Guiding Cases in Perspective TM 指导性案例透视

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1 Guiding Cases in Perspective TM TM 指导性案例透视 LI Jianjun v. Shanghai Jiapower Environment Protection Science and Technology Co., Ltd., A Corporate Resolution Revocation Dispute Guiding Case No. 10 (Discussed and Passed by the Adjudication Committee of the Supreme People s Court Released on September 18, 2012) CHINA GUIDING CASES PROJECT Guiding Case No. 10 April 30, 2016 * * The citation of this piece is: 李建军诉上海佳动力环保科技有限公司公司决议撤销纠纷案 (LI Jianjun v. Shanghai Jiapower Environment Protection Science and Technology Co., Ltd., A Corporate Resolution Revocation Dispute), STANFORD LAW SCHOOL CHINA GUIDING CASES PROJECT, Guiding Cases in Perspective TM, Guiding Case No. 10, Apr. 30, 2016, 10/. The parts highlighted below are essentially the same as the relevant parts in the original second-instance judgment of Guiding Case No. 10. Parts highlighted in yellow and red cover contents included in the Basic Facts of the Case and the Reasons for the Adjudication sections of Guiding Case No. 10, respectively. The English version of this Guiding Case was published by the China Guiding Cases Project on November 9, 2012 and is also available at the abovementioned hyperlink. Guiding Cases in Perspective TM is a unique serial publication of the China Guiding Cases Project that identifies the original judgments selected by the Supreme People s Court, examines their transformation into Guiding Cases, and explores the treatment of the Guiding Cases in subsequent cases.

2 2 Keywords Civil Corporate Resolution Revocation Scope of Judicial Review Main Points of the Adjudication A people s court, when handling a corporate resolution revocation dispute, should review: Whether or not the procedure for convening meetings and the method of voting violate laws, administrative regulations, or the articles of association, as well as whether or not the content of the resolution violates the articles of association. On the premise that the aforementioned provisions have not been violated, whether the facts on which the resolution dismissing the general manager is based are verified and whether the reasons can stand are not within the scope of judicial review. Related Legal Rule(s) Article 22, Paragraph 2 of the Company Law of the People s Republic of China Basic Facts of the Case Plaintiff LI Jianjun ( 李建军 ) claimed: The resolution that defendant Shanghai Jiapower Environment Protection Science and Technology Co., Ltd. ( 上海佳动力环保科技有限公司 ) (hereinafter referred to as Jiapower Company ) used to dismiss LI from his post as general manager was based on facts and reasons that could not stand, and the board of directors procedure for convening, its method of voting, as well as the contents of its resolution all violated the provisions of the Company Law. He requested that the court revoke the board of directors resolution in accordance with law. Defendant Jiapower Company defended its position, claiming: The board of directors procedure for convening, its method of voting, and the contents of its resolution all conform to the provisions of law and the articles of association, and therefore the board of directors resolution was valid. The court heard the case and ascertained: Plaintiff LI Jianjun was a shareholder of defendant Jiapower Company and served as general manager. Jiapower Company s shareholding structure was: 40% of shares held by GE Yongle, 46% by LI Jianjun, and 14% by WANG Taisheng. The three shareholders together constituted the board of directors; GE Yongle served as the chairperson of the board of directors, and the other two were directors. The articles of association stipulated:

