(Pix © Larry Catá Backer 2016)
On April 12, 2016, the Supreme People's Court has circulated its Provisions of the Supreme People's Court on Certain Issues Concerning the Application of the "Company Law of the People's Republic of China" (IV) (Draft for Comments). The object of these provisions is to provide guidance to courts and litigants about the application of provisions of the Company law. They represent an effort to augment and interpret the provisions of the Company la win important ways and are thus an important step forward in moving China towards a more mature and coherent system of rule.
The Supreme People's Court is accepting feedback on specific revisions, together with reasons therefor, which may be sent to Yang Ting of the Civil Adjudication Tribunal No. 2 of the Supreme People's Court at No. 2, Dong Jiao Min Xiang, Dongcheng District, Beijing, Postal code: 100745 or emailed to gsfjss_yang@163.com. The deadline for providing feedback is before May 25, 2016.
This post includes some of my thoughts on Part I of the Draft Provisions--Cases involving the effectiveness of the resolutions of the meetings or general meetings of shareholders and board of directors (一、关于公司股东会或者股东大会、董事会决议效力案件), including the provisions on which I comment. They will be included as part of a larger and more specific set of comments that may be submitted by the American Bar Association. Additional commentary is provided by GAO Shan, an SJD student at Penn State and licensed Chinese lawyer.
In circulating these additional guidance provisions the Supreme People's Court noted:
为 进一步适应经济发展及司法实践需求,针对公司治理及股东权益保护方面的法律适用问题,最高人民法 院起草了关于适用《中华人民共和国公司法》若干问题的规定(四)(征求意见稿)。为进一步完善该 司法解释稿,提高司法解释质量,更加准确地贯彻立法原意,更加稳妥地解决公司法适用中的实际问题 ,切实保护公司、股东及其他主体的合法权益,促进社会经济发展,现通过有关媒体向社会公开征求意 见。欢迎社会各界人士踊跃提出宝贵意见。特别欢迎各高校法律院系及各法学科研院所组织讨论并集体 提出意见。具体的修改意见反馈可采取书面寄送或者电子邮件的方式,并请在提出建议时说明具体理由 。[With a view to further meeting the demand of economic development and judicial practices and addressing the issues of application of laws in corporate governance and protection of shareholders' rights and interests, the Supreme People's Court has drafted the Provisions of the Supreme People's Court on Certain Issues Concerning the Application of the "Company Law of the People's Republic of China" (IV) (Draft for Comments). For the purposes of further refining such draft of judicial interpretation, improving the quality of judicial interpretation, accurately implementing the legislative intention, further prudentially addressing the practical issues concerning the application of the Company Law, effectively protecting the lawful rights and interests of companies, shareholders and other entities, and promoting the social and economic development, public opinions are hereby solicited through relevant media. Persons from all sectors of society are welcome to provide valuable comments. The schools and departments of law of colleges and universities and all scientific research institutes of law are in particular welcome to organize discussions and present opinions collectively.]
一、关于公司股东会或者股东大会、董事会决议效力案件 [I. Cases involving the effectiveness of the resolutions of the meetings or general meetings of shareholders and board of directors]
第一条 (确认之诉的原告) [Article1 (Plaintiffs to the actions for confirmation)
公司股东、董事、监事及与股东会或者股东大会、董事会决议内容有直接利害关系的公司高级管理 人员、职工、债权人等,依据公司法第二十二条第一款起诉请求确认决议无效或者有效的,应当依法受 理。 [Where companies' shareholders, directors, supervisors as well as the senior executives, employees and creditors, etc. that have direct interests in the content of the resolutions of meetings or general meetings of shareholders and board of directors file actions in accordance with Paragraph 1 of Article 22 of the Company Law requesting the confirmation of the resolutions as invalid or valid, such actions shall be accepted in accordance with the law.]
COMMENT:GAO Shan notes:
It should be the understanding of the courts that the initial burden of the plaintiff under Article 1 of the Draft Provisions must include a showing of a “direct interest in the content of the resolutions” that has caused harm personally to them beyond any interest in adhering to their responsibilities as directors, supervisors, shareholders, employees, and officers of the company. It should be noted that the issue classifying actions as direct versus derivative remains in the United States. The test adopted by the Delaware courts [See, e.g., Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004)] is similar to that articulated by the American Law Institute (ALI) in its Principles of Corporate Governance ¶ 7.01 and provides that the court must look to the nature of the wrong, to whom the relief should go, the independence of the direct injury to any injury to the company, and that the plaintiff can show that the duty breached was owed to the plaintiff and that the plaintiff can prevail without showing a harm to the company. The ALI Principles of Corporate Governance § 7.01(c) also provides that transactions may give rise to both direct and derivative actions simultaneously but that “any special restrictions or defenses pertaining to the maintenance, settlement, or dismissal of either action should not apply to the other.” These approaches may prove useful in the context Draft Provisions and its instructions for judges seeking to distinguish between Article 22 and Article 151 actions under the Company Law.
