Research on Regulation Paradigms of Controlling Shareholder and Actual Controlling Party in the Company Law:The Reform and Improvement on Regulation Paradigms of Dual Controlling Parties in China's Company Law
The paradigms of regulating dual controlling parties in different countries mainly consist of direct regulation and indirect regulation.For direct regulation,the United States stipulates in the form of case law that the dual controlling parties should undertake fiduciary duty to the company,shareholders or creditors in the specific context,and the violators must be held liable for compensation.The indirect regulation paradigm represented by the United Kingdom and South Korea mandates the dual controlling parties to assume compensation liability for the company or the third party together with the company directors for the actions if the dual controlling parties actually participate in the company activities or instruct the company directors to perform such activities.As the ownership structure of Chinese compa-nies are highly concentrated,their govemance models tend to be"dual controlling parties-centered",and the regulation of dual controlling parties appear to be very crucial.Article 21 was added in the Company Law of the People's Republic of China revised in 2005,and it mandated that the dual controlling parties shall not use their relationship to cause damage to the company's interests,starting the paradigm of direct regulation for the dual controlling parties.During the new revision of the company law in 2023,Article 192 stipulates that the dual controlling parties shall bear joint liability together with the company direc-tors and senior managers if they give instructions on corporate affairs,which is an indirect regulation.As a result,an eclectic regulation paradigm and system is introduced.However,this system has its disad-vantages such as being too abstract for many provisions,lack of applicability,and all the regulations being negative.The subsequent improvement on the regulation system for the dual controlling parties should be more specific in prohibiting the dual controlling parties from abusing their control rights and improving the applicability as well as the effectiveness of such regulations.In addition,positive regula-tions should be introduced to acknowledge the status of dual controlling parties in corporate govemance and their power to control the company.They should also be regulated and guided to exercise their power according to law and improve the corporate governance.All these will help lay an institutional foundation for improving the modern corporate system with Chinese characteristics and promoting the entrepreneurial spirit.
revision of China's Company Lawcontrolling shareholderactual controlling partydirect regulation paradigmindirect regulation paradigmeclectic regulation paradigmfiduciary duty
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