The new Company Law implements the most fundamental systemic restructuring of a company's internal oversight structure since 1993. Among its most significant innovations is the elevation of the audit committee system to a statutory oversight mechanism for the first time, permitting it, within the framework of corporate charter autonomy, to replace the supervisory board in exercising all supervisory powers. This systemic change signifies a structural transformation of China's corporate oversight system from external oversight to embedded oversight. The audit committee system simultaneously embodies the dual roles of a “committee under the board of directors” and a “statutory oversight subject,” thereby creating inherent tensions, including insufficient oversight independence and the homogenization of the oversight subject and object. At the operational level, the implementation of the new system faces practical risks such as inadequate professional competence, weak internal audit independence, over-reliance on external audits, fragmented oversight processes, and blurred legal responsibility boundaries. Aiming for an effective system, this study proposes improvement pathways, including rebuilding oversight independence by strengthening information independence, institutional independence, and procedural independence; enhancing the professional competence of the audit committee through a professional admission system and multi-level external professional support; reshaping oversight processes by constructing a “closed-loop oversight” system connecting internal and external audits; and clarifying legal responsibility boundaries by distinguishing decision-making liability from oversight liability, and refining the duty of care standards and exemption rules. The value of the audit committee system lies not in formally replacing the supervisory board, but in driving the upgrade of the oversight logic towards specialization, process-orientation, and accountability. Its effectiveness depends on the overall synergy of supporting rules, corporate governance culture, and external regulation.
Audit Committee; New Company Law; Internal Oversight; Supervisory Board; Oversight Independence.
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