Interpretation of the Revision of the Company Law | Bu Bin: Corporate Governance Structure and Related Subject Responsibilities
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2024.04.07
the 7th meeting of the standing Committee of the 14th national people's congress of the People's Republic of China deliberated and passed the the People's Republic of China company law (hereinafter referred to as the company law (revised in 2023)) on December 29, 2023, which will come into force on July 1, 2024. This revision has made significant adjustments to the shareholder's capital contribution responsibility and corporate governance structure. This series of articles through the analysis and interpretation of the revision of the Company Law, with a view to the follow-up of the company's legal practice is beneficial.
in order to improve the business environment, standardize the organizational behavior of the company, and implement the main responsibilities of all parties, the Company Law (as amended in 2023) makes the following amendments to optimize the corporate governance structure and strengthen the principal responsibilities of directors, supervisors, senior managers, controlling shareholders and actual controllers:
1. allow the company to have only a board of directors, not a board of supervisors, and set up an audit committee in the board of directors to exercise the powers of the board of supervisors
Since the promulgation of the Company Law, a two-tier governance structure of shareholders' meeting, board of directors and board of supervisors has been adopted. This revision of the Company Law introduces a single-tier system for the first time, allowing shareholders to choose a more flexible corporate governance structure according to the needs of the company's operations.
Article 69 of the Company Law (as amended in 2023) 1 and article 121 2 respectively stipulates that a limited liability company and a joint stock company may set up an audit committee composed of directors on the board of directors to exercise the powers of a supervisory board, without a supervisory board or supervisors.
It should be noted that the Company Law (as amended in 2023) has more stringent requirements for audit committees of joint stock companies:
(1) In terms of the number of members of the audit committee, the number of members should be three or more;
(2) in terms of interests, a majority of the members shall not hold positions other than directors in the company and shall not have any relationship with the company that may affect their independent and objective judgment;
(3) in terms of voting rules, the voting of the resolution of the audit committee shall be one person, one vote.
2. For companies with small scale or small number of shareholders, there may be no board of directors, one director, no board of supervisors, and one supervisor
(1) LLC
article 50, paragraph 1, of the company law (as amended in 2018) 3 stipulates that a limited liability company with a small number of shareholders or a small scale may have an executive director without a board of directors. Article 75 of the Company Law (as amended in 2023) 4 continue the foregoing and replace" executive director "with" director ".
article 51, paragraph 1, of the company law (as amended in 2018) 5 stipulates that a limited liability company with a small number of shareholders or a small scale may have" one or two supervisors "and no board of supervisors. Article 83 of the Company Law (revised in 2023) 6 is changed to" one supervisor ".
(2) INC.
The Companies Act (as amended in 2018) does not provide for the simplification of the board of directors and the supervisory board of a company limited by shares. Article 128 of the Company Law (revised in 2023) 7 and article 133 8 respectively stipulates that a joint stock limited company with a small scale or a small number of shareholders may have no board of directors, one director, no board of supervisors and one supervisor.
to sum up, after the implementation of the company law (revised in 2023), limited liability companies and joint stock limited companies with small scale or small number of shareholders may not have a board of directors, but a director, a board of supervisors and a supervisor. The determination of "small scale or small number of shareholders" needs to be further clarified in subsequent legislation and judicial practice.
1. companies with more than 300 employees , in addition to the board of supervisors established in accordance with the law and having representatives of the company's employees, its board of directors shall also have representatives of the company's employees
the company law (amended in 2018) only stipulates that wholly state-owned companies and limited liability companies invested by more than two state-owned enterprises or more than two other state-owned investment entities, the board of directors shall include representatives of the company's employees 9, there is no mandatory requirement for the board of directors of other types of limited liability companies to join the staff representatives. Article 68 of the Company Law (revised in 2023) 10 has expanded the types of companies that should be represented by employees on the board of directors. limited liability companies with more than 300 employees should have representatives of employees on the board of directors.
2. The audit committee may have staff representatives
articles 69 and 121 of the company law (revised in 2023) stipulate that limited liability companies and joint stock limited companies may set up audit committees, and that audit committees may have representatives of employees of the company. Note that the expression of the above two provisions is "can" rather than "should", that is to say, the establishment of the board of supervisors must have employee representatives. If an audit committee is established to replace the board of supervisors to exercise the powers of supervisors, combined with the provisions of Article 69 of the Company Law (2023 Revision), the audit committee may have employee representatives or no employee representatives.
