Introduction of Corporate Law
Dsicuss about the Domestic Media Coverage Of Mergers And Acquisitions.
Corporate law deals with the creation of the company and it is linked to the commercial law. Corporate law is the body of law which directs the rights, powers, relations and conduct of individual, companies, business and profession. Corporate governance code is framed in each nation according to social, legal and fiscal basis. The Corporate governance code reproduces corporate structure of each company. Each country has corporate structure having own features.
The Corporation law of Australia has taken from the UK company law (Lyon & Plessis, 2018). In Australia, legal structure contains of The Corporation Act, 2001. The Australian Securities and Investments Commission (ASIC) is the supervisory body which controls the statue of Australia. And The Corporate law of China protects the legal rights and interest of the entity, individual, shareholders and creditors (Jensen, 2018). In this essay how Australian corporate law and China’s corporate law are compared to each other is discussed and critically examined (Borochin & Cu, 2018).
The Australian Stock Exchange introduced Australian principles for best governance and practices recommendations in 2003. And in China, The China Securities Regulatory Commission’s corporate governance code is for listed company in China. There are some similarities between corporate code of Australia and corporate code of China in respect of rights of shareholders, powers of shareholders, duties of shareholders, formation of the board committee and name of the board committee, independent directors and risk management. Chinese company is not required only BOD (board of directors) but supervisory board is also required. The Supervisory board supervises the functions of the management. But there is no requirement of supervisory board in Australia. In Australian companies, board of directors are itself responsible for their functions and conducts (Ciambrone, 2018).
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Particulars |
China |
Australia |
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Powers and rights of Shareholders |
In Chinese companies, the Shareholders have some powers and legal rights which are specified by law, rules and regulations and AOA (article of association). The Shareholders should entertain these rights. General rights of shareholders are to vote in meeting of shareholder, to get share of liquidation proceeds and to review memorandum of company, article of association, minutes of shareholders, financial accounting report, consolidated financial statements, the resolution of the meeting of supervisory board and board resolutions. |
In Australian companies, the Shareholders also have some rights to entertain. It is a duty of company to respect shareholder’s right and give all possible facilities to exercise rights in effective manner. Shareholders make a decision in respect of election of shareholders and director’s remuneration. The Shareholders can also take corporate actions. This includes further issue of shares, buy back of shares, merger and de-merger with another company. |
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Formation of board committees |
Company’s board of directors are authorized to establish board committees. They may create board committees as per the requirements of companies. The bylaws define the functions of board committees. The main functions of the Board committees are to plan the function of board. It also corrects responsibilities of members as per the guidelines. |
The formation of board committee is suggested to the several extent of the principle as it fits within the legal documents. |
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Name of board committees recommended by board of directors (BOD) |
Following committees may recommend by the board of directors – – An audit committee – A nomination committee – A corporate strategy committee – A remuneration – Appraisal committee – Special committee which are required to be form as per the shareholders’ resolution pass in shareholder’s meetings. |
Following committees may recommend by the board of directors- – An audit committee – A risk management committee – A remuneration committee – A nomination committee |
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Supervisory board |
As per mention in China code, there is a Supervisory board in all companies. Supervisory board is in an addition of management board. In China, a limited liability company requires supervisory board. It is necessary that it should have not less than three persons. But a small scale company may have one or two person. The Supervisory board should include the representatives of shareholders and representative of employees at an appropriate ratio as defined in article of association. Further the term of supervisory board is 3 years but after the expiry of term of office, the position may hold again at re-election. The supervisors may attend the meeting of board directors but cannot vote in meetings. |
There is no such provision of establishment of Supervisory board in Australia. |
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Duty of supervisory board |
The Supervisory board is the grouping of individuals. The individuals are appointed by the stakeholders of the company to create interest through authority of company. It is a duty of Supervisory board to supervise the functions of management board, executive directors and CEO. |
As there is no such provision of the Supervisory board so no duty arises. |
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Stakeholder’s interest |
Some provisions are defined in chapter 6 of the China code for the protection of the interest of stakeholders. |
In the Australia, a stakeholder’s interest is included in the ethical and responsible decision making. |
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Introduction of independent director |
It is mentioned in the China code that as per the applicable rules and regulations, a listed company should introduce independent directors to the board of director in the company. Here independent director is a director who is not a substantial shareholder having 5 per cent or more than per cent or who has not appointed at executive level in the previous three years or who is not appointed as professional advisor or the professional consultant in the respective company from the previous three years. |
As per the Australia principle recommendation, there is a provision mentioned about the independent director. According to it, a majority of the board should be independent director. The provisions related to the independent director are main part of corporate governance. |
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Risk Management |
As per the China code, There is no full coverage of risk management (Aven & Zio, 2018). |
Principle 7 of recognize and manage risk covers full analysis of risk management. Risk management is practice of find possible risk in advance and evaluates it. It is a sub area of business and management which recognize and stop all probable destructive results in the organization (Elder & Teasdale, 2018). |
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Disclosure of relative party transaction and shareholder’s interest |
In the unique corporate structure of China, a listed company has a controlling shareholder. The disclosure includes the full details of the both parties, financial asset, financial transaction, equity, financial investments and agreement related to allocation of cost of transaction. The disclosure should have all the details regarding address of residence and registered place of business, opportunities, latest financial status of reporting company, segment reports, consolidated financial report, income tax obligations and non-related party transactions. |
The Corporate governance code of Australia includes disclosure of related party transaction and the shareholders. The related party transaction includes issued shares and securities given to public company. It also includes arrangement with a company which is possessed by family of director. |
While corporate law of Australia and corporate law of China are compared, it is found that there are some major differences in Australian corporate governance code and the corporate code of China. These differences are due to circumstances of countries. Different corporate governance code shows that how nations with different political, economic and social administration have recognized the code so as to particular development phases can be sued. It also reflects how corporate governance code should be adopted or implemented for good corporate governance behavior. Australia has isolated share ownership structure. On the other hand China has its own unique corporate structure. In China, most listed company has a controlling shareholder (kraakman & Hansmanm, 2017).
