This Month

The 2023 revision of the PRC Company Law took effect July 1, 2024. With nearly a year of operation behind the change, the doctrinal contours of the revision are settled enough to set out for federal-practice purposes. This issue focuses on the four clusters of changes most directly bearing on U.S. federal litigation involving Chinese issuers, Chinese subsidiaries, and PRC-incorporated counterparties: shareholder capital contribution and liability; minority-shareholder remedies; director and controlling-shareholder duties; and the prohibition on nominee holding of listed company shares.

The principal authority for the editorial summary below is the post-revision text of the PRC Company Law (中华人民共和国公司法), supplemented by Han Kun Law Offices, 重磅：从争议解决视角解读《中华人民共和国公司法》2023年修订要点 (December 30, 2023), a leading dispute-resolution-perspective analysis. Federal-practice analysis is the editor's own.

1. Shareholder Capital Contribution and Liability — Articles 47, 51–52, 54, 88

The most-discussed change is the five-year deadline for shareholders of limited liability companies to fulfill their subscribed capital contributions (Article 47). The 2023 revision is the first contraction of the capital-contribution regime since 2005, when the law shifted from a paid-in (实缴制) to a subscription system (认缴制). Several supporting provisions reinforce the new deadline:

• Accelerated maturity (Article 54). Where a company cannot pay a matured debt, the company itself or any creditor with a matured claim may demand that shareholders whose contribution period has not yet expired pay early. The provision codifies what was previously addressed only in the Supreme People's Court's 2019 Conference Summary on National Civil and Commercial Trial Work (九民纪要) and broadens its reach beyond the Conference Summary's narrower triggers (no executable property plus a bankruptcy cause; or post-debt extension of the contribution period).
• Transferor's residual liability (Article 88). A shareholder who transfers unpaid equity remains residually liable for the transferee's failure to fund within the contribution period. The provision is designed to prevent shareholders from transferring unpaid equity to insolvent transferees as a means of "shedding the shell" (金蝉脱壳) and escaping the contribution obligation.
• Forfeiture (Articles 51–52). The board must police capital contributions; non-paying shareholders can be subjected to a forfeiture mechanism (失权制度) under which unpaid equity is forfeited if not cured within a grace period of at least sixty days. A shareholder who disputes forfeiture must commence litigation within thirty days of the forfeiture notice.

2. Minority-Shareholder Remedies — Articles 89, 189

Two structural changes substantially expand minority-shareholder remedies. Article 89, paragraph 3 creates a buy-out right against controlling-shareholder abuse: where a controlling shareholder abuses shareholder rights and seriously harms the company or other shareholders' interests, other shareholders may demand that the company repurchase their equity at a reasonable price. The right does not require having voted against any particular resolution, distinguishing it from the pre-existing dissenting-shareholder buy-out under Article 89, paragraphs 1 and 2. Article 189, paragraph 4 codifies a double derivative action: parent-company shareholders may bring claims on behalf of wholly-owned subsidiaries against the subsidiaries' directors, officers, and third parties harming the subsidiaries' interests. The provision pairs with the expanded subsidiary-information rights in Article 57, paragraph 5, which extends shareholder information access to wholly-owned subsidiaries.

3. Director Duties and Controlling-Shareholder Liability — Articles 180, 185, 191, 192

The 2023 revision codifies the previously undefined duties of loyalty and care:

• Article 180 defines the duty of loyalty as taking measures to avoid conflicts between personal and company interests and not exploiting position for improper gain; and the duty of care as the reasonable attention a manager would normally give in pursuit of the company's best interests. Both duties are extended in their entirety to controlling shareholders and de facto controllers (实际控制人) who do not formally serve as directors but in fact direct company affairs.
• Article 185 introduces interested-director recusal on related-party matters: an interested director's vote is excluded, and the matter is routed to the shareholders' meeting if the unrelated-director quorum cannot be satisfied.
• Article 191 imposes direct third-party liability on directors and senior officers who, with intent or gross negligence, cause harm to third parties in the execution of their duties — alongside the company's vicarious liability.
• Article 192 imposes joint-and-several liability on controlling shareholders and de facto controllers who direct directors or officers to act against company or shareholder interests, codifying so-called shadow-director (影子董事) liability.

4. Prohibition on Nominee Holding of Listed Company Shares — Article 140

Article 140 codifies a prohibition that PRC courts had previously applied through case law: shares of listed companies may not be held by nominees in violation of laws and administrative regulations. The provision draws on the PRC Securities Law's information-disclosure regime, which requires that disclosed shareholder information be "true, accurate, and complete." Han Kun observes that, in light of pre-2024 Supreme People's Court and lower-court decisions consistently treating listed-company nominee arrangements as void, Article 140 is likely to become the operative statutory basis for that voidness going forward.

This Month

Two years after the Cyberspace Administration of China issued its updated Provisions on Promoting and Regulating Cross-Border Data Flows, the regulatory contour governing PIPL-defense objections to U.S. discovery is in a settled-enough form to set out for federal-practice purposes.

