Viewpoint... The establishment of the audit committee of the new "Company Law" view analysis.

The new "Company Law" stipulates that the audit committee exercises the powers of the board of supervisors stipulated in this law. It can be seen that the establishment of the audit committee has simplified the original "two-tier governance structure" to a "single-tier governance structure" with only a board of directors, allowing companies No board of supervisors or supervisors, only an audit committee is set up in the board of directors to exercise the powers of the board of supervisors. In different types of companies, the composition of the audit committee is different, the terms of reference are different, and the way of exercising their powers is also different. Under the framework of the law, the company can make provisions in the articles of association according to its own situation.

Article 69 of the new Company Law stipulates that "a limited liability company may, in accordance with the provisions of its articles of association, set up an audit committee composed of directors on its board of directors to exercise the functions and powers of the board of supervisors as stipulated in this Law, and shall not set up a board of supervisors or supervisors. Representatives of employees who are members of the board of directors of the company may become members of the audit committee."

With reference to the functions and powers of the board of supervisors of a limited liability company, the specific duties of the audit committee are as follows: 1. to inspect the financial affairs of the company; 2. to supervise the performance of duties by directors and senior managers, and to propose dismissal suggestions for directors and senior managers who violate laws, administrative regulations, articles of association or resolutions of the shareholders' meeting; 3. when the acts of directors and senior managers harm the interests of the company, require directors and senior managers to make corrections; 4. Propose to convene an interim shareholders' meeting to convene and preside over the shareholders' meeting when the board of directors fails to perform the duties of convening and presiding over the shareholders' meeting as stipulated in this Law; 5. Put forward a proposal to the shareholders' meeting; 6. In accordance with the provisions of Article 189 of this Law, bring a lawsuit against the directors and senior managers; 7. Other functions and powers stipulated in the articles of association.

As for the composition of the audit committee in a limited liability company, the new Company Law does not make detailed provisions, but only states that the employee representatives of the members of the company's board of directors can become members of the audit committee, which gives the company the right to independently formulate the system of the composition, election and term of office of the audit committee. While staff representatives are not required to be members, it is recommended that staff representatives be included among the members of the Audit Committee in order to exercise their oversight responsibilities more fully. It should be noted that the main function of the audit committee is oversight, so its staffing needs to ensure the independence, objectivity and professionalism of the staff. It is necessary to set up a system to prevent interference with their independence and objectivity in the exercise of their powers, and to pay attention to the professionalism of personnel when selecting candidates to ensure that they can perform their supervisory duties professionally, especially those with management, finance, compliance, and legal affairs. Personnel with background are more suitable candidates.

In terms of the current requirements of the new Company Law for general companies and the requirements of the current norms for limited liability companies, the so-called audit committee requires the formation of the board of directors, and the members of the audit committee must be "directors", which is essentially a "body under the board of directors". As a result, the selection, tenure, dismissal and working mechanism of the members of the audit committee need to be refined.

First of all, it should be determined whether the members of the audit committee are elected by the shareholders' meeting or determined by the board of directors. The establishment of the company's organization and the composition of the board of directors are determined by the articles of association of the company, which are the matters decided by the shareholders' meeting. However, it is not explicitly listed in the powers of the shareholders' meeting that it has the right to decide on the establishment of the company's institutions, but rather stipulates in the powers of the board of directors that "the board of directors exercises the following powers: ...... (VII) decide on the establishment of the company's internal management institutions". Thus, when it is up to the company to decide whether to set up an audit committee, whether it is up to the shareholders' meeting or the board of directors to decide may be divided. However, due to the function of the audit committee against the board of supervisors, the law stipulates that it should be established in accordance with the company's articles of association, and it should belong to the company's internal "supervisory body" rather than "management body". Therefore, it is a matter to be decided by the shareholders' meeting. The "organization of the company" recorded in the articles of association shall include the shareholders' meeting, the board of directors, the board of supervisors and the audit committee.