3 3 The board of directors exercises authorities including appointment and dismissal of the company s manager, etc.; board meetings shall be valid only when twothirds or more of the directors are in attendance; decisions made at the board meeting on the matters discussed should be valid only when directors who constitute more than two-thirds 1 of all shareholders approve by voting. On July 18, 2009, GE Yongle, Chairperson of the Board of Directors, Jiapower Company, convened and presided over a board meeting, and the three directors were all in attendance. A resolution was made during the meeting, the contents of which stated in part: In view of the fact that General Manager LI Jianjun, without the board of directors consent, privately used company funds for stock speculation in the secondary market, resulting in a heavy loss, [the board] hereby dismisses him from the position of general manager, effective as of today. The resolution was signed by GE Yongle, WANG Taisheng, and the supervisor, while LI Jianjun did not sign. Results of the Adjudication On February 5, 2010, the Huangpu District People s Court of Shanghai Municipality rendered the (2009) Huang Min Er (Shang) Chu Zi No Civil Judgment: Revoke the board of directors resolution made on July 18, 2009 by defendant Jiapower Company. After the judgment was pronounced, Jiapower Company appealed. On June 4, 2010, the No. 2 Intermediate People s Court of Shanghai Municipality rendered the (2010) Hu Er Zhong Min Si (Shang) Zhong Zi No. 436 Civil Judgment: (1) Repeal the (2009) Huang Min Er (Shang) Chu Zi No Civil Judgment of the Huangpu District People s Court of Shanghai Municipality; (2) reject LI Jianjun s litigation claims. 1 Translators note: 三分之二以上 should be literally translated as more than two-thirds. But this term should include two-thirds because (1) of the context (in the Reasons for the Adjudication, it mentions [t]he aforementioned resolution of the board of directors meeting was approved by the votes of two of the three shareholders (and directors); therefore the voting method did not violate the provisions of laws, administrative regulations, or the articles of association. ), and (2) the articles of association at issue likely follows the prevailing practice in China s Company Law. According to Article 155 of the General Principles of the Civil Law of the People s Republic of China (the GPCL ) ( 中华人民共和国民法通则 ), adopted on Apr. 12, 1986 and effective on Jan. 1, 1987, the term 以上 ( more than ) includes 本数 ( the number ). Since company law falls within the scope of civil law, Article 155 of the GPCL also applies to company law. Therefore, companies likely follow this practice when they prepare their articles of association.

4 4 Reasons for the Adjudication In the effective judgment, the court opined: 2 In accordance with Article 22, Paragraph 2 of the Company Law of the People s Republic of China, reasons for which a board of directors resolution can be revoked include: (1) The procedure for convening violates laws, administrative regulations, or the articles of association; (2) the voting method violates laws, administrative regulations, or the articles of association; (3) the content of resolutions violates the articles of association. From the view of the procedure for convening, one could see that the board of directors meeting held by Jiapower Company on July 18, 2009 was convened by Chairperson GE Yongle, and all three directors were in attendance. The procedure of convening that board meeting did not violate the provisions of laws, administrative regulations, or the articles of association. From the view of the voting method, one could see that, according to the provisions of Jiapower Company s articles of association, decisions on the matters discussed should be valid only when directors who constitute more than two-thirds 3 of all shareholders approve by voting. The aforementioned resolution of the board of directors meeting was approved by the votes of two of the three shareholders (and directors); therefore the voting method did not violate the provisions of laws, administrative regulations, or the articles of association. From the view of the contents of the resolution, one could see that Jiapower Company s articles of association provide that the board of directors has the right to dismiss the company s general manager. The contents of the board of directors resolution stating that General Manager LI Jianjun, without the board of directors consent, privately used company funds for stock speculation in the secondary market, resulting in a heavy loss were merely the reason for the board s dismissal of General Manager LI Jianjun, whereas the contents of the resolution themselves that General Manager LI Jianjun be dismissed did not violate the articles of association. Even if the reasons for the dismissal of General Manager LI Jianjun as stated in the board of directors resolution did not exist, this would not result in the revocation of the board of directors resolution. First, the Company Law respects corporate autonomy. Legal relations within companies, in principle, should be adjusted by corporate autonomy mechanisms and judicial organs, in principle, do not intervene in internal corporate affairs. Second, Jiapower Company s articles of association did not restrict the board of directors authority to dismiss the company s manager, and did not provide that the dismissal of the manager by the board must be based on particular reasons. The contents of the articles of association did not violate any compulsory provisions of the Company Law and should be regarded as valid; hence, Jiapower Company s board of directors could exercise the authority conferred by the articles of association to make the decision of dismissing the company s manager. Therefore, the court should respect corporate autonomy, and did not need to review whether or not there were reasons for which Jiapower Company s board of directors dismissed its general manager; this means that 2 Translators note: The Chinese text does not specify which court opined. Given the context, this should be the No. 2 Intermediate People s Court of Shanghai Municipality. 3 See supra note 1.

5 5 there was no need to review whether or not the facts on which the resolution was based were verified, and whether or not the reasons could stand. In summary, plaintiff LI Jianjun s litigation claims requesting revocation of the board of directors resolution could not stand and were rejected in accordance with law.

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