The 2023 Revision of China’s Company Law: Four Legislative Objectives, Four Guiding Principles and Seven Key Issues

Abstract

On 29 December 2023, the Standing Committee of the National People’s Congress revised the Company Law, originally enacted in 1993, for the second time, with amendments to take effect on 1 July 2024. The legislator’s intention with the revised version was to continue the reform of state-owned enterprises, this time through the introduction of an audit committee, which in certain companies will take on the functions of the supervisory board. The current version also aims to improve the business environment and encourage market innovation. The aim is to make it easier for companies to enter and exit the market, provide more options for business financing, make the organizational structure of companies more flexible, and reduce costs to corporations. The objective generally remains to better protect company assets as well as shareholders and creditors, in particular by holding not only the founder but also the shareholders more accountable at all stages of the business, from formation to liquidation. Finally, the legislator has sought to promote a sound capital market by improving corporate governance and by better protecting the legitimate rights and interests of investors, especially small and mid-sized investors.