The reform of trust company governance is entering a substantive implementation phase.

Recently, SDITC (01697.HK), listed on the H-share market, disclosed regulatory approval confirming the formal abolition of its supervisory board effective November 10. Earlier, on November 13, J-Yuan Trust Co.,Ltd. (600816.SH) also announced that its supervisory board dissolution had been approved by the Shanghai Bureau of the National Financial Regulatory Administration (NFRA).

With the abolition of supervisory boards, audit committees are officially taking over oversight functions. Industry experts view the completion of this process by the two institutions as marking the transition from policy pilot to practical implementation of governance optimization in the trust sector under the new Company Law framework.

**Two Companies Officially Scrap Supervisory Boards** As the first trust institutions to complete the adjustment, J-Yuan Trust and SDITC have set practical examples for the industry.

J-Yuan Trust initiated reforms as early as July this year. After a shareholder resolution on July 30, the company received approval from the Shanghai NFRA Bureau (Approval No. Hujinfu [2025] 714) on November 11, confirming the revised articles of association and abolishing the supervisory board. Its functions were transferred to the Risk Control and Audit Committee, and the "Supervisory Board Rules" were simultaneously repealed—a process completed in just three and a half months.

SDITC disclosed key progress on November 17, announcing receipt of approval from the Shandong Financial Regulatory Bureau (Approval No. Lujinjianfu [2025] 508). Effective November 10, the company no longer maintains a supervisory board, with its duties reassigned to the board’s audit committee, resulting in the departure of all nine former supervisors.

"Both listed trust companies followed a standardized process—regulatory approval, charter amendments, and authority handover—ensuring a smooth governance transition," said Bai Tuo, a trust industry analyst.

A compliance officer at a South China-based trust company noted that traditional supervisory boards suffer from delayed oversight and functional overlaps, whereas audit committees, led by independent directors, can more promptly engage in financial audits and risk management, improving decision-making efficiency.

Liao Hekai, an analyst at Jinle Function, views the abolition of supervisory boards as aligning with policy trends and modernization. "Supervisory boards and audit committees have overlapping functions. Eliminating the former reduces redundancy, cuts management costs, and enhances governance efficiency," he said. The new model also resembles the shareholder-oriented "single-tier board" structure common among global financial institutions, facilitating international alignment.

Notably, regulators have not relaxed standards for audit committees. Beyond requiring independent directors to lead them, rules mandate at least three members for specialized committees like the Related Party Transactions Control Committee. Non-conflicted directors must approve related-party transactions with a two-thirds majority, forming a multi-layered risk control system.

**Audit Committee Model Gains Traction** The accelerated governance reforms stem from recent regulatory updates.

The new Company Law, effective July 1, 2024, allows state-owned companies to replace supervisory boards with audit committees, providing a legal basis for governance optimization. In May 2025, the NFRA amended regulations like the Trust Company Management Rules, explicitly permitting trust companies to abolish supervisory boards if audit committees assume their functions—a clear operational pathway.

"The new rules emphasize 'sound governance and risk management,' and replacing supervisory boards with audit committees embodies this," Bai Tuo noted.

For small and mid-sized trust firms, Yu Zhi, a researcher at Use Trust, believes they may prefer abolishing supervisory boards to achieve flexible governance optimization while reducing staffing and operational costs.

Regarding post-abolition risks of "decision-making and oversight integration," Yuan Shuai, Deputy Director of the Investment Department at the China Urban Development Institute, suggested strengthening audit committees’ independence, clarifying core responsibilities in financial oversight and risk assessment, and ensuring timely disclosure of key decisions and financial status. External audits and whistleblower mechanisms should complement internal checks to build a robust, impartial oversight framework.

While only two trust companies have abolished supervisory boards so far, more are expected to follow.

"Most trust firms will likely complete governance restructuring within 3–5 years, with audit committees becoming the mainstream model," said Zhi Peiyuan, Vice Chairman of the Listed Company Investment Committee at the China Investment Association. The new Company Law allows limited liability companies to opt for audit committees, while NFRA rules align trust governance with higher laws, clearing obstacles for industry-wide transition.

For firms that have already adjusted, Zhi warned against "tokenism," urging vigilance to prevent audit committees from becoming mere formalities. "Trust companies must balance efficiency and checks through institutional innovation, technology empowerment, and regulatory coordination to build a governance system compliant with the new Company Law."

"The goal of governance is quality and efficiency, not just procedural compliance," Bai Tuo emphasized. Whether abolishing or retaining supervisory boards, the focus must remain on supporting the industry’s shift from "financing intermediaries" to "asset managers," safeguarding beneficiary interests through enhanced oversight—a cornerstone of high-quality development under the new regulatory framework.