On 24th April 2017, the China Insurance Regulatory Commission published the 'Guidance on Insurance Companies' Articles of Association (the Guidance). The Guidance is only enforceable against joint-stock insurance:
- holding companies;
- underwriting companies; and
- asset management companies,
collectively the Mandated Companies.
Other types of non-Mandated Companies and insurance entities (e.g. most foreign-invested insurance companies) are however encouraged to implement the Guidelines. The aim of the Guidelines is to ensure that five key principles of corporate governance and risk management are embedded in a Mandated Company's Articles of Association (AoA), being clear enunciation of:
- rights and obligations of shareholders, including detailed rules governing the nomination by shareholders of directors, supervisors and senior management;
- powers and functions of, and between, shareholders (shareholder meetings) on the one hand versus the directors (board meetings) on the other;
- mechanisms for the tabling and adoption of strategic resolutions by both shareholders meetings and board meetings;
- provisions concerning independent directors, including itemization of the rights, obligations and powers of independent directors; and
- special or reserved matters, and alternative mechanisms to be utilized in resolving deadlocks.
CIRC requires that all Mandated Companies approved for establishment or subsequent business operations on or after 24th April 2017 will be required to comply with the Guidelines. All other Mandated Companies must ensure that their AoAs are amended and made compliant with the Guidelines by the end of calendar year 2017.