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Focus On The Revision Of The Company Law: (1) Interpretation Of The Provisions On Corporate Governance

Time:2022-01-10 17:25:47Browse:

On December 24, 2021, the Company Law of the People's Republic of China (Draft Amendment) was officially announced and made available for public comment.

The Amendment of the Company Law involves matching or conflicting with other laws and regulations and it affects the direction of future corporate reform and development. Therefore, most of the amendments to the Law are progressive in nature, and this revision is no exception. However, although there are no substantial changes, the Draft Amendment also contains many new ideas and highlights, especially in the corporate governance structure, with some new and modified features.

Strengthening autonomy and weakening requirements

The balance between compulsory and arbitrary corporate law is a global and fundamental issue that runs through and covers the entire corporate law system. Strengthening the company's autonomy and weakening the mandatory rules are important directions and value orientations of the reform and development of China's corporate system in recent years. China's current Company Law has serious problems: many mandatory and arbitrary norms are unclear, and the formers outright outnumber the latter.

The Draft Amendment has been adjusted in the key institutional settings, removing some rigid requirements, placing more emphasis on corporate autonomy and charter autonomy.
It's important to understand that the current Company Law adopts a way of definition of powers and authority which is enumerative in nature. However, the Draft Amendment adopts a general expression of the powers and functions except those of the shareholders' meeting, enhancing the function of autonomy of the company charter. The board of directors and managers' powers and functions can be agreed on in the articles. Furthermore, Article 70 of the revised draft also innovatively provides that smaller companies with limited liability may not have a board of directors, a director or manager, and the manager of a company without a board of directors may "exercise the powers and functions of the board of directors as provided in this Law."


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