New Elements New Amendments – Revised Company Law
Previously, we analyzed the focus of attention “the company’s registered capital should be paid up within five years”. You can read the details on our website:
In this article, we will also share some other regulations in the new amendment of the PRC Company Law, which are more in line with contemporary business management.
- Articles & Interpretations
The Company’s Shareholders’ Meeting, Board of Directors, and Supervisory Committee may hold meetings and vote by means of electronic communication unless otherwise provided for in the Company’s Articles of Incorporation.
After the adjustment, the shareholders’ meeting, the board of directors, and the board of supervisors may meet and vote using electronic communication, unless otherwise provided for in the articles of association. This is more flexible in terms of time, place, and process compared to the previously cumbersome traditional mode of offline meetings.
In addition, the previous board meeting also requires the secretary of the board of directors to develop the minutes of the meeting and then sign by the directors to confirm, which often takes a long time. Now with the development of science and technology, especially after the impact of the epidemic, the network meeting-based model gradually replaced offline meetings. At the same time, the network communication can record the process of the meeting in real-time and will no longer need to formulate the minutes of the meeting and the signature of the directors.
This new provision at the legal level to give the electronic communication mode provides a legal basis, has a high degree of feasibility, and is a contemporary manifestation of efficient enterprise management.
A company established in accordance with law shall be issued a business license by the company registration authority. …,
The company registration authority may issue an electronic business license.
With the acceleration of digitalization, the scope of the application of electronic business licenses has gradually increased. It not only serves as a company registration document but also has a variety of functionalities, such as human resources and social insurance platform, tax declaration platform, Government Online-Offline Shanghai platform, etc., that can be logged in and processed through the electronic business license.
The new company law has pointed out that electronic business licenses and paper business licenses have the same legal effect. It is believed that paper business licenses will be gradually replaced in the near future.
The establishment of a limited liability company shall be based on the joint formulation of the articles of association by the shareholders.
Previously, the establishment of a limited liability company, the need for five basic conditions, including the number of people to determine, the amount of capital, the company name, premises, and so on. Now it is stipulated that only the articles of incorporation are required. This creates more convenience and flexibility for investors. In particular, many investors will choose to use shared office space in the early stages of the business, and then move to larger premises after the business is launched, which can allow investors to minimize the risk in the early stages.
However, it is worth noting that the articles of association should still cover the basic information of the enterprise, the rights, and obligations of shareholders or directors, the scope of business or business period, etc., if there is a lack of may face the situation of failure to register.
A limited liability company may, in accordance with the provisions of its articles of association, set up an audit committee consisting of directors in the board of directors, exercising the powers and functions of the supervisory board as provided for in this Law, without having a supervisory board or supervisors. Employee representatives among the members of the board of directors of a company may become members of the audit committee.
This is an additional organization – the Audit Committee. Its purpose is to bring diversity and relevance to the corporate structure. The main duties of the audit committee, compared to the supervisory board, are more focused on reviewing the company’s financial information, supervising the company’s financial system and implementation, auditing major related transactions, and communicating with and executing external audits. Companies can set up different organizations to supervise their operations according to their situation.
Shareholders of a limited liability company may transfer all or part of their shareholdings to each other.
If a shareholder transfers his or her equity interest to a person other than a shareholder, he or she shall notify the other shareholders in writing of the quantity, price, method of payment, and period for the transfer of the equity interest, and the other shareholders shall have the right of first refusal under the same conditions. If a shareholder fails to respond within thirty days from the date of receipt of the written notice, he or she shall be deemed to have waived the right of pre-emption. If two or more shareholders exercise the right of first refusal, they shall negotiate to determine their respective purchase ratios; if the negotiation fails, they shall exercise the right of first refusal in accordance with their respective capital contributions at the time of the transfer.
If the articles of association of a company provide otherwise for the transfer of equity, the provisions thereof shall apply.
In other words, shareholders wishing to transfer their shareholdings are no longer subject to the right of consent, and the duration of the right of first refusal has been clarified. Previously, shareholders were required to obtain the consent of a majority of the other shareholders to transfer their shares, which was not in line with business logic.
The new Company Law amends this problem and gives a certain period for the exercise of the right of first refusal, which is no longer unlimited, thus eliminating the occurrence of unreasonable and excessive preferences.
A person who is under any of the following circumstances shall not serve as a director, supervisor, or senior manager of the Company:
5) Individuals who have been classified by the people’s court as Defaulted Executor because they have incurred debts of a large amount that have not been settled by the due date.
Defaulted Executor refers to the person who fails to fulfill the obligation determined by the effective legal instrument and has the legal situation of “having the ability to fulfill but not fulfilling” and “resisting the execution”, and thus is included in the list of defaulted executors by the people’s court according to law.
The “defaulter” has become the mainstream topic. With the information disclosure, the People’s Court will be published in the major platforms of the executor of the letter. The new company law on this basis states that: the defaulted executor shall not serve as a director, supervisor, or senior management of the company. This is responsible for the company’s internal or external investors.
The person in charge of the Legal Affairs Committee of the Standing Committee of the National People’s Congress (NPC) said that amending the company law is a need to implement the major decisions and deployments of the CPC Central Committee on deepening the reform of state-owned enterprises, optimizing the business environment, strengthening the protection of property rights, and promoting the healthy development of the capital market, and it is also a need to adapt to the development of practice and continuously improve the legal system of the company. important significance.
“It is of great significance to implement the revised company law.” He said the revision of the company law to add many new systems is of great significance in facilitating corporate investment and financing and optimizing governance, and that all relevant parties should actively do a good job in publicizing and interpreting the law, speeding up the formulation of supporting regulations, and ensure that the law is correctly and effectively implemented.
The new company law has not yet come into effect, so please keep checking back for developments in the draft, and we will continue to share any other additions or deletions that are of close relevance to you.
If you have any questions, please contact us.