News

Recently, Zong Fuli of Wahaha announced her resignation from the positions of Vice Chairman and General Manager due to shareholder doubts, but later decided to resume her management duties. This series of events highlights important issues in corporate succession.

Based on limited public information and legal expertise, here are two key analyses:

Part 1: Legal Inheritance of Company Shares

Shares Can Be Legally Inherited

· According to the Civil Code, company shares are considered inheritable assets.

· Article 90 of the Company Law stipulates that upon a natural shareholder’s death, their legal heirs can inherit the shares unless the company's articles of association specify otherwise.

· If there are no special provisions in Wahaha Group's articles, Zong Qinghou’s shares can be inherited by his heirs, such as Zong Fuli, provided proper legal procedures are followed.

Executive Positions Cannot Be Inherited

· Executive roles like directors or general managers are specific identities and not property rights, hence they are not inheritable.

· These roles must be filled through the company's prescribed processes, typically requiring appointments by shareholders or board elections.

· Since most company articles do not allow inheritance of executive positions, Zong Fuli’s ability to resume her duties remains uncertain.

Part 2: Effective Succession Planning

Pre-emptive Arrangements

· Effective succession requires pre-emptive measures while the original owner is alive to ensure the process aligns with their intentions.

· Legal and management transitions need the support of other shareholders and company departments, which is easier to secure during the owner’s lifetime.

Scientific and Rational Planning

· Succession planning should balance interests and minimize resistance. The right tools and a reliable team are essential.

· For instance, transferring shares to heirs during the owner’s lifetime can avoid disputes, but it may also risk losing control if the heir is unsuitable.

Choosing Reliable Executors

· Executors should ideally be neutral parties with no conflicts of interest. For instance, a major shareholder should not choose a minor shareholder or current managers as executors due to potential conflicts.

· Forming a separate execution team outside the existing system may be ideal, ensuring minimal entanglement and clear post-transition roles.

Conclusion

Corporate succession has become a critical issue after over forty years of economic reform. Effective succession ensures both the company’s health and the family's interests. The insights provided aim to offer practical guidance for navigating these complex processes.