It may be further suggested that additional clarification would strengthen the guidance for judges intended in Article 1 with respect to the following points:
a. It is understood that the scope of Article 1 of the Draft Provisions is limited to the first paragraph of Article 22 of the Company Law. It is further understood, then, that only shareholders may seek judicial relief under Article 22 ¶¶2-3 of the Company Law relating to deficiencies in the conduct of meetings and their resulting actions, in part because such actions harmed the company and are therefore derivative in character. It is understood that such shareholder action is subject to the restrictions of Article 151 of the Company Law and to the authority of supervisors under Article 53 to correct misconduct. But Article I does not make that clear, and a modification with appropriate cross references might be useful to judges seeking guidance.
b. Article 1 references only resolutions of the shareholders and the boards of directors. It does not reference the important resolutions of the supervisors (Company Law Article 53, 55), whose authority to issue resolutions and to suggest changes to the resolutions of the board of directors is substantial under the Company Law Articles 53-54. Yet is is as likely that direct injury could result from supervisor resolutions as from those of directors and shareholders.
c. Article 1 usefully provides a list of those classes of plaintiffs that may file actions under Article 22 ¶ 1 of the Company Law. The inclusion of an open ended term—“etc.”—suggests that the court has the authority to expand the classes of plaintiffs under Article I ¶ 1 at will. That is unlikely intended and might be modified to eliminate the term “etc,.” and including in the list all of the classes of plaintiffs that may take advantage of Article 22 ¶ 1 filings.
d. Article 1 does not specific the appropriate defendants. The Section notes that Article 3 of the Draft Provisions requires that the company be listed as a defendant under certain circumstances. The Section assumes that the classes of individuals who may be named as defendants include those who failed in their duties as specified in Articles 20, and 146-151 of the Company Law, which are limited to shareholders, directors, supervisors. But it should also include representatives of staff members who participate in general meetings and issues resolutions under Article 18 of the Company Law. And it might also include the legal representative of the company (Article 13 of the Company Law).
e. The Draft Provisions does not specify the right of the State or state organs to initiate actions under Article 1 of the Draft Provisions. It is assumed that the state and state organs may be subject to other rules, but that should be clearly specified in the provisions.
f. It should be understood that direct actions under Article 22 ¶ 1 of the Company law will arise in the context of Article 1 of the Draft Provisions only in an action ion which the plaintiff has suffered some unique loss. In many cases the action should center on the loss, usually by reason of the Company’s application of the resolution at issue. In many of those cases, then, the resolution validity issue arises as a defense against an action by plaintiffs unless the plaintiff seeks to have a declaration of invalidity in anticipation of harm to her direct interests. But if that is the case then it is not clear that the plaintiff has suffered any harm, and a plaintiff can seek such declaration only to the extent that such declaratory procedures are permitted generally under Chinese law. Article 1, however, is drafted to suggest that a lawsuit may be filed to attack the validity of a resolution where the litigant anticipates harm to direct interest as well as where such direct interests have already been harmed. The Section suggests that clarity on this issue is important and would suggest that such action be limited to cases where actual harm has occurred or is unavoidable. Otherwise, Article 1 broadens Section 22 ¶ 1 of the Company Law to permit any person to interfere with corporate action with which they disagree. The result would be to reduce efficiency and potentially flood the courts with actions that amount to little more than disagreement among stakeholders in corporate activity.
g. The Section agrees that contemporaneous ownership is an important limiting element for actions under Article 22 of the Company Law. It notes that such a rule already applies to actions initiated by shareholders. But the Section also believes that the value of the contemporaneous ownership rule might also apply to other litigants under Article 1 of the Draft Provisions. Otherwise, the provision would encourage the sale of causes of action.
One of the most confusing matter under PRC Company Law and the most recent Draft of Judicial Interpretation for American reader is to understand the difference between ¶ 1 and 2 of Article 22. There are two reasons contributed to this confusion, one is bad translation, the other is confusion with American company law system of derivative suite.
