Viewpoint | Discussion on the "corporatization" of for-profit private schools
Published:
2021-11-15
The State Administration for Industry and Commerce and the Ministry of Education jointly issued the ''Notice on the Registration and Management of the Names of For-profit Private Schools'' (hereinafter referred to as the ''Notice'') (Industry and Commerce Enterprise Note [2017] No. 156) It is clearly stipulated that for-profit private schools should be registered in the form of companies, so that for-profit private schools put on the image of the company and opened the door to market-oriented competition for for for-oriented for-oriented private schools, this is of great significance to the development of private education in China. However, there is still some controversy about the corporate attributes of for-profit private schools, and this paper aims to explore the legitimacy of for-profit private schools registered as companies and the scope of protection of the Company Law under the background of gradual "corporatization. The legitimacy of a for-profit private school registered as a company is discussed. Discussion on the Legality of (I) for-profit Private Schools Registered as Companies Although the "Notice" clarifies that for-profit private schools must adopt the form of a company when registering, this provision is controversial. Some scholars believe that the company is a typical merchant subject, and private schools are non-merchant commercial subjects, the two are not the same, but under certain circumstances its establishment, registration, capital contribution, governance, etc. can apply the relevant provisions of the Company Law or the Partnership Law. Some lawyers engaged in practice believe that the "Private Education Promotion Law" only clarifies the corporate legal person status of for-profit private schools, but does not limit it to the scope of corporate legal persons. The provisions of the "Notice" actually deprive for-profit private schools. The opportunity to register as a non-corporate enterprise legal person is a restrictive interpretation of the "Private Education Promotion Law. The legal rank of the ''Notice'' belongs to departmental regulations. According to Article 45, paragraph 1, of the Legislative Law, only the Standing Committee of the National People's Congress has the right to interpret the law, and the two ministries and commissions impose restrictions on the ''Private Education Promotion Law'' in the form of departmental regulations. There is no basis in the law. The author believes that Article 10 of the "Private Education Promotion Law" only stipulates that private schools (including for-profit private schools) should have legal personality, but it does not specify the type of legal person to which they belong. Chapter III of the General Provisions of the Civil Code, on the other hand, clearly defines for-profit legal persons, non-profit legal persons, special legal persons and unincorporated organizations. According to the system interpretation, for-profit private schools should be classified as for-profit legal persons. In addition, due to the corporate nature of for-profit private schools, their registration as legal persons must be based on the Regulations on the Administration of Enterprise Legal Person Registration. Article 2 of the Regulations on the Administration of Enterprise Legal Person Registration stipulates that enterprises that need to be registered as legal persons include enterprises owned by the whole people, collectively owned enterprises, joint ventures, Sino-foreign joint ventures, private enterprises and other enterprises. For-profit private schools can only be organized by individuals or legal persons, and the state, collectives and government as princesses cannot contribute as organizers of private education. Therefore, it is impossible to adopt other forms of enterprises except private enterprises. Although my country's "Interim Regulations on Private Enterprises" was abolished in 2018, Article 9 of the "Regulations on the Classification of Enterprise Registration Types" issued by the National Bureau of Statistics and the State Administration for Industry and Commerce still clarifies that private enterprises include private limited liability companies and private companies. Limited by shares, private partnerships and private sole proprietorships, the latter two do not have legal personality, therefore, for-profit private schools can only choose the form of limited liability companies or limited liability companies for registration. In summary, the current laws and regulations have regulated the types of legal persons of for-profit private schools, and it is legal and appropriate to register in the form of a company. Discussion on the Rationality of (II) for-profit Private Schools Registered as Companies The rationality of registering for-profit private schools as corporate legal persons is reflected in the applicable attitude to the Company Law in the provisions of the Private Education Promotion Law. According to Articles 19 and 59 of the Law on the Promotion of Private Education, for-profit private schools should be dealt with "in accordance with" the relevant provisions of the Company Law in terms of the distribution of school income, the handling of school balances, and the distribution of surplus property, but in practice, the application of the Company Law by for-profit private schools is much more than that. It can be seen that the application of the Company Law by for-profit private schools in the event of disputes is not only because of the guiding provisions of the Private Education Promotion Law, but because of the natural rationality of the application of the Company Law by for-profit private schools based on their corporate attributes. II Analysis of the application of the Company Law to the protection of the rights of the organizers