1. Rule of Resignation of Legal Representative
Article 13 of the Company Law (as amended in 2018) 11 provides that the legal representative of the company shall be the chairman, executive director or manager. Article 10 of the Company Law (2023 Revision) 12 broadens the scope of serving as legal representative, stipulates that directors who perform company affairs on behalf of the company can also serve as legal representatives, and clearly the resignation of directors or managers who serve as legal representatives shall be deemed to have resigned from the legal representative at the same time. The company shall determine a new legal representative within 30 days from the date of resignation of the legal representative to avoid a vacuum in the company's legal representative.
2. Rules for Resignation and Removal of Directors
(1) Director's voluntary resignation
Article 70 of the Company Law (2023 Revision) 13 provides that the resignation of a director shall be notified to the company in writing and the resignation shall take effect on the date the company receives the notice. However, if a director is not re-elected in time at the expiration of his term of office, or if the resignation of a director during his term of office results in the number of members of the board of directors falling below the quorum, the director shall continue to perform his duties before the re-elected director takes office. This provision increases the effective time of a director's resignation and resolves a long-standing dispute over whether a director's resignation is "the date of the board's resolution" or "the date the company receives notice.
(2) Removal of Director by Shareholders' Meeting
Article 3 of the (V) of the Supreme People's Court on the Application of the the People's Republic of China Company Law & gt; Provisions of the Supreme People's Court on Certain Issues 14 provides for the rule of dismissal of directors without cause. Article 71 of the Company Law (2023 Revision) 15 incorporates the aforementioned judicial interpretation, which provides that the shareholders' meeting may decide to disappoint a director and specify that the dismissal shall take effect on the date of the resolution. If the shareholders' meeting disclaims a director before the expiration of his term of office without justifiable reasons, the director may demand compensation from the company. According to the mainstream judicial view, the relationship between the company and the director is a principal relationship. According to article 933 of the the People's Republic of China civil code 16, the principal or trustee may terminate the entrustment contract at any time. If the other party suffers losses as a result of the termination of the contract, the party to the termination of the paid entrustment contract shall compensate the other party for its direct losses and the benefits that can be obtained after the performance of the contract. In the process of dispute resolution, the director's claim for compensation may be determined by reference to the foregoing provisions.
article 147, paragraph 1, of the company law (as amended in 2018) 17 stipulates that directors, supervisors and senior managers have the duty of loyalty and diligence to the company, but does not specify the specific content of the duty of loyalty and diligence. Article 180 of the Company Law (revised in 2023) 18 explains this and amends the specific circumstances.
1. Duty of Faithfulness
the first paragraph of article 180 of the company law (revised in 2023) stipulates that the duty of loyalty requires directors, supervisors and senior managers to take measures to avoid conflicts between their own interests and those of the company, and shall not use their functions and powers to seek illegitimate interests.
the company law (revised in 2023) separated self-dealing, taking advantage of company opportunities, peer competition and other situations from article 181, amending the following contents:
(1) New Supervisors as Regulatory Subjects and Reporting Obligations on Specific Matters
articles 181 to 184 of the company law (revised in 2023) add supervisors as the regulatory subject of loyalty obligations, stipulating that directors, supervisors and senior managers shall report to the board of directors or shareholders' meeting when conducting related party transactions, peer competition, obtaining company opportunities and other matters with the company, and approved by the board of directors or the shareholders' meeting in accordance with the articles of association.
(2) New Board of Directors as Resolution Organ and Avoidance Rules
article 182 of the company law (as amended in 2023) 19, article 183 20, article 184 21 has added the board of directors as the subject of consent for directors, supervisors and senior managers to conduct related transactions with the company, take advantage of the company's opportunities, competition in the same industry, etc., and delegated the approval power to the board of directors. In addition, article 185 of the company law (revised in 2023) 22 also added associated director voting recusal rule. When the board of directors makes a resolution on the aforementioned matters, the related directors shall not participate in the voting, and their voting rights shall not be included in the total number of voting rights. If the number of unrelated directors present at the meeting of the board of directors is less than three, the matter shall be submitted to the shareholders' meeting for consideration. Related party transactions, taking advantage of company opportunities and other acts do not necessarily harm the interests of the company. Directors, supervisors and senior managers can improve the efficiency of internal resource allocation and enhance the market competitiveness of the company. Therefore, whether or not to agree to the act should be determined by the autonomy of the company. From the perspective of protecting the interests of the company and other shareholders, affiliated directors cannot participate in voting.