Lead Item — CAC Provisions on Promoting and Regulating Cross-Border Data Flows (March 22, 2024)

The Cyberspace Administration of China issued the Provisions on Promoting and Regulating Cross-Border Data Flows (促进和规范数据跨境流动规定) on March 22, 2024. The Provisions substantially relaxed the cross-border transfer thresholds previously imposed under Articles 38 through 43 of the Personal Information Protection Law. CAC security assessment is now triggered for transfers of sensitive personal information of more than 10,000 individuals, or non-sensitive personal information of more than one million individuals, in a calendar year. Standard-contract filing or certification applies between 100,000 and one million non-sensitive subjects. Transfers below the lowest threshold are exempt from these formal mechanisms. The Provisions also enumerate scenarios — including cross-border transfers necessary for the performance of contracts to which the data subject is a party — that fall outside the security-assessment regime.

This Month

China's accession to the Hague Apostille Convention took effect for mainland China on November 7, 2023. With more than two years of practice now behind the change, the apostille track for authenticating PRC public documents in U.S. federal proceedings is the operative pathway, and federal practitioners should treat consular legalization as historical for documents from mainland China.

Lead Item — China's Accession to the Hague Apostille Convention (effective for mainland China November 7, 2023)

China deposited its instrument of accession to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (the "Apostille Convention") on March 8, 2023; the Convention entered into force for mainland China on November 7, 2023. Hong Kong and Macau were already covered under the prior treaty extension. Documents issued in mainland China and bearing a competent-authority apostille — typically issued by the Ministry of Foreign Affairs or authorized provincial Foreign Affairs Offices — now circulate among Convention parties without consular legalization.

This Month

The 2023 amendment to the PRC Civil Procedure Law and the Supreme People's Court's earlier Conference Summary on Foreign-Related Commercial and Maritime Trial Work, read together, define the current PRC framework for recognition of foreign judgments. The pair is set out side by side here because federal courts evaluating forum non conveniens motions and comity arguments need both, not either in isolation.

Lead Item — 2023 Amendment to the PRC Civil Procedure Law (effective January 1, 2024)

The Standing Committee of the National People's Congress adopted the fifth amendment to the PRC Civil Procedure Law (中华人民共和国民事诉讼法) on September 1, 2023, with the amended Law effective January 1, 2024. The amendment substantially restructured the foreign-related civil procedure provisions: it expanded jurisdictional reach over foreign-related civil and commercial disputes, including a new "appropriate connection" jurisdictional ground; introduced more flexible service-abroad procedures; codified parallel-proceedings management; and revised the standard for recognition and enforcement of foreign judgments. The 2023 amendment is the most significant restructuring of foreign-related procedure since the 2012 amendment.

Companion Item — SPC Conference Summary on Foreign-Related Commercial and Maritime Trial Work of National Courts (December 31, 2021)

The Supreme People's Court issued the Conference Summary on Foreign-Related Commercial and Maritime Trial Work of National Courts (全国法院涉外商事海事审判工作座谈会纪要) on December 31, 2021. Although technically guidance rather than a formal judicial interpretation, the Conference Summary has been treated by lower PRC courts as the operative restatement of foreign-related civil practice. Section V introduces the "presumed reciprocity" (推定互惠) standard for recognition of foreign judgments: reciprocity is presumed where the foreign jurisdiction's law provides a legal basis for recognition of PRC judgments, with the burden of producing evidence of refusal on the party opposing recognition. This represents a meaningful shift from the prior "factual reciprocity" doctrine, which had required affirmative proof of a prior PRC-judgment recognition by the foreign jurisdiction.

Editor's Introduction

This is the founding issue of the ChinaLawBench Monthly Digest. The Digest compiles, with editorial selection, PRC legal developments material to questions arising in U.S. federal litigation. Each issue centers on one or two items chosen on materiality to federal practice rather than recency. Items are selected, summarized, and connected to the U.S. federal procedural or substantive question they bear on. The Digest does not advance positions in pending or anticipated litigation; it describes.

The founding issue takes the second anniversary of the PRC Foreign State Immunity Law's effective date as its peg. The shift from absolute to restrictive immunity in PRC law is the single most consequential structural change to PRC foreign-relations law in recent years and is the appropriate point of departure for a digest aimed at the federal bench and bar.

Lead Item — Foreign State Immunity Law of the People's Republic of China (effective January 1, 2024)

The Foreign State Immunity Law (中华人民共和国外国国家豁免法), adopted by the Standing Committee of the National People's Congress on September 1, 2023 and effective January 1, 2024, formally shifted PRC sovereign-immunity doctrine from the absolute-immunity rule the Ministry of Foreign Affairs had previously asserted to a restrictive-immunity rule. Article 3 establishes immunity as the default. Articles 7 through 13 set out exceptions, including for commercial activity, employment contracts, personal injury and property damage occurring in PRC territory, intellectual property, and arbitration agreements. The structure parallels — without precisely tracking — the U.S. Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602–11.