Reforming Corporate Compliance Systems in China Under the New Company Law: Lessons from the United States and Japan

Title Reforming Corporate Compliance Systems in China Under the New Company Law: Lessons from the United States and Japan
Author Zongqi Wu
Affiliation The Chinese University of Hong Kong
Region/Country Hong Kong
Pages 146-185
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Permalink https://www.ijlet.org/4.3.6
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Keywords Compliance System; Corporate Governance; Fiduciary Duties; Business Judgment Rule; New Company Law
Abstract This article investigates the construction of an ideal compliance system under China’s new Company Law through a comparative legal analysis. It begins by identifying the existing challenges in China’s compliance framework, particularly the historical dominance of shareholder primacy and the uneven distribution of responsibilities under the previous Company Law. These issues have hindered the development of an effective compliance system, necessitating a reevaluation of corporate governance principles in China. The comparative analysis examines the compliance systems in the United States and Japan, focusing on the frameworks and key elements such as fiduciary duties and the application of the business judgment rule. The study highlights significant differences in how these jurisdictions handle compliance, providing insights into potential improvements for China’s system. This section underscores the importance of adapting international best practices to local contexts to enhance the effectiveness of corporate compliance in China. Finally, the article proposes a dual-level compliance concept tailored to China’s unique legal and corporate environment, integrating both private and public interests. It outlines specific compliance duties for directors, supervisors, and other compliance personnel, emphasizing the need for robust information transmission, whistleblower protections, and temporary management systems. The conclusion calls for a comprehensive and flexible compliance framework that not only ensures corporate profitability but also promotes broader societal welfare, aligning with the evolving goals of corporate governance in China.