Highlights of the new corporate law changes
Summary: Important changes in the New Company Law (20 groups) and interpretation
Author: He Shaohua, a partner at Junyue Law Offices
Source: Confucianism Rumo
1. Terminology adjustments
1. In the original Company Law, it was specified that "signature and seal" were required, but in the draft of the Company Law, it was adjusted to "signature or seal".
2. The title of "executive director" has been cancelled in the new company law, as described in Article 10, and the legal representative of the company shall be a director or manager who performs the company's affairs on behalf of the company in accordance with the provisions of the company's articles of association. [Note: Article 13 of the current Company Law, the legal representative of the company shall be the chairman, executive director or manager in accordance with the provisions of the company's articles of association, and shall be registered in accordance with the law]
3. The general meeting of shareholders will be adjusted to "shareholders' meeting", and the general meeting of shareholders will cease to exist.
4. "One-person company" is replaced by "company with only one shareholder" (see Article 23).
Second, the capital contribution system
1. Improve the registered capital subscription system, and clarify that the capital contribution will be paid in full within five years (see Article 47). [Set up a transitional period for companies that have been registered and established before the implementation of the new law and whose capital contribution period exceeds the period specified in this Law, and require them to gradually adjust the capital contribution period to within the time limit specified in this Law, see Article 266]
2. If a company limited by shares is changed from subscription to actual payment (see Article 98), the promoter shall pay the full amount of shares according to the shares subscribed by the company before the establishment of the company. It may also be an arrangement to tie in with the authorized capital regime.
3. The "normalization" system of accelerated maturity of capital contributions (see Article 54). If the company is unable to pay off the debts due, the company or the creditors of the due creditors have the right to require the shareholders who have subscribed for capital contributions but have not yet reached the deadline for capital payment to pay their capital contributions in advance.
4. The capital adequacy responsibility of the promoter (see Article 50).
Article 50 of the company, when a limited liability company is established, the shareholders fail to actually pay the capital contribution in accordance with the provisions of the articles of association, or the actual value of the non-monetary property actually contributed is significantly lower than the subscribed capital contribution.
3. Capital reduction system
1. Targeted (non-year-on-year) capital reductions and exceptions are prohibited (see Article 224).
2. The new simple capital reduction (see Article 225, also known as "formal capital reduction") allows the company to make up for losses by reducing the registered capital in accordance with the regulations, but shall not distribute it to shareholders, nor shall it exempt shareholders from the obligation to pay capital contributions or shares. In the simplified capital reduction procedure, the announcement of the company's capital reduction can be publicized on the national enterprise credit information publicity system without notifying creditors.
Fourth, improve the equity transfer system
1. The transfer of equity of a limited company does not need to seek the consent of other shareholders (see Article 84). The current Company Law deletes the phrase "shall be subject to the consent of more than half of the other shareholders", and stipulates that "if a shareholder transfers equity to a person other than a shareholder, it shall notify the other shareholders in writing of the quantity, price, payment method and duration of the equity transfer, and the other shareholders shall have the right of first refusal under the same conditions." ”
2. When transferring equity, shareholders have added the obligation of "notifying the company in writing and requesting a change in the register of shareholders" (see Article 86).
3. The company shall publicize the change information such as equity transfer (see Article 40).
4. Distinguish between different responsibilities of "whether the term of capital contribution has expired" in equity transfer (see Article 88).
5. A joint-stock company may set up a transfer of restricted shares (see Article 157), and the shares held by shareholders of a company limited by shares may be transferred to other shareholders or to persons other than shareholders;
6. Delete the relevant provisions on the one-year lock-up period for the promoters of a joint-stock company, and make it clear that "if the shares are pledged within the restricted transfer period stipulated by laws and administrative regulations, the pledgee shall not exercise the pledge within the restricted transfer period." (See Article 160). Note: Article 141 of the current Company Law stipulates that "the shares of the company held by the promoter shall not be transferred within one year from the date of establishment of the company".
5. Corporate Governance
1. It is clarified that the resolution of the shareholders' meeting (on general matters) shall be passed by the shareholders representing more than half of the voting rights (see Article 66).
2. The company shall not increase the shareholding ratio of the shareholder who puts forward the temporary proposal (see Article 115).
3. A special provision is added that no resolution of the shareholders' meeting is required (see Article 219).
4. If the company is allowed to have only a board of directors and no board of supervisors, and the company only has a board of directors, an audit committee shall be set up in the board of directors to exercise the functions and powers of the board of supervisors.
