Asian Corporate Law in a Post-Covid-19 World

Thursday, November 26, 2020

The effects of the Covid-19 pandemic are widespread and are likely to change the legal landscape across many, if not all, jurisdictions in Asia, argues Roza Nurgozhayeva of Nazarbayev University in Kazakhstan. The impact of the heightened use of technology because of the need for social distancing is an example. Previously wary of technological innovation, a number of countries have introduced sweeping legislation allowing online practices once restricted to the real world. Corporate governance models are also shifting away from traditional Anglo-American standards to more bespoke frameworks to fit specific jurisdictions.

Asian Corporate Law in a Post-Covid-19 World

The directors are meeting virtually: Regulators, who had been reluctant to permit online decision-making, have updated legislation to allow boards to take remote actions (Credit: ImageFlow /

The Covid-19 pandemic continues to cause a deep economic recession in many major economies, disrupting international supply chains, destroying businesses, and making millions of people jobless. The corporate world has been shaken by severe restrictions and public-health directives aiming to slow down the virus’s spread.

Providing an immediate response, countries introduced material changes to legislation that affect the way organizations manage their operations. Governments announced unprecedented measures releasing companies from statutory requirements to help businesses during the crisis and boost economic recovery. Those measures include the suspension or postponement of general meetings of shareholders, board meetings, mandatory reporting and setting of capitalization standards, financial filings, share placements, and bankruptcy proceedings. At the same time, governments have tried to preserve jobs and decrease the financial burden on small and medium-sized enterprises.  

As the first shock caused by the pandemic passed, the question remains: Are recent legislative and regulatory changes temporary – or will the impact of the pandemic on corporate law and governance practices be game changing? The latter appears more likely – that Covid-19 will have a profound and lasting effect that will further transform Asia’s corporate legal landscape.

Digital technologies and their effect

Various public-health measures have prompted a shift from in-person to virtual meetings. State regulators across different jurisdictions in Asia, who had in the past been reluctant to introduce an online decision-making process, have updated legislation relating to shareholder meetings and board meetings to allow remote actions. If prior to the pandemic, countries generally demonstrated reservations about the legalization of online instruments in corporate governance, today they have no choice but explicitly to permit these practices. The use of digital space in many aspects of corporate law appears likely to become the norm.

Different technological and capital capacities across the region, however, impose constraints on the application of digital technologies in corporate governance. While frontier technologies have become embedded in the design of corporate governance and business processes, they also trigger new challenges and reinforce related risks. The development differentials in Asia, with some countries possessing strong technological potential and the others far behind, exacerbates existing economic and social divides. The unequal spread of technological capabilities across the region determines the initial conditions for companies to access and apply new technological processes in their operations and corporate decision-making, especially if they have regional operations. This uneven distribution can potentially limit the efficient application of corporate-governance norms. A company might only be able to do as much as the least tech-capable jurisdiction allows.

The wide application of digital and online instruments also raises privacy, data sharing, and cybersecurity issues. This requires adequate legal remedies that allow a sufficient level of access and disclosure across companies. It also means that corporate directors and executives must act fairly and responsibly in the interest of their company and other constituents. The need to guarantee that corporate stakeholders are technologically equipped and equally empowered to exercise their rights effectively and fulfill their roles requires a positive and normative analysis of future corporate-law reforms in the region. The increasing penetration of technologies in corporate settings involves a closer examination of contemporary corporate-governance standards to ascertain if they are still relevant and provide necessary protections.

Moving further from traditional norms

The Covid-19 crisis has put corporate stakeholders’ decision-making powers, the board and management’s responsibilities, and shareholders’ engagement under a spotlight. New economic, social and political realities can strengthen the role of shareholders in Asian jurisdictions characterized by high concentrations of ownership. The increasing power of shareholders might produce further deviation from the orthodox Anglo-American understanding of them as passive investors and residual claimants to the more robust sense of stockholders as owners of the firm who exercise control.

