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A Comparative Study of the Fundamental Elements of Chinese and English Company Law

Published online by Cambridge University Press:  17 January 2008

Kingsley T. W. Ong  and
Colin R. Baxter
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Extract

The People's Republic of China (hereafter “PRC” or “China”) is set to attain a leading position in the world economy. Headlines such as “the giant awakes” have been in common usage for some time.1 European businesses have come to realise that China cannot be ignored. Their legal advisers should follow suit. This explains the motivation for this article.

Type
Articles
Information
International & Comparative Law Quarterly , Volume 48 , Issue 1 , January 1999 , pp. 88 - 126
Copyright
Copyright © British Institute of International and Comparative Law 1999

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References

1. E.g. Singapore Sunday Times, 09 1996, p.1Google Scholar; The Economist, 28 11 1992, p.1.Google Scholar

2. This is also the case in Japan.

3. Masaji, Chiba (ed.), Asian Indigenous Law in Interaction with Perceived Law (1986), London.Google Scholar

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6. After Russia and Canada respectively.

7. Presently the world's most populated nation, with 1,175.36 million people—accounting for a fifth of the world's population (The Economist, Pocket World in Figures (1996)).Google Scholar

8. Japan is the world's second largest economy after the US, with a GDP of US$3,927 billion: ibid.

9. The Economist, 28 11 1992, p.3, predicted China's economy will match Japan's performance by 2002. See infra n.12.Google Scholar

10. The US and EC blocked China's bid to rejoin the GATT and WTO in April 1996. This is partly attributed to worries caused by China's impressive annual growth rates and economic potential in the 21 st century: Mo, J. S., “China, the World Trade Organisation, and the Agreement on Trade-Related Investment Measures” (1996) 30 J. World Trade 89.Google Scholar

11. China's average annual growth in real GDP from 1985 to 1993 was 9.2%, compared with the 23% growth of US and the 2.0% growth of the UK: The Economist, op. cit. supra n.7.

12. The Economist, 17 08 1996, p. 11Google Scholar predicts that China's economy will overtake the US in less than 20 years. According to World Bank projections, China's net imports in the year 2002 will be US$639 billion, compared to US$521 billion for Japan. Under similar projections, China will have a gross domestic product of US$9.8 trillion in 2002, compared to US$9.7 trillion for the US (cited in Skeen, D. D., “Can Capitalism Survive under Communist Rule? The Effect of Hong Kong's Reversion to the People's Republic of China in 1997” (1995) 29 International Lawyer 175, 206).Google Scholar For a further discussion, see Hu, P. S. P., “Taiwan, Hong Kong, and China: The Chinese Productivity Triangle” (1993) 27 International Lawyer 523.Google Scholar

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14. Idem, pp.93 and 112.

15. Although the Scottish legal system differs from that of England (see Thorpe, S. W. and Levy, J. (Eds), Company Law in Europe (3rd edn, 1994), p.520, for a discussion on the principal differences)Google Scholar, Scottish company legislation is relatively similar in substance. The differences between Scottish and English law will diminish even further as EC law continues to increase in importance: idem, p.521. However, because it remains arguable that differences still exist between the two systems, it is necessary to make clear that the term “UK law” will refer only to the law of England and Wales, unless otherwise stated.

16. Drury, and Xuereb, , op. cit. supra n.4, at p.4.Google Scholar

17. Jones, et al. Law of the PRC iii (28 12 1993, unpublished ms.)Google Scholar (cited in Benson, T. R., “Taking Security in China: Approaching US Practices?” (1996) 21 Yale J.I.L. 183, 188Google Scholar). See also Liang, , “Explicating ‘Law’: A Comparative Perspective of Chinese and Western Legal Culture” (1989) 3 J. Chinese Law 55Google Scholar, cited in Benson, ibid: “Law is an inadequate translation of the underlying culture in China where law is not even conceptualised as the basic organising norm for society”.

18. This was in line with the Marxist theory that production capital belonged to the people of China.

19. Wang, Guiguo, China's Company Law: The New Legislation (1994), p.1.Google Scholar

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22. The Economist, 28 11 1992, p.6.Google Scholar

23. Undeniably, China experienced turbulent events in 1989 (Tiananmen massacre), which have caused many people outside China to fear that the decade-long policy of opening to the outside world might be reversed. However, ProfessorDon Wallace, observes that “China is embarked in an irrevocable course of modernisation”: Rui, M. and Wang, G. (Eds), Chinese Foreign Economic Law: Analysis and Commentary (1990), p.xxiii.Google Scholar Also see the remarks of Lee Kuan Yew, Senior Minister and former Prime Minister of Singapore, infra Part VII.

