Unsolved Conflict Issues Under Company Law Framework: A Comparative Analysis Between China and UK Law

Abstract:

China is a traditional civil law country which is adopting the continental law system. Many laws, including the general principles of civil law and contract law, are reproduced from European countries, namely Germany. The Chinese Company law is not the exception, the supervisory board system which is originated from Germany has also been incorporated into Chinese Company Law regime. Instead of simply relying on the German system, the Chinese authority has also made reference to the common law jurisdiction to extract some applicable concepts to enhance the corporate governance standard, different kinds of common law corporate governance measures such as the independent director system and the piercing of corporate veil system have been incorporated into the Chinese legal framework. Nevertheless, despite certain measures have been adopted by the authority, the writer is of the opinion that the aforementioned measures are not capable to address the conflict of interest. In particular, board of directors may be influenced, if not controlled, by controlling shareholders, especially when the company was originally a State Owned Enterprise, and also controlled by insider, for instance the key influential person of the company or the Chinese society. Therefore simply adopting the shareholder primacy approach would not be fruitful for development of the corporate governance standard in China. The writer is of the opinion that the stakeholder approach should be considered by the Chinese authority and the relevant rules should be incorporated into the law to facilitate its implementation. This would alleviate the problem of form over substance such as the supervisory organs simply become a decorative organ and would avoid the decision making organ from improper influence.

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