The rules of corporate governance in the US have caught many inexperienced Chinese players unawares. Hong Haifeng explains how to keep your team in play
Under China’s “go out” policy, more and more Chinese enterprises are doing business in the US. And while enjoying business growth and success in the world’s largest market-based economy, many of them are increasingly encountering legal challenges arising from their investments, operations and commercial transactions. US corporate governance is among the most common of legal challenges that puzzle Chinese business executives.
Chinese executives often came to me asking corporate governance questions such as: As the largest (though less than 50% ownership) stockholder of the company, we are one of the owners of the company, but why are we not allowed to actively engage in the company’s business decision-making process? With a “not so friendly” board and management, how can we protect our legitimate business interests as a stockholder?
These questions are most commonly raised in the context of a situation in which a Chinese company invests in an existing US company as a minority equity investor. To answer these questions, Chinese companies need to carefully examine some distinctive aspects of the US corporate law system.
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Hong Haifeng is a US corporate lawyer with Porter Wright Morris & Arthur. Based in Washington DC, the author regularly advises Chinese and other Asian companies that invest, operate and transact their businesses in the US.