To be clear, the article 1 of the draft address confirmation upon the legality of the resolution, and the article 2 address to something I called “flawed” resolution. “Illegal resolution” and “flawed resolution” are fundamentally different subjects under PRC Company Law. ¶ 1 of the Article 22 is not designed as a derivative suit in nature, the underlying theory is to confirm the illegality of illegal resolution, which is why the draft termed it as “confirmation suit.” As one might notice, the draft grafts different approaches to company resolution that grounded on several different legal concepts.
It is a well established and well known principle embedded with Chinese law system that illegal civil action automatically invalid. For example, company 1 BOD/SH resolution decide to sell expired food with discount price, the creditor can file the claim against such resolution because it is illegal to sell expired food. Or company 2 resolution decide to conduct tax evasion, then creditor or employee under the draft can have a claim. Or company 3 resolution not following certain procedure requirements provided by company law or other statutory rules, as the Article 6 specified. It is worth to mention article 22 ¶ 1 never designed to exclusively protect shareholder interest, it designed with the intention to deter illegal corporate behavior through internal corporate decision, which is why original statutory language not listing who can file the claim under this provision.
The new draft limited scope of plaintiff who can file a claim under such provision with the condition that they must establish they have direct stake within the resolution and I would consider it as a progress. As for people concern about the floodgate of the litigation, my only answer would be that is the issue with ¶ 1 of article 22 itself, unless you get rid of this paragraph. Thus, It would defeating the very purpose of having ¶ 1 of article 22 if one consider shareholder status should be required to apply this provision.
The article 2 of the draft, which address ¶2 of the Article 22, I would consider it referring something as “flawed resolution.” For example, company 3 bylaw provided SH/BOD resolution must past by more than 1⁄2 of shareholders/ directors who wear white suit, then shareholder can have a claim to revoke the resolution if less than 1⁄2 people vote and they were wearing black suit. A flawed resolution is not illegal resolution, which requiring plaintiff hold shareholder status and subject to a 60 days statute of limitation period.
第二条 (撤销之诉的原告) [Article2 (Plaintiffs to the actions for revocation)]
依据公司法第二十二条第二款起诉请求撤销股东会或者股东大会、董事会决议的原告,应当在起诉 时具有公司股东身份。案件受理后不再具有公司股东身份的,应当驳回起诉。 [The plaintiffs that file actions in accordance with Paragraph 2 of Article 22 of the Company Law requesting the revocation of the resolutions of meetings or general meetings of shareholders and board of directors shall have shareholder status at the time when the actions are filed. Where a plaintiff ceases to be a shareholder after the case is accepted, the action shall be dismissed.
COMMENT: It should be agreed that a contemporaneous ownership rule is a useful mechanism, and one that is common in other states. In addition, the Section offers the following suggestions:
a. It is suggested that since only shareholders have the authority to file actions under Article 22 ¶ 2 of the Company Law the word plaintiff be changed to “plaintiff-shareholders” to make the concept of the class of plaintiffs and the shareholder status of the litigant clear.
b. It is noted that as written, Article 2 of the Draft Provisions appears to encourage arbitrage of shareholder status so that shares can be transferred within 60 day period to a third party who may have been disadvantaged by the corporate action and wants to take legal action. An alternative might be offered: a modification of Article 2 of the Draft Provisions to provide that shareholder status should be determined as of the date of the resolutions.
c. It is suggested that it may be useful to clarify Article 2 of the Draft Provisions to provide that litigation may proceed as long as there is at least one plaintiff who meets the standing requirement (share ownership). To that end, the provisions of Article 3 ¶ 2 of the Draft Provisions might be usefully applied here to determine the existence of a sufficient number of legitimate plaintiffs. Moreover, it is not clear what happens where in the circumstances of Article 3 of the Drat Provisions, all plaintiffs drop out except the company. In that case it might be useful to include a provision permitting the company to dismiss the suit subject to its obligations under Articles 53 and 151 of the Company Law.
d. It is noted that the difference in the language of Article 1 of the Draft Provisions (“requesting conformation of the resolution as invalid or valid”) and Article 2 (“requesting revocation of the resolution”). The Section notes that the language of Article 2 appears narrower than that of Article 1 and suggests that both be made consistent, using the language of Article 1. The reason for this choice is that this provides consistency among Articles 1 and 2, and more importantly, better aligns with the objectives of Article 9 of the Draft Provisions on affirmance.
GAO Shan notes:
First, I may disagree with the change “plaintiff shareholder”. It may complicate in the scenario when the resolution was to stop plaintiff’s shareholder title. There were cases where resolution decide to kick someone out, then that person who lost shareholder title need to rely on this provision to file the suite. By changing it to plaintiff shareholder, it may create unnecessary confusion for court to apply statutory protection in such cases.