24. In 1978 China's exports totalled a mere US$9.8 billion. By 1994 they were US$121 billion, making China the eighth largest exporter of manufactured goods in the world: The Economist, 17 08 1996, p.16.Google Scholar Between 1979 and 1989 the total investment portfolio amounted to US$170.6 billion and over 20,000 foreign investment enterprises were established: Johnson, Stokes and Master, , China Prospectus, p.2.Google Scholar

25. PRC Joint Venture Law, Art.1.

26. PRC Constitution, Art.18. Art.18 establishes the basis for the lawful existence of foreign investment in a country where “the basis of the socialist economic system is socialist public ownership of the means of production” (Art.6). It further provides the constitutional basis for later laws and regulations concerning foreign investment in China and their constitutional protection.

27. For example, the National People's Congress adopted the Law of the PRC on Industrial Enterprises Owned by the Whole People on 13 Apr. 1988. To implement this law, the State Council further promulgated the Regulations for Converting the Status of the Enterprises Owned by the Whole People on 23 July 1992. These laws ensured a legal framework governing State-owned enterprises. China also adopted laws and regulations governing enterprises with foreign investment like the Chinese–foreign equity joint ventures, Chinese–foreign contractual joint ventures and wholly foreign-owned enterprises. For privately owned enterprises, the State Council promulgated the Provisional Regulations of the PRC on Private Enterprises on 25 June 1988. In 1992 Deng Xiaoping visited Southern China to promote further economic reforms and to advocate the establishment of a market economy in China. Following this, the State Economic Structure Reform Commission of the State Council took a major step by promulgating the Opinion on the Standardisation of Joint Stock Companies on 15 May 1992. This Opinion provides for the establishment of limited liability companies and joint stock companies in China and made it possible for Chinese companies to be listed on stock exchanges outside China. Local governments like Shenzhen Municipality and Guangdong Provincial People's Government have also adopted provisions in respect of business enterprises: Wang, op. cit. supra n.19, at p.2.Google Scholar

28. In reviewing PRC's current developments in 1993, prior to the enactment of the PRC Company Law, Wang, Guiguo, Business Law of China—Cases, Texts and Commentary (1993), p.xxxviGoogle Scholar, accurately anticipated the adoption of the legislation by the end of 1993. The urgency catalysed the enactment of the Company Law by the Standing Committee of the National People's Congress, instead of the full Session of the Congress, which is the more appropriate organ for enacting important laws such as this. (Wang (1994), ibid). For a further background discussion on the situation before the enactment of the PRC Company Law, see Fu, Tingmei, “Legal Person in China: Essence and Limits” (1993) 41 A.J.Comp.L. 261.Google Scholar

29. Zhonghua Renmin Congheguo Gongsifa (The Corporation Law of the PRC)(enacted 29 12 1993).Google Scholar

30. Art.1.

31. Friedmann, W., Legal Theory (5th edn, 1967), p.556.Google Scholar

32. Dicey, , Law of the Constitution (8th edn), pp.87–88.Google Scholar Cited ibid.

33. Marx believed that there would be no need for law in the ideal classless communist society. Collins, (1982)Google Scholar, Jessop, (1990)Google Scholar, chap.2, Fine, (1984)Google Scholar, Pierson, (1986) chap.7Google Scholar, Hirst, (1986), chaps.1–4 illustrate the mass of different opinions about what exactly is the true Marxian theory of law.Google Scholar For Chinese works, see Liu, Han (1988), pp.37–74, 95–110Google Scholar, Buyun, Li (1988), chap.1Google Scholar, Zhang, Youyu (1989), chap.2Google Scholar, Zhao, Zhenjiang (1990), chaps.3, 4.Google Scholar

34. Chiam Boon Keng, Registrar of the Supreme Court of Singapore, cited in Sia, Sau Hura, Business Firms and Companies, 4th edn. (1996), Singapore, p 5.Google Scholar

35. Hu, Yebi, China's Capital Market (1993), pp.67–68.Google Scholar This view was endorsed by Premier Li Peng in 1991. See Cheung, , op. cit. supra n.20, for more theories and arguments.Google Scholar

36. Sobel, M. A. and Zhang, D. “The Evolution of Foreign Secured Lending in China: Socialism and Property” (1989) Vol. 52 No. 3 Law & Contemp. Probs. 185.Google Scholar

37. For further references to discussion on this issue, see Fu, , op. cit. supra n.28, at p.282Google Scholar, n.106. For further discussion on property rights of legal persons prior to the CL, see idem, pp.282–289. Fu provides a comprehensive discussion of the law of Chinese legal persons immediately prior to the enactment of the CL.

