On February 27, 2024, Han Kun Law Offices ("Han Kun"), in collaboration with the American Chamber of Commerce in the People's Republic of China ("AmCham China"), successfully hosted a symposium titled "See Through the Lens of the New Company Law in the FIE's Life Cycle" at Han Kun's Beijing office. Ms. Claire Ma, AmCham China Vice President, attended and delivered the opening remarks, while Mr. Yijun Chao from Han Kun, extended a warm welcome.
The symposium was moderated by Mr. Ray Shi from Han Kun, with Professor Bin Liu, Associate Professor and Doctoral Supervisor of the Institute of Business Law at China University of Political Science and Law, and Deputy Director of the Institute of Business Law, serving as a guest speaker. Han Kun's partners, Mr. Aaron Zhou, Ms. Qimin Zhu, Mr. Ray Shi, and Ms. Ruby Jiang, delivered keynote speeches. Professor Liu shared insights into the legislative intent, motives, mechanisms, and potential practical effects of the recent revision from a scholarly perspective. Following that, Han Kun's partners practicing in various areas, respectively discussed the new Company Law's impact on foreign-invested enterprises (FIE) throughout their lifecycle – from establishment and personnel selection to governance, evolution of control rights, financing, mergers and acquisitions, IPOs, and investor exits. They also addressed new changes in tax compliance and risks during the sustained period of foreign-invested enterprises under the new law. The event concluded with an interactive Q&A session with participants.
Before the thematic presentations and discussions, Ms. Claire Ma and Mr. Yijun Chao, on behalf of AmCham China and Han Kun, respectively, delivered opening and welcome remarks, highlighting the high standards and meticulous preparation by both parties.
Bin Liu, Associate Professor and Doctoral Supervisor of the Institute of Business Law at China University of Political Science and Law, and Deputy Director of the Institute of Business Law.
Professor Bin Liu gave a keynote speech titled "The Comprehensive Revision and Practical Impact of New Company Law". Professor Liu outlined the overall revisions to the 2023 Company Law and delved into specific changes related to capital systems, corporate governance, and other crucial institutional modifications. He emphasized that the revision aimed at maximizing market vitality and the creative capabilities of economic entities, showcasing both grand designs and subtle but equally thoughtful adjustments that deserve a close look and bold experimentation from all market participants.
Afterward, Han Kun's partners addressed various aspects of the Company Law in sequence, focusing on different stages of an FIE.
Firstly, Mr. Aaron Zhou presented on "The 2023 Company Law -- Capital Contribution Obligations and Corporate Governance". He provided a systematic analysis of shareholder capital contribution responsibility and corporate governance, offering practical advice based on his professional experience. Mr. Zhou highlighted the importance of shareholders and directors paying closer attention to shareholder capital contribution arrangements, potential joint liabilities among founding shareholders, and suggested detailed provisions in articles of association and shareholder agreements related to equity forfeiture mechanisms and acceleration of capital contribution timeline. He also discussed due diligence and transaction document considerations in the purchase of existing shares. Moreover, in the context of the strengthened powers and responsibilities of directors, supervisors, executives, controlling shareholders, and actual controllers under the new Company Law, Mr. Zhou explained the fiduciary duties of directors and executives, cautioning controlling shareholders and actual controllers to avoid situations that may constitute "de facto directors" or "shadow directors".
Ms. Qimin Zhu addressed the theme "The Revised Company Law: Responsibilities for Shareholders and Company Officers & Company Control". She discussed the increased legal risks faced by major shareholders, actual controllers, and directors and executives under the new Company Law. Ms. Zhu pointed out that the legal responsibilities of major shareholders, actual controllers, and senior management have significantly increased under the new law, warranting attention. The new Company Law expands shareholder information rights, allows shareholder representative lawsuits to penetrate subsidiaries, introduces new procedures for demanding the repurchase of lost rights, and includes the horizontal legal personality denial system, providing minority shareholders and company creditors with stronger legal means for safeguarding their rights. This, in turn, poses new challenges for actual controllers in ensuring control over the company.
Mr. Ray Shi went on to deliver a speech titled "Go Big and Go Out: How the New Company Law Practically Affects Company's Financing/Acquisition/IPO and Shareholder Exit". Using an imaginary FIE Company A, Mr. Shi illustrated the new possibilities and challenges in the areas of company financing, mergers and acquisitions, IPOs, and investor exits under the new Company Law. He emphasized that the market-oriented direction of the new law is concentratedly showcased by the various new institutional frameworks and autonomous spaces it provides for company financing, mergers and acquisitions, and IPOs. Meanwhile, he highlighted that the new law's regulatory approach with restraint is evident in terms of shareholder exit. As a whole, the new law creates more opportunities for innovation in investment, financing and the capital market, while also raising the standard for for companies and professionals.
Lastly, Ms. Ruby Jiang made a presentation titled "Focus on How New Corporate Law Impacts Tax Compliance and Risk Exposure". She provided detailed insights into aspects such as the extended maximum subscription period for registered capital, the horizontal legal personality denial system leading to expanded tax responsibilities, the clarification of equity and debt contributions resulting in non-monetary contribution tax liabilities, the expanded dissenting shareholder repurchase request right, and the newly added simplified deregistration clause affecting the responsibility for untrue debt commitments. Ms. Jiang highlighted that the new Company Law has introduced certain tax implications for companies, shareholders, related parties, and creditors. Particularly, the requirement of the longest subscription period for registered capital of five years has prompted many companies to consider capital reduction, leading to widespread concern about the tax implications of such reductions. In the backdrop of the new Company Law, companies need to pre-emptively enhance their financial and tax management systems, improve corporate financial and tax governance, and strategically plan for tax optimization within reasonable timelines.
The presentations by Han Kun's lawyers were rich and comprehensible. After the event, the lawyers addressed audience questions, providing practical and professional advice.
Han Kun is a leading full-service law firm in China. Over the years, Han Kun has been widely recognized as a leader in complex cross-border and domestic transactions and compliance matters. Our main practice areas include private equity, mergers and acquisitions, international and domestic capital markets, investment funds, asset management, compliance, banking and finance, aviation finance, foreign direct investment, antitrust/competition, data protection, private client/wealth management, intellectual property, bankruptcy and restructuring and dispute resolution. All our lawyers are graduates of top universities and have extensive experience in complex cross-border transactions and dispute resolution as counsel to both Chinese and foreign clients.
