China's centrally-administered SOEs enhance reform and oversight with newly appointed chief compliance officers

Huang Yixuan
China's centrally-administered state-owned enterprises embrace less risk and more oversight, with the new position of chief compliance officer.
Huang Yixuan

China's centrally-administered state-owned enterprises are required to establish the post of chief compliance officer, according to a document released by the State-owned Assets Supervision and Administration Commission of the State Council.

The administrative measures on compliance management of centrally-administered SOEs, released on September 16, is aimed to deepen their construction under the rule of law, promote compliance management, effectively prevent and control risks, and strongly guarantee the deepening of reform and high-quality development, the SASAC said.

The measures, based on the construction practice of compliance systems in recent years, have a clearer classification of the content of compliance management, including aspects of establishing compliance systems, improving operation mechanisms, fostering compliance culture, and strengthening supervision and accountability, according to Jin Xu, lawyer at the Global Law Office.

The document clarified that central enterprises should establish a chief compliance officer who will be responsible for the people in charge of the enterprise. The job should also be taken on by the general counsel as a concurrent post, instead of creating new leadership positions.

In terms of operational mechanisms, centrally-administered SOEs are required to embed compliance review as a mandatory procedure in the operation and management process, and the compliance review opinions on major decision-making matters should be signed by the chief compliance officer.

On supervision and accountability, central enterprises should hold accountable those who fail to detect irregularities knowingly or with gross negligence in the course of their duties, or who fail to perform their duties when irregularities are detected, resulting in losses or adverse impacts on the enterprise.

The administrative measures will come into force on October 1, 2022.

Weng Jieming, deputy director of the SASAC, stressed that central enterprises should regard the chief compliance officer as a key figure, who should fully participate in major decisions, and also see compliance review as a key link, speeding up optimization of the working mechanisms.

"The provisions of the administrative measures reflect the great importance attached on the effective implementation of compliance systems," Jin said.

Centrally-administered SOEs need to review the status of their own compliance system item by item and make necessary adjustments to their compliance systems, and more importantly, they need to review and improve their compliance system from the perspective of practicality and effectiveness, taking into account their own situation and features, she said.

According to the list updated on July 25, China now sees a total of 98 central enterprises.

Jin expects that the next phase of compliance management will also be rolled out in depth, at the level of the central enterprises' subsidiaries as well as SOEs of lower levels.

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