38. Guo, Feng, “Gufenzhi Qiye Suoyouquan Wenti de Tantao” (Discussion of the Issue of Ownership Right of Joint Stock Companies) (1988) 3 Zhongguo Faxue 3.Google Scholar

39. Wang, Liming, “Lun Gufenzhi Qiye Suotouquan de Erchong Jieguo” (On the Two-Tier Structure of Ownership Rights of Limited Companies) (1989) 1 Zhongguo Faxue 47.Google Scholar

40. Tong, Rou and Shi, Jichun, “Woguo Quanmin Suoyouzhi ‘Lianquan Fenli’ de Caich anquan Jieguo” (The Property Rights Represented by the Separation of Ownership and Management in Our State Ownership System) (1990) 3 Zhongguo Shehui Kexue 159.Google Scholar

41. CL, Art.4.

42. See Macaura v. Northern Assurance Co. [1925] A.C. 619.Google Scholar

43. See Png, C. A., “Some Concerns About Chinese Company Law” (1996) 17 Co. Lawyer 199, 200–201, for a further discussion of the uncertain nature of property rights in the PRC.Google Scholar

44. See CL, Arts.189–198.

45. Sia, (1994), p.18.Google Scholar

46. Wang, , op. cit. supra n.19, at p.2.Google Scholar

47. Wang, , op. cit. supra n.28, at p.147.Google Scholar

48. Png, , op. cit. supra n.43, at p.200.Google Scholar

49. Sia, , loc. cit. supra n.45.Google Scholar

50. Art, R. C. and Gu, M., “China Incorporated: The First Corporation Law of the People's Republic of China” (1995) Yale J.I.L. 273, 274–275.Google Scholar

51. Idem, p.275.

52. However, see Song, (1995), p.73, who believes that the CL is to work in conjunction with old laws, rather than repeal or replace them.Google Scholar

53. CL, Art.18.

54. CL, Art.229. Companies existing before the enactment of the CL were expected to comply with it by the end of 1996, under Art.1 of the Notice of State Council Concerning the Standardisation of the Former Established Limited Liability Company and Shareholding Company According to the Company Law of PRC (promulgated by State Council on 3 July 1995, and effective as of the same day).

55. Wang, loc. cit. supra n.19. Official statistics show that the number of registered companies in China has grown from 486, 700 in 1992 to 1,448,000 in 1994, per Wu, op. cit. supra n.21, cited in Png, , op. cit. supra n.43, at p.199.Google Scholar

56. E.g. the Law provides for stock with par value and dividends; shareholders with limited liability, pre-emptive rights, and the power to elect directors; and directors with fiduciary duties and the power to appoint officers.

57. CL, Art.1.

58. Singapore Straits Times, 10 08 1996.Google Scholar

59. Cohen Committee, Cmnd 6659 (1945).Google Scholar

60. Birds (1995), pp.1–4.Google Scholar

61. “Relevant departments” authorised by the State Council would be the State Administration of Industry and Commerce (SAIC, an organisation analogous to the Companies Registry in the UK) or the Ministry of Foreign Trade and Economic Cooperation (MOFTEC, formerly known as Ministry of Foreign Economic Relations and Trade, MOFERT) for foreign-owned companies (Khattar, Wong & Partners, Investing in China (07 1993), p 2).Google Scholar

62. “Relevant departments” authorised by the provincial government would be the Provincial Administration of Industry and Commerce: ibid.

63. CL, Art.77.

64. The prerequisites for establishing a company are set out in Arts.19 (LLCs) and 73(JSCs). See the Administrative Regulations of the PRC Governing the Registration of Legal Corporations, Art.7, promulgated 3 June 1988 by the State Council. See also the Administrative Regulations of the PRC Concerning the Registration of Corporations (promulgated 1 July 1994 by the State Council).

65. CL, Arts.94–95.

66. Or trading certificates in the case of plcs.

67. CL, Art.11. Companies may circumvent this regulation of operations by investing in another company. But any company is prohibited from investing more than 50% of its assets in another company (Art.12).

68. CL, Arts.84–85.

69. CL, Arts.86–91.

70. See Friedmann, op. cit. supra n.31, at chap. 34.

71. CL, Art.2.

72. Some states call public companies “capital” companies. “Joint stock” is the expression the UK used till 1862.

73. Art, and Gu, , op. cit. supra n.50, at p.291.Google Scholar

74. CL, Art.99.

75. The Chinese term for limited liability company is You Xian Ze Ren Gong Si, and Gu Feng You Xian Gong Si for joint stock company.

