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The current Standing Committee of the National People’s Congress of China concluded its 38th session on December 30, 2022. During this session, the Standing Committee reviewed amendments to seven existing legislations and six newly drafted legislations. All 13 draft legislations are now published for the general public to review and comment.

These draft legislations include amendments to the Legislation Law, the Company Law, the Counterespionage Law, the Marine Environment Protection Law, and the Civil Procedure Law, as well as entirely new draft legislations such as the Law on Foreign Sovereign Immunity and the Law on Value-added Tax. Some of the provisions in these draft legislations will have an impact on the investments and projects of companies in China.

The key amendments to the Company Law include, among others:

  • the consequences of failure of shareholders in meeting their capital contribution commitments; a shareholder will forfeit its shareholder rights (without the need to hold a shareholders’ meeting) if the shareholder fails to pay or fully pay the capital contribution;
  • a requirement that a company with more than 300 employees must include an employees’ representative on its board of directors; and
  • the reinforcement of liabilities of directors and senior management by holding them jointly liable for their wilful misconduct or gross negligence.

—  The amendments to the Counterespionage Law provide the definition of espionage activities for the first time, which include the act of providing information such as cybersecurity vulnerabilities against critical information infrastructure for spying on organizations and their agents.

—  The draft Law on Foreign Sovereign Immunity is new. It is the first time that China is considering to enact a law regarding this subject matter. Foreign countries, as defined under Article 2 of the draft law, include any foreign sovereign countries other than China, any organizations of such foreign sovereign countries, and any natural person, legal person or non-legal person that carries out activities with the authorization of such foreign sovereign countries. The draft law states that its purpose is to protect the legitimate rights and interests of the foreign countries. However, the draft law sets out a number of exceptions to foreign sovereign immunity that apply to certain court procedures, assets and property, and the interest and rights of the foreign countries. It may become difficult for the foreign countries to claim foreign sovereign immunity if the draft law is enacted.

Mayer Brown will continue to monitor the development of these draft legislations and publish articles about them in due course.