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Corporate resolutions mainly include resolutions of shareholders' meetings, resolutions of shareholders' general meetings, and resolutions of the board of directors. Their establishment must meet the procedural requirements, otherwise there may be hidden dangers of legal disputes. Synthesizing relevant cases, the author attempts to analyze the common situations in which corporate resolutions are not established in judicial practice.

Legal Terms

Article 5 of the "Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Company Law of the People's Republic of China (4)" stipulates: "If any of the following circumstances exists in the resolution of the shareholders' meeting or the shareholders' meeting or the board of directors, and the parties claim that the resolution is invalid, the people's court will support: (1) If the company has not held a meeting, but in accordance with paragraph 2 of Article 37 of the Company Law or the company's articles of association, it may directly make a decision without holding a shareholders' meeting or a shareholders' general meeting, and all shareholders will sign the decision document , except those with seals; (2) The meeting did not vote on the resolutions; (3) The number of people present at the meeting or the voting rights held by shareholders did not comply with the provisions of the Company Law or the articles of association of the company; (4) The voting results of the meeting did not meet the requirements of the Company Law or the proportion of approvals stipulated in the company’s articles of association; (5) other circumstances that lead to the failure of the resolution.”

A company did not actually hold a meeting

Name of the case: Zhang Yong and Jiangsu Haitian Microelectronics Co., Ltd. Resolutions Confirming the Validity of the Dispute Court of Trial: People's Court of Yangzhong City, Jiangsu Province Case number: (2020) Su 1182 Minchu No. 1876 Judgment gist: Although the defendant Jiangsu Haitian Microelectronics Co., Ltd. disclosed the notice of convening the general meeting of shareholders involved in the case on the information disclosure platform designated by the National Share Transfer System, but according to Li Lin's statement and the recording of the call between Li Lin and the defendant's board secretary Zhang Jie, it can be proved that the general meeting of shareholders involved in the case did not actually hold the meeting. , only to be signed by all shareholders on the minutes of the general meeting of shareholders and the signature page of the meeting resolutions. According to the provisions of the articles of association of the defendant company, if a shareholder needs to entrust another person to attend and vote on his behalf at the general meeting of shareholders, in addition to specifying the name of the proxy on the power of attorney, it should also specify whether he/she has the right to vote on each proposal and the voting instructions for each proposal, etc. However, the power of attorney from the plaintiff Zhang Yong to Li Lin provided by the defendant did not comply with the above-mentioned provisions of the company's articles of association, and the defendant did not provide other evidence during the trial to prove the specific voting opinion issued by the plaintiff on the relevant resolutions of the shareholders' meeting involved in the case. According to the power of attorney involved in the case, the defendant notified Li Lin to sign the minutes of the shareholders' general meeting and the signature page of the meeting resolutions on behalf of the plaintiff, and recorded the plaintiff's voting opinions according to the defendant's own intention, which violated the plaintiff's right to exercise the voting rights of shareholders. Therefore, the plaintiff's request to confirm that the resolution of the general meeting of shareholders involved in the case is not established is supported by this court in accordance with the law.

The second procedure is flawed

Name of the case: Yang Ping, Yang Zhe and Beijing Huoyanyan Real Estate Consulting Co., Ltd. Company Resolution Confirmation Dispute Trial Court: Chaoyang District People's Court, Beijing Case No.: (2016) Jing 0105 Min Chu No. 39864 Judgment gist: According to the facts confirmed in court , Yang Zhe and Yang Ping did not hold the second shareholders’ meeting of the third session of Huoyanyan Company, nor did Huoyanyan Company provide evidence to prove that the second shareholders’ meeting of the third session was held, and Yang Zhe and Yang Ping also have never expressed their intentions related to the resolution of the second shareholders' meeting of the third session of Huoyanyan Company. The factual requirements for convening the meeting, the procedural requirements for convening the meeting and the procedural requirements for the resolution are not available, so the resolution of the company involved is not established. Yang Zhe and Yang Ping's request to confirm that the resolution of the second shareholders' meeting of the third session was invalid, had factual and legal basis, and was supported by this court.

Three signatures,  false seal

Case name: Du Lisha and Han Xiao Company's decision to confirm the validity of the dispute Trial court: Beijing Second Intermediate People's Court Case number: (2020) Jing 02 Min Zhong No. 6043 Judgment gist: In this case, Han Xiao denied that on April 10, 2008 The resolution of the shareholders' meeting in Japan and the resolution of the shareholders' meeting on March 11, 2015, the signature of "Han Xiao" is his true intention, and the resolution of the shareholders' meeting on April 10, 2008 has come into effect. The judgment document confirms that "Han Xiao" is on the resolution of the shareholders' meeting, the signature was not signed by him. Both Santa Maria Company and Tu Lisa recognized in the first instance trial that the resolution of the shareholders meeting on March 11, 2015 was the change registration of the intermediary agency. The existing evidence cannot prove that Han Xiao agrees with the above two resolutions of the content of the shareholders’ meeting, and cannot prove that Santa Maria has ever held the above-mentioned shareholders' meeting, the court of first instance found that the establishment of the above-mentioned two shareholders' meeting resolutions lacked the factual and procedural requirements for convening the meeting. The two resolutions of the shareholders' meeting involved in the case were invalid and were handled correctly.

