China Company Law
Approved by the Standing Committee of the National People's Congress
(NPC) on Oct. 27, 2004, the revised China Company Law has taken effect
on Jan. 1, 2006. In contrary to 229 former clauses, now 46 clauses of
them have been deleted from the law, 137 clauses revised. In the
meantime, 41clauses have been added into the law. It is a substantial,
material and crucial modification on the law in the decade, after
deeply discussed and disputed by scholars and lawmakers in several
years.
The modification focuses on establishment and capital system of a
company, and perfects the structure of company governance.
The new law reduces the minimum registered capital of a company,
simplifies the register procedure, and thus relaxed the threshold of
company establishment in order to encourage investment and venture,
boost economic development and increase employment opportunities.
The law has expanded the coverage of property a shareholder is allowed
to invest in a company. Now, the law allows "individual limited
liability company" or "one-person" company, in other words, one legal
entity can set up a one-person limited company under relevant clauses.
The law has revised certain provisions to protect the interests of
shareholders, especially small shareholders. For example, with regard
to the right to be informed, shareholders are permitted to check their
companies' financial accounts. And in some special circumstance, small
shareholder can suit managers, directors or other shareholders for his
interest or the company's interest with his name or the company's
name.
The law set up necessary mechanism to prevent risks, ensure trading
safety, safeguard corporate creditors' interests and maintain social
economic order. The common law concept, pierce the corporate veil, has
been introduced into China Company Law. If proved that a corporation
exists merely as a completely controlled front (alter ego) for an
individual or management group, so that in a lawsuit the individual
defendants can be held responsible (liable) for damages for actions of
the corporation.
Other important amendments are relating to these clauses about
state-owned company. As you know, restructuration of the 200,000
state-owned enterprises is a heavy task. Now, these new clauses will
offer more substantial guidelines fro the restructuration process.
The Standing Committee NPC also deleted some clauses relating to stock
law, revised them and moved them into China Stock Law which is
approved in the same time. you can review the china company law
(revised in 2005, English) in there.