(3) make it clear that the relatives of the directors and supervisors and the enterprises they control belong to the scope of the related subjects.
article 216, item 4, of the company law (as amended in 2018) 23 The relationship stipulated in the relationship refers to the relationship between the company's controlling shareholders, actual controllers, directors, supervisors, and senior managers and the companies directly or indirectly controlled by them, and may lead to other relationships that transfer the company's interests.
the second paragraph of article 182 of the company law (revised in 2023) further clarifies that the close relatives of directors, supervisors and senior managers and the enterprises directly or indirectly controlled by their close relatives belong to the category of related persons, and through the bottom of the way to increase the directors, supervisors, senior managers have other related relationships as a basis for the judgment of related persons. Connected transactions by the aforementioned connected persons are also subject to the reporting obligations of paragraph 1 of Article 182 of the Company Law (as amended in 2023) and the consent of the Board of Directors or the shareholders' meeting.
(4) Add cases of legitimate use of corporate opportunities.
the situation of proper use of company opportunities stipulated in article 183 of the company law (revised in 2023) not only retains the" company consent "of the original company law (revised in 2018), but also adds" according to the provisions of laws, administrative regulations or the articles of association of the company, the company cannot take advantage of the business opportunity ", emphasizing that when the company cannot objectively take advantage of the business opportunity, directors, supervisors, and senior managers can obtain the business opportunity. In addition, the situation of "objective inability" should be limited to the scope stipulated by laws, administrative regulations or articles of association of the company, so as to avoid the problem that it is difficult to determine the judgment standard, which leads to the confusion of implementation in practice.
2. Duty of Diligence
the second paragraph of article 180 of the company law (revised in 2023) stipulates that the duty of diligence requires directors, supervisors and senior managers to perform their duties in the best interests of the company and to do the reasonable attention that managers usually deserve.
the revision of the company law (revised in 2023) on the specific application of diligence obligations mainly clarifies the liquidation obligations of directors and the responsibility of maintaining capital enrichment. Article 232 of the company law (revised in 2023) 24 continues the second paragraph of Article 70 of the the People's Republic of China Civil Code 25, unified the liquidation of limited liability companies and limited liability companies, clear directors as the company's liquidation obligations. The directors shall form a liquidation group within 15 days from the date of the occurrence of the cause of dissolution, and the liquidation group shall be composed of directors unless otherwise provided in the articles of association or the shareholders' meeting resolves to elect another person. This provision implicitly states that the director is a member of the liquidation group. Where the articles of association provide otherwise or the shareholders' meeting resolutes to elect another person as a member of the liquidation group, the identities of the liquidation obligor and the members of the liquidation group may not overlap. The Company Law (as amended in 2023) makes it clear that if the liquidation obligor fails to perform its liquidation obligations in a timely manner and causes losses to the company or creditors, it shall be liable for compensation. In addition, article 238 of the company law (revised in 2023) 26 stipulates that members of the liquidation group shall also have the duty of loyalty and diligence, and shall be liable for compensation if they fail to perform their liquidation duties and cause losses to the company or cause losses to creditors through intentional or gross negligence.
The responsibility of directors to maintain capital enrichment is detailed below.
in practice, there are controlling shareholders or actual controllers who do not have the status of directors but actually carry out the company's affairs, or directly instruct directors and senior executives to manipulate the company, but because they do not have the status of directors and senior executives, they may not bear the responsibilities arising from the duty of trust. This revision of the Companies Act fills these loopholes by introducing substantive director rules. Articles 180 and 192 of the Company Law (as amended in 2023) stipulate two types of substantive directors, de facto directors and shadow directors, respectively, and Article 192 also extends from shadow directors to shadow executives.
according to the relevant provisions of the company law (revised in 2023), there are two points to note for substantive directors:
1. responsible subject
Articles 180 and 192 of the Company Law (as amended in 2023) 27 stipulates that the subjects of de facto directors and shadow directors and senior management are all controlling shareholders and actual controllers. Article 265 of the company law (revised in 2023) 28 basically follows the definition of controlling shareholder and actual controller in the Company Law (as amended in 2018), except that the actual controller" although not a shareholder of the company "is deleted, indicating that the actual controller does not have the status of a shareholder in name, but actually exercises the rights of shareholders, under statutory circumstances, the same obligations as shareholders should be fulfilled.