Second, I am not sure the concern about “arbitrage of shareholder status” entails a modification of “status should be determined as of the date of the resolutions.” There may be an underlying public policy and interest consideration here that emphasize the integrity of the bylaws and good faith of SH/BOD resolution. Shareholder may take advantage of this provision to against those who at the first place violate the bylaws or procedure requirements set up by the law during the process of delivering a resolution. For that reason, I do not believe it is necessary to be determined as of the date of the resolution.
Also, as for the concern that shareholder exploit company’s mistake in delivering resolution, this might be fixed under principle of good faith.For example, those who enter into contract transferring shares after the resolution will subject to fact finder whether they made conscious and informed decision in relation with the disputed resolution. There are statutory provisions enable litigation parties to argue their litigation is in good faith. Further as Article 8 provided, there was an alternative situation that allow company to consult and obtain permission from shareholders when resolution is flawed. When company provided satisfactory evidence showing the existence of permission, the court can dismiss the claim by plaintiff. Thus, I am not sure shareholder can truely taking advantage of this.
Last, some may confused if company itself could be the plaintiff in a suit based on article 1, 2 and 3 of draft. In fact, they are not. When plaintiff drop out the litigation, the court will dismiss the action itself. Thuse scenario “w hat happens where in the circumstances of Article 3 of the Drat Provisions, all plaintiffs drop out except the company. ” might not occur.
第三条 (当事人的诉讼地位) [Article3 (Litigation status of the parties concerned)]
原告起诉请求确认本规定第四条规定的决议不存在、本规定第五条规定的未形成有效决议,以及确 认决议无效、有效或者撤销决议案件,应当列公司为被告。 [In the cases filed by plaintiffs for confirming the non-existence of a resolution as prescribed in Article 4 hereof, failure to form a valid resolution as prescribed in Article 5 hereof and the invalidity, validity or revocation of resolutions, companies shall be listed as defendants. ]
他人在一审法庭辩论结束前以与原告相同的诉讼请求申请参加诉讼,其诉讼主体资格符合民事诉讼 法、公司法规定的,应当列为共同原告。 [Where
another person applies for participating in the litigation with the
claims same as those made by the plaintiff prior to the end of the court
debate in the first instance and is eligible to be a party to the
litigation as required under the Civil Procedure Law and the Company
Law, such person shall be listed as co-plaintiff.]
COMMENT: One can agree that under the circumstances specified in Article 3 of the Draft Provisions, the company should be added as a defendant. That is especially important where the action is grounded solely on direct injury to the plaintiff as a result of the invalidity of a resolution, but not an injury to the plaintiff solely be reason of status as a corporate stakeholder. In addition, these specific comments and suggestions are offered:
a. It is unclear whether, in the circumstances of Article 5 of the Draft Provisions, the legal representative of the company should also be named.
b. It is noted that if a company is to be named as a defendant then it is important to determine who speaks for the company. In this case the Section assumes that it is the supervisors. But in the event the supervisors themselves are the cause of the liability then it becomes unclear.
c. One might acknowledge the importance of the connection between Articles 3, 4 and 5. It might be useful for judges and litigants if that connection is made more comprehensively explicit. That might entail redrafting the order of the provisions or some other method to make it easier for the litigant and judge to better understand the structure of the instructions provided in the Draft Provisions.
第四条 (决议不存在) [Article4 (Non-existence of resolutions) ]
本规定第一条规定的原告有证据证明系争决议存在下列情形之一,请求确认决议不存在的,应予支 持: [If a plaintiff specified in Article 1 hereof presents evidence showing that the disputed resolution falls under any of the following circumstances and claims for confirming the non-existence of the resolution, the claim of the plaintiff shall be upheld:
(一)公司未召开股东会或者股东大会、董事会,但是公司按照公司法第三十七条第二款或者公司 章程的规定不召开股东会或者股东大会而直接作出决定,并由全体股东在决定文件上签名、盖章的除外 ; (1) Where the company fails to convene a meeting or general meeting of shareholders or a meeting of the board of directors, unless the company renders the decision directly without convening the meeting or general meeting of shareholders as prescribed in Paragraph 2 of Article 37 of the Company Law or the company's articles of association and the written decision is sighed or sealed by all shareholders; and]
(二)公司召开股东会或者股东大会、董事会,但是未对决议进行表决。 [(2) Where the company convenes a meeting or general meeting of shareholder or a meeting of the board of directors but fails to vote on the resolution. ]
COMMENT: One agrees that a distinction ought to be made between invalid resolutions (treated in Article 5 of the Draft Provisions) and resolutions that have not been adopted (treated in Article 4 of the Draft Provisions).
