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 6: The general corporate governance and management structure

JiangYu Wang


Corporate governance has become a highly fashionable topic in China since the outset of the twenty-first century, when a listed company, popularly known as YinGuangXia, was disclosed by the media to have committed a RMB745 million fraud through massive fabrication of sales receipts and false disclosures perpetrated by a few 'core' insiders. This case caused losses to thousands of minority shareholders and is considered one of the biggest corporate scandals in recent decades of PRC history. It revealed some fundamental weaknesses in the management, regulation, and supervision of the country's enterprises. As a Standard & Poor's report noted, '[c]orporate governance since then has been placed at the very top of the government's agenda', and 'the mandate to improve corporate governance is a top priority amongst all sectors, including government bodies, regulators, intermediaries, corporations, and investors'. In the following years, various government agencies issued numerous laws and normative documents to standardize the corporate governance practice of Chinese enterprises. As a general note, several 'Chinese characteristics' of corporate governance will be pointed out. First, China has set up a hybrid system of corporate governance institutions, borrowed from both the Anglo-American model and Germanic-Japanese model. In terms of internal governance, the typical organizational structure of a company comprises three tiers of control, namely the shareholder's meeting, the board of directors, and the supervisory board. In addition, a JSLC is legally required to have a management team.

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