2. Liability
for de facto directors, article 180, paragraph 3, of the company law (revised in 2023) stipulates that de facto directors shall be subject to the obligation of loyalty and diligence. If the duty of loyalty and diligence is violated, the liability shall be borne in accordance with the specific circumstances prescribed by law.
for shadow directors and senior executives, article 192 of the company law (revised in 2023) stipulates that if the controlling shareholder and actual controller of the company instruct directors and senior executives to engage in acts harmful to the interests of the company or shareholders, they shall be jointly and severally liable with the directors and senior executives. This provision clarifies the rules of joint and several liability for controlling shareholders and actual controllers to use directors and executives to harm the interests of the company or shareholders.
1. New Directors' Duty to Call Capital Contribution and Liability
" (III) of the Supreme People's Court on the Application of the the People's Republic of China Company Law & gt; Provisions on Certain Issues "(hereinafter referred to as" Judicial Interpretation III of the Company Law "), Article 13, paragraph 4 29 only stipulates that when the company increases its capital, if the directors and senior managers fail to fulfill their obligations of loyalty and diligence, resulting in the non-payment of capital contributions, they shall be liable for this.
The Companies Act was amended to strengthen directors' call obligations. Article 51 of the Company Law (as amended in 2023) 30 stipulates that after the establishment of a limited liability company, the board of directors shall perform its obligation to verify the capital contributions of shareholders, not only in the case of" capital increase. If the board of directors finds that a shareholder has not paid the capital contribution stipulated in the articles of association on time and in full, it shall issue a written call to the shareholder through the company to call for the payment of the capital contribution. If the company fails to perform the aforementioned obligations in a timely manner and causes losses to the company, the responsible director shall be liable for compensation.
2. add the joint and several liability of directors, supervisors and senior executives who are responsible for the withdrawal of capital contributions
article 14 31 only provides for the directors and senior management to be jointly and severally liable in the event of" assistance in the withdrawal of capital contributions.
Article 53 32 adds the supervisor as the main body of responsibility, and widens the responsibility situation, not limited to the positive fact of" assisting in the withdrawal of capital contribution ", and stipulates that the directors, supervisors and senior managers responsible for the withdrawal of capital contribution shall bear joint and several liability with the shareholder.
3. add the compensation liability of directors and supervisors in case of illegal financial assistance of the company
article 163 of the company law (revised in 2023) 33 New provision for financial assistance for the acquisition of shares in the company by others. This provision requires the company not to provide gifts, loans, guarantees and other financial assistance for others to acquire shares in the company or its parent company, except where the company implements an employee stock ownership plan. For the benefit of the company, the company may provide financial assistance for others to acquire shares of the company or its parent company by resolution of the shareholders' meeting or by resolution of the board of directors in accordance with the articles of association or the authorization of the shareholders' meeting, but the cumulative total amount of financial assistance shall not exceed 10% of the total issued share capital. A resolution made by the board of directors shall be adopted by a 2/3 or more of all directors. If the violation of the aforementioned provisions causes losses to the company, the responsible directors, supervisors, and senior managers shall be liable for compensation.
4. add the liability of directors and supervisors for illegal distribution of profits
Company Law (Revised 2023) Article 211 34 stipulates that if the company illegally distributes profits to shareholders, the shareholders shall return the profits distributed in violation of the regulations to the company; if losses are caused to the company, the shareholders and the responsible directors, supervisors and senior managers shall be liable for compensation.
5. liability of directors and supervisors for illegal capital reduction
company law (as amended in 2023) article 226 35 requires shareholders to refund the funds they receive in the event of an illegal reduction of registered capital. The reduction or exemption of shareholders' capital contributions shall be restored to the original state. If the aforementioned circumstances cause losses to the company, the shareholders and the responsible directors, supervisors and senior managers shall be liable for compensation.
the company law (amended in 2018) stipulates that directors, supervisors and senior executives shall be liable for compensation when they cause losses to the company and shareholders. The revision of the Company Law has increased the relevant provisions on the liability of directors and senior executives to third parties other than the company in the performance of their duties.
