Core Viewpoint - The traditional "supervisory board" structure in Chinese companies is being replaced by a more efficient governance model, particularly with the implementation of the new Company Law, which allows for the establishment of audit committees within the board of directors to assume the functions of the supervisory board [1][2][3]. Group 1: Changes in Governance Structure - Several insurance companies, including China Pacific Insurance and others, have announced the abolition of their supervisory boards, aligning with the new Company Law [1][2]. - The new Company Law, effective July 1, 2024, permits state-owned companies to set up audit committees composed of directors to perform the duties of the supervisory board, eliminating the need for a supervisory board [2]. - Major state-owned banks and other financial institutions have also followed suit, announcing the dissolution of their supervisory boards, with their functions being transferred to the audit committees [2]. Group 2: Implications of the New Governance Model - The removal of the supervisory board is driven by policy changes and the need for cost and efficiency optimization, as it reduces management layers and associated costs [3]. - The audit committee, which is typically composed of independent directors, is expected to enhance oversight by being closer to decision-making processes, thus improving information access and independence compared to the supervisory board [3]. - The new governance structure aims to address issues of insufficient independence and limited information access that were prevalent in the supervisory board system [3]. Group 3: Impact on Directors and Officers Liability Insurance - The new Company Law has significantly increased the liability risks for directors and senior executives, making them jointly liable for damages caused by intentional misconduct or gross negligence [4]. - The law allows companies to purchase liability insurance for directors, which is a new legislative development aimed at protecting them from increased risks [4]. - Following the implementation of the new Company Law, there has been a notable increase in the market for directors and officers liability insurance, with over 270 A-share listed companies announcing their intention to purchase such insurance in the first half of the year [4][5].