What Are The Risks Of A Supervisor?
This is the 11th video of the Investing In China Chapter.
In today’s video, we will talk about what a supervisor is, the responsibilities of this role and the legal risks involved.
When asked by a friend to assume the role of a company supervisor, some people may perceive it as merely a nominal position with limited responsibilities and obligations. However, within the framework of corporate governance, company supervisors play a crucial supervisory role, possessing statutory rights and responsibilities to oversee the actions of the company's shareholders, directors, and senior executives.
In accordance with the Company Law, company supervisors bear the responsibility of supervision and balance within corporate governance. Failure on the part of supervisors to fulfill their statutory duties or their collusion with company executives in illegal activities may result in liability for damages.
As company supervisors, their statutory rights and obligations include the following:
1. Safeguarding the Company's Interests: Company supervisors are prohibited from exploiting their affiliations with shareholders, directors, or senior executives to the detriment of the company's interests. If this provision is violated and the company incurs losses as a result, supervisors may be liable to compensate for damages.
2. Calling Shareholders' Meetings: Supervisors representing shareholders with more than 10% voting rights, one-third or more of the directors, or supervisors in companies without a supervisory board have the right to propose the convening of ad-hoc shareholders' meetings.
3. Convening Shareholders' Meetings: In cases where the board of directors or executive directors fail to fulfill their duty of convening shareholders' meetings, supervisors in companies with or without a supervisory board have the right to convene and preside over such meetings. If the supervisors fail to convene or preside, shareholders holding more than 10% voting rights can convene and preside over the meetings themselves.
4. Monitoring the Company's Management: Both supervisory boards and supervisors in companies without a supervisory board exercise various powers, including inspecting the company's financial status, overseeing the performance of directors and senior executives, proposing dismissals, demanding corrective actions for acts detrimental to the company's interests, proposing the convening of ad-hoc shareholders' meetings, submitting proposals to shareholders' meetings, and initiating legal proceedings against directors and senior executives.
5. Participation in Board Meetings: Supervisors have the right to attend board meetings and raise inquiries or suggestions regarding board resolutions. Supervisors can also conduct investigations if they detect abnormal business operations within the company, and if necessary, they may engage the services of accounting firms or other relevant entities, with the company bearing the related costs.
6. Convening Supervisory Board Meetings: Supervisory boards are required to hold at least one meeting per year, and supervisors have the authority to propose the convening of ad-hoc supervisory board meetings.
7. Cost Coverage: The expenses incurred in the exercise of powers by supervisory boards and supervisors in companies with or without a supervisory board are borne by the company.
Furthermore, directors, supervisors, and senior executives have an obligation to comply with laws, regulations, and the company's articles of association. They owe a duty of loyalty and diligence to the company. If they breach laws, regulations, or the company's articles of association, resulting in losses for the company during the execution of their duties, they may be held liable for compensation.
Therefore, accepting the role of a company supervisor is not a mere formality but entails significant responsibilities and obligations. Company supervisors play a vital role in upholding corporate governance, protecting shareholders' rights, and overseeing the management team.
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Investing In China
1) 5 Must-Knows About Company Incorporation in China
2) How To Trade Safely With Chinese Factories
3) Is Chinese Partner Needed For Company Registration
4) How To Get Money Back From Debtors?
5) What Is Director And Supervisor?
6) What Is The Best Type Of Company To Register?
7) How To Protect Your Intellectual Property In China?
8) What Is A Legal Representative?