Article 191 of the Company Law (as amended in 2023) 36 stipulates that if directors and senior managers perform their duties and cause damage to others, the company shall be liable for compensation. Directors and senior managers who are intentionally or grossly negligent shall also be liable for compensation. This article improves the system of rights protection and helps to protect the legitimate rights and interests of third parties. Note that the only subjects liable to others here are the company, directors and executives, excluding supervisors. The new clause can urge directors to be diligent and responsible, limit the abuse of power by directors and executives, and avoid harming the interests of third parties while pursuing benefits.
The revised Company Law has increased the liability of directors. In order to spread the risks borne by directors, the Company Law (revised in 2023) has added director insurance rules, stipulating that companies can take out liability insurance for directors. Article 193 of the Company Law (revised in 2023) 37 provides that the company may insure liability insurance for the director's liability for the performance of the company's duties during the director's term of office. After the company has insured or renewed the liability insurance for the directors, the board of directors shall report to the shareholders' meeting the insured amount, coverage and premium rate of the liability insurance.
[introduction to practice] master's degree in civil and commercial law of the Chinese university of hong kong. He is currently a lawyer of Shengdian Law Firm, senior corporate compliance engineer, deputy director of Shengdian Foreign Affairs Legal Professional Committee, director of Shenzhen University Law School Alumni Association, director of Shenzhen Legal Culture Research Association, selected into the Guangdong Foreign Lawyer Talent Pool, Shenzhen Foreign Lawyer Talent Pool, with securities qualifications, rich practical experience in dispute resolution, and has handled a large number of civil and commercial disputes, focus on corporate litigation, foreign-related litigation, commercial contracts, financial disputes, corporate compliance and other fields, good at handling difficult and complex cases, has provided legal services for dozens of domestic banks, securities firms, trusts, listed companies and large enterprises, etc., and is good at helping customers effectively achieve their business goals through litigation.
Working languages are Mandarin, Cantonese, English and Hakka.
Contacts
email: bubin@shengdian.com.cn
Notes:
1. Article 69 of the the People's Republic of China Company Law (2023 Revision):" A limited liability company may, in accordance with the provisions of the articles of association, set up an audit committee composed of directors on the board of directors to exercise the functions and powers of the board of supervisors as stipulated in this Law, without a board of supervisors or supervisors. Representatives of employees who are members of the company's board of directors may become members of the audit committee."
2. Article 121 of the the People's Republic of China Company Law (2023 Revision):" A company limited by shares may, in accordance with the provisions of the articles of association, set up an audit committee composed of directors on the board of directors to exercise the functions and powers of the board of supervisors as stipulated in this Law, without a board of supervisors or supervisors.
the audit committee is composed of more than three members, and more than half of the members are not may hold positions other than directors in the company and shall not have any relationship with the company that may affect his independent and objective judgment. Representatives of employees who are members of the company's board of directors may become members of the audit committee.
Resolutions of the Board of Auditors shall be adopted by a majority of the members of the Board of Auditors.
A vote on a resolution of the Board of Auditors shall be one person, one vote.
The method of discussion and voting procedures of the audit committee shall be prescribed by the articles of association of the company, except as provided for in this law.
the company may set up other committees in the board of directors in accordance with the provisions of the articles of association."
3. The first paragraph of Article 50 of the the People's Republic of China Company Law (2018 Amendment):" A limited liability company with a small number of shareholders or a small scale may have an executive director instead of a board of directors. The executive director may concurrently serve as the manager of the company."
4. Article 75 of the the People's Republic of China Company Law (as amended in 2023):" A limited liability company with a small scale or a small number of shareholders may have one director without a board of directors to exercise the functions and powers of the board of directors as stipulated in this Law. The director may also be the manager of the company."
5. The first paragraph of Article 51 of the the People's Republic of China Company Law (2018 Amendment):" A limited liability company shall have a board of supervisors with no less than three members. A limited liability company with a small number of shareholders or a small scale may have one or two supervisors instead of a board of supervisors."
6. Article 83 of the the People's Republic of China Company Law (2023 Revision):" A limited liability company with a small scale or a small number of shareholders may not have a board of supervisors, but a supervisor to exercise the provisions of this law. The powers of the board of supervisors; with the unanimous consent of all shareholders, there may be no supervisors."
