Study On Conflict Of Laws Regarding Corporate Governance For Foreign Companies Seeking To Be Listed In China’s Stock Exchange

Attracting excellent foreign enterprises to issue their stocks and be listed in China,which would expand the volume of China’s stock market and the quality of listed companies, aswell as render more investment opportunities for Chinese investors, has become a significantitem in China’s agenda of financial reform. During the Fourth Forum of China-AmericaEconomics Strategies, China has clearly promised to permit foreign companies to issue theirsecurities in China. Notwithstanding the existing disputes whether China have had the conditionsfor the establishment of the international board, this is the trend driven by the opening-up ofChina’s financial market. It is especially true when China’s foreign exchange reserves havereached the first position throughout the world, because this would solve the problem of “excessliquidity” arising in recent years.The problem of priority for the establishment of the international board is the establishmentof corresponding legal system. Considering the differences between the legal systems of Chinaand other countries, how to make foreign enterprises suit well in China and avoid issues causedby such differences to regulations have attracted the attention of numerous scholars. Among allthese questions, a fundamental one is on corporate governance. Major differences exist evenbetween British and the U.S. both of which have been classified as common law system. Theconcept of corporate governance is the internal departments, their allocation of power andinteraction, which makes it the foundation for a company’s smooth operation. Moreover, externalregulations may work only on the basis of a company’s smooth operation. All these make it necessary to study how major capital markets around the world deal with conflict of laws oncorporate governance, so as to provide helpful suggestions with reference to the establishment ofChina’s international board.This paper is consisted of four major parts. The first part introduces the basic modes ofcorporate governance around the world, including the Anglo-Saxon mode, the German-Japanmode and a comparative study of these modes. The second part analyzes the reason for theconflict of laws on corporate governance arising from a foreign company being listed on adomestic market. To make the analysis more persuasive, this paper exerts two of the fundamentaltheories with respect to corporate governance, namely the evolution theory and the pathdependence theory. The third part studies the modes adopted by the multiple countries to dealwith the conflict of laws on corporate governance, typically the place-of-registration modeadopted by Hong Kong and the interference-by-security-law mode adopted by the U.S.. Thefourth part analyzes which mode China should adopt. After analysis of the modes as mentionedin the third part and the features of China’s legislation, this paper denies the place-of-registrationmode adopted by Hong Kong and suggests that China adopts the interference-by-security-lawmode.