On 29 December 2023, China enacted its significantly revised Company Law. It now comprises 266 articles with far-reaching changes in many areas and comes into force on July 1, 2024. Another important deadline is 31 December 2024, by which older
foreign companies must adapt their organizational form and other aspects. The revised Companies Act includes, among other things:
. Revised capitalization rules, including a 5-year deadline for capital contributions and transitional rules for existing companies; publication of registered and actually paid-up capital, internal audit requirement for paid-in capital and legal consequences for late payment; right of third party creditors to demand earlier payment of capital; use of reserves to cover losses, business expansion or capital increase;
. Changed internal structure, including an optional „audit committee“ on the Management Board; possible structure of companies without a supervisory board/supervisor;
. Mandatory participation of employee representatives, including in the management board of companies with more than 300 employees; and e.g. during corporate restructuring;
. Revised rules for share transfers, including waiver of pre-emption rights; enforcement of share transfers; liability of the acquirer; right of shareholders to require the company to purchase their shares in certain cases;
. Liability of legal representatives, directors, officers, controlling shareholders; in relation to related transactions; during the incorporation process; in relation to the unlawful distribution of profits;
. Formalities, e.g.: Resignation of the legal representative, electronic committee decisions, invalidity of shareholder/supervisory board resolutions, mandatory extension of the term of office of directors/supervisory board members, process of reduction of share capital, liquidation process.
Sebastian Wiendieck, lawyer and partner of Rödl & Partner China, presents the main changes of the new Company Law, including the mandatory obligations for for older companies to revise their organizational form, organizational structure, etc.