Since the first Companies Law of the People’s Republic of China was promulgated in 1993, which has been refined continuously by legislative and judicial authorities in practice, the disputes related to companies have expanded from a few to the current 26 categories[1]. Among them, the disputes over revocation of a corporate resolution are one of the most common. In this article, I will organize and summarize the issues related to shareholders exercising their right to revoke a corporate resolution in a systematical manner around the cases handled by me and with reference to relevant laws and judicial interpretations, and provide them for reference.

01 Brief Introduction to the Case

Company A is a company limited by shares listed on the National Equities Exchange and Quotations (“NEEQ”); B is a professional investment institution, and becomes a shareholder of Company A by means of capital increase, holding 37.061% of shares in Company A; and individual C is a shareholder and the Chairman of Company A, holding 27.96% of shares in Company A.

During subsequent operation, a conflict arose between B and C. To remove the directors previously nominated by B, C convened a shareholders’ general meeting by taking advantage of its effective control over Company A, at which C did not submit the proposal on nomination of B’s director candidates for deliberation, and maliciously prevented representatives appointed by B from entering the office building where the meeting was held, using epidemic prevention measures as an excuse (a person may enter the location chosen by C for convening the shareholders’ general meeting only after preregistration, and C deliberately refused to preregister for B’s representatives).

Ultimately, after the meeting, I, acting on behalf of B, filed a lawsuit with the people’s court on the ground of the disputes over revocation of a corporate resolution, so as to safeguard B’s legitimate rights and interests.

02 Court Opinion

During the trial, regarding C’s unreasonable refusal to submit the “proposal on nomination of director candidates” furnished by B to the shareholders’ general meeting for deliberation and C’s malicious prevention of the representatives appointed by B from attending the shareholders’ general meeting on the ground of epidemic prevention and controlling, I presented a substantial amount of evidence to the people’s court, and provided a detailed argument for the issue that the resolution involved should be revoked with reference to relevant laws and judicial interpretations.

The people’s court ruled that: C’s failure to include B’s “proposal on nomination of director candidates” in the agenda of the shareholders’ general meeting violated the articles of association of the company; C maliciously prevented the representatives appointed by B from attending the shareholders’ general meeting on the ground of epidemic prevention and controlling, which substantively deprives the shareholder of the right to attend the shareholders’ general meeting, and materially violates the provisions of the law, and the articles of association of the company; the election of directors at the shareholders’ general meeting convened by C did not adopt a centralized voting formula, which violates the articles of association of the company. To sum up, the procedures for convening the shareholders’ general meeting and the voting formulas are against laws, administrative regulations, or the articles of association of the company, and the resolution should therefore be revoked[2].

03 Blossom & Credit’s Viewpoint

Disputes related to companies mainly involve three categories of legal relationships, including the relationship between minority shareholders and controlling shareholders; the relationship between shareholders and officers; and the relationship between creditors and the company. The main reason for the disputes over revocation of a corporate resolution is that disagreements arise between shareholders due to business management, especially when the shareholder who effectively controls the company adopted the resolution of the shareholders’ general meeting disregarding the interests of minority shareholders, in which case, minority shareholders often resort to lawsuits to safeguard their rights and interests. Next, I will systematically sort out the key points related to shareholders exercising their right to revoke a corporate resolution in conjunction with the above case and the ruling, so as to help minority shareholders better protect their rights and interests.

Q1: Who is the eligible plaintiff in a lawsuit for revocation of a corporate resolution?

In my opinion:

In accordance with Article 2 of the Provisions (IV) of the Supreme People’s Court Concerning Several Issues in the Application of the Companies Law of the People’s Republic of China (2020 Revision) (the “Interpretation (IV) of the Companies Law”) [3], the plaintiff who requests the people’s court to revoke a resolution of the shareholders’ meeting, the shareholders’ general meeting or the board of directors should have the status of shareholder when filing the lawsuit.

Therefore, when filing the lawsuit for the revocation of a corporate resolution, the shareholder should submit evidence proving its qualification as a shareholder. In the case of a shareholder of the limited liability company, it usually needs to submit the register of shareholders issued by the company or the shareholder registration documents publicized by the market supervision administration; and in the case of a shareholder of the company limited by shares, it usually needs to submit the register of shareholders issued by the company or the shareholding certificate issued by the securities depository and clearing institution.

