Directors’ Duties in China

>> Board Requirements in China

Appointment of directors

Under Chinese statutory law, the minimum number of Directors is one (1), an executive Director.

However, should a Board be established then the minimum number of directors is three (3) and the maximum number is thirteen (13) for an LLC.

At least one Board member must be appointed as

Chairman. This is unless the Articles of Association (Articles) of the company specify a different number that falls between one (1) and thirteen (13). In any case, the Articles will specify a number of directors.

In general, there is no maximum duration of the appointment of Directors of an LLC.

Directors of a Chinese LLC are not required to be resident in China. There are no formal qualifying requirements for Directors of an LLC.

You are restricted in your capacity to act as a Director of an LLC if you fall into any of the follow categories:

  • you have been sentenced to any criminal penalty due to an offence of corruption, bribery, encroachment of property, misappropriation of property or disrupting the economic order of the socialist market economy and five (5) years have not passed since the completion date of the penalty
  • you have been deprived of your political rights due to any crime and five (5) years have not passed since the completion date of the penalty
  • where you were a former Director or general manager of a company or enterprise which was declared bankrupt and liquidated, you were personally liable for the bankruptcy of such company or enterprise and three (3) years have not passed since the date of completion of the bankruptcy and liquidation of the entity
  • where you were the former legal representative of a company or enterprise, whose business license was revoked and the company or enterprise was ordered to close due to a violation of the law, and you are personally liable for the revocation and three (3) years have not passed since the date of the revocation of the business license
  • you have a relatively large amount of debt which is due but unpaid

Conflicts

According to Chinese company law, Directors are forbidden from signing a contract or trading with the company in violation of the Articles or without the consent of the shareholders.

They may not seek business opportunities for themselves or any other person by taking advantage of their authority. Further, where any of the Directors has any relationship with a company involved in a matter to be discussed at a Board meeting, they shall abstain from voting on this resolution, nor may they vote on behalf of any other person.

In addition to the above, for a company limited by shares, the company is also not allowed, directly or via its subsidiary, to lend money to any of its Directors.


Latest version updated 22nd March 2018

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