China business series: directors and supervisors

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By Woon-Wah Siu and Julian Zou

Every Chinese company, including subsidiaries established in China by foreign companies, is required to have a board of directors and a board of supervisors. Multinationals should understand the responsibilities and liabilities of directors and supervisors of their PRC subsidiaries.

This advisory is one in a series prepared by Pillsbury’s China practice on questions frequently asked by clients doing business in China. Here, Pillsbury summarises current PRC laws relating to the board of directors and the board of supervisors of foreign-invested companies, including the responsibilities and potential liabilities of directors and supervisors. Unless otherwise specified or as otherwise indicated by the context, the word ‘company’ refers to a foreign-invested company in China, rather than its offshore parent company.

By law, every company in China must have a board of directors and a board of supervisors. A small-scale company may satisfy this requirement by having one executive director and one or two supervisors. What constitutes a ‘small-scale company’ is not clear, but in practice a company with no more than two shareholders can be considered a small-scale company. That means a wholly owned PRC subsidiary will qualify as a small-scale company in China…

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