a. One notes that Article 22 ¶ 1 of the Company Law speaks only to resolutions that have been passed. It does not appear to speak to resolutions that have not been adopted. As such, Article 4, it is assumed, speaks only to resolutions that were placed before the shareholders, staff, or directors and that were defeated or which the body otherwise refused to consider where they had a duty to consider the resolution and the failure to consider the resolution caused a direct injury to the plaintiff.
b. One assumes that Article 4 will be interpreted in a way that does not otherwise impede shareholders, directors, staff or supervisors in their vigorous exercise of the fiduciary duty to the company or otherwise permit action that would be considered corrupt (Article 147 of the Company Law). Specific reference might be made to Article 147 of the Company Law as a limiting standard to the application of Article 4 of the Draft Provisions.
c. One also notes that this Article only addresses what claims will be upheld from a Plaintiff under Article 1. It is understood that the grounds for invalidity under Article 2 are specified in Article 22 ¶ 2 of the Company Law.
第五条 (未形成有效决议) [Article5 (Failure to form valid resolutions)]
公司召开股东会或者股东大会、董事会并作出决议,但是本规定第一条规定的原告有证据证明存在 下列情形之一,请求确认未形成有效决议的,应予支持: [Where the company convenes a meeting or general meeting of shareholders or the meeting of the board of directors and renders a resolution, but a plaintiff specified in Article 1 hereof presents evidence showing the existence of any of the following circumstances and claims for confirming the failure to form a valid resolution, the claim of the plaintiff shall be upheld:]
公司召开股东会或者股东大会、董事会并作出决议,但是本规定第一条规定的原告有证据证明存在 下列情形之一,请求确认未形成有效决议的,应予支持: [Where the company convenes a meeting or general meeting of shareholders or the meeting of the board of directors and renders a resolution, but a plaintiff specified in Article 1 hereof presents evidence showing the existence of any of the following circumstances and claims for confirming the failure to form a valid resolution, the claim of the plaintiff shall be upheld:]
(一)出席会议的人数或者股东所持表决权不符合公司章程的规定; [(1) Where the number of the people present at the meeting or the voting rights held by shareholders fail to conform to the provisions of the company's articles of association; ]
(二)决议通过比例不符合公司法或者公司章程的规定; [(2) Where the proportion of the votes for adoption of the resolution fails to conform to the provisions of the Company Law or the company's articles of association;]
(三)决议上的部分签名系伪造,且被伪造签名的股东或者董事不予认可; [(3) Some of the signatures on the resolution are falsified and are not accepted by the shareholders or directors whose signatures are falsified; and ]
另一种观点:决议上的部分签名系伪造,且被伪造签名的股东或者董事不予认可,在去除伪造签名 后通过比例不符合公司法或者公司章程的规定; [Another opinion: Some of the signatures on the resolution are falsified and are not accepted by the shareholders or directors whose signatures are falsified and the proportion of the votes for adoption of the resolution fails to conform to the provisions of the Company Law or the company's articles of association after removal of the falsified signatures; and]
另一种观点:决议上的部分签名系伪造,且被伪造签名的股东或者董事不予认可,在去除伪造签名 后通过比例不符合公司法或者公司章程的规定; [Another opinion: Some of the signatures on the resolution are falsified and are not accepted by the shareholders or directors whose signatures are falsified and the proportion of the votes for adoption of the resolution fails to conform to the provisions of the Company Law or the company's articles of association after removal of the falsified signatures; and]
四)决议内容超越股东会或者股东大会、董事会的职权。 [(4) The content of the resolution exceeds the authority of the meeting or general meeting of shareholders or the board of directors. ]
COMMENT: One appreciates the request for suggestions among the two alternative versions of Article 5(3) respecting falsified signatures. The Section understands that the issue is between choosing an absolute taint standard (any falsification voids the resolution) or a functional taint standard (falsification voids only where there are insufficient valid signatures to adopt the resolution). The Section believes that the functional taint standard would be the better alternative. Otherwise a minority that sought to impede the majority could do so simply by strategically inserting one or two falsified signatures and then cause a litigation to be filed. That would substantially interfere with the valid operation of the company and would not further the foundational aim of the Draft Provisions “effectively protecting the lawful rights and interests of companies, shareholders and other entities, and promoting the social and economic development.”
