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NPC Shanghai delegations submits Company Law revision

By ZHOU WENTING in Shanghai | | Updated: 2021-03-05 21:53
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The Company Law shall be revised to better protect the interests of minority shareholders and for a better business environment, said a motion that the Shanghai delegation to the National People's Congress submitted on Friday.

It was the first time ever that the entire Shanghai delegation had submitted motions. It submitted two motions this way during the ongoing annual session of the national legislature in Beijing.

The deputies said small and medium shareholders' control and dominance power over the company is very different from substantial shareholders, which usually leads to conflicts of interest between them and the former are often at a disadvantage.

"We suggested that the law should make corresponding improvements, including protecting the rights of minority shareholders to join the liquidation group, and balancing the control rights of the controlling shareholders," read the motion.

"For example, the law should stipulate that the controlling shareholders cannot use their position to make any decision in violation of laws and regulations or have other major inappropriate behaviors," it continued.

Also, the delegation suggested a new chapter about affiliated transactions, which may sometimes undermine the independence of a company and cause illegal transfer of benefits, which poses greater risks of unfairness and damages the interests of small and medium shareholders.

"So we suggested that the law should clarify the procedures for affiliated transactions, including the disclosure mechanism before a transaction, voting right restriction mechanism during it, and damage compensation mechanism after it," the motion said.

"At the same time, judgement standards for fair affiliated transactions should be established and complete remedies for unfair ones should be formulated," it said.

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