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 10: Financial affairs, accounting, and profit distribution

JiangYu Wang

Extract

The Company Law largely leaves other laws to regulate a company's internal financial and accounting affairs. Article 164 provides that 'a company shall establish its own financial and accounting systems in accordance with laws, administrative regulations and rules of the treasury department [Ministry of Finance] of the State Council'. China's accounting system underwent revolutionary changes during 1992-2002, moving basically in the trend to converge with international accounting standards. The China Auditing Standards for CPA issued by the PRC Ministry of Finance in 2006 marked China's full embracing of the international best practices on accounting and auditing. As the CSRC notes, These new auditing standards cover almost all items of international auditing criteria … [They] are based on the structure of international auditing standards and cover nearly all of its items. They adopt all the basic principles and core procedures of the international standards. Major aspects such as the auditing objective and principle, evaluation and risk management, access to auditing evidence and evidence analysis, drafting and report of auditing conclusions, as well as formulation of professional responsibilities are in conformity with international auditing standards. In addition, a few provisions in Chapter 8 of the Company Law (entitled 'Financial Affairs and Accounting of Companies') emphasize the company's obligations to report and disclose information, some of which are also provided in other parts of the Company Law as well as in the Securities Law.

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