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Legal Representative Amendments 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, etc. Coming into effect on July 1, 2024, these amendments will introduce pivotal changes to the role and liability of legal representatives in China under Articles 10 and 11, impacting all companies within the country, including foreign invested enterprises.

Key among the amendments is the expansion of the eligible pool for legal representatives. Unlike the previous restriction to the chairman, executive director, or general manager, the new law allows any director or manager actively involved in executing company affairs to assume the role of legal representative. This flexibility not only offers companies greater choice but also provides foreign investors with more options in designating their top representatives.

The exit mechanism for legal representatives has also been clarified. If a director or general manager serving as the legal representative resigns, the resignation is now deemed simultaneous with their departure from the position of the legal representative. Companies are mandated to appoint a new legal representative within 30 days.

A significant focus of the amendments is the explicit delineation of the legal representative's responsibilities and liabilities. The legal representative now bears the consequences of civil activities conducted in the company's name, and any restrictions on their powers outlined in the articles of association or shareholders' meeting cannot be enforced against bona fide third parties.

The changes aim to enhance corporate governance, transparency, and adaptability in the appointment of legal representatives. The new legal representative dynamics mark a significant step toward reforming China's corporate governance framework and fostering a more dynamic and flexible business environment.


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