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At the end of last year, the Chinese authorities published the final version of the new company law, which comes into force on 1 July 2024. The changes will affect both local and foreign companies.

The revised law contains 266 articles which, among other things, implement reforms to liability regulations and company structures. Another key aspect of the adjusted law is the introduction of deadlines for the repayment of capital contributions by the shareholder.

 

A summary of the most important new regulations:

  • Managing directors who are dismissed without valid reason before the end of their term of office are entitled to charge an appropriate compensation
  • Unlawful distributions of profits to shareholders must be repaid to the company. Any resulting company losses are covered by the remuneration responsibility of the managing director
  • If directors or senior managers breach their duties (intentionally or through gross negligence), they are liable with their own assets
  • Removing of the restriction on the number of board members for limited liability companies (previously a maximum of 13)
  • Managing Board and Supervisory Board meetings can be held via electronic communication in future
  • Non-executive members of the Managing Board are authorized to assume the role of the legal representative of the company
  • Limited liability companies with more than 300 employees must include at least one employee representative on the board of directors. This person is democratically elected in advance by the employees
  • The share capital of a limited liability company must be paid in full within 5 years from the date of formation of the company. This period also applies to increases in share capital
  • Companies that are already registered, before the revised company law comes into force, will have to gradually introduce the new capital contribution period. Precise modalities for the implementation of this law have not yet been determined by the State Council

Further reforms of Chinese company law can be found in the GTAI article in German language published on 28 February 2024.

 

Source: GTAI (German)