Comparison between Australian corporate law and corporate law in the People’s Republic of China
Besides the corporate structure, Australia and China have different corporate governance models. The Corporate governance model have two main parts insider based model and outsider based model. The outsider based model is embodied by US and UK. The insider based model is embodied by Germany and Japan. The differences between corporate code of Australia and corporate code of China provide base for comparison of corporate governance code (Lanis, Richardson & Taylor, 2017).
Finance law is a framework of rules, regulations, standards and practices by which financial markets are regulated and financial transactions are made (Leng, 2017). The main goal of formation of financial law is financial stability in the market. All countries have their own government standards and own interest which leads threatened to the globalization, financial growth and technical development (Stumbles, 2017). So it is necessary to develop and maintain financial stability in the environment of nations (Eastel, 2017).
Each country has its own and different structure and approach to the financial system. The institutional approach emphasizes on the formation of the regulatory institution. Bank, an insurer and security firms are the example (Clarke, 2018). Antitrust, bankruptcy and security law give protection to the financial interest of small scale business and individual investor. It makes a separate specialist regulator for the institution (Ntim, 2018).
There are some similarities between finance law of China and finance law of Australia. The financial system of China is more difficult and integrated in comparison of Australia. China faces many challenges in respect of the current financial regulatory system (Reid, 2018). It considers the insight that the experience of Australia. China has moved towards a twin peaks structure, mostly in context of the different reform proposals which are required to be advocated (Sherraden, Birkenmair & Collins, 2018).
Thus the twin peaks structure of China has both advantages and disadvantages. Twin peaks structure explores insights that occurred in Australia (Singer, 2018). At the time of the evaluation of experience of Australia and other twin peaks structure, the experience of Australia is considered by twin peaks structure (Stephen, 2018). The twin peaks structure evaluates the correct version of twin peaks structure of China. The twin peaks structure considers two major characteristics which are following-
- Transparency of regulatory objects.
- Effective regulatory direction and coordination.
On the basis of experience of Australia and other nations which have adopted the twin peaks structure, three questions are required to be asked for the application of the twin peaks structure and to find out the correct version of twin peaks structure. These three questions are following-
- Where should prudential regulatory be located?
- How can duties, powers and goals of the regulators be expressed?
- What is the way to achieve and maintain coordination effectively?
Powers and rights of Shareholders
Despite of the similarities, there are some differences between finance law of China and finance law of Australia. The licensing provisions in The Corporations Act, 2001 are articulated for extraterritorial effects so as to able to regulate financial services outside the Australia which are planned to or likely to have the effect of including persons in Australia to use those services.
The Corporation Act of China provides for identical and uniform approach of financial regulators. There is constant licensing and disclosure rule in Australia. In Australia, it is necessary to have Australian financial service license (AFSL). The Australian Securities and Investment Commission (ASIC) issues the Australian financial service license to the individual and corporate entity otherwise they may take the exemption to obtain license. Following are the regulated financial services which required an Australian financial service license-
- Trading in financial goods.
- The provision of advice.
- Operate a registered managed investment scheme.
- Prepare market for trading of financial products.
- Make available depository and custodial service for the financial products.
On the other hand, China may require a number of license, permits and certifications for functioning legally in the marketplace. It is a challenge for China for business operating license approvals. Qualified Foreign Institutional Investor (QFII) and Qualified Domestic Institutional Investors (QFII) are the two main licenses for foreign financial firms which want to enter into China’s industry. The Qualified Foreign Institutional Investor is essential for foreign financial firms which want to make investments in RMB denominated stocks and fixed revenue products. The China Banking Regulatory Commission (CBRC), the Chinese Insurance Regulatory Commission (CIRC) and the CSRC defined the possibility of investment for QDII. In 2011, Renminbi Qualified Institutional Investor (RQFII) was also introduced. But QFII is more restrictive in the comparison of RQFII.