76. CL, Art.20. These correspond to French private company law, which was the same in the UK until 1980.

77. Companies Act 1985, s.24.

78. S.I. 1992, No.1699, effective from 15 July 1992.

79. Wang, , op. cit. supra n.19, at p 3.Google Scholar

80. Art, and Gu, , op. cit. supra n.50, at p.292. However, allowing JSCs to have any number of shareholders does not imply a lack of control. All JSCs must satisfy conditions laid down in CL, Arts.73, 75, 79(5).Google Scholar

81. CL, Arts.74, 83.

82. CL, Art.74.

83. CL, Art.147.

84. £1 = approx. RMB 13. The Chinese term for RMB is yuan.

85. CL, Art.23. Scientific, technological, consulting and service companies require capitalisation at the low end of the range (Art.23(4)). Commercial retail companies lie in the middle (Art.23(3)). Production, management and wholesale companies need the most capitalisation (Art.23(1)–(2)).

86. According to Art.72 of The Insurance Law of PRC (adopted at the 14th Session of the Eighth National People's Congress on 30 June 1995, promulgated by Order No.51 of the President of the PRC on 30 June 1995, and effective as of 1 Oct. 1995): the registered capital of an insurance company must not be less than RMB 200 million.

According to Art.28 of The Interim Regulation of PRC on the Administration of Real Estate Development in Urban Districts (promulgated by Order 41 of Ministry of Construction of PRC on 23 Jan. 1995 and effective as of 1 Mar. 1995): the registered capital of a real estate development company must not be less than RMB 1 million.

87. Thorpe, and Levy, , op. cit. supra n.15, at pp.04–44.Google Scholar

88. Ibid. At time of press companies can be bought at £46 (“Exchange & Mart”).

89. Cohen, op. cit. supra n.59, at para.5, cited in Sealy, L. S., Company Law and Commercial Reality (1984), p.6.Google Scholar

90. Art, and Gu, , op. cit. supra n.50, at p.289.Google Scholar

91. The Law Committee of the National People's Congress, Report Concerning the Examination of Chinese Company Law (draft), 17 12 1993 (in Chinese).Google Scholar

92. Art, and Gu, , op. cit. supra n.50, at p.290.Google Scholar

93. Ibid.

94. Ibid.

95. Manne, H. G. (1967) 53 Virginia L.R. 259Google Scholar, cited in Farrar, J. H., Furey, N. E., Hannigan, B. M. and Wylie, P., Farrar's Company Law (3rd edn, 1991), p.317.Google Scholar

96. Morse, C., Charlesworth & Morse Company Law (1995), p.312.Google Scholar

97. LLCs may have 3 to 13 directors (CL, Art.45); JSCs 5 to 19 (CL, Art.112).

98. CL, Art.46.

99. CL, Art.45.

100. CL, Art.51.

101. CL, Art.46(9).

102. CL, Art.46. Previously, the Chinese Communist Party dominated the management decisions of the factory directors.

103. CL, Arts.112, 115, 118.

104. Companies Act 1985, s.319.

105. idem, s.303.

106. Bushell v. Faith [1969] 2 Ch. 438.Google Scholar

107. Hicks, A., “Disqualification of Directors—Forty Years On” (1988) J.Bus.L. 27, 28.Google Scholar

108. Ibid.

109. Shearman, J., “Corporate Governance—An Overview of the German Aufsichtsrat” (1995) J.Bus.L. 517, 529–530.Google Scholar

110. Idem, p.530. See also Hicks, A., “Disqualification of Directors for Persistent Default in Filing Documents; Section 155, Companies Act” (1985) Malayan L.Rev. 329, 357, who expresses a similar concern in Singapore.Google Scholar

111. Shearman, ibid.

112. Freedman, , “Small Businesses and the Corporate Form: Burden or Privilege” (1994) 57 M.L.R. 555.Google Scholar

113. Companies Act 1985, Table A, Art.70.

114. E.g. keeping extensive registers and records, updating and auditing their accounts, etc.

115. A director can be charged with over 200 kinds of offence under Companies Act 1985: Finch, V., “Personal Accountability and Corporate Control: The Role of Directors' and Officers' Liability Insurance” (1994) 57 M.L.R. 880.Google Scholar

116. Boyle, A. J., Birds, J., Ferran, E. and Villiers, C., Boyle & Birds' Company Law (3rd edn., 1995), p.430.Google Scholar

117. See Farrar, et al. , op. cit. supra n.95, at chap.28, for a detailed discussion on disclosure requirements in the UK.Google Scholar

118. For further information, see the DTI Handbook of the Companies Inspection System (1990).Google Scholar

119. For criticisms on accounting disclosure requirements, see Smith, T., Accounting for Growth (1992), passim.Google Scholar For discussions of DTI investigations, see Farrar, et al. , op. cit. supra n.95, at p.509.Google Scholar

120. Companies Act 1985, s.246. It is estimated that about 90% of all registered companies in the UK qualify as small companies (Cmnd 9794, para.8.5).