Case name: Shandong Shengxin Bonding and Cementitious Materials Co., Ltd. and Beijing Oriental Zhongqing Investment Development Co., Ltd. Company Resolution Dispute Trial Court: Beijing Higher People's Court Case No.: (2019) Jingminshen No. 2181 Judgment gist: Udongrui Company and Shengxin Company submitted the resolution of the "Shareholders' Meeting of Beijing Udongrui Jingha Investment Management Co., Ltd.", claiming that the "Shareholders' Meeting Resolution" in the dispute was the true expression of the parties, and the "Shareholders' Meeting Resolution" affixed to the dispute was affixed. Under the circumstance that the official seal of “Beijing Oriental Zhongqing Investment Development Co., Ltd.” is not the official seal of Oriental Zhongqing Company, Oriental Zhongqing Company has clearly stated that it has not participated in the shareholders’ meeting, and the above-mentioned evidence submitted by Udongrui Company and Shengxin Company is insufficient. In order to prove that Oriental Zhongqing Company expressed its true intention to sign the "Resolution of the Shareholders' Meeting" in the dispute. The Court of First Instance found that the Resolution of the Shareholders' Meeting in the dispute was not established, which is based on the law.

The number of attendance or the number of votes does not meet the requirements of the company law or the company's articles of association

Case name: Nan'an Electric Power Engineering Co., Ltd. and Nan'an Chenggong Water Conservancy and Electric Power Engineering Survey and Design Co., Ltd. Company Resolution Confirmation Dispute Trial Court: Fuzhou Intermediate People's Court, Fujian Province Case No.: (2018) Min 01 Min Zhong No. 1320 Judgment Gist : This case should be the basis for judging whether the resolution is established or not according to the specific provisions of the Jiezhukou Company's Articles of Association on the way of proceedings and voting procedures of the board of directors. "There is a dispute between the parties on the voting ratio of the resolutions of the board of directors, that is, the Article 29 of the company's articles of association that "the board of directors of the company implements collective decision-making, and the voting follows the principle of one person, one vote and majority approval.The resolutions of the board of directors must be approved by all directors, and the minutes of the meeting should be formed, and the directors attending the meeting should sign the minutes." The first sentence of the clause stipulates that the board of directors adopts the principle of collective decision-making and the voting method of one person, one vote. The approval by the directors does not violate the legal provisions. Compared with the approval by the majority, the requirements are more stringent in terms of the specific approval ratio, and it also conforms to the principles of collective decision-making and approval by the board of directors. Since the articles of association of the company were jointly formulated by the shareholders of the company, the above clauses cannot lead to the conclusion that "passed by all directors" claimed by Jiezhukou Company is actually a clerical error that "the resolutions of the board of directors should be notified to all directors to participate", so the defense lacks basis, and this court does not accept it. It is true that such provisions in the Jiezhukou Company's Articles of Association may lead to a deadlock in the company's decision-making mechanism as long as there are directors who disagree with the company's business decision-making. Governing the principle of autonomy of will, the court has no right to intervene. The court of first instance rejected the provisions of the Articles of Association on the grounds that commercial activities focus on efficiency, which has no basis in law and should be corrected.

Then, in the process of corporate governance, how to improve the system design to avoid the situation that the company's resolution is not established? Based on past practical experience, the author puts forward the following suggestions:

01 Improve the convening procedure of the meeting

Whether it is a shareholders meeting or a board of directors, its convening procedures must be legal and justified. If there are flaws in the convening procedure, the corresponding company resolution cannot reflect the true expression of intention, and there is a legal risk of not being established. Therefore, in the actual corporate governance process, the qualifications of the convener of the meeting and the legitimacy of the convening procedure should be guaranteed. For example, if a limited liability company wants to convene a shareholders' meeting, according to the relevant provisions of the "Company Law of the People's Republic of China", it should be convened by the board of directors or executive directors. Or the supervisors of a company without a board of supervisors shall convene and preside over the meeting. If the board of supervisors or the supervisors do not convene and preside over the meeting, shareholders representing more than one-tenth of the voting rights may convene and preside over the meeting on their own. At the same time, when holding a shareholders' meeting, unless otherwise stipulated in the company's articles of association or otherwise agreed by all shareholders, all shareholders shall be notified 15 days before the meeting. Special attention must be paid to the effective delivery of the meeting notice.

02 Clarify the time, place and topic of the meeting

When the convener calls a meeting, the time, place and topics of the meeting will be stated in the notification document. In doing so, one is to ensure the efficiency of the meeting, and the other is to prevent some shareholders or directors from deliberately not attending the meeting or holding another meeting in violation of the convening notice.

03 Set up pre-qualification procedures

The qualification examination procedure is mainly to ensure the qualifications of shareholders, directors and relevant trustees. In practice, many cases where the company's resolution is not established are caused by "false entrustment", so during the review process, special attention should be paid to the authenticity and legitimacy of the authorization and entrustment procedures, and it is best to confirm with the client. Once it is found that the trustee has no power of proxy and exceeds the power of proxy, the attendance and voting of the trustee will not be regarded as valid attendance and voting.

04 Make complete meeting minutes

The shareholders' meeting or the board of directors will make detailed meeting minutes for the decisions on the matters discussed, and all persons present at the meeting shall sign the minutes.

05 Strictly abide by the voting rules of the meeting

Our country's company law stipulates that the method of discussion and voting procedures can be stipulated by the company's articles of association. If the articles of association of the company make special provisions for the method of discussion and voting procedures, but the actual voting is not carried out in accordance with the requirements of the special regulations, unless all eligible voters unanimously vote to agree, otherwise the corresponding resolution will not stand.

Statement:

This article was originally created by lawyers of JAVY Law Firm, and only represents the author's own views, and should not be regarded as a formal legal opinion or suggestion issued by JAVY Law Firm or her lawyers. If you need to reprint or quote any content of this article, please indicate the source.