The revised Company Law of the PRC, which came into force on 1 July 2024, significantly increases the compliance obligations and legal liabilities of the directors, supervisors and senior management personnel. Below is a summary of the compensation liabilities of the directors, supervisors and senior management personnel under the Company Law for your easy reference.

1. Compensation Liability for Affiliated Relationships Damage
   
   According to Article 22 of the Company Law, a director, supervisor or senior management personnel shall be liable for any losses that the company may suffer due to taking advantage of his/her affiliated relationships to damage the interests of the company.
   
   
2. Compensation Liability for Failure to Call for Capital Contribution
   
   According to Article 51 of the Company Law, upon the establishment of a limited liability company, the board of directors is obliged to verify the shareholders’ capital contributions and call for outstanding capital contribution. If the directors fail to fulfil their foregoing obligations in a timely manner, they shall be liable to compensate the company for its losses.
   
   
3. Compensation Liability for Illegal Capital Withdrawal
   
   According to Article 53 of the Company Law, in case of shareholder’s illegal capital withdrawal which results in any losses of the company, the director, supervisor and senior management personnel, who are accountable for the shareholder’s illegal capital withdrawal, shall be jointly and severally liable to compensate the company for such losses with the concerned shareholder.
   
   
4. Compensation Liability for Board Resolution Damage
   
   According to Article 125 of the Company Law, if a resolution of the board of directors violates laws, administrative regulations, the company's articles of association, or a resolution of the shareholders' meeting, causing serious losses to the company, the directors who participated in the resolution shall be liable to compensate the company for its losses. If it is proven that the director has expressed objections during the voting and recorded them in the board minutes, the director may be exempted from liability.
   
   
5. Compensation Liability for Financial Assistance Damage
   
   According to Article 163 of the Company Law, in the event that a company provides grants, loans, guarantees or other financial assistance for a third party to acquire its or its parent company’s shares in violation of this provision and thereby suffers losses, the director, supervisor and senior management personnel who are accountable for such breach shall be liable to compensate the company for its losses.
   
   
6. Compensation Liability for Duty Performance Damage
   
   According to Article 188 of the Company Law, if a director, supervisor or senior management personnel violates any provisions of the laws, administrative regulations or articles of association of the company in the performance of his/her duties, which causing any losses to the company, he/she shall be liable for compensation for such losses.
   
   According to Article 191 of the Company Law, if a director or senior management personnel causes losses to a third party during the performance of his/her duties, the company shall be liable for such losses. However, the director or senior management personnel concerned shall also be liable for compensation, provided that the losses are caused by the director’s or senior management personnel’s willful misconduct or gross negligence.
   
   According to Article 192 of the Company Law, the director and senior management personnel shall exercise their duties independently and compliantly and refrain from being influenced by controlling shareholder or actual controller to act detrimentally to the interests of the company or its shareholders. Failure to fulfil such obligations will result in the joint and several liability with the controlling shareholder or actual controller.
   
   
7. Compensation Liability for Unlawful Profit distribution
   
   According to Article 211 of the Company Law, if a company distributes profits to its shareholders in violation of this law and thereby suffers losses, the director, supervisor and senior management personnel who are accountable for such unlawful profit distributions shall be liable to compensate the company for its losses.
   
   
8. Compensation Liability for Unlawful Capital Reduction
   
   According to Article 226 of the Company Law, in case of a reduction of the registered capital of a company in violation of this law resulting in losses to the company, the director, supervisor and senior management personnel who are accountable for such unlawful capital reduction shall be liable to compensate the company for its losses.
   
   
9. Compensation Liability for Failure to Fulfil Liquidation Obligations and Duties
   
   According to Article 232 of the Company Law, directors shall be the obligors in the company’s liquidation and shall set up a liquidation committee within 15 days after a liquidation event occurs. The liquidation committee shall be composed of directors, unless otherwise provided in the articles of association of the company or otherwise appointed by shareholders’ resolution. If the liquidation obligor fails to fulfill the liquidation obligation in a timely manner and causes losses to the company or creditors, the liquidation obligor shall be liable for compensation.
   
   According to Article 238 of the Company Law, if the members of the liquidation committee fail to perform their liquidation duties and causes losses to the company, they shall be liable for compensation. And they shall be liable for the losses suffered by the creditors due to their willful misconduct or gross negligence in fulfilling their duties.

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