Amendments to the Shareholders’ Meeting in China

On December 29, 2023 the National People’s Congress revised and approved the sixth amendment to the Company Law of the People’s Republic of China, following many years of deliberation. According to the latest revision of the Company Law, the sixth amendment contributes 112 newly added or revised articles. These amendments address significant aspects, including corporate governance, capital contribution, management responsibilities. Coming into effect on July 1, 2024, these amendments introduce notable changes to the role and powers of shareholders' meetings.

The recent amendments have removed two powers from the shareholders' meeting, specifically the authority to determine the company’s operating strategies and investment plans and the power to review and approve the company’s annual financial budget plan and final accounts plan. These modifications aim to streamline decision-making processes, enhance efficiency, and clarify the responsibilities of the shareholders' meeting within a company.

A significant change grants the shareholders' meeting the ability to authorize the board of directors to decide on the issuance of corporate bonds. Previously, this decision required direct approval from the shareholders' meeting.

There is also a shift in decision-making dynamics for companies with a single shareholder. Now, a sole shareholder can make decisions that would typically fall under the scope of the shareholders' meeting. This flexibility is contingent upon the shareholder's decision being documented in writing, signed or stamped, and deposited with the company.