第六条 (决议无效事由) [Article6 (Causes for invalidity of resolutions)]
股东会或者股东大会、董事会决议存在下列情形之一的,应当认定无效: [A resolution of the meeting or general meeting of shareholders or the meeting of board of directors that falls under any of the following circumstances shall be determined to be invalid:]
(一)股东滥用股东权利通过决议损害公司或者其他股东的利益; [(1) Where the shareholders abuse the rights of shareholders and impair the interests of the company or other shareholders through the resolution; ]
(二)决议过度分配利润、进行重大不当关联交易等导致公司债权人的利益受到损害; [(2) Where the resolution provides for excessive distribution of profits, major improper affiliated transactions or other arrangements, causing harm to the interests of the company's creditors; and ]
(三)决议内容违反法律、行政法规强制性规定的其他情形。 [(3) Other circumstances where the content of the resolution violates the compulsory provisions of laws and administrative regulations.]
COMMENT: One can agree about the utility of this provision that specifies the grounds for invalidity. It notes that such grounds do not add to or reduce the grounds set out in the Company Law, especially those in Articles 22, 146-150 of the Company Law. The additional following points may also be useful:
a. One notes that there may be a tension between this provision and the provision in Article 20 of the Draft Resolution relating to the distribution of dividends. It appears that the court may only act pursuant to Article 20 only after resolution of a claim for invalidity under Article 6(2) of the Draft Provisions. Moreover, there is no guidance on the meaning of “excessive” distribution of profits. Additional guidance might be useful.
b. The Company Law (Article 34) references only the methods of distribution and vests shareholders (Article 37(6)) with approval authority for dividend distributions. However, the Company Law vests the Board of Directors with the authority to formulate profit distribution plans (Company Law Article 46(5)) and vests the supervisors with oversight authority to correct conduct that prejudices the interests of the company. Thus in the case of dividend distributions there may be multiple resolutions that may be involved. And in the case of Draft Provisions Article 1 litigation, it is hard to see how the direct interest of anyone but shareholders are implicated in distribution plans, except to the extent that such plans violate the terms of contractual provisions (loan agreements and the like), in which case the issue of the resolutions themselves would be secondary to the issue of the breach of contract.
第七条 (决议撤销事由) [Article7 (Causes for revocation of resolutions)]
公司法第二十二条第二款所称的“召集程序”和“表决方式”,包括股东会或者股东大会、董事会 会议的通知、股权登记、提案和议程的确定、主持、投票、计票、表决结果的宣布、决议的形成、会议 记录及签署等事项。 [For the purpose of Paragraph 2 of Article 22 of the Company Law, "convening procedures" and "voting methods" include the matters such as notices for the meetings or general meetings of shareholders and the meetings of the board of directors, equity registration, determination of proposals and agendas, presiding over such meetings, voting, count of votes, announcement of voting results, formation of resolutions, meeting minutes, and the signing of the meeting minutes.
修改公司章程的有效决议不属于公司法第二十二条第二款所规定的“决议内容违反公司章程”。 [A valid resolution for revising the company's articles of association does not fall under the circumstances where "the content of a resolution violates the company's articles of association" as prescribed in Paragraph 2 of Article 22 of the Company Law.]
第八条 (事后同意决议) [Article8 (Ex post consent to resolutions)
股东起诉请求撤销股东会或者股东大会、董事会决议,公司有证据证明存在下列情形之一的,应当 驳回诉讼请求: [Where a shareholder files an action requesting the revocation of a resolution of the meeting or general meeting of shareholders or the meeting of board of directors and the company presents evidence showing the existence of any of the following circumstances, the action shall be dismissed: ]
(一)决议作出后,股东明确表示同意决议内容; [(1) Where the shareholder expressly consents to the content of the resolution after it is made;]
COMMENT: These provisions are useful clarifying measures. Especially important is guidance to avoid unnecessary complications where shareholders, board members or supervisors seek to modify the articles of incorporation.
第八条 (事后同意决议) [Article8 (Ex post consent to resolutions)
股东起诉请求撤销股东会或者股东大会、董事会决议,公司有证据证明存在下列情形之一的,应当 驳回诉讼请求: [Where a shareholder files an action requesting the revocation of a resolution of the meeting or general meeting of shareholders or the meeting of board of directors and the company presents evidence showing the existence of any of the following circumstances, the action shall be dismissed: ]
(一)决议作出后,股东明确表示同意决议内容; [(1) Where the shareholder expressly consents to the content of the resolution after it is made;]
(二)决议作出后,股东以自己的行为明确表示接受决议内容; [(2) Where the shareholder expressly indicates through its actions the acceptance of the content of the resolution after it is made; and]
(三)作出新的决议,实质认可股东诉讼请求的内容。[(3) Where new resolution is made to substantially recognize the content of the litigious claims of the shareholder.]
