Company Supervisors in China: Responsibilities and Legal Requirements

Company supervisors in China play a crucial role in upholding corporate governance and ensuring legal compliance within organizations. As overseers of executive actions, supervisors act as a safeguard against potential misconduct or irregularities, contributing to the overall transparency and integrity of business operations. Most foreign companies operating in China are required to appoint supervisors, and many must also set up a board of supervisors.


By providing an additional layer of oversight, the role of supervisors and the board of supervisors is meant to enhance accountability, mitigate risks, and protect the interests of shareholders.  

Under China’s Company Law, all companies are required to appoint supervisors, and in some cases, to establish a board of supervisors. Company supervisors are bound to the company’s articles of association (AoA) and bear corresponding legal liability. 

In this article, we explain the current requirements for company supervisors in China, including their roles and responsibilities, the appointment process, and legal liabilities within the company. 

Requirements for supervisors and the board of supervisors 

Under China’s Company Law, limited liability companies (LLCs) and joint-stock companies must set up a board of supervisors with at least three members, meaning that each company must have at least three supervisors. 

An LLC that is either smaller in scale or has a small number of shareholders may have only one or two supervisors and does not need to set up a board of supervisors. 

In both LLCs and joint-stock companies, the board of supervisors must include shareholder representatives and an appropriate proportion of company employee representatives. At least one-third of the board must be held by employee representatives. This proportion must be stipulated in the company’s AoA. 

Company Law Requirements for Supervisors and Board of Supervisors
  Organizational requirement  Composition of board of supervisors 
LLCs 
  • A board of supervisors with at least three members; or 
  • 1-2 shareholders for an LLC that is either smaller in scale or has a small number of shareholders  
In both LLCs and joint-stock companies: 

  • The board of supervisors must include shareholder representatives and an appropriate proportion of company employee representatives.  
  • At least one-third of the board must be held by employee representatives. This proportion must be stipulated in the company’s articles of association (AoA). 
Joint-Stock companies 
  • A board of supervisors with at least three members 

The board of supervisors must also have a chairman and may also have a vice chairman in the case of a joint-stock company. The chairman of the board of supervisors is tasked with convening and presiding over the meeting of the board of supervisors. 

Supervisor eligibility requirements

There are various limits on the persons who can take up the role of supervisor under the Company Law. 

First of all, directors and senior managers may not concurrently serve as supervisors. 

In addition, anyone who falls under any of the following circumstances is not permitted to serve as a supervisor: 

  • Has no civil capacity or has limited civil capacity (generally, those aged over 18); 
  • Has been sentenced for corruption, bribery, encroachment of property, misappropriation of property, or undermining the socialist market economic order and a five-year period has not lapsed since the expiration of the penalty expired, or has been deprived of political rights due to a crime and a five-year period has not lapsed since the expiry of the penalty expired; 
  • Is serving as a director, factory director, or manager of a company or enterprise undergoing bankruptcy liquidation, and is personally responsible for the bankruptcy of the company or enterprise, and less than three years have elapsed since the date of completion of the bankruptcy liquidation; 
  • Is serving as the legal representative of a company or enterprise that has had its business license revoked or ordered to close due to a legal violation and bears personal responsibility for the violation, and a three-year period has not elapsed since the revocation of the business license of the company; or 
  • Has a large amount of personal debt that has not been paid off on time. 

The appointment of a supervisor shall be deemed invalid if the candidate falls under any of the above circumstances. In addition, if they find themselves under one of these circumstances after assuming office, the company is required to dismiss them as supervisors. 

Election of company supervisors 

In an LLC: 

  • Company supervisors who are not employee representatives are selected by the shareholders’ meeting. 
  • The employee representatives on the board of supervisors must be democratically elected by the employees through employee congresses, workers’ conferences, or other forms of democratic meetings. 
  • The chairman of the board of supervisors must be elected by a majority of the supervisors on the board.
  • If the chairman of the board of supervisors is unable or fails to perform their duties, then more than half of the supervisors can jointly elect a supervisor to convene and preside over the meeting of the board of supervisors.  

In a joint-stock company: 

  • The board of supervisors and supervisors are selected by the founding members after they have made sufficient capital contributions as stipulated in the company’s AoA. The company’s supervisors and members of the board of supervisors must be written in the AoA. 
  • The employee representatives on the board of supervisors must be democratically elected by the employees through employee congresses, workers’ conferences, or other forms of democratic meetings. 
  • The chairman and vice chairman of the board of supervisors must be elected by a majority of the supervisors on the board.  

Supervisors hold office for a term of three years. When the supervisor’s term expires, they may be re-elected. 

If a supervisor’s term expires and they are not re-elected in time, or if a supervisor resigns during their term and the members of the board of supervisors fall below the required number, then the original supervisor must continue to perform their duties as a supervisor until the re-elected supervisor takes office. 

In addition to electing the supervisors in an LLC, the shareholders’ meeting also has the power to replace supervisors, provided they are not employee representatives, and decide on their remuneration. 