In the above case, I, as the plaintiff’s representative, submitted the shareholding certificate issued by the securities depository and clearing institution to the people’s court to prove that the plaintiff has the capacity to file the lawsuit.

Tips to common doubts:

1. The aforementioned capacity to file the lawsuit is not contingent on whether the plaintiff had the status of shareholder at the time the resolution was adopted, not is it subject to the presence of voting rights, attendance at the meeting, voting results, or differences in the number of shares held; provided that the directors, supervisors and officers who do not have the status of shareholder should be excluded.

2. If a shareholder transfers their shares after initiating a lawsuit, it is commonly agreed in the judicial practice that the provisions of Article 249.1 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China (the “Interpretation of the Civil Procedure Law”) shall apply as relevant, namely, the share transfer does not affect the plaintiff’ legal standing and litigation status, and the judgment rendered by the people’s court has binding effect on transferee shareholders.

3. If any other shareholder having the qualification of plaintiff intends to request revoking a corporate resolution, it may apply for joining the lawsuit for revocation of the resolution before the conclusion of the first instance court debate. If the shareholder applying for joining the lawsuit presents claims that align with the plaintiff’s, it should join the lawsuit as a plaintiff; if the shareholder’s claim is contradictory to the plaintiff’s claims, it should join the lawsuit as a third party. 

Q2: Who is the eligible defendant in a lawsuit for revocation of a resolution?

In my opinion:

In accordance with the provisions of Article 3.1 of the Interpretation (IV) of the Companies Law[5], if a shareholder files a lawsuit for revocation of a corporate resolution, the company shall be named as the defendant, and other interested parties involved in the resolution shall be named as a third party. 

In the above case, I named the company as the defendant and filed a lawsuit with the people’s court.

Tips to common doubts:

In practice, when a minority shareholder requests the people’s court to revoke a corporate resolution, it often also intends to claim damages against relevant directors or officers. However, such claim for damages falls under the disputes over impairment of the interests of the company (shareholders), which are different from the disputes over revocation of a corporate resolution in term of eligibility of parties concerned, application conditions, judgment basis and assumption of liability. Accordingly, the court typically will not consolidate cases, but rather inform the plaintiff to file a separate lawsuit.

Q3: What are the grounds for revoking a corporate resolution?

In my opinion,

In accordance with the provisions of Article 22.2 of the Companies Law of the People’s Republic of China (2018 Revision)[6], the statutory grounds for shareholders to request the people’s court to revoke a corporate resolution include:

1. The procedures for convening the meeting at which the corporate resolution is adopted and the voting formulas are against laws, administrative regulations, or the articles of association of the company;

2. The contents of the corporate resolution are against the articles of association of the company.

As discussed earlier, in the above case, the people’s court concluded that: C did not include B’s “proposal on nomination of director candidates” in the agenda of the shareholders’ general meeting, which violates the articles of association of the company; C maliciously prevented the representatives appointed by B from attending the shareholders’ general meeting on the ground of epidemic prevention and controlling, which substantively deprives the shareholder of the right to attend the shareholders’ general meeting, and materially violates the provisions of the law and the articles of association of the company; the election of directors at the shareholders’ general meeting convened by C did not adopt a centralized voting formula, which violates the articles of association of the company. To sum up, the procedures for convening the shareholders’ general meeting and the voting formula are against laws, administrative regulations, or the articles of association of the company, and the resolution should therefore be revoked.

Tips to common doubts:

1. The procedures for convening the meeting or the voting formulas must materially violate laws, administrative regulations, or the articles of association of the company, and must have a material effect on the results of the resolution, otherwise the people’s court will reject the shareholder’s request for revocation of the resolution.

2. The procedures for convening the meeting or the voting formulas materially violate laws, administrative regulations, or the articles of association of the company, but afterwards the company takes proactive measures to eliminate the adverse effect of the serious defects in the aforementioned procedures, in which case, if the shareholder requests revocation of the resolution on the ground of the serious defects in the previous procedures for convening the meeting or the voting formulas, such request will not usually be supported by the people’s court.

3. If the defects in the procedures for convening the meeting or the voting formulas pertain only to a specific shareholder, then other shareholders will not be entitled to file a lawsuit for revocation of the corporate resolution on this ground.

Q4: How many days does the statutory period consist of for shareholders to exercise the right to revoke a corporate resolution?