7. Article 128 of the the People's Republic of China Company Law (as amended in 2023):" A joint stock limited company with a small scale or a small number of shareholders may have one director instead of a board of directors to exercise the functions and powers of the board of directors as stipulated in this Law. The director may also be the manager of the company."
8. Article 133 of the the People's Republic of China Company Law (revised in 2023):" A company limited by shares with a small scale or a small number of shareholders may have a supervisor instead of a board of supervisors to exercise the functions and powers of the board of supervisors as stipulated in this Law."
9. Article 67 of the the People's Republic of China Company Law (2018 Amendment):" A wholly state-owned company shall have a board of directors, which shall exercise its functions and powers in accordance with the provisions of Articles 46 and 66 of this Law. The term of office of a director shall not exceed three years. The board of directors shall include representatives of the employees of the company."
10. Article 68 of the the People's Republic of China Company Law (as amended in 2023):" The board of directors of a limited liability company shall have three or more members, and its members may have representatives of the company's employees. A limited liability company with more than 300 employees shall have representatives of the company's employees among its board of directors, except where it has a board of supervisors in accordance with the law and has representatives of the company's employees. The employee representatives on the board of directors are democratically elected by the employees of the company through the employee representative assembly, the employee assembly or other forms."
11. Article 13 of the the People's Republic of China Company Law (as amended in 2018):" The legal representative of a company shall be the chairman, executive director or manager in accordance with the provisions of the articles of association of the company, and shall be registered in accordance with the law. If the company's legal representative changes, it shall register the change."
12. Article 10 of the the People's Republic of China Company Law (as amended in 2023):" The legal representative of a company shall be a director or manager who performs company affairs on behalf of the company in accordance with the provisions of the company's articles of association.
The resignation of a director or manager who serves as the legal representative shall be deemed to have resigned as the legal representative at the same time.
If the legal representative resigns, the company shall determine a new legal representative within 30 days from the date of resignation of the legal representative."
13. Article 70 of the the People's Republic of China Company Law (as amended in 2023):" The term of office of a director shall be prescribed by the articles of association of the company, but each term of office shall not exceed three years. Upon expiration of the term of office, a director may be re-elected.
If a director is not re-elected in time at the expiration of his term of office, or if the resignation of a director during his term of office results in the number of members of the board of directors falling below the quorum, the original director shall still perform his duties in accordance with the provisions of laws, administrative regulations and the articles of association before the re-elected director takes office.
If a director resigns, he shall notify the company in writing, and the resignation shall take effect on the date the company receives the notice, but if the circumstances specified in the preceding paragraph exist, the director shall continue to perform his duties."
14. article 3 of the (V) of the provisions of the supreme people's court on the application of the the People's Republic of China company law & lt; several issues:" if a director is removed by an effective resolution of the shareholders' meeting or the shareholders' meeting before the expiration of his term of office, the people's court will not support his claim that the removal does not have legal effect.
After the director's position is removed, if a lawsuit is filed due to a dispute between compensation and the company, the people's court shall, in accordance with laws, administrative regulations, the company's articles of association, or the contract, comprehensively consider the reasons for the termination, the remaining term of office, the director's remuneration, etc. Factors to determine whether to compensate and the reasonable amount of compensation."
15. Article 71 of the the People's Republic of China Company Law (as amended in 2023):" The shareholders' meeting may decide to dismiss a director, and the dismissal shall take effect on the date of the resolution.
If, without good reason, a director is dismissed before the expiration of his term of office, the director may claim compensation from the company."
16. Article 933 of the the People's Republic of China Civil Code:" The principal or trustee may terminate the contract of entrustment at any time. If the loss of the other party is caused by the termination of the contract, except for the reasons that are not attributable to the party, the party of the non-compensation entrustment contract shall compensate for the direct loss caused by the improper time of the termination, and the party of the paid entrustment contract shall compensate the other party for the direct loss and the benefits that can be obtained after the performance of the contract."
17. Article 147 of the the People's Republic of China Company Law (2018 Amendment):" Directors, supervisors and senior managers shall abide by laws, administrative regulations and the articles of association of the company, and shall have the duty of loyalty and diligence to the company."
18. Article 180 of the the People's Republic of China Company Law (revised in 2023):" Directors, supervisors and senior managers have the duty of loyalty to the company and shall take measures to avoid conflicts between their own interests and the interests of the company, and shall not take advantage of their functions and powers to seek illegitimate interests.