121. Hicks, , op. cit. supra n.110, at p.356.Google Scholar

122. For an outline of German law, see Thorpe, and Levy, , op. cit. supra n.15, at pp.E130–141.Google Scholar For a more detailed discussion of the German supervisory board (Aufsichtsrat), see Shearman, op. cit. supra n.110. The German concept of supervisory councils, with labour representation, has been used in newly adopted company laws in Eastern Europe (Art, and Gu, , op. cit. supra n.50, at p.295, n.144).Google Scholar

123. Art and Gu, idem, p.295.

124. CL, Arts.124, 125.

125. CL, Arts.52 (LLCs), 126(JSCs).

126. Ibid.

127. CL, Art.54.

128. CL, Art.54 (LLCs), 126 (JSCs).

129. See Shearman, , op. cit. supra n.110, at p.530, who discusses the advantages of the German supervisory board.Google Scholar

130. Companies Act 1985, s.318.

131. Idem, ss.198–200.

132. CL, Arts.54 (LLCs), 126 (JSCs).

133. Shearman, , op. cit. supra n.110, at p.531.Google Scholar

134. Ibid.

135. Ibid.

136. Ibid.

137. Idem, p.517. The suggestion of implementing the supervisory board concept in England was raised as part of the underlying EC objective of a standard European market economy. See Farrar et al., op.cit. supra n.95, at chap. 3, for a discussion of the harmonisation of company law in the EC.

138. Png, , op. cit. supra n.43, at p.202.Google Scholar This is partly because courts are considered by non-judicial officials to be co-equals with the State bureaucracy. Another problem is corruption owing to judges' low pay.

139. See Drury, and Xuereb, op. cit. supra n.4, at p.142, who cite examples of the French, Italian and English law.Google Scholar

140. Farrar, et al. , op. cit. supra n.95, at p.321.Google Scholar

141. Galgano, in Drury, and Xuereb, , op. cit. supra n.4, at p.86.Google Scholar

142. idem, p.87.

143. Ibid, citing the ideas of Rathenau.

144. See Farrar et al., op. cit. supra n.95. See Gower, L. C. B., Modern Company Law (4th edn, 1979), p.143Google Scholar, for a more detailed discussion. German law was the first Continental European legal system to repudiate the concept of general meeting sovereignty, in 1937: Galgano, ibid.

145. In Marshall's Valve Gear v. Manning [1909] 1 Ch. 267Google Scholar, the board of directors decided 2: I not to sue a person infringing the company's patent. But it was held that the general meeting (in which the dissenting director was a majority shareholder) could sue.

146. Automatic Self-Cleansing v. Cunninghame [1906] 2 Ch. 34Google Scholar, where an extraordinary resolution to override the board was required. This has been reaffirmed in Breckland Group Holdings v. London & Suffolk Properties [1988] 4 B.C.C. 542, where Harman J considered Marshall's Valve Gear was overwhelmed by the weight of authorities against it.Google Scholar

147. Farrar, et al. , loc. cit. supra n.95.Google Scholar

148. CL, Arts.37 (LLCs), 102 (JSCs).

149. CL, Art.42.

150. Companies Act 1985, Table A, Art.37, which is adopted by most companies in England.

151. CL, Art.104.

152. CL, Art.43.

153. CL, Art.104.

154. CL, Art.64.

155. CL, Arts.65–69.

156. Art, and Gu, , op. cit. supra n.50, at p.293.Google Scholar

157. CL, Art.38 (LLCs), 103 (JSCs).

158. CL, Art.39.

159. CL, Art.108 (JSCs).

160. CL, Art.38(1), (6), (9).

161. CL, Art.38(7) for LLCs; Art 103(7) for JSCs.

162. See Automatic Self-Cleansing and Breckland Group Holdings, both supra n.146. These two cases show that once the general meeting has devolved powers, it can exercise them itself only after first taking them back from directors.

