Regulation of Business Organizations in a Socialist Market Economy
Chapter 5: Shareholders and their rights
Article 4 of the Company Law, an umbrella provision on shareholders' rights in China, states: 'The shareholders of a company shall enjoy such rights as earnings from assets, participation in major decision-making and selection of management personnel according to law'. This provision has given rise to some curious questions as to the nature of shareholders' interests, functions, rights, and powers in the company. Reading it together with the specific rights granted by other provisions of the Company Law to shareholders, one could have the impression that shareholders in China have more significant statutory rights than their counterparts in Anglo-American jurisdictions, especially with respect to 'participation in major decision-making'. For example, it is the shareholders, not directors, who decide the policy concerning dividend distribution in China. It is a separate question whether these rules are actually enforced to empower the Chinese shareholders. In addition, it has been argued that even those rules are not adequate to address the conflicts between minority and majority shareholders in a context where the state is often the majority shareholder in many companies. Conceptually, corporate law theorists in China divide shareholder rights into 'self-benefit rights' (zi yi quan) and 'co-benefit rights' (gong yi quan) based on the purpose of exercising a particular right. A self-benefit right is exercised directly for a shareholder's personal and own interest. In contrast, a co-benefit right is one for all the shareholders' interests, involving mainly shareholder rights in corporate governance and management.
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