Company Law in China
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Company Law in China

Regulation of Business Organizations in a Socialist Market Economy

JiangYu Wang

This accessible book offer a comprehensive and critical introduction to the law on business organizations in the People’s Republic of China. The coverage focuses on the 2005-adopted PRC Company Law and the most recent legislative and regulatory developments in the company law landscape in China. The book covers a wide range of topics including the definitions of companies as compared with other forms of business organizations, incorporation, shareholders rights and legal remedies, corporate governance (including the fiduciary and other duties and liabilities of directors, supervisors and managers), corporate finance (including capital and shares offering), fundamental corporate changes (including mergers & acquisitions, and takeovers), and corporate liquidation and bankruptcy. In addition to presenting strong doctrinal analysis, the author also considers China’s unique social, political and economic contexts.
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Chapter 5: Shareholders and their rights

JiangYu Wang

Extract

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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