On the eve of the May Day holiday, the financial sector continued to release significant news. On the evening of April 29, five state-owned commercial banks—Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Bank of Communications—along with two joint-stock banks, China Merchants Bank and Huaxia Bank, announced board resolutions proposing the abolition of their supervisory boards. This marks a turning point for the decades-old supervisory board system in China’s banking industry.
The seven banks disclosed the resolutions through board announcements. For example, China Merchants Bank’s 12th Board of Directors approved the “Proposal to Abolish the Supervisory Board” at its 49th meeting, while the 12th Supervisory Board also passed the same proposal at its 39th meeting. According to the board meeting minutes, the decision aligns with the “Company Law of the People’s Republic of China” and relevant regulations from the China Securities Regulatory Commission and the National Financial Regulatory Administration regarding the abolition of supervisory boards. The banks’ decision to “no longer establish” supervisory boards is based on adjustments made under the newly revised “Company Law,” effective July 1, 2024. Article 69 of the revised law states: “A limited liability company may, in accordance with its articles of association, establish an audit committee composed of directors within the board of directors to exercise the functions and powers of the supervisory board as prescribed by this law, without establishing a supervisory board or supervisors. Employee representatives on the company’s board of directors may serve as members of the audit committee.” Subsequently, the National Financial Regulatory Administration issued the “Notice on Matters Concerning the Alignment of Corporate Governance Regulations with the Company Law” on December 17, 2024, which outlined corresponding adjustments to the functions of supervisory boards. In the existing corporate governance framework, supervisory boards play a critical role, including but not limited to: (1) reviewing company finances; (2) supervising the conduct of directors and senior management, proposing their dismissal for violations of laws, regulations, articles of association, or shareholder resolutions; (3) requiring corrective action when directors or senior management harm company interests; (4) convening interim shareholder meetings when the board fails to do so; (5) submitting proposals to shareholder meetings; and (6) initiating lawsuits against directors or senior management under Article 189 of the law.Additionally, the Company Law stipulates: “The board of supervisors shall consist of at least three members. It must include representatives of shareholders and an appropriate proportion of employee representatives, with the latter accounting for no less than one-third of the total.”
How will the relevant functions and positions be adjusted when banks abolish their boards of supervisors? According to announcements from relevant banks, the following changes will be implemented: 1. The board of directors’ audit committee will assume the statutory responsibilities previously held by the board of supervisors. 2. Employee directors will be appointed to the board of directors and included in its audit committee. These adjustments require approval from the shareholders’ meeting and regulatory authorities, and will only take effect after the bank receives official approval from the National Financial Regulatory Administration for the revised Articles of Association. The process will take some time to complete. Risk Warning and Disclaimer: Market investments carry risks. This document does not constitute personal investment advice and does not account for individual users’ specific investment objectives, financial situations, or needs. Users should assess whether the opinions, views, or conclusions herein align with their circumstances. Investment decisions are made at one’s own risk.