Directors, supervisors and senior management have a duty of diligence to the Company and shall perform their duties in the best interests of the Company with the reasonable attention normally due to managers.
If the controlling shareholder or actual controller of the company does not serve as a director of the company but actually executes the affairs of the company, the provisions of the preceding two paragraphs shall apply."
19. Article 182 of the the People's Republic of China Company Law (revised in 2023):" Directors, supervisors and senior managers who directly or indirectly enter into contracts or conduct transactions with the company shall report to the board of directors or the shareholders' meeting on matters related to the conclusion of contracts or transactions, and shall be approved by resolution of the board of directors or the shareholders' meeting in accordance with the provisions of the articles of association.
close relatives of directors, supervisors, and senior managers, companies directly or indirectly controlled by directors, supervisors, senior managers or their close relatives, and related persons who have other related relationships with directors, supervisors, and senior managers, The provisions of the preceding paragraph shall apply to the conclusion of contracts or transactions with the company."
20. Article 183 of the the People's Republic of China Company Law (revised in 2023):" Directors, supervisors and senior managers shall not take advantage of their positions to seek business opportunities belonging to the company for themselves or others. Except in any of the following cases:
(I) report to the board of directors or shareholders' meeting, and in accordance with the provisions of the articles of association by the board of directors or shareholders' meeting resolution;
(II) in accordance with laws, administrative regulations or the company's articles of association, the company cannot take advantage of the business opportunity."
21. Article 184 of the the People's Republic of China Company Law (revised in 2023):" Directors, supervisors and senior managers shall not report to the board of directors or the shareholders' meeting and shall be approved by the resolution of the board of directors or the shareholders' meeting in accordance with the provisions of the articles of association, and shall not operate the same business as the company in which they work for others."
22. Article 185 of the the People's Republic of China Company Law (revised in 2023):" When the board of directors makes a resolution on the matters specified in Articles 182 to 184 of this Law, the related directors shall not participate in the voting, and their voting rights shall not be included in the total number of voting rights. If the number of unrelated directors present at a meeting of the Board of Directors is less than three, the matter shall be submitted to the shareholders' meeting for consideration."
23." the People's Republic of China Company Law "(2018 Amendment) Article 216 The meaning of the following terms in this law:" (IV) association refers to the controlling shareholder, actual controller, director, supervisor, and senior management of a company. The relationship between personnel and the enterprise directly or indirectly controlled, and other relationships that may lead to the transfer of company interests. However, state-controlled enterprises are not only related to each other because they are controlled by the state."
24. Article 232 of the the People's Republic of China Company Law (revised in 2023):" A company that is dissolved due to the provisions of items 1, 2, 4 and 5 of paragraph 1 of Article 229 of this Law shall be liquidated. If the directors are the company's liquidation obligors, they shall form a liquidation group to liquidate the company within 15 days from the date of the dissolution.
The liquidation group shall be composed of directors, except as otherwise provided in the articles of association of the company or the resolution of the shareholders' meeting to elect another person.
If the liquidation obligor fails to perform its liquidation obligations in a timely manner and causes losses to the company or creditors, it shall be liable for compensation."
25. Article 70, paragraph 2, of the the People's Republic of China Civil Code:" Directors, directors and other members of executive or decision-making bodies of a legal person are liquidation obligors. Where laws and administrative regulations provide otherwise, such provisions shall prevail."
26. Article 238 of the the People's Republic of China Company Law (2023 Revision):" The members of the liquidation group perform liquidation duties and have the duty of loyalty and diligence.
If the members of the liquidation team are negligent in performing their liquidation duties and cause losses to the company, they shall be liable for compensation; if they cause losses to creditors due to intentional or gross negligence, they shall be liable for compensation."
27. Article 192 of the the People's Republic of China Company Law (revised in 2023):" If the controlling shareholder or actual controller of a company instructs a director or senior manager to engage in an act that harms the interests of the company or shareholders, he shall be jointly and severally liable with the director or senior manager."
28. Article 265 of the the People's Republic of China Company Law (2023 Revision):" The meaning of the following terms in this Law: (2) Controlling shareholder refers to a shareholder whose capital contribution accounts for more than 50% of the total capital of a limited liability company or whose shares account for more than 50% of the total capital of a joint stock limited company; although the capital contribution or the proportion of shares held is less than 50%, however, the shareholders who have enough voting rights to have a significant impact on the resolution of the shareholders' meeting according to their capital contribution or the shares they hold.
