Safe Harbor Procedure for Related Party Transactions and Legislation for Corporate Groups

The disputes of validity of related party guarantees relating to Article 16 of Chinese Company Law reflects the disputes of validity of corporate related party transactions in general. The Revision of Chinese Company Law should establish safe harbor procedure for related party transactions. Judgment on whether a related party transaction which has not abided by safe harbor procedures is voidable should based on fairness of the transaction. Moreover, Chinese Company Law should also regulate corporate groups to legitimate the unified management right of corporate groups as well as to protect the rights of minority shareholders and debtors via fair compensation inside corporate groups.