25 January 2024

Following three draft revisions since December 2021, the newly revised PRC Company Law (“new Company Law”), as adopted by the Standing Committee of the National People’s Congress, was unveiled on 29 December 2023, and will come into effect on 1 July 2024. This revision is the first thorough revision (as opposed to patching amendments) since the amendments made in 2005 when China sought to modernise its Company Law to adapt to the global market economy after joining the World Trade Organization in 2001.

Almost 20 years have passed since the 2005 revision and China now stands at a new crossroads of economic development. To facilitate the next phase of high-quality economic development, China will have to continue to deepen reform of its corporate system, optimise the business environment, strengthen intellectual property rights protection, and promote healthy development of the capital markets. Amending its Company Law is a fundamental step to achieve such goals.

The amendments to the new Company Law range from those that simply formalise and codify existing judicial rules and regulatory practices to many others that are expected to reshape the operational landscape for companies in China. For foreign investors and foreign-invested companies, the new Company Law will have significant implications in many aspects of foreign investment, be it the changes in incorporation and exit processes, reform of the corporate capital system and corporate governance, or the enhanced liabilities of directors, supervisors, and senior executives.

This article sets out our first insights on key aspects of the new Company Law that may be more pertinent to foreign investors.

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