of for-profit private schools. The corporate governance structure of for-profit private schools is different from that of ordinary companies, so there are some differences in the authority of their corporate governance institutions, and the names are also different. However, in the current judicial practice, the rights and interests of the organizers of for-profit private schools are often damaged. Since the Private Education Promotion Law does not stipulate the rights of its shareholders, its rights and interests are controversial in the process of judicial protection. Can the rights of the organizers of for-profit private schools be protected in accordance with the rights of shareholders in the Company Law? From the perspective of judicial practice, the practice of referring to the rights of shareholders to protect the interests of the organizers of for-profit private schools has been widely supported by the judicial department. Even before the amendment of the Private Education Promotion Law in 2017, the judge demonstrated from the perspective of civil law. The organizer's right to know guarantees the organizer's right to consult the accounting books of private schools, which is not reflected in the then and present Private Education Promotion Law. After the implementation of the "Private Education Promotion Law" on September 1, 2017, the court's jurisprudence even directly invoked the provisions of the "Company Law" to protect the rights of the organizer's shareholders, and this is based on sufficient jurisprudence. Of course, the application of the "Company Law" protection for the expansion of the rights of for-profit private school organizers is not without boundaries. The parts of the "Company Law" that conflict with the "Private Education Promotion Law" should be screened in judicial application. For example, ordinary company shareholders have the right to participate in the shareholders' (general) meeting, the right to elect the board of directors, the right to participate in the company's decision-making, etc., these rights are incompatible with the corporate governance structure of for-profit private schools, and are also in line with the "Private Education Promotion Law" Special provisions are contrary. Therefore, the protection of shareholders' rights of for-profit private school organizers should only cover the right to asset income (including the right to distribute profits and the right to distribute surplus property), the right to know, such as the decision of the board of directors, financial and accounting reports, the transfer and inheritance of shareholders' rights, the preemptive right of other organizers when the organizers of for-profit private schools in the form of limited companies transfer their equity, and the direct litigation right of shareholders when their own rights are damaged, the right of shareholders to represent litigation in the event of damage to the school's interests in certain circumstances, and so on. three conclusion Although the notice on the work related to the name registration and management of for-profit private schools puts on the image of a company, it can be registered as a limited liability company or a joint stock limited company in industrial and commercial registration. However, due to the differences in the governance structure of schools and companies, although they can be protected by company law, they are still subject to certain restrictions.
The State Administration for Industry and Commerce and the Ministry of Education jointly issued the ''Notice on the Registration and Management of the Names of For-profit Private Schools'' (hereinafter referred to as the ''Notice'') (Industry and Commerce Enterprise Note [2017] No. 156) It is clearly stipulated that for-profit private schools should be registered in the form of companies, so that for-profit private schools put on the image of the company and opened the door to market-oriented competition for for for-oriented for-oriented private schools, this is of great significance to the development of private education in China. However, there is still some controversy about the corporate attributes of for-profit private schools, and this paper aims to explore the legitimacy of for-profit private schools registered as companies and the scope of protection of the Company Law under the background of gradual "corporatization.
1Discussion on the Legitimacy of for-profit Private Schools Registered as Companies
Discussion on the Legality of (I) for-profit Private Schools Registered as Companies
Although the "Notice" clarifies that for-profit private schools must adopt the form of a company when registering, this provision is controversial.
Some scholars believe that the company is a typical merchant subject, and private schools are non-merchant commercial subjects, the two are not the same, but under certain circumstances its establishment, registration, capital contribution, governance, etc. can apply the relevant provisions of the Company Law or the Partnership Law.
Some lawyers engaged in practice believe that the "Private Education Promotion Law" only clarifies the corporate legal person status of for-profit private schools, but does not limit it to the scope of corporate legal persons. The provisions of the "Notice" actually deprive for-profit private schools. The opportunity to register as a non-corporate enterprise legal person is a restrictive interpretation of the "Private Education Promotion Law. The legal rank of the ''Notice'' belongs to departmental regulations. According to Article 45, paragraph 1, of the Legislative Law, only the Standing Committee of the National People's Congress has the right to interpret the law, and the two ministries and commissions impose restrictions on the ''Private Education Promotion Law'' in the form of departmental regulations. There is no basis in the law.
