China Laws and Regulations Update in February 2014

  1. Seven laws, including the Company Law, the Customs Law, etc. Are Amended

On 28 December 2013 the Standing Committee of the National People’s Congress adopted the Decisions on Amending Seven Laws of the People’s Republic of China, including the Marine Environment Protection Law, the Drug Control Law, the Metrology Law, the Fisheries Law, the Customs Law, the Law on Tobacco Monopoly and the Company Law.

The amendments to the Marine Environment Protection Law, the Drug Control Law, the Metrology Law, the Fisheries Law, the Customs Law, and the Law on Tobacco Monopoly entered into force upon promulgation and the amendments to the Company Law will be effective as of 1 March 2014.

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Signals from Latest Company Law Amendment

(By Bai Lituan) On December 28, 2013, the 6th Meeting of the Standing Committee of the Twelfth National People’s Congress approved the Amendment to the Company Law of the People’s Republic of China. The Amendment has three highlights: replaced the paid-in system with the registered capital to-be-paid-in system, decreased requirements for capital registration and simplified registration items and files. No doubt amendment to laws aims at meeting the demand of economic development, then what did this Amendment to the Company Law positively signal?

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The Confusion of Affiliated Companies shall Assume Joint Liability for Their Debts

(By Luo Yanjie) Abstract: Company’s independent status as a legal person is a prerequisite for bearing liabilities independently incurred to the company. If a company loses its independent status as a legal person, shareholders shall bear several and joint liability for the debts of the company or the affiliated company, similarly for debts incurred in affiliated companies.

    In recent years, there are many disputes regarding abuse of company’s independent status as a legal person that many intelligent merchants attempted to evade the payments of debts by abusing the company’s independent status as a legal person or the limited liability of shareholders. In today’s post, we would like to introduce a typical case regarding the confusion of company’s independent status as a legal person on the Cases Guidance of the Supreme People’s Court in China as follows.

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Legal Analysis on the Preemption Dispute between Fosun and SOHO China

(by Bai Lituan) After six months of tense negotiation without any satisfactory result over a dispute of the 8-1 Pearl Project land plot on the Bund, Fosun (00656.HK) and SOHO China (00410.HK) finally chose to take the case to court in Shanghai. The first hearing of the case was in late November 2012. Before then, Fosun insisted that the share transaction between SOHO China and Shanghai Zendai Group damaged its right of preemption.

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