchase of equity interests or shares if the shareholder votes against certain resolutions; • the right of shareholders holding 10% or more of the voting rights of the company to apply for volun - tary liquidation; and • the right of shareholders to request the company to acquire their equity interests at a reasonable price if a company’s controlling shareholder abuses shareholder rights and seriously damages the inter - ests of the company or other shareholders.
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