(III) de facto controller is a person who, through an investment relationship, agreement or other arrangement, is able to de facto control the conduct of the company."
29. the (III) of the provisions of the supreme people's court on the application of the the People's Republic of China company law on several issues, article 13, paragraph 4:" the plaintiff who fails to perform or fully perform the obligation of capital contribution when the company increases its capital, and files a lawsuit in accordance with the first or second paragraph of this article, if the request fails to fulfill the obligations stipulated in the first paragraph of Article 147 of the Company Law and makes the directors and senior managers whose capital contributions have not been paid in full bear the corresponding responsibilities, the people's court shall support it; after the directors and senior managers bear the responsibilities, they may recover compensation from the defendant shareholders."
30. Article 51 of the the People's Republic of China Company Law (2023 Revision):" After the establishment of a limited liability company, the board of directors shall verify the capital contribution of the shareholders and find that the shareholders have failed to pay the capital contribution stipulated in the articles of association in full and on time, the company shall issue a written call to the shareholder to make the capital contribution.
If the company fails to perform its obligations under the preceding paragraph in a timely manner and causes losses to the company, the responsible director shall be liable for compensation."
31. Article 14 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law:" The people's court shall support the withdrawal of capital contributions by shareholders and the request of the company or other shareholders to return the principal and interest of the capital contributions to the company and assist in the withdrawal of capital contributions. Other shareholders, directors, senior managers or actual controllers shall bear joint and several liabilities for this.
The company's creditors request that the shareholders who withdraw their capital contributions bear supplementary compensation liability for the unpayable part of the company's debts within the scope of the principal and interest of the withdrawn capital contributions, and other shareholders, directors, senior managers or actual controllers who assist in the withdrawal of capital contributions bear joint and several liability for this, the people's court shall support it; the shareholders who withdraw capital contributions have already assumed the above-mentioned responsibilities, and other creditors make the same request, The people's court will not support."
32. Article 53 of the the People's Republic of China Company Law (revised in 2023):" After the establishment of a company, shareholders shall not withdraw their capital contributions.
in violation of the provisions of the preceding paragraph, the shareholder shall return the capital contribution withdrawn; if losses are caused to the company, the responsible directors, supervisors and senior managers shall bear joint and several liability with the shareholder."
33. Article 163 of the the People's Republic of China Company Law (as amended in 2023):" A company shall not provide gifts, loans, guarantees or other financial assistance for others to acquire shares of the company or its parent company, except for the implementation of employee stock ownership plans.
For the benefit of the company, by resolution of the shareholders' meeting, or by resolution of the board of directors in accordance with the articles of association or the authorization of the shareholders' meeting, the company may provide financial assistance for others to acquire shares in the company or its parent company, but the cumulative total amount of financial assistance shall not exceed 10% of the total issued share capital. A resolution made by the board of directors shall be adopted by a 2/3 or more of all directors.
If the company violates the provisions of the preceding two paragraphs and causes losses to the company, the responsible directors, supervisors, and senior managers shall be liable for compensation."
34. Article 211 of the the People's Republic of China Company Law (2023 Revision):" If a company distributes profits to shareholders in violation of this Law, the shareholders shall return the profits distributed in violation of the regulations to the company; if losses are caused to the company, Shareholders and responsible directors, supervisors, and senior managers shall be liable for compensation."
35. Article 246 of the the People's Republic of China Company Law (2023 Revision):" If the registered capital is reduced in violation of the provisions of this Law, the shareholders shall refund the funds received by them, and the reduced or reduced shareholder's capital contribution shall be restored to the original state; If losses are caused to the company, the shareholders and the responsible directors, supervisors, and senior managers shall be liable for compensation."
36. Article 191 of the the People's Republic of China Company Law (revised in 2023):" if a director or senior manager performs his duties and causes damage to others, the company shall be liable for compensation; if a director or senior manager has intentional or gross negligence, he shall also be liable for compensation."
37. Article 193 of the the People's Republic of China Company Law (as amended in 2023):" A company may insure liability insurance for the liability of directors for the performance of their duties during their tenure of office.
After the company has insured or renewed liability insurance for directors, the board of directors shall report to the shareholders' meeting the insured amount, coverage and insurance rates of liability insurance."