163. Companies Act 1985, s.14.

164. Motley v. Alston (1847) I Ph. 790Google Scholar, Bentley-Stevens v. Jones [1974] 2 All E.R. 653.Google Scholar But see Wedderburn, [1957] C.L.J. 194, 212.Google Scholar See also Goldberg, (1972) 35 M.L.R. 362Google Scholar, Prentice, [1980] Co. Law 179.Google Scholar

165. Eley v. The Positive Government Security Life Assurance Co. Ltd (1876) 1 Ex.D. 88 (CA).Google Scholar

166. Percival v. Wright [1902] 2 Ch. 421.Google Scholar

167. (1843) 2 Hare 461.Google Scholar

168. Prudential v. Newman (No.2) [1981] Ch. 257Google Scholar and NW Transportation v. Beatty (1887) 12 App. Cas. 589.Google Scholar

169. Estamanco v. GLC [1982] 1 All E.R. 437.Google Scholar

170. See Drury, and Xuereb, , op. cit. supra n.4, at p.146Google Scholar

171. In Ebrahimi v. Westbourne Galleries [1973] A.C. 360Google Scholar, the House of Lords' decision emphasised that the scope of “just and equitable” grounds under the Insolvency Act 1986, s.122(1)(g) should not be confined to special situations.

172. Re a Company (No. 007623 of 1984) [1986] B.C.L.C. 362 (per Hoffmann, J).Google ScholarThis view is endorsed in Re a Company (No. 00314 of 1989) [1990] B.C.C 221Google Scholar; Re Castlebum Ltd [1991] B.C.L.C. 89Google Scholar; Re a Company (No. 005685 of 1988), ex p. Schwarcz (No.2) [1989] B.C.L.C.Google Scholar Cited from Farrar, et al. , op. cit. supra n.95, at p.474.Google Scholar

173. Farrar et al., idem, pp.474, 475.

174. CL, Art.111 (JSCs).

175. Art, and Gu, , op. cit. supra n.50, at p.297.Google Scholar

176. Ibid.

177. PRC 1982 Constitution, Art.1. “The PRC is a socialist state under the people' democratic dictatorship led by the working class and based on the alliance of workers and peasants. The socialist system is the basic system of the PRC. Disruption of the socialist system by any organisation or individual is prohibited”.

178. CL, Art.55.

179. CL, Arts.55, 56.

180. CL, Art.55.

181. Ibid.

182. CL, Art.45.

183. CL, Art.124.

184. Art, and Gu, , op. cit. supra n.50, at p.298.Google Scholar

185. For a further discussion on German law, see Thorpe, and Levy, , op. cit. supra n.15, at pp.E130–141.Google Scholar

186. This power is exercised via a Workers' Assembly provided under the Law of the PRC on Industrial Enterprises Owned by the Whole People, adopted by the People's Congress in 1988.

187. Lin, F., “The PRC's New Labour Law—A Workers' Charter?”, in de Roo, A. J. and Jagtenberg, R. W. (Eds), Yearbook Law and Legal Practice in East Asia 1995, Vol.1, p.23, at P.27.Google Scholar

188. Art, and Gu, , op. cit. supra n.50, at p.297.Google Scholar

189. Lin, , op. cit. supra n.187, at p.23. The most serious accident was a fire incident in Zhili Factory in Shenzhen at the end of 1994. Approximately 100 workers were killed.Google Scholar

190. Adopted on 5 July 1994 by the Standing Committee of the National People's Congress (NPC) of the PRC. This new Law is the most comprehensive legislation on industrial relations ever passed by the NPC.

191. Labour Law, Art.1.

192. Lin, , op. cit. supra n.187, at p.39.Google Scholar

193. Idem, passim. This failing has been recognised by the Chinese Ministry of Labour. Separate complementary statutes have since been enacted. Adoption of more separate statutes is still expected.

194. Though Deng Xiaoping had relinquished all his offices prior to his death on 19 Feb.1997, there was still widespread concern that his death might alter the course of reforms and government policy. This suggests that real power in China does not always require formal trappings. See Art, and Gu, , op. cit. supra n.50, at p.299.Google Scholar See also Beijing Review, 17–23 03 1997, pp.4–5Google Scholar, “A Stable China Left by Deng”. This explains the relatively large distance between formal and actual law in China, as compared to developed countries like the US and UK, observed by ProfessorAlford, W., “Chinese Living Law: An Interview with Professor William Alford” (1989) 7 Arizona J.Int.L. & Comp.L. 135, 136.Google Scholar However, Benson, , op. cit. supra n.17, at p.227, believes, based on current developments, that the Chinese system on paper and in practice will over time increasingly resemble US and other Western models.Google Scholar

195. Companies Act 1985, s.309.

196. idem, s.235.

197. idem, s.743.

198. Note, however, that this is just a theoretical emphasis. In reality, enforcement of derivative civil actions by shareholders is not easy. However, this difficulty has been eased by idem, s.459. See supra Section IV.C.

