Employees’ Participation in Corporate Governance under the Revised Chinese Company Law
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This law affects all companies in the country, regardless of size. It will be effective in July 1st 2024, and there are 3 key points are:

  1. There is a new organ present in each company called the Employee Assembly. This organ is for employees to exercise their power of democratic governance of the company. There are two types, one is an assembly for all employees or an assembly for employee representatives. In general, companies with more than 100 employees will have an assembly for employee representatives, while less than 100 will have an assembly for all employees. The number of employee representatives must not be less than 5% of the total number of employees and also not be less than 30, while the number of managers and executives must not be greater than 20% the number of representatives. The trade union acts as the executive organ of the Employee Assembly.
  2. The Employee Assembly has access to basically all the information a company stores, which can be used to affect the worker benefits of employees. It also seeks to make sure the company is always following the labor laws present at the local and national level. When a company considers dissolution or applying for bankruptcy, it is required to listen to the opinions of its trade union and employees through the Employee Assembly or by other forms.
  3. All companies with at least 300 employees must have employee representatives at the board of directors, unless it already has a board of supervisors with employee supervisors elected by the Employee Assembly in it.
  • qwenameM
    6·
    2 months ago

    I reread Article 68 of the Company Law and figured I misunderstood it with regards to the audit committee (AC below) and board of supervisors (BoS below). If a company has an AC (optional employee representatives) in place of a BoS (minimum one-third employee representatives), and has 300 or more employees, then it is required to have employee representatives on the board of directors (BoD below).

    Both the AC and BoS include 3 or more members, here are some of the differences that affect the number of employee representatives (summarized from Article 121 (on corporation AC), 76 (on LLC BoS), 130 (on corporation BoS) of the Company Law):

    • AC: Members are from the BoD, and a majority should not hold positions other than being on the BoD. Employee representatives in the BoD may (optional) join the committee.
    • BoS: Members should include shareholder representatives and employee representatives, employee representatives must make up at least one-third of members. Members of the BoD and senior executives cannot be on the BoS.

    The difference in membership requirements means that at least one-third (x >= 1/3) of the BoS should be employee representatives, and less than half (x < 1/2) the AC can (optional) be employee representatives.

    So if I understood all this correctly, for small private companies that have less than 300 employees and meet the criteria for not having a board of supervisors, they don’t need employee representatives at all. This is where the interpretation of Paragraph 2 of Article 17 matters the most, whether or not establishing an Employee’s Congress is mandatory, but I guess we’ll find out soon enough when the revised law goes into effect on July 1st.