Key Updates on China’s New Company Law: Implications for Global Enterprises
Effective from 1 July 2024, significant amendments to China’s Company Law have been introduced, directly impacting the operations of multinational enterprises. These changes span various aspects of company operations, including the powers and responsibilities of company members, the structure and scope of work of boards and committees, capital contributions, provisions for smaller enterprises and others.
Bolster Group offers a comprehensive overview of the essential adjustments, with a particular focus on Limited Liability Companies (LLCs), which remain the preferred form of incorporation for foreign entities in China.
One of the most notable changes is the removal of the limit on the number of members on the board of directors for LLCs. This amendment grants boards greater autonomy in managing daily operations and strategic planning, including development and funding initiatives. Additionally, boards now hold oversight authority regarding shareholder capital contributions, which must be fulfilled in full.
The new law places significant emphasis on employee rights. LLCs with more than three hundred employees are now required to appoint an employee representative director to advocate for the rights and interests of employees.
Smaller LLCs can now appoint a director instead of forming a full board. This director may also serve as the manager, streamlining governance. Furthermore, these companies are exempt from establishing a supervisor or board of supervisors, provided all shareholders agree.
For the first time since the implementation of the Company Law, LLCs can operate without supervisors and can establish an audit committee, enhancing their governance flexibility.
The legal representative of the company is now empowered to execute operations and must hold a position as either the director or manager, ensuring clear accountability.
Given these significant changes, multinational enterprises operating in China will need to adapt to comply with the new regulations. This may involve reviewing and amending key corporate documents, organisational structures, operational modes, and designated roles within the company. These changes are expected to create a more favourable economic environment by promoting transparency, accountability, and efficiency within the corporate sector.
Bolster Group is here to assist you in navigating the recent developments that shape the business landscape. Subsribe for further insights on global business dynamics.