199. It should be noted that civil actions exist in China under separate legislation—the General Principles of the Civil Law of the PRC (adopted at the Fourth Session of the Sixth National People's Congress, promulgated by Order No.37 of the President of the PRC on 12 Apr. 1986, effective as of 1 Jan. 1987). However, this law has often been criticised as being unclear. This is partly because where criminal sanctions are not appropriate, the Chinese people prefer to resolve their disputes through the administrative system (via mayors or political leaders) rather than the judicial system.

200. Art, and Gu, , op. cit. supra n.50, at p.299.Google Scholar

201. CL, Art.60.

202. CL, Art.61.

203. Supra Section IV.B.

204. CL, Art.57.

205. CL, Art.58.

206. Such corruption includes insider trading of securities: Art, and Gu, , op. cit. supra n.50, at p.300.Google Scholar

207. See UK Cork Committee Report, paras.1817, 1826. The Committee was against automatic disqualification, despite recognising some possible benefits.

208. Hicks, loc. cit. supra n.110.

209. For some Chinese views on human rights, see Ren, Yanshi, “A Look at the US Human Rights Record”, Beijing Review, 17–23 03 1997, pp.12–19.Google Scholar This article attacks US human rights policies. “The US government, posing as the ‘human rights judge of the world’, turn a blind eye to the serious human rights problems in its own country. Facts prove it is the US itself that has a poor human rights record in the world today. Reuter Reports on 16 Jan. 1996: 26 million or 10% of Americans lived on hand-outs from charity institutions”. See also ‘US Human Rights Report Criticised by Chinese Scholar’, Beijing Review, 10–16 03 1997, p.30.Google Scholar This article criticises the US for interfering with China's internal affairs and violating the UN Charter.

210. CL, Art.22.

211. Bachner, Bryan S. and Fu, H. L. (eds.), Commercial Law in the PRC: Regulation and Reform Affecting the Market (1995), p 34.Google Scholar

212. Idem, p.35. See CL, Art.22.

213. See Companies Act 1985, s.2, for list of company memorandum items in the UK. S.1(3) further adds that memoranda of public companies in UK must state that the company is a public company.

214. Morse, , op. cit. supra n.96, at p.79Google Scholar, describes the articles of association of UK companies as the “internal arrangements and management of the company”. The UK articles of association correspond roughly to the non-basic elements list specified in the CL, Art. 22. In the UK the provisions of the standard-form articles contained in the Companies (Tables A to F) Regulations 1985 will apply.

215. CL, Art.22(9).

216. Art, and Gu, , op. cit. supra n.50, at p.293.Google Scholar

217. Idem, n.126.

218. Known in Chinese as the fading daibiaoren.

219. General Principles of Civil Law of the PRC, Art.43, 12 04 1986.Google Scholar

220. CL, Arts.45, 68, 113.

221. CL, Art.51.

222. See CL, Art.214, for reference to directors, supervisors and managers. These provisions are similar to the UK provisions for fraudulent and wrongful trading (Companies Act 1985, ss.213–214). See also CL, Arts.208, 209, 211, 212, 217 and 218 for a comparison.

223. CL, Art.49.

224. Ibid.

225. Ibid.

226. See Smith, J. C. and Hogan, B., Criminal Law (7th edn, 1992), p.182.Google Scholar However, where the person committing the crime can be identified as the “directing mind and will” of the guilty company, the company can be held guilty of intent to deceive (DPP v. Kent & Sussex Contractors Ltd [1944] K.B. 146Google Scholar), and even guilty of manslaughter (R. v. P&O Ferries (1990) 93 Cr. App. Rep. 72Google Scholar). Nevertheless, while normal criminal sanctions may be applied to the Chinese “legal representative” (natural person), they cannot be applied to the company per se (artificial legal person).

227. Art, and Gu, , op. cit. supra n.50, at p.294.Google Scholar

228. CL, Arts.3, 4.

229. CL, Art.3.

230. For a further discussion of the Marxist approach to punishment, see Murphy, J. G., “Marxism and Retribution”, in Duff, A. and Garland, D. (Eds), A Reader on Punishment (1994).Google Scholar

231. CL, Arts.206, 209, 211.

232. CL, Arts.206–212.

233. CL, Art.206. This is about £750 to £7,500.

234. CL, Art.210.

235. CL, Art.209.

236. The term “administrative sanctions” is defined in Zhonghua Renmin Gongheguo Xingzheng Jiancha Tiaoli (The Provisions of Administrative Supervision of PRC), passed on 23 Nov. 1990 by the State Council.

