Board of Directors System of Limited Liability Companies in China: Realistic Problems and Reform Trend

Abstract

As an integral part of corporate governance, the system of the board of directors has been improved in China with the development of history. Up against in-depth China’s market-oriented reform, there are some problems in the board of directors system of the limited liability company in the Corporate Law. On the one hand, the board of directors of limited liability companies under the Positivist Jurisprudence is faced with defects, including the vague distribution of powers between shareholders and board of directors, power of the board of directors plundered by managers, and serious impact of the legal representative system on the position of the board of directors. On the other hand, due to the contradiction between corporate autonomy and state compulsory force, the system of the board of directors is also facing a huge shock from business practice. In this regard, there are two theoretical solutions, that is, “reservation theory” and “abolition theory”. However, both of them have their own imperfections. Limited liability companies should be given the right to choose whether to set up a board of directors and improve the linkage design of the corresponding corporate governance system.