CHINA Law and Practice Contributed by: Kevin Wang, Global Law Office
3.3 Decision-Making Processes Normally, meetings of the board of directors shall be convened and presided over by the chair of the board. When the board of directors votes on a resolution, each director shall have one vote. Procedural Requirements for Board Meetings For a limited liability company, the discussion methods and voting procedures of the board of directors shall be specified by the articles of association or by-laws, unless it is otherwise provided for by the Company Law. In joint stock companies, the convening of board meeting shall follow special procedural require - ments. • The board of directors shall convene at least two meetings a year, which must be notified to all directors and supervisors ten days in advance. • Shareholders representing more than a tenth of voting rights, or more than a third of the board of directors or the board of supervisors, may propose to convene an interim meeting of the board of directors. For limited liabilities companies and joint stock companies, their board meeting shall follow some procedural requirements. • No meeting of the board of directors can be held unless more than half of the directors are present. • When the board of directors makes a resolu - tion, it shall be adopted by more than half of all the directors. Related-Party Transactions For the management of related-party transac - tions, it is clarified that affiliated directors shall recuse themselves from voting; if the number
of non-affiliated directors present at the board meeting is less than three, the related-party transaction shall be submitted to the sharehold - ers’ meeting for review and approval. Voting Deadlock Solution In practice, if there is a deadlock situation in decision-making, solutions should be clearly stipulated in the articles of association or inter - nal corporate governance rules. For example, the chair of the board can have an additional second voting right, or some key directors can have a veto right. With respect to the shareholder meeting, please see 5.3 Shareholder Meetings regarding deci - sion-making processes. The board of directors in a limited liability com - pany shall have at least three members, while there is no upper or lower limit for the number of board members of a joint stock limited company. • Small companies, a company with a smaller scale or with fewer shareholders may only have one single director, but without the board of directors. • For medium-to-large companies, if the board of directors has three or more members, it may include an employees’ representa - tive. The board of a limited liability company which has 300 or more employees and does not establish the board of supervisors shall include an employees’ representative. Audit Committee or Board of Supervisors A company may set up an audit committee in the board of directors to exercise the supervisory 4. Directors and Officers 4.1 Board Structure
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