On 29 December 2023, the Standing Committee of the National People's Congress of PRC released the latest amendments to the Company Law (new Company Law), set to take effect on 1 July 2024. This revision introduces substantial changes across various areas, including corporate governance and management duties and liabilities. This update looks at key amendments which potentially impact employment management.

Employee Representative Congress and democratic management

Although the existing Company Law has mandated that companies implement democratic management through an Employee Representative Congress or other methods, this provision has in practice been overlooked. Aiming to reinforce the significance of democratic management, the new Company Law introduces a new requirement for companies to establish a democratic management "system" primarily through the Employee Representative Congress.

In addition, the existing Company Law has set out specific situations where companies are required to consult with employees through the Employee Representative Congress or other methods. These situations include deciding on restructuring and major operational issues, and establishing significant internal policies. The new Company Law expands this scope by adding two more scenarios that necessitate employee consultations: filing for liquidation and applying for bankruptcy. This update brings the Company Law into alignment with the provisions in the Employment Contract Law.

Employee representative on the board of directors

The new Company Law requires that companies with at least 300 employees must include employee representative(s) on the board of directors, unless the company's board of supervisors already includes employee representative(s). Under the existing Company Law, this requirement only applies to companies with state-owned interests.

In addition, the new Company Law stipulates that an employee representative on the board of directors can serve as a member of the audit committee, which, constituted by directors, is a novel mechanism introduced by the new Company Law as an alternative to the board of supervisors or individual supervisor(s). This signifies that an employee representative can exercise their supervisory and auditing rights by actively participating in audit processes.

Management duties

The existing Company Law generally stipulates that directors, supervisors, and senior management owe the company a duty of loyalty and a duty of diligence, without clearly defining the implications and requirements of these duties. The new Company Law fills this gap by providing explicit definitions for the two duties:

  • the duty of loyalty requires directors, supervisors, and senior management to take measures to prevent conflicts between their personal interests and those of the company. They are prohibited from leveraging their positions to gain improper benefits.
  • the duty of diligence mandates that directors, supervisors, and senior management perform their roles with reasonable care that is typically expected of managers, in the best interest of the company.

It is also worth noting that the new Company Law extends the application of these two duties to controlling shareholders and actual controllers of a company who do not serve as directors but are involved in the actual execution of company affairs.

Furthermore, the new Company Law provides more detailed regulations for some restrictive provisions under the duty of loyalty, such as restrictions on self-dealing or related-party transactions, seeking company business opportunities, and engaging in competition. The primary enhancements are:

  • broadening the subjects of these regulations from directors and senior management to now include supervisors;
  • introducing the procedural requirement for disclosing and reporting such matters to the board of directors or shareholders' meeting;

establishing the board of directors as the eligible approving body, a role previously reserved only for the shareholders' meeting or general meeting of shareholders.

Management liabilities

The existing Company Law only stipulates that directors, supervisors, and senior management are liable for compensation when they cause losses to the company due to violations of laws, regulations, or the company's article of association.

The new Company Law introduces a new provision that directors or senior management will be jointly liable with the company if they cause damage to others due to intentional acts or gross negligence in the performance of their duties. This implies that directors and senior management are now subject to a heightened level of personal accountability. They are not only responsible for the company's losses due to their misconduct but also for the damages caused to third parties.

Key Takeaways

On one hand, the new Company Law strengthens the protection of employee rights by ensuring their representation in the company's governance and democratic management system. On the other hand, it amplifies the duties and liabilities of management, presenting new challenges in the appointment and carrying out of duties of directors, supervisors, and senior executives. Employers should make necessary adjustments in line with the new Company Law's requirements. This could include setting up an Employee Representative Congress, incorporating employee representatives into the board of directors, and ensuring that all management personnel are fully aware of their duties and responsibilities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

中国：《公司法》修订及其对员工的潜在影响

2023年12月29日，全国人大常委会通过了最新修订的《公司法》（“ 新《公司法》”），于2024年7月1日起施行。此次修订在公司治理、管理人员的义务与责任等多个方面做出了重大新增或修改。本期更新聚焦于可能会对雇佣管理造成影响的条款内容。

职工代表大会与民主管理

虽然现行《公司法》中就有规定，要求公司通过职工代表大会或者其他形式实行民主管理。但该规定在实践中很难说得到了重视。新《公司法》新增了公司应建立健全以职工代表大会为基本形式的民主管理“制度”的要求，旨在强化民主管理的重要性。

此外，现行《公司法》规定了公司应当通过职工代表大会或者其他形式听取职工的意见和建议的特定情形，包括决定改制以及经营方面的重大问题、制定重要的规章制度。新《公司法》在前述应当征询职工意见的事项范围中新增了两项情形：解散和申请破产。这使《公司法》与《劳动合同法》中的规定相衔接。

董事会中的职工代表

新《公司法》要求职工人数三百人以上的公司应当在董事会中包含职工代表，依法设监事会并有公司职工代表的除外。在现行《公司法》下，该要求只适用于部分国资公司。

此外，新《公司法》还规定公司董事会成员中的职工代表可以成为审计委员会成员。审计委员会是新《公司法》中引入的一个新机制，由董事组成，可以替代监事会或监事的职权。这意味着职工代表可以通过参与审计来行使监督与审计的权利。

管理者义务

现行《公司法》仅仅笼统地规定董事、监事、高级管理人员对公司负有忠实义务和勤勉义务，没有对这两类义务的内涵与要求作出明确界定。新《公司法》弥补了这个空白，对这两类义务作出的明确定义：

  • 忠实义务要求董事、监事、高级管理人员应当采取措施避免自身利益与公司利益冲突，不得利用职权牟取不正当利益。
  • 勤勉义务要求董事、监事、高级管理人员执行职务应当为公司的最大利益尽到管理者通常应有的合理注意。

还值得注意的是，新公司法将这两项义务的适用范围延伸到了不担任公司董事但实际执行公司事务的控股股东和实际控制人。

此外，对于忠实义务项下的一些限制性规定，例如限制自我交易或关联交易、谋取公司商业机会、同业竞争等，新公司法做出了更为细致的规定，主要体现在：

  • 将适用主体从董事和高级管理人员扩大到了包含监事；
  • 明确了应当向董事会或者股东会报告的程序性要求；

新增董事会为批准机关（原先只有股东会或股东大会）。

管理者责任

现行《公司法》仅规定了董事、监事、高级管理人员在违反法律、行政法规或者公司章程的规定等情形下给公司造成损失时，应当对公司承担赔偿责任。

新《公司法》增加了一条规定，董事、高级管理人员执行职务时存在故意或者重大过失，给他人造成损害的，董事、高级管理人员应当与公司一同承担赔偿责任。这意味着董事和高级管理人员将承担更高水平的个人责任。他们不仅要对因其不当行为造成的公司损失负责，还要对给第三方造成的损害负责。

要点总结

一方面，新《公司法》通过保障职工代表在公司治理与民主管理体系中的参与，强化了对员工权益的保障。另一方面，新《公司法》也加重了管理者的义务与责任，对于以后董事、监事、高管的任命与履职增添了挑战。我们建议各雇主根据新《公司法》的要求及时作出必要调整，例如设立职工代表大会，在董事会中新增职工代表，并确保管理人员充分知晓其义务与责任。

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.