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What Is the Board of Directors

Updated:2021-10-27 18:40:35    Source:www.tannet-group.comViews:299

Under the Three FIE Laws (namely the Sino-Foreign Equity Joint Venture
Enterprise Law, the Sino-Foreign Cooperative Joint Venture Enterprise Lawand the Wholly Foreign-Owned Enterprise Law) that governed FIEs for nearly four decades, the board of directors used to be the highest decision-making authority of Sino-foreign equity joint ventures (the
“EJVs”) and Sino-foreign cooperative joint ventures (the “CJVs”), exercising powers and functions which would normally be reserved for shareholders in other jurisdictions.

Under the Foreign Investment Law, the Company Law would apply equally to domestic companies and FIEs, including EJVs, CJVs and FICLSs established under the old regime. Accordingly, FIEs established under the Foreign Investment Law will need to be incorporated with a corporate governance structure that is consistent with that set out in the Company Law, and those FIEs already established under the old regime will need to make changes to the existing corporate governance structure to be in line with the Company Law requirements. The shareholder or shareholders’ meeting will be the highest decision-making authority of FIEs and FICLSs, with the power to make decisions on major issues affecting the company such as amendments to the articles of association and increases or reductions of capital. The existing FIEs established before 2020 are granted five years to complete reform of their corporate governance structure and the relevant corporate registration therefor by 1 January 2025. Further, SAMR or its authorised authorities will not process applications for any other registration matter(s) starting from 2025 if the existing FIEs fail to complete their corporate governance reform and the corresponding corporate registration by the end of 2024.

A mainland Chinese company is required to establish a board of directors of between three to 13 members, 51 save that a company with a comparatively small number of shareholders, or which is comparatively small in scale, may consider having one executive director instead of a board of directors. An FICLS must establish a board of directors of between five to 19 members. The term of office for a director of a mainland Chinese company must not be more than three years. The term is renewable upon re-election.

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