China state enterprise managers spooked by new liability rules

Hong Kong

BUSINESS development managers at Chinese state-owned firms have been put on notice: mess up on merger- and-acquisition (M&A) deals and you can be held personally liable - for life.

Under new rules unveiled by China's State Council, or Cabinet, last month, managers will be held accountable if they "fail to, or incorrectly, perform their duties" with respect to deals that result in a loss of state assets.

A lack of specifics has prompted bankers and lawyers to say this is a draconian catch-all clause that is already slowing dealmaking at Chinese state-owned enterprises (SOEs).

Sanctions include pay cuts, disciplinary action or full judicial hearings - even years after managers have moved jobs or retired. In the United States and Europe, company executives are rarely held personally accountable, let alone criminally liable, for bad deals - provided…