For the appointment and voting rules of the audit committee of the board of directors of a limited company, the new "Company Law" does not make too many provisions. At present, it can refer to the provisions of the new "Company Law" on the board of supervisors and Article 121 The appointment and voting rules of the audit committee of a joint stock company are formulated. Article 121 of the new Company Law: "A company limited by shares may, in accordance with the provisions of its articles of association, set up an audit committee composed of directors on the board of directors to exercise the functions and powers of the board of supervisors as stipulated in this Law, without a board of supervisors or supervisors. The audit committee shall have three or more members, and more than half of the members shall not hold positions other than directors in the company, and shall not have any relationship with the company that may affect their independent and objective judgment. Representatives of employees who are members of the company's board of directors may become members of the audit committee. A resolution of the Audit Committee shall be adopted by a majority of the members of the Audit Committee. The voting on the resolution of the audit committee shall be one person, one vote. The method of discussion and voting procedures of the audit committee shall be prescribed by the articles of association of the company, except as provided for in this Law. The company may set up other committees in the board of directors in accordance with the provisions of the articles of association." In order to ensure the independence and objectivity of members, attention should be paid to ensuring the counterbalance of supervision in the selection of candidates, and appropriate material incentives should be given to the members of the audit committee and the rights and responsibilities of their members should be equal, as far as possible, to meet the independence of personnel selection and appointment, the independence of funds and remuneration, and the independence of powers and responsibilities.

Therefore, it is suggested that the board of directors should submit a report on the necessity and feasibility of forming an audit committee when the company actually forms an audit committee, and the shareholders' meeting should decide on the members of the audit committee and stipulate the audit committee system by amending the articles of association according to the actual situation. If there are no more than three members of the committee, the authority, term of office and composition of the committee shall be determined by the shareholders' meeting, and it is recommended that employee representatives be included in the composition and that the distribution of voting rights be clarified. When there are more than three members of the committee, it is recommended that a certain proportion of employee representatives be included, and more than half of the members shall not hold positions other than directors in the company, and shall not have any relationship with the company that may affect their independent and objective judgment. A resolution of the Audit Committee shall be adopted by a majority of the members of the Audit Committee. The voting on the resolution of the audit committee shall be one person, one vote. The first meeting of the audit committee may elect the chairman and vice-chairman, and determine the method of procedure and voting procedures of the committee in accordance with the law and the articles of association of the company.

The Audit Committee is the most independent and professionally competent body among the special committees of the Board of Directors, which is mainly responsible for the communication, supervision and verification of the Company's audits, and supervises and inspects the management's operations, the formulation and implementation of internal systems on behalf of the Board of Directors. The matters considered by the Audit Committee are usually more significant in the company's business activities, such as the company's periodic reports, major investment and financing, and related transactions. Prior to the convening of the Audit Committee, the Company shall communicate with the members in advance and provide them with important information and financial information. In the internal control work, the company coordinates various departments to actively cooperate with the audit committee's supervision work, and the internal control department regularly reports to the audit committee on the implementation of the company's internal control.

The provisions of the audit committee of a company limited by shares in the new Company Law are more detailed, in which Article 121 specifies the composition of the committee, the voting procedure, the method of resolution, etc., and provides the requirements and direction for the establishment of the audit committee as described in the entire Company Law.

With reference to the functions and powers of the board of supervisors of a joint stock limited company, the specific duties of the audit committee are as follows: 1. to inspect the financial affairs of the company; 2. to supervise the behavior of directors and senior managers in the performance of their duties, to put forward suggestions for dismissal of directors and senior managers who violate laws, administrative regulations, articles of association or resolutions of the shareholders' meeting; 3. when the acts of directors and senior managers harm the interests of the company, require directors and senior management personnel to make corrections; 4. Propose the convening of an interim shareholders' meeting, and convene and preside over the shareholders' meeting when the board of directors fails to perform the duties of convening and presiding over the shareholders' meeting as stipulated in this law; 5. Propose a proposal to the shareholders' meeting; 6. In accordance with the provisions of Article 189 of this law, file a lawsuit against the directors and senior management personnel; 7; 8. Other functions and powers stipulated in the articles of association of the company.

In summary, the establishment of an audit committee in the board of directors of a company limited by shares shall first submit a report on the necessity and feasibility of establishing an audit committee by the board of directors in accordance with the provisions of Article 121 of the new Company Law, and the board of shareholders shall decide to establish an audit committee. Then the shareholders' meeting shall elect the members of the audit committee, which shall be more than three members, and more than half of the members shall not hold other positions other than directors in the company, and shall not have any relationship with the company that may affect their independent and objective judgment. at the same time, it should also ensure that the members of the committee are professional and can perform their supervisory duties well, in order to achieve a comprehensive and efficient supervision system, it is suggested that there may be employee representatives among the committee members. After that, the voting mechanism of the audit committee shall be determined. According to the law, the resolution of the audit committee shall be adopted by a majority of the members of the audit committee. The voting on the resolution of the audit committee shall be one person, one vote. The manner of discussion and voting procedures of the audit committee may be stipulated in the articles of association according to the actual situation. Finally, at the first meeting of the Audit Committee, members may elect a chairman and vice-chairman to preside over the meeting, or, of course, may be designated by the shareholders' meeting.

