Corporate Organ in China Essay Example | Topics and Well Written Essays - 2000 words

Corporate Organ in China - Essay Example The PRC Company Law 2005 has enhanced corporate governance, transparency and minority shareholders protection. The terms and conditions for the establishment of the liability companies and joint stock limited entities have been softened. The Company Law 2005 has barred the directors and management of the limited company from the violation and contradiction of their official duties and responsibilities towards the company. According to the law, in case of any mismanagement or financial manipulation, it is the controlling shareholder, director or senior manager, who is personally responsible for their failure to handle conflict of interest situation. The approach has been responsible for the lifting of corporate veil. The directors of Chinese public listed companies have been barred from participation in any matter, which has direct relevance with tier authority, based on interest. The approved PRC Company Law has encouraged the accountability process, and has recommended strong action against the controlling shareholder, if found guilty of abusing the profits and benefits of limited liability. The previous PRC Company Law failed to protect the legitimate and financial interest of minority shareholders. ... In case 1 if the company disapproves the disposal of its major assets, or in case if the company is involved in any merger or acquisition deal, the minority shareholder has the right to pressurize the company for the purchase of their shares. The minority shareholder also has the legal authority to take judicial action against the directors, if the directors are involved in embezzlement of funds, or breach of fiduciary duties. The PRC Company Law has authorized the .3% of the total shareholders to request the Board of directors, and seek their opinion and consideration towards the submitted proposals and agenda. The shareholders also have the right to call upon Board of directors meeting in case of violation of an article or law is observed. The PRC Company has further authorized 10% of the shareholders to seek liquidation of the company through submission of a petition in People's Intermediate Court2. The shareholders have the right to access and secure company's corporate records, accounts and articles. Limited Liability Companies: Gains for Minority Shareholder The PRC Company Law has abolished the previously approved system, according to which the company intending to launch their subsidiary were to contribute 50% ceiling on such investment activities. The PRC Company Law has encouraged the companies to establish their subsidiaries unconditionally3. The company law has further encouraged the involvement and participation of the local shareholders by increasing the non cash contribution from 20% to 70%. Even those shareholders having intellectual property rights have the grant to contribute and participate in shares transaction. However condition has been