Companies make their success from fierce competition by virtue of their premium products and technological strength, and also a sound and efficient internal compliance management system. As an external supporter of corporate risk control competence, the corporate counsel is in a good position to provide legal support to the company in terms of the establishment, execution and renewal of compliance management rules and regulations.
Establishment of a compliance management system. The internal compliance management systems of companies should be improved on a continuous and step-by-step basis. The compliance management system should be tailor-made to the operation management mode of the company. The corporate counsel shall start with the following work during the establishment of a corporate internal compliance management system.
First, at the corporate governance level, the corporate counsel should provide legal opinions on the compliant construction of the board of directors, board of supervisors, managers and other decision-making levels of the company, and help the company define a compliance management system that caters to the long-term development needs of the company. The counsel should ensure that the operation, management and behaviour of the company are in compliance with laws and regulations, regulatory requirements, industry standards, articles of association, rules and regulations, and international treaties and rules.
Second, the corporate counsel should undertake a comprehensive analysis of the company’s internal compliance management system to make sure that it is legal and compliant. The corporate counsel should review the system based on the business and operation of the company and the reality of the industry, to check whether there is any: violation of national laws and mandatory regulations; unclear division of roles and responsibilities; imbalance between the rights and obligations; conflict between different management rules; defined owners for every business aspect; and whether the business processes are traceable and under supervision.
Apart from a review of the merits of the compliance management system, the corporate counsel should also pay special attention to the compliance of the procedures, for example, whether a democratic procedure is implemented when performing the rules and regulations on the rights and interests of the workers, and whether the compliance management system is submitted to the board or shareholders’ meeting for review and approval according to the articles of association.
Finally, the corporate counsel should manage the language of the rules and regulations, in particular the logic of the structure, the normativeness of the expression, and the rigorousness of the phrasing.
Execution of the rules and regulations. An excellent corporate counsel should also assist the company in building and improving its capacity to execute the internal compliance management rules and regulations. The ultimate goal of execution is to put in place an orderly management system and improve the rules and regulations on a continuous basis. The execution of this system is the most important factor to guarantee that the rules and regulations are thoroughly implemented.
The corporate counsel should also give special attention to the effective execution of the compliance management system when designing it. For example, a private car for public use is common in many companies. And, although it has been banned, employees can use loopholes in the internal reimbursement system. Finally the internal compliance management system is completely undermined. This is a common difficulty in executing an compliance management system.
To solve this problem, the corporate counsel can hold regular legal training sessions for employees, with a full consideration of the operational pattern and development of the company, to enhance employees’ awareness of risks and their recognition of corporate management. The corporate counsel should also keep regular communication with management and provide professional analysis of the execution of management rules and regulations, and offer proper solutions.
Renewal of the compliance management system. The internal compliance management system of the company is upgraded and improved on a continuous basis, and the renewal and improvement of the system is the last step for the whole system. Upon execution, conflicts between the operation risks and the business development may emerge. In such cases, the corporate counsel should consider how to improve the compliance management system with the aim of balancing operation risk and business development.
External factors such as technological progress and policy adjustments also require compatibility with the company’s compliance system. For example, an advisory unit of the authors’ service recently planned to launch an e-commerce platform business. At this time, as an external force, the corporate legal counsel needed to combine the E-commerce Law, and other relevant laws and regulations that were officially implemented in 2019, to target business operations, and assist the company in making adjustments to the original compliance system.
To conclude, a well established compliance management system is essential to a company, and should involve comprehensive, systematic and objective development, and continuous improvement. The significance of corporate counsel is to deliver to the company and put in place legal, reasonable and rigorous management concepts, and help the company establish an ecological closed loop of internal compliance management through rigorous establishment, effective execution and the timely renewal of the compliance management system.
Yan Lantao is an associate and Zhang Yubo is a legal assistant at Tiantai Law Firm
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