COMMENT: One can agree with the substance of Article 8 of the Draft Provisions. One notes only the following:
a. It is not clear whether Article 8 speaks to actions under Paragraph 1 or Paragraph 2 of Article 22 of the Company Law or to both. If it speaks to ¶1 then the action is not limited to shareholders as Article 8 suggests according to the provisions of Article 1 of the Draft Provisions. If it applied only to ¶ 2 then only shareholders may assert the right. In that case it includes resolutions of the general meeting as well as board and shareholder meeting resolutions—but Article 8 of the Draft Provisions appears to exclude resolutions of the general meeting. One suggests that clarification here would improve the utility of this section for judges.
b. Article 8 § 3 references “new resolutions”. It is assumed that these include resolutions of the supervisors under Article 53 of the Company Law. It is not clear whether it also includes resolutions adopted under Article 151 of the Company Law. That is, it cane be assumed that the resolutions references in Article 8 § 3 include all resolutions that might supersede the defective resolution, and not just a resolution passed by the same body that originally enacted the allegedly defective resolution.
c. One can recommend deleting the word “expressly” as nearly impossible to demonstrate. Perhaps the provision might be modified to reference written consent or consent before witnesses reduced to writing.
d. There is reason to be concerned that the provision for ratification by conduct is too ambiguous to rely on. In the absence of substantial understanding of baseline conduct that indicates consent, the provisions invites unnecessary and strategic litigation designed to inhibit corporate action.
第九条 (决议效力的直接认定) [Article9 (Direct affirmation of the effectiveness of resolutions)]
原告起诉请求确认股东会或者股东大会、董事会决议不存在、未形成有效决议、决议无效或者撤销 决议,与人民法院根据案件事实作出的认定不一致的,应当直接作出判决。 [Where the plaintiff files an action for confirming that a resolution of the meeting or general meeting of shareholders or the meeting of board of directors fails to exist or form a valid resolution or is invalid or revoked, which is inconsistent with the decision rendered by the people's court based on the facts of the case, judgment shall be made directly. ]
另一种观点:原告起诉请求确认股东会或者股东大会、董事会决议不存在、未形成有效决议、决议 无效或者撤销决议,与人民法院根据案件事实依法认定的决议效力情形不一致的,应当告知原告可以变 更诉讼请求。原告不变更的,应当驳回诉讼请求。 [Another opinion: Where the plaintiff files an action for confirming a resolution of the meeting or general meeting of shareholders or the meeting of board of directors fails to exist or form a valid resolution or is invalid or revoked, which is inconsistent with the decision on the effectiveness of the resolution as rendered by the people's court based on the facts of the case and in accordance with the law, the plaintiff shall be notified that the litigious claims may be modified. If the plaintiff fails to make the modification, the action shall be dismissed. ]
COMMENT: One appreciates the two alternatives presented for Article 9 of the Draft Provisions relating to the direct affirmation of the effectiveness of resolutions. The Section believes that that language in the first option is preferable. If the facts of the case do not substantiate the plaintiff’s claim, the plaintiff should not be given an opportunity to amend or re-plead his/her case. The company should not be hampered by the continuation of an action that is not substantiated by the facts. The Court may want to consider substituting the word “contrary to” for “inconsistent with” to give the Court discretion on technical, rather than substantive, inconsistencies. In addition, the Section assumes that this provision does not otherwise modify general rules under Chinese Procedural Law for claim or issue preclusion, which the Section assumes continues to apply. The availability of general issue and claim preclusion rules should be sufficient to protect the rights of plaintiffs, especially where the issue revolves around direct harm as specified in Article 1 of the Draft Provisions and Article 22 ¶ 1 of the Company Law.
第十条 (行为保全) [Article10 (Preservation of acts)]
股东会或者股东大会、董事会决议存在实施后不能恢复原状或者使当事人、利害关系人的合法权益 受到难以弥补的损害等情形的,可以依据原告的申请禁止实施有关决议。 [Where a resolution of the meeting or general meeting of shareholders or the meeting of board of directors involves the circumstances where its implementation will make the restoration of the original condition impossible or cause irremediable harm to the lawful rights and interests of the parties concerned or the interested parties, the implementation of the resolution may be prohibited upon the application by the plaintiff. ]
人民法院采取前款规定的行为保全措施,可以根据公司的申请或者依职权责令原告提供相应担保。 原告提供相应担保的,应当禁止实施有关决议。[Where the people's court adopts the measure of preservation of acts prescribed in the preceding paragraph, it may order the plaintiff to provide appropriate security upon application by the company or ex officio. If the plaintiff provides appropriate security, the implementation of relevant resolution shall be prohibited.
