Given geopolitical tensions and slower economic momentum, it is a difficult time to be in a position of corporate responsibility in mainland China. This week, an amendment to the country’s legal code is unlikely to make it any easier.
China’s updated company law, in effect as of Monday, expands the duties of boards and “imposes additional liabilities on directors, supervisors and executive officers”, according to a briefing from law firm Squire Patton Boggs. More broadly, it also impacts capital contributions, shareholder rights and liquidations. The new law aims to further cut down on the conflicts of interest and misappropriations of capital that are sometimes associated with China’s fast-evolving and expansive business landscape.
But in an environment characterised by uncertainty over policymaking, prospective directors, roles that are often unpaid except for expenses in China, are thinking twice. “It’s always been a little challenging to get people to agree to be officers or directors of Chinese companies, particularly joint ventures,” said Daniel Roules, a partner at Squire Patton Boggs in Shanghai. “With the changes to the law, we’re seeing greater reluctance”.