Thoughts about mandatory versus non-mandatory rules in Chinese corporate law

I attended an interesting conference in Beijing on Nov. 6th on practical issues in corporate law litigation in China. There were a number of judges there who spoke about the kind of cases they were seeing.

11月6日我在北京参加了一场非常有意思的会议，会议的主题是有关中国公司法诉讼案件的实践问题。

I was asked to talk for three minutes about mandatory versus non-mandatory rules in corporate law. Having only three minutes concentrates the mind. Here’s the general gist of what I had to say.

与会者请我就公司法中强制性规则与非强制性规则间取舍发表一下评论，限时3分钟。时间很短，罗索不得。我讲的大体如下：

First, I made the observation – now unoriginal, I think, in US corporate law circles, but I don’t think widely appreciated in China – that mandatory rules may not be all that mandatory and that non-mandatory rules (i.e., default rules that can be varied if people want to do so) may not be all that optional. Bernard Black famously wrote about the former issue several years ago in his article, “Is Corporate Law Trivial?”, 84 Nw. U. L. Rev. 542 (1990), and the latter point has been made more recently by (among others) Yair Listokin, “What Do Corporate Default Rules and Menus Do? An Empirical Examination,” 6 J. Empirical Leg. Stud. 279 (2009) and Brett McDonnell, “Sticky Defaults and Altering Rules in Corporate Law,” 60 SMU L. Rev. 383 (2007).

首先，我注意到一个现象，强制性规则也许并不完全具有强制性，而非强制性规则（即任意性规则，其适用与否由当事人自行选择）也并不完全任由人选择。我认为在美国公司法学界，这早已不是一个新鲜话题了，但是在中国，这一问题还没有得到足够的重视。若干年前，伯纳德•布莱克在其名作《公司法是否无足轻重？》 一文中谈到了强制性规则有其非强制性的一面，最近几年里，包括耶尔•里斯托金的《公司法下任意性规则及菜单规则，其作用何在？实证的检验》 和布拉特•迈克多奈尔的《公司法中不易选掉的任意性规则和变更规则》 在内的一些论文也提到了非强制性规则也有其强制性的一面。

Mandatory rules can be evaded if you can choose a different organizational form – for example, you choose to organize as a limited partnership in order to avoid things you don’t like about the law applying to corporations – or a different jurisdiction altogether in which to incorporate. Optional rules may not be so optional if it’s costly for some reason to choose something other than the default rule provided by the law (and there has to be some default rule).

有几种方法可以合法规避强制性规则，例如：1）你可以选择其他组织形式，比如你选择成立有限合伙企业，那么公司法中你不喜欢的强制性规则就不适用了；2）你也可以选择在其他司法管辖区注册成立公司。至于任意性规则，如果选掉任意性规则的成本因某些原因而奇高，那么任意性规则也许并非完全任由人选择。

Particularly when talking about mandatory rules, it occurred to me that the Chinese participants at the conference might be thinking to themselves, “Well, it may be true in the US that you have a huge menu of organizational forms and jurisdictions of incorporation from which to choose, but what’s that got to do with China? That’s not the reality we face here.” Precisely. Business people in China face a much more restricted set of choices. First, there is only one company law: the national one. There is no jurisdictional competition within China. Second, incorporating abroad creates as many problems as it solves. Among other things, foreign companies are subject to considerable restrictions on what they can do in China. Although Lenovo went this route, incorporating in Hong Kong, not many companies can as a practical matter follow in its footsteps. Finally, China’s laws on business organizations – mainly the Company Law and the Partnership Law – offer much less choice of organizational form to businesses. If you want to list your stock publicly, for example, you must be organized as a joint stock company (gufen youxian gongsi, also translated as “company limited by shares”).

特别是在讨论强制性规则时，我感觉到中方与会者可能在想：“诚然，在美国，你们既有很多组织形式供选，在公司成立时也有很多司法管辖区可挑，这也许是不争的事实，但这和中国有什么关系？中国的国情在这两点上与美国完全不同。”没错， 在中国，商人的选择范围受到的限制多得多。首先，中国只有一部全国性的公司法，不存在各司法管辖区间的竞争。其次，在海外成立公司所带来的新问题并不少于解决的老问题，比如，外国公司在中国的经营范围受到相当的限制。虽然联想走的是这条路，在香港成立了公司，但绝大多数公司无法在实践层面追随联想的步伐。最后，根据中国有关组织形式的法律（主要是《公司法》和《合伙企业法》），可供选择的组织形式要少很多，比如，如果你要上市，组织形式必须是股份有限公司。

What’s the significance of this? It means that Chinese should be especially careful about borrowing mandatory rules from jurisdictions where extensive choice in fact exists. There is a tendency to think that Delaware or the Model Business Corporation Act must have it right in many respects, and that where something is mandatory in those statutes there should therefore be at least a presumption in favor of making it mandatory in China. But a mandatory rule in Delaware has to be understood in context: it’s mandatory in a world where you don’t have to incorporate in Delaware and where you may not have to be organized as an ordinary corporation. In this sense, then, companies subject to Delaware’s rules have all chosen to be subject to them and we can assume that the rules can’t be too burdensome to those companies.

以上问题其重要性体现在什么地方？其重要性就在于，若要从那些有诸多其他选择的司法管辖区借鉴强制性规则，中国人须三思而后行。有这样一种倾向，认为特拉华的公司法或《标准商务公司条例》在很多方面有其优越性，所以，如果在某一方面它们做出了强制性规定，至少可以先假设中国也应该在同一方面做强制性规定。但是，特拉华公司法中的强制性规则必须放在大背景下去理解：这些规则的确是强制性的，但是在美国，人们既可以选择不在特拉华州成立公司，还可以选择除普通公司外的其他组织形式。从这一个意义上说，受制于特拉华公司法的公司是出于自愿，既然出于自愿，我们就可以假设这些规则不会给这些公司带来难以承受的负担。

In China, however, such a mandatory rule would have a much stronger effect. Companies could not easily opt out. Thus, companies for whom the mandatory rule was highly burdensome would have no escape. In other words, importing mandatory rules from jurisdictions where real choice exists is importing something that doesn’t really exist in the country of origin. China will end up with a company law that is much more rigid than the company law of the jurisdictions it is trying to emulate.

而在中国，同样的强制性规则，造成的影响将要大得多。考虑到公司将无法轻易做出其他选择，面对将带来沉重负担的强制性规则，公司将无处可遁。换句话说，从其他实际上有广大选择范围的司法管辖区进口强制性规则其实是在进口一个在原产地不存在的东西，所谓“橘生淮南则为橘，生于淮北则为枳，叶徒相似，其实味不同”。其结果便是，中国的公司法将会比它的模仿对象要严厉得多。