The new "Company Law" also provides for the establishment of audit committees in listed companies and wholly state-owned companies. Listed companies are different from other types of companies due to the influence of the securities regulatory system, and their audit committees are also unique.

For listed companies, Article 137 of the new "Company Law" stipulates that "Where a listed company sets up an audit committee on the board of directors, the board of directors shall be approved by more than half of all members of the audit committee before making a resolution on the following matters: (1) Hire and dismiss The accounting firm that undertakes the company's audit business; (II) the appointment and dismissal of the person in charge of finance; (III) disclosure of financial accounting reports; (IV) other matters specified by the securities regulatory agency under the State Council." This shows that: 1. Listed companies can choose whether to set up in the board of directors, but even if the audit committee is set up, the board of supervisors cannot be canceled at present. According to the spirit of the whole Company Law, in order to streamline the company structure, the responsibilities of the board of supervisors can be "translated" to the audit committee, one of the two can be selected, although it has not been stated that listed companies can only set up the audit committee without the board of supervisors, however, because listed companies are also subject to the Securities Law, and the Securities Law and the Company Law are the relationship between special law and general law, we can pay attention to the adjustment of the China Securities Regulatory Commission as to whether listed companies can abolish the board of supervisors. 2. The law clearly stipulates the responsibilities of the audit committee of listed companies. In view of the fact that listed companies are not allowed to cancel the board of supervisors, the responsibilities of the audit committee set up in the board of directors are more inclined to supervise the board of directors, and the board of directors is required to make the law. Before the four types of resolutions, it should be passed by more than half of all members of the audit committee. 3. The law is not clear about the composition and voting method of the audit committee of listed companies, and the system of the audit committee can be determined by reference to the provisions of listed companies.

For wholly state-owned companies, Article 176 of the new "Company Law" stipulates that "Where a wholly state-owned company has an audit committee composed of directors on the board of directors to exercise the functions and powers of the board of supervisors stipulated in this law, there shall be no board of supervisors or supervisors." According to the "Guiding Opinions of the General Office of the State Council on Further Improving the Corporate Governance Structure of State-owned Enterprises", (II) 2 3. Regulating the Rules of Procedure of the Board of Directors "... The Board of Directors shall establish a nomination committee, a remuneration and assessment committee, an audit committee and other special committees to provide advice for the decision-making of the Board of Directors..." The board of directors of a wholly state-owned company shall establish an audit committee, and its board of supervisors. If the responsibilities of the Audit Committee and the Supervisory Board do not overlap and are differentiated, they can be parallel. The new "Company Law" is not clear about the composition, terms of reference, and voting methods of the audit committee of a wholly state-owned company. At present, you can refer to the relevant provisions of limited liability companies and joint stock companies.

For companies where the controlling shareholder has the right to operate the company, in addition to the statutory financial supervision and internal and external audit interface, the audit committee should also focus on whether the controlling shareholder abuses the "right to operate" under its control and whether it fulfills the duty of loyalty and diligence to the company and other small and medium-sized shareholders. The fiduciary duty of the controlling shareholder needs to be reflected through the perspective of its implementation of the company's obligations, including but not limited to "no fraud, exclusion of small and medium-sized shareholders", "no insider trading", "no unfair self-trading", "no usurpation of company opportunities", "non-competition", "no violation of information disclosure obligations" and other types. Based on this, in addition to financial and accounting supervision, leading internal audit and contacting external audit, the audit committee's supervision focus in daily work should also supervise the controlling shareholder's related party transactions, self-transaction, non-competition and other matters involving the controlling shareholder's duty of trust, so as to urge it to faithfully and diligently use the company's operator's power, promote the company's operation, and safeguard the interests of other shareholders and the company as a whole. Since the new "Company Law" stipulates the diligence obligations of directors and senior executives, the audit committee should also supervise whether the chairman, vice chairman, and board secretary and other senior executives actually perform their duties of loyalty and diligence. The specific performance is that when the audit committee conducts internal supervision, in addition to supervising the decision-making of the management level and the operation of various departments under the management level, it should also check whether the general manager, the head of the financial department and other senior management personnel have effectively fulfilled their obligations of loyalty and diligence. Whether there are related transactions, self-trading, non-competition, and whether there are illegal sanctions against the company's stocks held by them during the period of non-transfer, whether there is any disclosure of the company's trade secrets, inside information and other circumstances for actual supervision. If necessary, the legality and reasonableness of the decisions made by the managers in the operation of the company can be jointly reviewed by the legal department.