For lesson on corporate law, Chinese look to Delaware

State's reputation acknowledged around the world

By MAUREEN MILFORD / The News Journal

11/20/2004

A delegation of eight officials from the People's Republic of China, in Wilmington on Friday to learn about Delaware's corporate law, already knew a thing or two about the state.

First, they were aware of the high-stakes shareholder lawsuit involving the Walt Disney Co. taking place in Georgetown.

"Disney is a famous corporation," said Wu Gaosheng, an official with the Standing Committee of the National People's Congress - the Chinese counterpart to the U.S. Congress.

Secondly, they knew Delaware is home to more than 600,000 business entities, including 58 percent of the Fortune 500 companies.

"We know Delaware corporate law in China. We know it is the most popular corporate law in the world," said Wu, who spoke through an interpreter.

Wu and the delegation are spending 10 days in the United States to learn about corporate and securities law as part of China's effort to revise its business laws. The creation of a sound rule of law is vital to China as it moves toward a true market economy, said an official for the U.S. Department of Commerce, which is sponsoring the event. The department has had a rule-of-law initiative for China under way for about two years.

The stakes are high, as China becomes a major economic world power and U.S. trading partner, experts said.

China's economy has been exploding in the past 10 years. Last year, its gross domestic product grew by 9 percent; this year it is expected to grow by 9.5 percent to 9.7 percent, according to Chinese government figures. The country's exports and imports rose by 30 percent between 2000 and 2002. It was the fourth largest merchandise trader in 2002, according to the World Trade Organization. In terms of purchasing power, it ranks second behind the United States.

But Wu said China has had many problems with corporations since it enacted its first company laws in 1993.

Anne Marie Plubell, senior business adviser with The Plubell Firm in Washington, D.C., said China is fortunate to start with almost a blank slate. Plubell, a vice chairwoman of the China law committee of the American Bar Association, accompanied the delegation.

As part of the trip, the group met Friday morning with Vice Chancellor Donald F. Parsons Jr. in one of the courtrooms in the New Castle County Courthouse.

Delaware corporate law has broad principles and there is leeway within the basic requirements that allow directors to run their businesses, he said.

He explained that directors and officers have a duty of due care to shareholders, a duty of loyalty and a duty of good faith.

Later in the day, the group had lunch with representatives from the DuPont Co. and then attended a presentation on corporate law hosted by Delaware Assistant Secretary of State Rick Geisenberger, Lawrence A. Hamermesh, a professor of law at Widener University and Karen Valihura, a litigation partner at Skadden, Arps, Slate, Meagher & Flom in Wilmington.

Wu said China hopes to have a draft of its revised company law by the end of the year. Delaware law will serve as a model, he said.

Contact Maureen Milford at 324-2881 or mailto:mmilford@delawareonline.com