At a glance
- Amendments to the Chinese Company Law were adopted on 29 December 2023, and came into force on 1 July 2024.
- Some of the revisions impact human resources (HR) management and interplay with topics such as protection for employee rights and democratic management, and obligations for directors, supervisors and senior executives (duty of loyalty and duty of diligence) among others.
- A more detailed account of the amendments to the 2023 Company Law can be found here.
On 29 December 2023, the Standing Committee of the National People’s Congress of the People’s Republic of China (PRC) adopted an amendment to revise its Company Law, with the revised law (2023 Company Law) taking effect from 1 July 2024.
Some of the revisions impact HR management and interplay with topics such as protection for employee rights and democratic management, and director, supervisor and senior executives' obligations, among others. The main takeaways for HR include:
- An enhanced protection for employee rights and employee participation has been created.
- The 2023 Company Law highlights the status of employees as important stakeholders in corporate governance.
- It addresses employees’ collective rights to participate in the company’s democratic management.
- A company should establish and improve its democratic management system with the employee representative congress (ERC) as the fundamental form and carry out democratic management through the ERC or any other forms.
- For a company with more than 300 employees, the board of directors must include employee representative director(s), unless the company has established a board of supervisors which includes employee representative supervisor(s).
- Employees are granted the right to rest and leave through collective contracts.
- The 2023 Company Law includes heighted obligations for directors, supervisors and senior executives.
- A duty of loyalty:
- The 2023 Company Law list the prohibited activities which could be interpreted as in scope for the duty of loyalty among directors, supervisors, and senior executives.
- The duty of loyalty prevents directors, supervisors, senior executives, and de facto directors from engaging in competing business without approval.
- A duty of diligence:
- The duty of diligence should apply throughout the lifecycle of a company, from its establishment to deregistration.
- Companies may want to know whether they can unilaterally terminate the employment of an employee in a director, supervisor, or senior executive role by reason of their violation of the duty of loyalty or duty of diligence. This would need to be reviewed case by case.
A more detailed account of the amendments to the 2023 Company Law can be found here.
More to explore
