The Company Law (2023 Revision) must match with the Civil Code. On the one hand, because the Company Law is systematically subordinate to the Civil Code, its internal value and external normative system should highly coordinate with the Civil Code. In addition, the “General Part” Book of the Civil Code provides nearly 30 direct general provisions on legal persons and for-profit legal persons. As a result, the Company Law is subject to a kind of clear and direct limitation within this scope. Accordingly, it may incorporate much more detailed provisions but shall contain no conflicting provisions. On the other hand, the Civil Code has adopted a special open system model, with special space and flexibility for other laws to match with it. Besides, since the Company Law and other specific laws were enacted relatively early and have evolved independently for a long time, they have a space of autonomy to some extent in practice. From the perspective of legislative matching relationship, the Company Law should be revised based on five circumstances by adopting different matching strategies according to different matching requirements.
The Third Plenary Session of the 20th Central Committee of the Communist Party of China has proposed “deepening reform of the business registration system based on subscribed registered capital” as a crucial strategic initiative. This reform aims to strengthen corporate credit foundations, enhance transaction security, stimulate business investment, promote high-quality corporate development, and implement the core value system established by the Company Law (2023 Revision). Corporate credit, comprising capital credit, assets credit, and personality credit, serves as the material foundation for high-quality corporate development. However, the current system faces significant challenges due to vulnerabilities in three key areas: capital credit, asset credit, and personality credit. This study proposes a comprehensive framework with several crucial dimensions for reform implementation. First, it is necessary to rationalize shareholders’ capital subscription commitments by enhancing the presumptive validity of public disclosure thereof, facilitating a smooth transition to the new five-year maximum subscription period, implementing flexible administrative guidance, and strengthening judicial remedies. Second, it is essential to reinforce the justiciability of shareholders’ paid-in capital obligations through multiple mechanisms: improving the rule for accelerated maturity of capital contribution obligations, strengthening civil liability of shareholders for defective capital contributions, enhancing the supervisory function of joint and several liabilities among founding shareholders, establishing presumptive rules for full-chain joint and several liability in multi-tier transfers of defectively contributed equity, and enhancing the shareholders’ obligations on paid-in capital guarantee for transfer of equities corresponding to subscribed capital but not paid-in capital. Third, it is crucial to enhance transparency in capital subscription and contribution information through four major disclosure channels: business license documentation, articles of association filing, registration authority records, and the National Enterprise Credit Information Publicity System. The nature of corporate registration is a public information service that provides corporate registration information to the public. The disclosure of registered capital information has the effect of presumptive validity of public disclosure. It is recommended to convert all filing information into registration information to achieve a comprehensive integration of corporate registration matters and filing matters and to classify registration information into three categories: absolutely necessary, relatively necessary, and optional registration items.
Modern company law regards shareholders’ rights protection as its core legislative goal, but equity protection needs to be achieved through control regulation. The widespread existence of corporate control relationship suggests that control interests can constitute an implicit incentive and that the control relationship has a dual effect on corporate governance. The traditional legislation that adopts a regulatory strategy of “mandatory prohibition and ex-post accountability” for the pursuit of control interests is inefficient. Especially due to the lack of positive guidance, there is a clear institutional imbalance. The Company Law (2023 Revision) demonstrates the orientation of balancing and regulating corporate control, adjusting the institutional functions of the company law by expanding the legislative purposes, meeting the control needs of controllers through diversified equity allocation, enhancing the effectiveness of corporate governance through flexible organizational structures, and ensuring the appropriateness of control behavior through a comprehensive accountability mechanism. In the future, control should be further transformed from facts to rights, its identification rules and power system should be improved, the limits of judicial intervention in commerce should be clarified to achieve prudent accountability, and attention should be paid to procedure-guided regulatory strategy.
The directors’ duty of care is an inherently abstract legal concept, requiring directors to perform their duties with due care, loyalty, and good faith. To guide directors to perform their duties diligently and conscientiously, the Company Law (2023 Revision) sets out directors’ duty of care and stipulates that directors shall meet the general standard for the duty of care when performing their duties. However, imposing broad liability on directors for corporate loss caused by the breach of this duty is a disregard for the intricate dynamics of corporate governance and will give rise to a chilling effect or expelling effect. It may even have a certain impact on economic development. In view of this, the jurisprudential interpretation of the Company Law (2023 Revision) should further clarify the behavior standard for directors. Judges should adhere to the general behavior standard for the duty of care while exercising measured discretion in casespecific adjudication, thereby working out a set of judicial review standards aligned with commercial realities. A good system of directors’ duty of care should embrace the binary structure of behavior standards and review standards and acknowledge the different roles and responsibilities among directors. Corporate entities should generally bear the risks arising from directors’ performance of duties, and the director is liable for compensatory damages exclusively under limited conditions.
Following the Company Law (2023 Revision), substantial changes have been made to many important legal regimes, necessitating clarification through interpretative analysis. In the field of corporate litigation, the Company Law (2023 Revision) has taken a clear stance in strengthening the protection of minority shareholders’ rights, reflecting a broader shift in litigation philosophy from “creditor primacy” to “investor primacy.” This shift underscores an adjustment in the balancing of interests among various stakeholders under the Company Law (2023 Revision). On the validity of accelerated shareholder capital contribution, there is significant debate between the pooling rule theory and the direct repayment theory. In this context, the nature of the accelerated mechanism should be interpreted as a special case of creditors’ subrogation rights, favoring the application of direct repayment. With regard to the liability of directors, the Company Law (2023 Revision) has established a systematic framework for director liability, including liabilities related to shareholder capital contributions, capital operations and outflows, liquidation obligations, liability to third parties, and general liability for breaches of fiduciary duties. This framework further clarified director liability at the capital inflow stage. Although the issue of reverse piercing of the corporate veil is not explicitly codified in the Company Law (2023 Revision), the Supreme People’s Court, in the selected Q&A on its legal consultation portal, has acknowledged its applicability in scenarios of corporate personality confusion. However, this Q&A should not serve as a basis for expanding the scope of application of the reverse piercing through analogical reasoning. In Chinese laws, reverse piercing of the corporate veil is merely an effect rather than an independent behavioral norm.