The author believes that Article 10 of the "Private Education Promotion Law" only stipulates that private schools (including for-profit private schools) should have legal personality, but it does not specify the type of legal person to which they belong. Chapter III of the General Provisions of the Civil Code, on the other hand, clearly defines for-profit legal persons, non-profit legal persons, special legal persons and unincorporated organizations. According to the system interpretation, for-profit private schools should be classified as for-profit legal persons. In addition, due to the corporate nature of for-profit private schools, their registration as legal persons must be based on the Regulations on the Administration of Enterprise Legal Person Registration. Article 2 of the Regulations on the Administration of Enterprise Legal Person Registration stipulates that enterprises that need to be registered as legal persons include enterprises owned by the whole people, collectively owned enterprises, joint ventures, Sino-foreign joint ventures, private enterprises and other enterprises. For-profit private schools can only be organized by individuals or legal persons, and the state, collectives and government as princesses cannot contribute as organizers of private education. Therefore, it is impossible to adopt other forms of enterprises except private enterprises. Although my country's "Interim Regulations on Private Enterprises" was abolished in 2018, Article 9 of the "Regulations on the Classification of Enterprise Registration Types" issued by the National Bureau of Statistics and the State Administration for Industry and Commerce still clarifies that private enterprises include private limited liability companies and private companies. Limited by shares, private partnerships and private sole proprietorships, the latter two do not have legal personality, therefore, for-profit private schools can only choose the form of limited liability companies or limited liability companies for registration. In summary, the current laws and regulations have regulated the types of legal persons of for-profit private schools, and it is legal and appropriate to register in the form of a company.
Discussion on the Rationality of (II) for-profit Private Schools Registered as Companies
The rationality of registering for-profit private schools as corporate legal persons is reflected in the applicable attitude to the Company Law in the provisions of the Private Education Promotion Law. According to Articles 19 and 59 of the Law on the Promotion of Private Education, for-profit private schools should be dealt with "in accordance with" the relevant provisions of the Company Law in terms of the distribution of school income, the handling of school balances, and the distribution of surplus property, but in practice, the application of the Company Law by for-profit private schools is much more than that. It can be seen that the application of the Company Law by for-profit private schools in the event of disputes is not only because of the guiding provisions of the Private Education Promotion Law, but because of the natural rationality of the application of the Company Law by for-profit private schools based on their corporate attributes.
2Analysis on the application of the company law to the protection of the rights of the organizers of for-profit private schools
The corporate governance structure of for-profit private schools is different from that of ordinary companies, so there are some differences in the authority of their corporate governance institutions, and the names are also different. However, in the current judicial practice, the rights and interests of the organizers of for-profit private schools are often damaged. Since the Private Education Promotion Law does not stipulate the rights of its shareholders, its rights and interests are controversial in the process of judicial protection. Can the rights of the organizers of for-profit private schools be protected in accordance with the rights of shareholders in the Company Law? From the perspective of judicial practice, the practice of referring to the rights of shareholders to protect the interests of the organizers of for-profit private schools has been widely supported by the judicial department. Even before the amendment of the Private Education Promotion Law in 2017, the judge demonstrated from the perspective of civil law. The organizer's right to know guarantees the organizer's right to consult the accounting books of private schools, which is not reflected in the then and present Private Education Promotion Law. After the implementation of the "Private Education Promotion Law" on September 1, 2017, the court's jurisprudence even directly invoked the provisions of the "Company Law" to protect the rights of the organizer's shareholders, and this is based on sufficient jurisprudence.
Of course, the application of the "Company Law" protection for the expansion of the rights of for-profit private school organizers is not without boundaries. The parts of the "Company Law" that conflict with the "Private Education Promotion Law" should be screened in judicial application. For example, ordinary company shareholders have the right to participate in the shareholders' (general) meeting, the right to elect the board of directors, the right to participate in the company's decision-making, etc., these rights are incompatible with the corporate governance structure of for-profit private schools, and are also in line with the "Private Education Promotion Law" Special provisions are contrary. Therefore, the protection of shareholders' rights of for-profit private school organizers should only cover the right to asset income (including the right to distribute profits and the right to distribute surplus property), the right to know, such as the decision of the board of directors, financial and accounting reports, the transfer and inheritance of shareholders' rights, the preemptive right of other organizers when the organizers of for-profit private schools in the form of limited companies transfer their equity, and the direct litigation right of shareholders when their own rights are damaged, the right of shareholders to represent litigation in the event of damage to the school's interests in certain circumstances, and so on.
3Conclusion
Although the notice on the work related to the name registration and management of for-profit private schools puts on the image of a company, it can be registered as a limited liability company or a joint stock limited company in industrial and commercial registration. However, due to the differences in the governance structure of schools and companies, although they can be protected by company law, they are still subject to certain restrictions.
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