2.1.2 Sources of corporate law

Before introducing the sources of the Chinese company law, it is necessary to give a brief introduction to the legislative framework in China. The National People's Congress (NPC) and its standing committee are at the top of the Chinese legislative structure. They are in charge of making the Constitution and national laws.1 The State Council enacts administrative regulations.2 Since China is a huge country with a large population and the economic development is uneven among different regions, in many situations the state legislature cannot be expected to give uniform and detailed provisions. To solve this problem, a certain degree of decentralization is allowed, and the People's Congress of a province, autonomous region, municipality or city where a special economic zone is located may enact local decrees.3 The hierarchy of legislation is as follows: 1) the Constitution, 2) national laws, 3) administrative regulations, 4) and local decrees, autonomous decrees and special decrees.4 The NPC has the power to revoke administrative regulations and local decrees that go against the laws it has laid down.

PRC company law prescribes two corporate forms• limited liability companies and companies limited by shares (or joint stock limited companies).5 Limited liability companies are generally referred to as close companies, and companies limited by shares can offer shares to the public.

A company limited by shares is a public company. It is subdivided into listed and non-listed companies. Listed companies within this category are also governed by the securities law. The stock markets, where shares are publicly traded, also have their own listing rules by which listed companies must abide. There are two stock exchanges in China, the Shanghai Stock Exchange and the Shenzhen Stock Exchange. Listed companies have to comply as well with requirements in the "Guidelines for Corporate Governance of Listed Companies" issued by China Securities Regulatory Commission (CSRC).6

One feature of the Chinese corporate law framework is that laws on FlEs run parallel to Company Law 2006. Unlike other countries, where company law governs both FlEs and companies with only domestic investors, foreign investment enterprises in China are regulated by a separate set of laws.7

Regulations by administrative organs and regulatory commissions, and legislative interpretations by the People's Supreme Court are also major sources of corporate law in a broad sense. They play a significant role in understanding the corporate law and in its application. Specific issues and the legislative intent are explained in detail by administrative regulations and by the Supreme Court interpretation. To name a few: the "Catalogue for the Guidance of Foreign Investment Industries" promulgated by the State Development and Reform Commission of the Ministry of Commerce, the "Provisions on Guiding Foreign Investment Direction" by the State Council, and the three series of "Interpretation of the New Company Law" by the Supreme Court.