Navigating the 2023 Chinese Company Law Amendments and their Impact on Insolvency

After three rounds of review and public comment, the amendments to the Company Law of the People’s Republic of China were approved by the Standing Committee of the National People’s Congress in December 2023 and will go into effect on 1 July 2024. This marks the first amendment to the Company Law of the PRC since 2018 and serves as a comprehensive overhaul, expanding the Company Law to 266 articles. The revision spans a range of issues, including corporate governance, shareholder rights, capital contributions, the establishment of companies, company liquidation, and the ability to issue different share classes, among others. All joint ventures and wholly foreign-owned enterprises (WFOEs) must revise their company documents to comply with the new provisions.

The amendments place greater obligations on company officers, including directors and senior management, while clarifying the duties of loyalty and diligence. While the provisions introduce a number of important changes, their impact will be most significantly felt by management when companies become insolvent and insufficient funds are available to satisfy creditors, including employees. Therefore, this article first addresses some of the general changes to corporate governance that are important to all foreign investors in Part II, before specifically discussing changes to liquidation in Part III. In the fourth section, the update discusses changes to the Civil Procedure Law recently passed that establish broad jurisdiction for Chinese courts. Understanding jurisdiction is important both in ensuring management meets their fiduciary duties and because the changes may impact cross-border insolvency.