China\u00e2\u20ac\u2122s \u00e2\u20ac\u0153Belt and Road\u00e2\u20ac\u009d initiative (BRI) describes a vast international system of trade facilitation, infrastructure development, investment, and financial integration. With over 80 countries and regions participating in it, its touchstones are interconnection among states and their co-operation for mutual benefit.<\/p>\n
Institutional support for the BRI is provided by sources such as the Asian Infrastructure Investment Bank and the New Development Bank.<\/p>\n
The BRI offers huge trade and investment opportunities in BRI projects and with Chinese companies. The realisation of these opportunities is dependent on potential investors having adequate access to quality information about Chinese companies, essential for the necessary assessment of risks and returns that underlies investment decisions.<\/p>\n
In their note, \u00e2\u20ac\u0153More Business Opportunities or Higher Legal Risks under the Belt and Road Initiative?\u00e2\u20ac\u009d<\/a>, in the Company and Securities Law Journal<\/em><\/a> (Vol 36 Pt 8<\/a>), Professor Say Goo and Dr Heather Lee consider China\u00e2\u20ac\u2122s legal framework for ensuring company information disclosure, and identify deficiencies in that system in terms of coverage, implementation, and enforcement.<\/p>\n China\u00e2\u20ac\u2122s laws and regulations certainly stipulate information disclosure requirements for companies, including in the: Company Law of the People\u00e2\u20ac\u2122s Republic of China 2018<\/em>; Accounting Law of the People\u00e2\u20ac\u2122s Republic of China 2017<\/em>; and Securities Law of the People\u00e2\u20ac\u2122s Republic of China 2014. <\/em>However, shortcomings include discrepancies in the treatment of different types of companies (eg limited liability companies and joint stock companies), and insufficient provisions requiring the disclosure of connected transactions, which are \u00e2\u20ac\u0153a common phenomenon in China\u00e2\u20ac\u009d.<\/p>\n More pressing perhaps for Goo and Lee, is the insufficiency of mechanisms for giving effect to the information disclosure provisions. \u00c2\u00a0They note a lack of details for implementation \u00c2\u00ad\u00e2\u20ac\u201c \u00e2\u20ac\u0153how, when and where \u00e2\u20ac\u00a6 information should be disclosed\u00e2\u20ac\u009d. For example, decisions by Chinese courts granting claimants rights of inspection under the Company Law<\/em> (they cite a number of these decisions) tend to lack specificity as to the duration and venue of inspection.<\/p>\n \u00e2\u20ac\u0153Clear procedural details,\u00e2\u20ac\u009d say Goo and Lee, \u00e2\u20ac\u0153can help shareholders gain easy access at a reasonable time for inspection and photocopying of company documents.\u00e2\u20ac\u009d<\/p>\n The authors also find sanctions for non-compliance with the information disclosure requirements under Chinese law, weak or non-existent. They argue that sanctions should be proportionate and effective, so as \u00e2\u20ac\u0153to mitigate the opportunistic behaviour which definitely negatively affects the confidence of the investors of BRI\u00e2\u20ac\u009d.<\/p>\n Access to \u00e2\u20ac\u0153meaningful, timely, and accurate\u00e2\u20ac\u009d information about companies would seem to be an essential prerequisite to building strong business relationships. It is surely foundational to the BRI fulfilling its promise of creating a collaborative, integrated, mutually beneficial, multi-national economic system.<\/p>\n Please note that the links to the content in this post will direct you to Westlaw AU.<\/p>\n To purchase an article, please email: LTA.Service@thomsonreuters.com\u00c2\u00a0or\u00c2\u00a0contact us on 1300 304 195\u00c2\u00a0(Australian customers) or +61 2 8587 7980\u00c2\u00a0(international customers) during business hours\u00c2\u00a0(Mon-Fri, 8am-6pm AEST).<\/p>\n