2.1.1 Introduction

Nowadays, the economic competition among nations is no longer confined to the product and market area, but has expanded to include competition in the legal environment as well, for instance, whose rules are better, whose system is more efficient, and whose commercial law provides a more friendly environment for economic development.1 As a result, we see that in recent years, company law, being a branch of commercial law, has frequently been reformed worldwide with the tendency towards less limitations and more freedom for various corporate forms.

To meet this international challenge, China has also been making efforts to maintain a constant development of its investment climate. The first move made by the Chinese legislative authority to "internationalize" its investment environment was in the area of foreign investment enterprises (FlEs) laws.2 Around its entry into the WTO, in response to the undertakings and obligations required by the WTO, China underwent a rigorous wave of reforms of legislation concerning FIEs. Many rules and regulations on FIEs were revised or abandoned. In recent years, China has entered into a new stage of law reforms. The latest major move to improve its legal and business environment came in 2005 with wholesale revisions of the Company Law 1993 and the Securities Law 1998. Considering China's status in the world economy, such large-scale corporate law amendment has drawn worldwide attention.

This chapter introduces the sources and some history of Chinese company law, overviews the goals and innovations of the new Company Law 2006 and the corporate forms in China, namely, companies limited by shares, limited liability companies, and a subgroup of limited liability companies, foreign investment enterprises. Finally, it briefly introduces the exit remedy provided in Company Law 2006 for a limited liability company (a close company).