Core Viewpoint - The core regulatory principle of "tracing the actual controllers of listed companies to natural persons or state-owned entities, with clear and stable equity" aims to ensure effective corporate governance and protect the rights of minority investors, but it has led to issues due to the predominance of natural persons as actual controllers [1] Existing Issues and Contradictions - There are institutional limitations in corporate governance structures, as the dominance of natural persons as actual controllers in A-share companies leads to a model where ownership and management are combined, restricting modern governance development and causing short-term strategic focus [2] - Natural person controllers face limitations in resources, strategy, governance, and integration, leading to challenges in industry upgrading and sustained growth as companies mature [2] - Private equity (PE) firms are unable to become actual controllers of listed companies, which suppresses effective participation of long-term capital and weakens the long-term growth potential of listed companies [3] - Most private equity funds cannot meet the requirements for actual controllers, leading to a focus on short-term trading in the secondary market, which exacerbates the disconnect between primary and secondary investment markets and diminishes governance levels [3][4] - Regulatory policies often fail to produce sustainable effects, trapping the A-share market in a cycle of limited growth, with IPO controls and merger policies failing to break through the actual controller principle [4] Systemic Reform Suggestions and Path Design - The first phase involves clarifying governance structure reform directions and initiating pilot programs for long-term capital and professional management teams to form evergreen funds, allowing them to participate in the management of listed companies [5] - The second phase encourages the separation of ownership and management, establishing a governance structure linked to long-term development, and allowing evergreen funds to qualify as actual controllers for IPOs [6] - The third phase focuses on comprehensive marketization and modernization of governance, promoting legal reforms to support mergers and acquisitions as a standard growth path for companies [8] Strengthening Long-term Capital Guidance Mechanisms - The goal is to enhance corporate quality and investor confidence, creating a virtuous cycle in the Chinese capital market, fostering competitive companies, and activating substantial financial risk capital [9]

Core Viewpoint - The cancellation of the supervisory board by various financial institutions indicates a significant reform in corporate governance, driven by the revised Company Law and regulatory encouragement for more adaptable governance structures [2][4][5]. Group 1: Background and Legal Framework - On May 21, 2024, Changsha Bank announced it would no longer establish a supervisory board, transferring its functions to the audit committee of the board of directors [2]. - The recent trend of abolishing supervisory boards spans across state-owned commercial banks, joint-stock banks, local city commercial banks, rural commercial banks, and even insurance companies [2][4]. - The revised Company Law allows limited liability companies to set up an audit committee within the board of directors to perform the functions of a supervisory board, thus eliminating the need for a separate supervisory board [4][5]. Group 2: Reasons for Abolishing the Supervisory Board - The overlapping functions of the supervisory board and the audit committee have led to inefficiencies and increased operational costs for financial institutions [3][5]. - The decision to abolish the supervisory board is influenced by various factors, including the institution's development strategy, operational scale, business complexity, and internal governance status [5][7]. - The new Company Law provides legal grounds for financial institutions to adopt a single-tier governance model, allowing them to make this decision [5][7]. Group 3: Transition of Responsibilities - The audit committee under the board of directors will take over the responsibilities previously held by the supervisory board, as seen in announcements from several banks [6]. - The audit committee, typically composed of independent directors, will focus on overseeing financial reporting, internal controls, and risk management [6]. - This shift reflects a move towards a more flexible and adaptive governance structure, enhancing the role of the audit committee in corporate governance [6][7]. Group 4: Implications of the New Governance Structure - The new governance model allows financial institutions to tailor their governance structures based on their specific circumstances, potentially improving operational efficiency [7]. - A single-tier governance model can reduce friction in internal checks and balances, enhancing decision-making efficiency, especially in a rapidly changing financial market [7]. - Smaller financial institutions may benefit from reduced operational costs by not establishing a supervisory board, allowing for better resource utilization [7]. Group 5: Controversies and Challenges - There are concerns regarding whether the audit committee can effectively fulfill the supervisory board's duties and maintain independent oversight [8][9]. - The potential conflict of interest arises as the audit committee, composed entirely of directors, supervises the board itself, which may hinder effective checks and balances [9].