China to Introduce 'Chief Legal Officer' to Major SOEs

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Last updated at: (Beijing Time) Thursday, August 28, 2003

China to Introduce 'Chief Legal Officer' to Major SOEs

The Chinese central government is to introduce a "Chief Legal Officer" (CLO) system to the managerial groups of all major state-owned enterprises (SOEs) next year.

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The Chinese central government is to introduce a "Chief Legal Officer" (CLO) system to the managerial groups of all major state-owned enterprises (SOEs) next year.

According to the State Assets Supervision and Administration Commission (SASAC) under the State Council, the drafting of the legal counsel system in SOEs is speeding up.

A senior SASAC official Wednesday told a conference attended mainly by legal staff members of SOEs that a document titled LegalCounsel Management Methods for SOEs will come out around the end of this year, so as to pave a way for the expansion of the CLO system to all SOEs from the current 24 trial ones.

While it is common practice for a Western investor to take at least two persons when starting a new project: a chief accountant to calculate the economic risk and a CLO to calculate the legal risk, legal staff in China's SOEs stay at relatively lower level, and mainly deal with the company's routine legal affairs.

Advice from legal staff is becoming increasingly important to acompany's operation now that China has entered the World Trade Organization and China's new government is determined to govern the country based on law, the official said, noting that SASAC, designated by the State Council as the owner of the state assets, is trying to raise SOEs' capability to deal with legal risks by promoting the CLO system.

The CLOs in the 24 trial SOEs, which started to establish the CLO system late last year, are leading members of their enterprises, being directly responsible to the representatives of the enterprises, and have the duty to offer legal advice on the company's major operational decisions.

Through the CLO system, SASAC means to strengthen legal supervision over SOEs as well as financial supervision through thegeneral accountant, to help them avoid legal risks, said the official.

SASAC is currently summing up the experience of the trial enterprises, and will set out the CLO's major duties and methods when evaluating an enterprise's capacity to avoid legal risks, he said.

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