人民法院经审查认为,原告的申请存在恶意干扰或拖延决议实施情形的,应当驳回申请。 [If the people's court, upon examination, finds that the application of the plaintiff involves the circumstance of maliciously disturbing or delaying the implementation of the resolution, it shall dismiss the application. ]
第十一条 (判决的溯及力) [Article11 (Retrospective effect of judgments)]
人民法院判决股东会或者股东大会、董事会决议不存在、未形成有效决议、决议无效或者撤销决议 的,该决议自始没有法律约束力。 [Where the people's court rules that a resolution of the meeting or general meeting of shareholders or the meeting of board of directors fails to exist or form a valid resolution or is invalid or revoked, such resolution shall not be legally binding ab initio.]
-->COMMENT: It is possible to appreciate the need for temporary relief from the actions of the company where such acts may produce substantial harm (application of interim measures). Understood as a provision for establishing standards for granting temporary relief in such circumstances, the Section is concerned about the use of the word “prohibited” (禁止) without modification. The Court may want to consider, in lieu of such word, the phrase “stayed temporarily or until resolution of the action” or the phrase “halted as an interim measure.” One also notes the following:
a. One might be concerned that the phrase “lawful rights and interests of the parties concerned or the interested parties” is too broad. The Section suggests that a materiality provision be included—that would require the court to balance the harm to the company of halting the operation of the resolution against the harm to the plaintiff’s interest if the resolution implementation would go forward. That consideration might be useful as well in considering the amount of security to be posted under Article 10 ¶ 2 of the Draft Provisions. One notes the potential application of Article 101 of the Civil Procedure Law and expects that Article 10(2) will be applied consistently with the general bonding provisions of the Civil Procedure Law and binding Supreme People’s Court precedent.
b. It cane be assumed that the phrase “application by the plaintiff” refers to the action of plaintiffs after suit has been filed in accordance with Article 22 ¶ 1of the Company Law and Article 1 of the Draft Provisions.
c. The section usefully provides that an application should be dismissed upon a showing of malice or delay (Article 10 ¶ 3 of the Draft Provisions). It might improve the section to clarify what is being dismissed, because the reference is either to the action for interim measures covered in Article 10 or the entire action filed or both. In addition, such a dismissal might be used as evidence should the company then seek to file an action against the plaintiff for violation of their obligations under Sections 146-150 of the Company Law.
第十一条 (判决的溯及力) [Article11 (Retrospective effect of judgments)]
人民法院判决股东会或者股东大会、董事会决议不存在、未形成有效决议、决议无效或者撤销决议 的,该决议自始没有法律约束力。 [Where the people's court rules that a resolution of the meeting or general meeting of shareholders or the meeting of board of directors fails to exist or form a valid resolution or is invalid or revoked, such resolution shall not be legally binding ab initio.]
COMMENT: This section might be improved with greater protection for individuals who relied on the resolution in good faith before the commencement of the litigation. The Court might consider whether such individuals should be allowed to sue the company after the resolution is declared invalid and the party suffers loss. That might be implied as part of Article 4 of the Draft Provisions where an individual suffers direct harm for the failure ab inito of a resolution on which he relied thinking that it was in force. That option should be made clear in the Drat Provisions.
第十二条 (参照适用) [Article12 (Application by reference) ]
人民法院审理因一人有限责任公司依据公司法第六十一条作出的决定、国有资产监督管理机构依据 公司法第六十六条行使股东会职权作出的决定效力发生争议的案件,可以参照适用本规定第一条至第十 一条有关规定。 [In the trial of the cases involving the disputes over the effectiveness of the decisions made by one-person limited liability companies in accordance with Article 61 of the Company Law or the decisions made by the State-owned assets supervision and administration departments by exercising rights of shareholders in accordance with Article 66 of the Company Law, the people's courts may apply relevant provisions of Article 1 through Article 11 hereof as reference.]
COMMENT: Article 12 of the Draft Provisions permits courts to apply the first 11 articles of the Draft Provisions to litigation involving one person limited liability companies and state owned enterprises as they might be useful or relevant. Especially in the case of state owned enterprises, that it may be necessary to litigate against parties other than the shareholder. Teh state must be prepared to provide a basis for policing its own cadres in the exercise of their authority in state owned enterprises. This may require not merely reference to the Company Law and these Judicial glosses, but also to the requirements of the Central Commission for Discipline Inspection (中国共产党中央纪律检查委员会) especially with respect to corruption and abuse of power.
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