Responsibilities of company supervisors and the board of supervisors 

The board of supervisors, or the individual supervisors in the case of a company does not have a board of supervisors, have the following powers and responsibilities: 

  1. Checking the company’s finances;
  2. Supervising the performance of the company’s duties by directors and senior managers, and making recommendations for the removal of directors and senior managers who violate laws, administrative regulations, company AoA, or shareholders’ meeting resolutions;
  3. Requiring directors and senior managers to make corrections when their actions harm the interests of the company;
  4. Proposing to convene additional shareholders’ meetings outside the number stipulated in the AoA, and convening and presiding over the shareholders’ meeting when the board of directors fails to perform this duty as is normally required;
  5. Putting forward proposals to the shareholders’ meeting;
  6. Initiating lawsuits against directors and senior managers in accordance with the Company Law; and
  7. Any other powers stipulated in the company’s AoA. 

In addition to the above duties, supervisors can also attend board meetings as non-voting delegates and make inquiries or suggestions on matters resolved by the board of directors. 

If the board of supervisors or supervisors of a company without a board of supervisors discovers that the company’s operating conditions are abnormal, they may conduct an investigation; if necessary, they may hire an accounting firm to assist them in their work at the company’s expense.

Find Business Support

The board of supervisors is required to hold at least one meeting every year in an LLC, and every six months in a joint-stock company. Supervisors may also propose to convene additional meetings outside the required number. The board of supervisors must keep minutes of its decisions on the matters discussed, which must be signed by all of the supervisors in attendance.

The company can stipulate its own discussion methods and voting procedures of the board of supervisors, which must be written in the AoA. 

Resolutions of the board of supervisors must be approved by more than half of the supervisors. Minutes of the meetings of the board of supervisors must be recorded and signed by the supervisors who attended the meeting. 

The shareholders’ meeting is responsible for reviewing and approving reports compiled by the board of supervisors (or supervisors in the case of a company without a board of supervisors). 

Where a director or senior executive violates the laws and administrative regulations or the AoA of the company in the performance of their duties and powers, and this violation causes the company to suffer damages, they will bear liability for compensation. In these circumstances, a shareholder or a group of shareholders of an LLC, or in the case of a joint-stock, a shareholder or shareholders who have held at least one percent of shares in the company for 180 consecutive days, may submit a request in writing to the board of supervisors or the supervisor (in the case of an LLC which has not established a board of supervisors) to file a lawsuit with a people’s court. 

Legal liabilities of supervisors 

Supervisors are required to abide by laws, administrative regulations, and the company’s AoA, and have a duty of loyalty and diligence to the company. Supervisors may not take advantage of their powers to accept bribes or other illegal income or misappropriate the company’s property. 

Supervisors who are found to violate any laws, administrative regulations, or the company’s AoA when performing their duties, and where these violations cause losses to the company, will be liable for compensation. 

If a supervisor is found to have committed any of these violations, a company shareholder (or multiple shareholders) of an LLC (or, in a joint-stock company, a shareholder or shareholders who have held at least one percent of shares in the company for 180 consecutive days), may request the board of directors (or the executive director in an LLC without a board of directors) to file a lawsuit to the people’s court in writing.  

Requirements for supervisors and boards of supervisors in foreign companies

Under the current Foreign Investment Law (the FIL), the organizational form, governing structure, and operating rules of foreign-invested entities (FIEs) will be subject to the provisions of the Company Law, the Partnership Enterprise Law, and other applicable laws, just as enterprises established by domestic investors are.

Find Business Support

That is to say, any FIEs established after January 1, 2020 (when the FIL came into effect) and in accordance with the Company Law need to appoint supervisors and a board of supervisors, as applicable.  

Meanwhile, according to Article 42 of the FIL, the Wholly Foreign-owned Enterprises (WFOE Law), the Law on Sino-foreign Cooperative Joint Ventures (CJV Law), and the Law on Sino-foreign Equity Joint Ventures (EJV Law) were repealed simultaneously when the new FIL came into force on January 1, 2020. 

However, FIEs established in accordance with these three laws before the FIL took effect may retain their original organizational structures for five years after January 1, 2020, that is, until the end of 2024. While the WFOE law has provisions on supervisors, the CJV Law and EJV Law do not mention supervisors. In theory, this means that FIEs established in accordance with the CJV Law and the EJV Law are not required to have supervisors or a board of supervisors until the end of 2024. 

Supervisor Requirements for FIEs
Established before January 1, 2020  Established after January 1, 2020 
Supervisors not required for sino-foreign cooperative joint ventures and sino-foreign equity joint ventures before end-2024  Supervisors required for all types of foreign-invested companies 
Supervisors required for wholly-owned foreign enterprises   
Supervisors required for all types of foreign-invested companies after end-2024   

Establishment of an audit committee in lieu of a board of supervisors in draft amendment of Company Law

In the last few years, China has been in the process of updating the Company Law, having released three draft amendments for public comment since late 2021. The third and most recent draft amendment was released for public comment on September 1, 2023.

Related Reading

One of the major proposed changes to the Company Law is allowing LLCs and joint-stock companies to establish an “audit committee” within the board of directors, in which case it would not need to establish a board of supervisors (or appoint any supervisors). The audit committee can be “composed of directors on the board of directors [and] exercise the powers of the board of supervisors”. 

The third draft amendment states that the audit committee in a joint-stock company must have at least three members, of which more than half (at least two if the committee only has three members) do not hold any other positions within the company other than the director. They must also not have any relationship with the company that could affect their independent and objective judgment. 

No minimum number of members has been set for LLCs in the third draft amendment. 

About Us

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at [email protected].

Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, Dubai (UAE), and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.