Corporate Law in China
Corporate Law in ChinaUpdated on Tuesday 19th April 2016
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The revised Company Law of the People’s Republic of China governs all aspects related to company formation, types of companies, company management and structure and company dissolution. Any Chinese company must observe this law and the liabilities that derive from it.
Foreign companies that want to establish a branch in China must also observe the corporate law governing these legal structures. The law is a standard for company organization and it also acts as a document that offers protective rights to shareholders, creditors and investors in China.
Our law firm in China can help you understand and observe the legal provisions if you own or run a business in China.
Companies in China
A Chinese company is defined as a legal entity with independent property rights but also liability to the extent of its assets. Corporations that engage in business activities must act in good faith and observe the business ethics as well as stand up to their social responsibilities. Legal entities are governed by the Chinese government with its relevant regulatory bodies.
Any Chinese company must be registered at the Companies Registry, provided that it meets all the regulations for registration. A company must have articles of association which are the main document governing the internal functioning of that legal entity and are binding to the shareholders and company directors. This document can be amended according to law and to the business scope of the company or if relevant information about it has changed.
Our lawyers in China can give you additional information about the law for foreign investments, types of companies and the ownership rights of foreign investors.
Corporate governance in China
The board of shareholders is the main regulatory authority within the company and has functions and powers according to law. It is composed of all the company’s shareholders who convene in general meetings, regular or extraordinary ones. The duties of the shareholders include:
- deciding upon the business and investment policies;
- electing and dismissing directors;
- approving reports, annual financial accounts and financial budgets;
- passing resolutions for the increase or decrease of capital and the issuance of corporate bonds;
- deciding upon company mergers, acquisitions, division, liquidation;
- amending the articles of association.
The board of directors has an executory role and is accountable to the board of shareholders. Limited liability companies can also have a company manager, appointed or dismissed by the board of directors. A board of supervisors is also necessary for limited liability companies and their number depends on the number of shareholders. Chinese companies listed on the Stock Exchange are subject to additional rules.
For more information about the corporate law and company management and registration you can contact our law firm in China.