The Ghost of 1929: Why Greater China’s Corporate Modernization Remains Unfinished in 2026

 

The Ghost of 1929: Why Greater China’s Corporate Modernization Remains Unfinished in 2026

As an economist observing the trajectory of Greater China through 2026, it is striking how the "36 Principles" of the 1929 Company Law remain more of a spectral ambition than a settled reality. While the 1929 Law was a landmark attempt to transplant Western corporate norms onto Chinese soil, the core tension it introduced—the struggle between private autonomy and state supervision—continues to define the region's markets today.

In a true market economy, the company law serves as a "private constitution" for entrepreneurs. However, in Greater China, the 1929 principles of "State Ascendancy" (promoting state control over private capital) have evolved into modern state-led capitalism. We see that while the technical mechanisms of the 36 principles exist, the institutional spirit—specifically the protection of minority shareholders and the independence of corporate legal persons from political interference—remains fragile.

The 36 Legislative Principles (Legislative Blueprint of 1929)

These principles were the mandatory guidelines used by the Legislative Yuan to draft the 1929 Act:

1. Legal Personality: Companies must register to obtain independent legal status.
2. Four Types of Organizations: Categorization into Unlimited, Limited, Joint, and Joint-Stock companies.
3. Government Supervision: The state maintains the right to inspect and dissolve companies.
4. Registration as Condition Precedent: No company exists before formal government approval.
5. Capital Certainty: Total capital must be clearly defined in the articles of incorporation.
6. Capital Maintenance: Prohibition on returning capital to shareholders except through legal reduction.
7. Minimum Subscription: Promoters must subscribe to a minimum of 35% of shares before public offering.
8. Standardized Par Value: All shares in a class must have equal value.
9. Transferability of Shares: Shares are generally transferable, subject to specific restrictions.
10. Shareholders' Meeting Supremacy: The meeting is the highest decision-making body.
11. Voting Rights: One share, one vote (with certain limits on large blocks to prevent monopoly).
12. Board of Directors: Requirement for a board to manage daily operations.
13. Directors' Fiduciary Duty: Directors must act in the company's best interest.
14. Supervisory Board (监察人): A mandatory body to oversee the board and accounts.
15. Independence of Supervisors: Supervisors cannot simultaneously serve as directors.
16. Liability of Management: Joint and several liability for directors in case of illegal acts.
17. Annual General Meetings: Mandatory yearly gatherings for transparency.
18. Financial Disclosure: Obligation to provide audited balance sheets to shareholders.
19. Statutory Reserve Funds: Mandatory retention of earnings to protect creditors.
20. Dividend Restrictions: Dividends can only be paid from actual net profits.
21. Preferential Shares: Authorization to issue shares with special rights.
22. Corporate Debentures: Legal framework for issuing bonds to raise debt capital.
23. Protection of Minority Shareholders: Legal recourse for those holding small stakes against majority abuse.
24. Employee Welfare Considerations: Encouragement of profit-sharing or labor participation.
25. Merger Procedures: Clear legal steps for corporate consolidation.
26. Creditor Notification: Requirement to notify creditors during major structural changes.
27. Voluntary Dissolution: Shareholders’ right to end the business.
28. Compulsory Dissolution: Court or government-ordered closure for law-breaking.
29. Appointment of Liquidators: Standardized process for winding down affairs.
30. Asset Distribution Priority: Creditors must be paid before shareholders in liquidation.
31. Special Provisions for Unlimited Partners: Defining the heavy liability of general partners.
32. Foreign Company Recognition: Rules for foreign entities operating within China.
33. National Treatment: Foreign firms must comply with local laws and registration.
34. Branch Office Regulation: Legal status and liability of subsidiary branches.
35. Penalties for Non-compliance: Fines and criminal liability for falsified records.
36. Transition Clauses: Harmonizing existing firms with the new 1929 standards.

Why These Principles are Key for a Market Economy

For a market to function, participants need predictability and protection. Principles like Capital Maintenance (6) and Financial Disclosure (18) ensure that creditors aren't defrauded. Minority Protection (23) is the bedrock of capital markets; without it, individuals will not invest, and capital remains trapped in family silos or state hands.

In 2026, we see that while the letter of these laws is present in the PRC’s recent Company Law updates and Taiwan’s long-standing statutes, the application is often uneven. In the mainland, the "Socialist Market Economy" often subordinates Principle 10 (Shareholder Supremacy) to Party directives. In Taiwan, while more aligned with global norms, "Family-Centric" block-holding still challenges the Fiduciary Duties (13) intended by the 1929 reformers. The 1929 dream of a standardized, transparent, and autonomous corporate sector remains the "unfinished business" of the century.