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China to Revise Company Law to Improve Incorporation & Dissolution System

Thu, 27 Jan 2022
Categories: China Legal Trends

On 20 Dec. 2021, the “Company Law of the People’s Republic of China (Draft for Revision)” (hereinafter “the Draft”, 中华人民共和国公司法(修订草案)) was submitted to the session of the Standing Committee of the National People’s Congress for deliberation.

Consisting of 15 chapters and 260 articles, the Draft updates the current version (13 chapters and 218 articles) by revising or adding around 70 articles, accounting for more than 30%.

The Draft sets up two chapters for the “Incorporation of Companies” and “State-Funded Companies” by incorporating the previous relevant provisions and adding more detailed regulations.

The key takeaways of the Draft are as followed:

  1. The registration information will be open to the public through the information disclosure system;
  2. The shareholder’s failure to fulfill the capital commitment in time or in full will result in loss of shares;
  3. If the company is unable to settle its debts, the creditors or the company has the right to demand immediate payment of the capital contribution from shareholders, even if the contribution deadline has not yet expired;
  4. Companies with 300 or more employees shall have employee representatives on their board of directors;
  5. Shareholders who hold more than 1% of the shares for more than 180 days straight may appoint accountants or lawyers to investigate the company's accounting information;
  6. The CPC Party organizations of state-funded companies can discuss major operation and management matters and provide support for shareholder’s meetings, the board of directors, supervisors meetings, and senior managers in exercising their powers; and,
  7. A stock corporation may issue preferred stock with more or less voting rights per share than common stock.

Enacted in 1993, China’s current Company Law has gone through a handful of revisions including amendments to several provisions in 1999 and 2004, a comprehensive revision in 2005, and two important amendments to the company’s capital regime in 2013 and 2018.



Cover Photo by choi wingkin on Unsplash

Contributors: CJO Staff Contributors Team

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