Interpretation Path of Shadow Directors in Article 192 of China’s New Company Law

With the implementation of China’s new Company Law in 2024, Article 192 specifically targets the institutional design for regulating the abuse of control by controlling shareholders and actual controllers. However, there remain deficiencies in the current identification of actual controllers and the regulation of behaviors that harm the interests of the company. Given the similarity between Article 192 and the shadow director system in the UK, this article compares this new provision with the traditional shadow director system, which also aims to regulate those who “manipulate” behind the directors. By analyzing the similarities and differences in their regulatory functions, this article suggests improving Article 192 of China’s Company Law by drawing on the extraterritorial shadow director system. The specific improvement paths include: specifying the criteria for identifying actual controllers, clarifying the acts that constitute “instructions,” and determining the criteria for dividing the internal liability shares among jointly and severally liable parties.