The 230-article Corporation Law, effective in 1994, is a milestone in China's market reform. But sentiment for revising it has been rising as China steps up embracing the market economy.

Some 601 deputies moved for revising the law at last year's full NPC session, accounting for about one-fifth of all the congress deputies.

"There have been voices for the revision for some time but now seems to be the right time with the growth of the economy, a change of minds and improvement in regulatory practices," said Wang Xinxin of Beijing-based Renmin University.

In a report delivered to the NPC Standing Committee last Friday on the amendment, the State Council's Legislative Affairs Office listed six defects with the current law: excessive limitations on creating a company, poor corporate governance framework, insufficient protection for small shareholders, outdated stipulations on share issuance, transfer and listing, absence of credibility and diligence requirements on directors, supervisors and senior managers, and failure to respond to new challenges in public company supervision.

The office shepherded leading experts and related legislative and government departments to write the draft. The draft added 44 articles to the current law, removed 13 and modified 91.

Still, the report affirmed the contributions the outdated law has made.

By the third quarter of last year, China had 3.4 million companies registered in line with the law. In total, they have 13.8 trillion yuan (US$1.7 trillion) of registered capital, not including the 241,400 foreign-funded companies which make up for US$709.7 billion registered capital.

Some 2,510 of the country's 4,223 major State-owned enterprises were transformed into shareholding companies with multiple sources of capital by the end of 2003.

Members of NPC Standing Committee meet once every two months. It usually takes three rounds of reviews before an act goes to a vote.

Source: China Daily