Zheng Lue Consulting: How should a state-owned sole proprietorship company establish an efficient and well-functioning board of directors?

According to the definition in the Company Law, a state-owned sole proprietorship company refers to 'a limited liability company funded solely by the State, with the State Council or local people’s governments authorizing the respective level of the State-owned Assets Supervision and Administration Commission (SASAC) to perform the duties of the shareholder.' In such companies, the sole shareholder is the State, which delegates its shareholder rights to SASAC through formal government authorization. The Company Law explicitly defines the powers vested in the shareholder—namely, the right to asset returns, the authority over major decisions, and the power to appoint and dismiss managers. Establishing a board of directors in a state-owned sole proprietorship enterprise is thus a critical mechanism for fulfilling the State’s responsibilities as the owner of state-owned assets. Guided by the overarching principles and objectives for building boards in state-owned sole proprietorship enterprises, the board is generally positioned as the enterprise’s strategic decision-making center and the body responsible for selecting and supervising the managerial team. It must fully serve the interests of the shareholder, protect stakeholders’ interests, exercise supervisory functions, and ensure that corporate operations comply with applicable laws and regulations. I. Three Key Challenges in Board Establishment and Operation In recent years, guided by the Guiding Opinions on Deepening SOE Reform, China has continuously advanced improvements to the corporate governance structure of state-owned enterprises (SOEs) and strengthened board construction through measures including the issuance of the Guiding Opinions on Further Improving the Corporate Governance Structure of SOEs and revisions to the Company Law. Nevertheless, the establishment and operation of boards in state-owned sole proprietorship companies still face the following three challenges: 1. Ambiguous Board Positioning: On one hand, since state-owned sole proprietorship companies do not have shareholders’ meetings, ownership rights are exercised by the government, and both the functions of the shareholders’ meeting and those of the board are effectively performed jointly by the government and the board; moreover, board members are appointed by the government, often rendering the board little more than an administrative arm of the government. On the other hand, the managerial team frequently oversteps its authority, bypassing the board altogether—leading to situations where the board fails to fulfill its statutory duties and obligations under the Company Law, resulting in widespread 'ornamental director' phenomena. 2. Board Composition Issues: First, significant overlap exists among the board of directors, the Party committee, and the managerial team—commonly described as 'three leadership bodies sharing one set of personnel,' leading to internal control failures and ineffective supervision and evaluation. Second, board seat allocation and personnel configuration fail to match the company’s development needs, and members’ overall competencies fall short of requirements for scientific decision-making. Third, external directors are often appointed in name only; they conduct only superficial reviews of major decisions and rarely provide constructive input. 3. Board Operational Deficiencies: First, the board lacks concrete channels and effective tools to exert influence—specialized committees and day-to-day operational support units remain unestablished. Second, relationships among the board, the managerial team, and the Party organization remain unclear, with poorly defined responsibilities—resulting in instances where the board directly intervenes in daily production and operations, while the Party committee struggles to integrate into corporate governance and fulfill its gatekeeping function. Third, institutional mechanisms governing board operations remain incomplete:议事 rules are underdeveloped, delegation frameworks remain undefined, and oversight and performance evaluation systems require strengthening—thus undermining coordinated, balanced, and effective functioning. II. Seven Critical Topics for Building a Standardized, Efficient Board Zheng Lue Consulting holds that, to fully realize the board’s core functions—'setting strategy, making decisions, and preventing risks'—and achieve standardized, efficient operations, state-owned sole proprietorship companies must thoroughly address the following seven key topics: 01. Optimal Board Size: Too Many or Too Few Members?

The New Round of Reform Breakthroughs—End-to-End Practical Implementation of Corporate Governance Restructuring, Deepening Mixed-Ownership Reform, and Strategic Restructuring & Integration

With the implementation of the newly revised Company Law and the Enterprise State-Owned Assets Law, governance responsibilities and authorities of state-invested enterprises have been further clarified and reinforced, and the compliance transition window has significantly narrowed. The new round of state-owned assets and SOE reform plan (2026–2029) has officially launched nationwide. Its reform focus has shifted from 'expanding scale and coverage' to 'enhancing quality and efficiency, solidifying governance, deepening mixed-ownership reform, and optimizing industrial layout'—with corporate governance restructuring, tiered and categorized advancement of mixed-ownership reform, accelerated professionalized restructuring and integration, and routine shutdowns of inefficient and loss-making enterprises becoming mandatory performance indicators for SOEs at all levels over the next four years. This is not piecemeal adjustment but an integrated, end-to-end transformation anchored on 'governance as the foundation, with mixed-ownership reform and restructuring as implementation scenarios.' Focusing on three core modules—corporate governance system restructuring, deepening and upgrading of mixed-ownership reform, and strategic restructuring and integration under focused core businesses—we deliver comprehensive, hands-on practical guidance to help enterprises strengthen governance through reform and empower development through improved governance. This training program helps enterprises systematically clarify responsibility boundaries across governance tiers, master tiered and categorized mixed-ownership reform strategies and pathways for governance-oriented control implementation, understand compliance requirements for professionalized restructuring, integration, and shutdown/merger/divestment operations, learn methodologies for evaluating post-integration synergies and standardizing inspection-readiness documentation—and provides complementary resources including case studies, expert Q&A sessions, and a practical toolkit. Participants bring real-world challenges and leave with actionable reform strategies and ready-to-implement toolkits. August 18–21, Chengdu; September 8–11, Changsha. For details, contact 13071111319. [Training Curriculum] Part I: Comprehensive Reform Policy Landscape and Corporate Governance System Restructuring (Setting Direction, Establishing Systems, Clarifying Responsibilities) I. Core Deployment and Governance Orientation of the New Reform Plan (2026–2029) 1. Stage-specific reform goals, institutional framework, and the 'Two Consistently Upheld' principle 2. Differentiated governance, mixed-ownership reform, and regulatory boundaries for commercial Category I / Category II / public welfare enterprises 3. Impacts of the newly revised Company Law and Enterprise State-Owned Assets Law on the state-owned equity director system 4. Governance boundary redefinition under 'penetrative supervision', rectification and accountability mechanisms, and dynamic supervision frameworks 5. New inspection and assessment indicator system: hard requirements on core business consolidation, value creation, and elimination of inefficiency II. Implementation of the Chinese-Characteristic Modern Enterprise System (A) Integrating Party Leadership into Corporate Governance and Substantive Board Operations 1. Pathways for integrating Party work with corporate governance 2. Practical implementation and performance evaluation criteria for the board’s three core functions: setting strategy, making decisions, and preventing risks 3. 'External directors outnumbering internal directors' configuration, innovative selection mechanisms, and support systems for director履职 4. Establishment and substantive operation of specialized committees 5. Development of board-to-management delegation lists, dynamic management, and supervisory enforcement (B) Functional Transition of Supervisory Boards / Audit Committees and Contractual Management of the Managerial Team 1. Practical pathways for adjusting supervisory board functions and transferring authority to audit committees 2. Clarification of managerial team responsibilities, full coverage of term-based contractual management, and performance-based compensation realization 3. Key points for implementing differentiated remuneration distribution and flexible 'up-or-down' adjustments 4. Compilation of 'Three Major and One Important' (Three Major Decisions and One Important Matter) item lists and precise three-tier authority delineation 5. Definition of governance boundaries between parent and subsidiary companies, and compliance highlights for articles of association revisions 6. Newly stipulated fiduciary and diligent duties of directors, supervisors, and senior management—including liability for damages—and the scope of tolerance under the 'Three Distinctions' principle

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