Directors' Duties Under Chinese Law: A Comparative Review

Abstract:     
The terms "one-tier-board system" and "two-tier-board system"
are customarily used to classify corporate governance systems of
different jurisdictions. There are also other species of systems
that do not strictly fit in any of the two major descriptions.1
Nevertheless, it has been the trend in the development of all
systems that the centre of corporate governance shifts from the
members' meeting to the board of directors. Nowadays, the
powers of corporate management are basically conferred on the
board of directors in most systems.2 Directors thus become
crucial to the commercial performance of corporations and are
held accountable for the conduct and activities of corporations.
Consequently, directors have been subject to increasing legal
responsibilities.

China is a latecomer to corporatisation. In China, corporatisation
has been a means of facilitating the country's enterprise reform
- reforming state owned enterprises into modern corporations.3
The enactment of the 1993 Company Law of the People's
Republic of China (the 1993 Company Law) was one of the
products of China's enterprise reform efforts. The 1993 Company Law was amended twice since its coming into effect.4
An advantage of being a latecomer is that China has the
opportunity of assimilating relevant and useful heritage and
incorporating advanced experience into its own practice. Indeed,
China has endeavoured to fully take such advantage in the
process of reforming its economic structure and modernizing its
legal system. Corporate legislation and practice in China
particularly illustrate this point. The 1993 Company Law is an
outcome of both common law and continental law influences.5
Corporate practice in China in the past ten years has further
demonstrated that the Chinese have made great efforts to build
up a corporate system which is close to the standard practice of
other influential corporate systems, and, in the meantime, is
applicable to its particular social and economic situations.6 It is
therefore interesting to have a close look at the Chinese treatment
of directors' duties, which is a combination of the strengths of
different systems. This article attempts to provide readers with an
overview of directors' obligations in China from a comparative
perspective in order to draw the readers' attention to the current
development of Chinese corporate legislation and practice, and
how it affects the duties of company directors.

Number of Pages in PDF File: 26

Keywords: Corporate Governance, Comparative Corporate Governance

working papers series