China’s 2023 Company Law Reform: Shifting the Accountability System for IPO Misrepresentation from Regulatory to Contractual Paradigms?

In cases of misrepresentation, the mandatory disclosure of information by publicly listed companies is a legal obligation designed to enable informed investment decisions, uphold market integrity, and support broader societal goals. Currently, misrepresentation is governed by arts 89 and 163 of the Securities Law of the People’s Republic of China 2019 (PRC Securities Law 2019), which applies a tort law approach. Aggrieved investors may pursue private legal action, exemplifying a contractual accountability paradigm where market participants are expected to fulfil their roles. However, investors often face challenges, such as burdensome proof requirements, which limit the effectiveness of private actions even after the removal of administrative preconditions. In this context, intervention by the China Securities Regulatory Commission (CSRC) and institutions like the China Securities Investor Services Center Co Ltd (CSISC) is critical to ease the burden on investors. Administrative measures like “buybacks” and “advanced compensation” reinforce the system’s administrative tone. The 2023 revision of the Company Law of the People’s Republic of China (PRC Company Law 2023), which aims to strengthen individual liabilities, retains the tort-based logic of the PRC Securities Law 2019, failing to shift fully to a contractual paradigm. This paper recommends future revisions focus on clarifying the distinct roles of the PRC Securities Law 2019 and PRC Company Law 2023 in creating a “regulatory-contracting mixed paradigm” for accountability. Greater involvement of market professionals in misrepresentation cases would streamline compensation for primary market investors and mitigate future risks.