Asian countries are recognizing the idiosyncrasies of their corporate governance systems and setting alternative standards that align with their specific conditions (Credit: Photon photo /

Asian countries are recognizing the idiosyncrasies of their corporate governance systems and setting alternative standards that align with their specific conditions (Credit: Photon photo /

A controlling shareholder might then enjoy even closer oversight, tighter control, and greater decision-making authority over corporate operations disrupting the board’s governance power. In this scenario, the board becomes less strategic and more instrumental. It essentially serves the interests of controlling shareholder. The board becomes an administrator of the shareholder’s decisions, undermining the value and questioning the interpretation of traditional fiduciary duties of directors. When controlling shareholders are not mere beneficiaries but instead play a highly influential role that allows them to interfere in corporate activities, they become fiduciaries or trustees themselves. This entails a reallocation of duties between directors and controlling shareholders in many concentrated-ownership jurisdictions in Asia and the protection of other corporate constituents’ interests to maintain an equilibrium.

Another important factor is that current market constraints cause companies to review their priorities, agendas and investment strategies. At this time of a global threat – when resources are even more limited, interests are diverse, and risks are high – priorities shift beyond shareholder preferences to embrace broader policy and social welfare considerations.

The current situation reinforces debates around the narrative of a broad corporate purpose and, as a result, the raises questions about the legitimacy of adopting Anglo-American “good” corporate governance standards, which govern the separation of ownership and control in the Berle and Means company model (outlined in the 1932 book The Modern Corporation and Private Property by lawyer and diplomat Adolf Berle and Harvard University economist Gardiner Means) of multiple shareholders and powerful managers. In the diverse institutional contexts of many Asian jurisdictions where dispersed ownership is an exception not a general norm, adopting those standards has appeared to be the main driving force behind legal and policy reforms. Countries in the region, however, supported by a significant body of academic literature, are recognizing more and more the idiosyncrasies of their corporate governance systems and are setting alternative standards that align with their own institutional frameworks and market conditions instead of transplanting those from the Anglo-American world.

The growing expansion of the state as a dominant shareholder

The pandemic has heated the discourse around the state’s role in national development. While still early days, management experts claim that the past months have demonstrated that Asian economies such as Singapore, Taiwan, Hong Kong and South Korea are effectively weathering the crisis. These jurisdictions tend to have a strong public sector and invest significant state funds in education, healthcare, infrastructure, industrialization, R&D and innovation. The state’s presence increases the focus on the public good, socio-economic development, and economic self-sufficiency, particularly when the movement of people, goods and services is limited.

To fulfill their agenda, governments prefer to set up state-owned enterprises and deal with unexpected contingencies through their internal governance and capital structures. State-owned enterprises often manage critical infrastructure, energy, financial and public-utility systems. Controlling positions of the state in many large and often strategic firms in Asia will strengthen even more after the pandemic. The Covid-19 crisis will, therefore, bolster the role of state-owned enterprises across Asia and beyond.

Although the pandemic rocked the foundation of many legislative systems, forcing them to introduce new legal norms, there is no “one-size-fits-all” approach. The choice of an applicable legal framework depends on the socio-economic, capital, and institutional context of an individual country or even the allocation of power and ownership in any individual company. Firms may have various objectives, ownership structures, risks and market conditions, which lead to different organizational forms and governance systems.

This divergence might widen and broaden in the future, imposing an additional challenge to a single-minded regulatory approach to corporate governance. Asian countries will continue to adopt alternative narratives that help their corporate laws to evolve into systems designed for their own specific purposes. The influence of autocratic state-driven systems will also continue to rise. As these trends play out, additional empirical studies and academic discussions are needed to assess the pandemic’s systemic impact on corporate law across Asia.

Opinions expressed in articles published by AsiaGlobal Online reflect only those of the authors and do not necessarily represent the views of AsiaGlobal Online or the Asia Global Institute


Roza Nurgozhayeva

Roza Nurgozhayeva

Nazarbayev University

Roza Nurgozhayeva is assistant professor of law at Nazarbayev University in Kazakhstan. Previously, she served as vice-president and general counsel at the same university. Until August 2020, she held the position of post-doctoral fellow at the Center for Asian Legal Studies in the Faculty of Law of National University of Singapore (NUS). Before joining academia, she practiced law for more than seven years as in-house counsel of a commercial bank, a member of an international financial group, where she provided support for bank operations, major acquisitions, securities’ issuance and litigation. She completed bachelor’s degrees in law and economics in Kazakhstan and a master of laws at Cornell Law School. She holds a doctorate of the science of law, also from Cornell. Her research interests include comparative corporate law, corporate governance, state-owned enterprises, emerging markets, and law and development.

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