In Australia, it is mandatory to obtain separate license for operating financial market and settlement and clearing process in Australia. Australian Securities Exchange (ASX) has power to issue separate license. On the other hand in China, the China Banking Regulatory Commission (CBRC) have powers of issue, changing, revoke and withdraw the financial license. There is strict provision that no other person (individual or entity) can exercise the powers of China Banking Regulatory Commission.
In respect of renewal of obtained license, the requirement of renewal of license in China is more in respect of Australia. It creates challenges for the China because it leads uncertainty. It makes many consequences such as delay in process and complicated process.
In Australia, most foreign exchange transactions are not restricted. They are free from regulations. RBA passed on its authority to money market dealers and foreign exchange dealers. On the other hand, China is more restrict about foreign exchange transactions. It is strict rule that Companies, banks and financial institutions or individual cannot transfer money within locality or outside the jurisdiction except in some cases. The People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) control foreign exchange within or outside of China. The State Administration of Foreign Exchange and the People’s Bank of China have powers to provide exchange rates by using a managed flow system (Pearson, 2018).
Formation of board committees
When foreign investment is made in Australian banking sector, it is required to review by Foreign Investment Review Board. It is essential for foreign investment to comply with The Banking Act and The Financial Sector (shareholding) Act, 1998. While making foreign investment, banking policy should also be considered. In China, the regulators of the People’s Republic of China (PRC) have authority to regulate the foreign investment.
In past days, China made only focus on the traditional industries such as plant and machinery, textile and plastic. But now days it makes focus high-tech industries such as automobiles, electronics products, medicines and biological science. These industries become main and beneficial industries for foreign investment but Australia makes focus on medical and material science and advanced equipment, digital technologies. The following are the five areas of growth in Australia-
- Main organizations.
- Tourism organization
- Food sector.
- Energy and resources.
- Innovative technologies and advanced manufacturing and services.
Anti-money laundering is a subject of the regulatory concern. Australia is able to protect investors from money laundering by the anti-money laundering and The Counter Terrorism Financing Act, 2008. On the other hand, China has made a law in 2007 for money laundering. China’s anti money laundering law controls the money laundering activities. There is no specific act in China for controlling money laundering activities. But by the 2020, China will be able to control and stop money laundering. It would be possible by improving rules and regulations and by making law in effective manner.
Australia is going to have better financial service relationship with China. There are many challenges for Australia to be face such as Australia has to make its own resourceful and innovative histories of financial services. It has to follow its own financial system and framework.
The law of Australia contains number of levels of organized and unorganized forms of law (Whincop, Keyes & Posner, 2018). The Australian law developed from Britain law which had taken in Australia as the part of Britain law in 1770. From 1855 to 1870, local system of government has been established to the every of British colony in the Australia. Later, central government was created in 19th century. The Australian constitution comes into effect in January 1, 1901. It can be said starting of independent Australian legal system (Wojkik, 2018). And The Commonwealth of Australia Constitution Act, 1900 (United Kingdom) was formed.
Law of China is the oldest law among the all. It contains various traditions in the 20th and the 21st century. The basic China law is created on Germanic style civil law, the socialist law and the other traditional approaches of China. In 1949, People’s Republic of China has been recognized (Yabuki, 2018).
Name of board committees recommended by board of directors (BOD)
At present, Law in the People’s Republic of China is undertaking regular reform. There are various elements which focus on the necessity to make strong the rule of law in China (Yin, Yu, Jiang, 2018). They also focus on the foreign trade and the globalization. Law in republic of China is called civil law system. It is arranged into the six codes. These six codes are following –
- The constitution.
- The civil code.
- The criminal code.
- The code of civil procedures.
- The code of criminal procedures.
- The administrative law.
Conclusion
From the above analysis, it is cleared that Australia and China have both similarities and differences due to own circumstances. Every Corporate governance code should boost good governance compliance behave. Companies of Australia which are doing business with Asia should take account of the government effects in China. It is necessary to Understand differences and similarities of corporate governance code in Australia and China for the worldwide companies functioning across these two nations (Teasdale, 2018).
It is cleared that China has People’s Republic’s economy. Economy in Australia becomes effective from all the matters and activities of China because of level of exposure are high. If the economy of China will going to be change, then Australia have to follow those changes and improve its own histories (Tong, 2017). So government of Australia and Australian companies are required to make good financial service relationship with China.
The financial services of Australia have solid base. Australia has reasonable and fair advantages and solid regulatory structure. It encourages confidence and trust to the great extent. It is well known that Australia may come out of the whole financial crises at any time because of loans at low rate in comparison of economy of other developed countries.
References
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