In my opinion:

In accordance with the provisions of Article 22.2 of the Companies Law, shareholders should, within 60 days from the date the resolution to be revoked is adopted, request the people’s court to revoke it, otherwise the people’s court will not accept it.

In the above case, Company A is a company limited by shares listed on the NEEQ, so the plaintiff can have an easier access to the date the resolution is adopted through the NEEQ, and file the lawsuit promptly.

Tips to common doubts:

In my experience handling cases, many parties involved mistakenly believe that the 60-day period starts from the date the shareholder knows or should know about the resolution. However, their understanding clearly exceeds the extent provided in Article 22.2 of the Companies Law. In practice, the common reason why shareholders are unaware of the relevant resolution is that shareholders are omitted maliciously when the meeting are convened and the notice is given. In such cases, it is considered that a significant procedural defect occurs in the procedures of the corporate resolution, and shareholders are seriously deprived of their substantive rights. Shareholders can protect their rights by filing a lawsuit challenging the validity of the resolution. If the resolution has already been fully implemented, shareholders can seek remedies by filing a lawsuit for impairment of the interests of the company (shareholders).

Q5: What are the legal consequences after a corporate resolution is revoked?

In my opinion:

In accordance with the provisions of Article 22.4 of the Companies Law[7], after a corporate resolution is revoked, the company shall apply with the company registration authority for withdrawing the changes in registration particulars already made with the registration authority pursuant to such resolution.

In the above case, in addition to requesting the people’s court to order the revocation of the resolution in dispute, I also requested the people’s court to order the company to withdraw the changes in registration particulars already made with the registration authority, all of which are ultimately supported by the people’s court.

Tips to common doubts:

If the matters on which the corporate resolution has been adopted are not related to changing the company’s registration particulars, but pertain to the company's routine business affairs involving third parties external to the case, then in this lawsuit, the plaintiff will have no right to request the people’s court to annul or change the civil relationship established by the company with the third party external to the case. If the plaintiff alleged that such action indeed harms its own interests or the interests of the company, it may file a separate lawsuit.

04 Conclusion

The lawsuits for revocation of the corporate resolution are one of the most common corporate disputes and also a common means for minority shareholders to protect their own rights and interests. The Companies Law and its judicial interpretations provide for the relevant matters of such lawsuits in detail, but this article suggests that you should seek the advice of the professional lawyer before filing the lawsuit to avoid being at a disadvantage position because of complexity of corporate structure.

[References to legal provisions]

[1] Notice of the Supreme People’s Court on Printing and Distributing the Provisions on Cause of Action for Civil Cases (2020), which sets out “XXI. Disputes related to companies”.

[2] Civil Judgment (2021) Jing 0105 Min chu No. 49856 of the People’s Court of Chaoyang District, Beijing.

[3] Article 2 of Judicial Interpretation (IV) of the Companies Law, which provides that: “The plaintiff who requests revocation of a resolution of the shareholders’ meeting, the shareholder’s general meeting or the board of directors of a company in accordance with Article 85 of the Civil Code or Article 22.2 of the Companies Law shall have the status of shareholder when filing the lawsuit”.

[4] Article 249.1 of the Interpretation of the Civil Procedure Law, which provides that: “If the civil rights and obligations in dispute are transferred during the litigation, the legal standing and litigation status of the parties involved will not be affected. Any legally effective judgment and ruling rendered by the people’s court shall have binding effect on transferees”.

[5] Article 3.1 of the Interpretation (IV) of the Companies Law, which provides that: “If the plaintiff requests confirmation of a resolution of the shareholders’ meeting, the shareholders’ general meeting or the board of directors of a company to have never been formed or be void or requests revocation of the same, the company shall be named as the defendant. Any other party with a vested interest in the resolution may be named as a third party in accordance with the law”.

[6] Article 22.2 of the Companies Law, which provides that: “If the procedures for convening the shareholders’ meeting, the shareholders’ general meeting or the board of directors, or the voting formulas are against laws, administrative regulations or the articles of association of a company, or the content of the resolution adopted is against the company’s articles of association, the shareholders may, within 60 days from the date the resolution is adopted, request the people’s court to revoke the resolution”.

[7] Article 22.4 of the Companies Law, which provides that: “If a company has changed the registration particulars in accordance with the resolution adopted by the shareholders’ meeting, the shareholder s’ general meeting or the board of directors, then after the people’s court declares the resolution invalid or revokes it, the company shall apply for withdrawal of changes in registration particulars”.