CHINA Law and Practice Contributed by: Kevin Wang, Global Law Office
1. Introductory 1.1 Forms of Corporate/Business Organisations There are three principal forms of corporate/ business organisation in China: • companies; • partnership enterprises; and • individual proprietorship enterprises. Only companies have the status of legal per - sons, and shareholders shall bear liabilities for a company to the extent of their respective subscribed capital contribution/shares. How - ever, a shareholder who abuses the independ - ent legal person status of the company or the shareholder’s limited liabilities to evade debts, thereby prejudicing the interests of creditors of the company, shall be jointly and severally liable for the debts of the company. Companies are categorised as limited liability companies and joint stock limited companies. Joint stock limited companies whose shares are listed and traded on a stock exchange are pub - licly traded companies. 1.2 Sources of Corporate Governance Requirements The principal sources of corporate governance requirements for companies are the Company Law of the People’s Republic of China (the “Company Law” ) and five judicial interpretations of the Company Law. In addition to the laws, judicial interpretations and regulations, the activ - ities of a company and all participants (including shareholders, directors, supervisors and offic - ers) are governed by the articles of association of the company.
Publicly Traded Companies Provisions on the supervision and administra - tion of publicly traded companies are numerous and complex. As publicly traded companies are a type of joint stock limited company, the provisions of Chapter 5 of the Company Law, regarding joint stock limited companies, apply to them, and particularly, they are also subject to the special provisions of Section 5 of Chapter 5 regarding the organisation of publicly traded companies. The organisation and activities of publicly traded companies are also regulated by the Securities Law of the People’s Republic of China, the regulatory rules of the China Secu - rities Regulatory Commission (CSRC) and the relevant stock exchanges. 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares Corporate governance requirements for compa - nies with publicly traded shares mainly include the following: • the company shall establish and maintain effective mechanisms of shareholder meet - ings, boards of directors, boards of supervi - sors, independent directors, board secretar - ies and special committees in accordance with the law; • the company shall be encouraged to appoint officers in an open and transparent manner; • the company shall establish fair and transpar - ent standards and procedures for evaluating the performance of directors, supervisors and officers; • the company shall establish a mechanism linking remuneration with the company’s per - formance and individual performance; • the company shall be strictly independent from its controlling shareholder and actual control persons in terms of personnel, assets,
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