237. Sia, , op. cit. supra n.45, at p.4.Google Scholar

238. CL, Arts.214, 215.

239. At least 15 arts, state that, in addition to other more specific sanctions, criminal liability (not defined in CL) applies in accordance with the law: CL, Arts.206–214, 217–224.Google Scholar

240. Art, and Gu, , op. cit. supra n.50, at pp.299–300.Google Scholar

241. “Chinese Woman Executed Over S$62m Fraud” Singapore Straits Times, 1 02 1997. The case was reported in the China Business Times.Google Scholar

242. Per Finch, , op. cit. supra n. 115, at p.880.Google Scholar

243. China's most-favoured-nation (MFN) status with the US has been an issue since June 1989 (following the Tiananmen massacre). A number of US Congressmen put forward bills to remove or extend China's MFN status with pre–conditions. During President Clinton's first year in the White House, he decided to link the renewal of China's MFN status with human rights. This decision was condemned and opposed by China. President Clinton finally decided to de-link MFN status with human rights issues in 1994. For further discussion of human rights in China, see “A North–South Struggle Over Human Rights”, Beijing Review, 14–20 04 1997, pp.7–10.Google Scholar

244. Chea, Wenjing, “The Status Quo and Prospects of Sino-US Trade Relations” (1996) 30 J. World Trade 19, 20.Google Scholar

245. Ibid.

246. Fu, , op. cit. supra n.28, at p.295, cites the three most notable legal concepts established in China in the last decade as company law, bankruptcy and intellectual property.Google Scholar

247. Black, B. and Kraakman, R., “A Self-Enforcing Model of Corporate Law” (1996) 109 Harv.L.Rev. 1911, 1979.Google Scholar

248. Png, , op. cit. supra n.43, at p.202.Google Scholar

249. See Png, idem, Keller, P., “Sources of Order in Chinese Law” (1994) 42 A.J.Comp.L. 711Google Scholar and Seidman, A. and Seidman, R. B., “Drafting Legislation for Development Lessons From a Chinese Project” (1996) 44 A.J.Comp.L. 1— all passim.Google Scholar

250. See Mo, , op. cit. supra n.10, at p.91.Google Scholar China's bid to rejoin the GATT in April 1996 was blocked by the US and EU, and to some extent Canada and Japan. They raised concerns about weaknesses in the present Chinese legal system. However, see “IPR Protection Achieving Progress”, Beijing Review, 27 01–2 02 1997, p.5Google Scholar: Chinese courts handled 20,000 civil IPR cases from 1991 to June 1996. According to the Supreme People's Court (SPC) 90% of these cases have been resolved. To date, more than 3,000 judges in China have been trained to try IPR cases. Furthermore, a Chinese IPR Training Centre is in preparation.

251. Schlesinger, R. B., “The Past and Future of Comparative Law” (1995) 43 A.J.Comp.L. 477 defines “compare” as “to observe and to explain similarities as well as differences”.CrossRefGoogle Scholar

252. Seidman, and Seidman, , op. cit. supra n.249, at p.37.Google Scholar

253. CL, Arts.63, 128.

254. CL, Art.123 (directors and managers), Art.128 (supervisors). A more accurate translation of the Chinese text would be “sincerely and diligently”: Art, and Gu, , op. cit. supra n.50, at p.296.Google Scholar

255. CL, Art.123.

256. Hurlock, M., “Social Harmony and Individual Rights in China” (1993) 93 Col.L.Rev. 1318, 1332CrossRefGoogle Scholar cites Hong Kong's then impending handover (on 1 July 1997) to illustrate the radical difference between Chinese and English concepts of the role of law in society. The failure of previous attempts to combine these two systems raised questions concerning the future of law in Hong Kong.

257. State-owned enterprises are expected to remain the dominant feature of the Chinese economy for the foreseeable future: Art, and Gu, , op. cit. supra n.50, at p.307.Google Scholar

258. Ibid.

259. Ibid.

260. Keller, , op. cit. supra n.249, at pp.712–713.Google Scholar See Keller, idem, passim for a discussion of the ways in which ideas concerning proper organisation of positive law have been adapted to the political and administrative realities of China.

261. Mo, , op. cit. supra n.10, at p.93.Google Scholar

262. Art, and Gu, , op. cit. supra n.50, at p.307.Google Scholar

263. Edward Epstein is sceptical about the attitudes of both the legal officials and the community towards formal legal institutions. He argues that the future of Chinese law reform must depend on its political development. Unless the Chinese leaders themselves support it, China cannot be a State limited by the rule of law (cited in Png, , op. cit. supra n.43, at p.202).Google Scholar

264. Lee Kuan, Yew, Senior Minister and former Prime Minister of Singapore. Quoted from The Economist, 28 11 1992, p. 18.Google Scholar

265. This has been part of Chinese tradition.