Articles 68 and 120 of the New Company Law unify the number of directors to "more than three people" (applicable to limited liability companies and companies limited by shares) (Note: Article 44 of the current Company Law stipulates that a limited liability company shall have a board of directors with three to thirteen members). Article 108 stipulates that a company limited by shares shall have a board of directors consisting of five to nineteen members.
5. The principle of majority of the board of directors (Articles 73 and 124): The meeting of the board of directors shall be held only when more than half of the directors are present. The resolution of the board of directors shall be passed by a majority of all directors (Article 48 of the current Company Law only stipulates that the board of directors shall be subject to a "head vote" for the board of directors of a limited liability company, and the rest shall be "stipulated by the articles of association", and Article 124 of the New Company Law and Article 111 of the current Company Law both adopt the "majority principle" for the board of directors of a company limited by shares, and Article 73 of the New Company Law also clarifies this principle).
6. A company with more than 300 employees shall have provisions on employee representatives of the board of directors. It is further clarified that employee representatives may be included on the board of directors of other companies (see article 68).
7. The New Company Law does not set up a board of supervisors. There are three situations in which there are supervisors: (1) an audit committee is set up to replace the functions and powers of the board of supervisors (Article 69);(2) a limited company with a small scale or a small number of shareholders may not have a board of supervisors and a supervisor (Article 83) ;(3) a small limited company with a small number of shareholders may not have a supervisor with the unanimous consent of all shareholders (Article 83) (Note: In the second draft, a smaller company may not have a board of supervisors and have one or two supervisors, which has been adjusted to one supervisor in the third draft, and has been added to the object). "or a smaller number of shareholders").
8. Strengthen the responsibilities of controlling shareholders, actual controllers, directors, supervisors and senior managers.
| 180 articles | Improve the specific content of the duty of loyalty and diligence, and clarify the connotation of the duty of loyalty and duty of diligence for the first time |
| 182 articles 185 articles | Strengthen the regulation of related party transactions between directors, supervisors, and senior management personnel and the company, and increase the reporting obligations and rules for recusal from voting on related party transactions |
| 51 articles 53 articles | Strengthen the responsibility of directors, supervisors and senior management to maintain the company's capital adequacy. - Articles 51 (Demand - Compensation), 53 (Evasion - Joint and Several Compensation), etc |
| Article 191 | It is clarified that directors and senior managers shall be liable for compensation if they intentionally or grossly negligently perform their duties and cause harm to others. [Judicial Interpretation of the General Principles of Contract Codification - Combination of Duty Agency, and Article 188 of the Company Law on the Company's Liability for Compensation; the current Company Law only stipulates (Article 190 of the directors' liability to the company and the liability to the shareholders), but does not stipulate the directors' liability to third parties, and Article 191 of the New Company Law adds this rule] |
| 180 articles | It is clarified that if the controlling shareholder or actual controller of the company does not serve as a director of the company but actually performs the company's affairs, he has a duty of loyalty and diligence to the company |
| Article 192 | If the controlling shareholder or actual controller of the company instructs the directors or senior management personnel to engage in acts that harm the interests of the company or shareholders, the directors or senior management personnel shall be jointly and severally liable |
9. Refine the circumstances under which you are not allowed to serve as a director, supervisor or senior manager of the company
Compared with Article 146 of the current Company Law, which prohibits a person from serving as a director, supervisor or senior manager of a company, the application scenarios of the new Company Law (see Article 178) have been added to the refinement, for example, if a suspended sentence is announced, no more than two years have elapsed since the expiration of the probationary period of probation; Three years have not elapsed since the date of the closure order, and the individual is listed as a judgment defaulter by the people's court because the debt he bears is relatively large and has not been paid off when it is due. If the election or appointment of directors or supervisors or the appointment of senior management personnel is violated in violation of regulations, it is invalid.
10. The person in charge shall be held accountable, and if the company is registered by falsely reporting the registered capital, submitting false materials or using other fraudulent means to conceal important facts, the person in charge who is directly responsible and other persons directly responsible shall be fined not less than 10,000 yuan but not more than 50,000 yuan (see Article 250).
6. Strengthen the protection of the rights of shareholders, especially small and medium-sized shareholders
1. (New) If the controlling shareholder of the company abuses the rights of shareholders and seriously damages the interests of the company or other shareholders, the other shareholders have the right to request the company to acquire its equity at a reasonable price (see Article 89).
2. The right of shareholders of a company limited by shares to request for objection to repurchase is added (see Article 161), noting that the current Company Law only stipulates that shareholders of a limited liability company may request the company to repurchase shares if certain conditions are met (Article 74), but does not give shareholders of a company limited by shares the right to object to repurchase.
3. Dual shareholder representative action (see Article 189).
4. Improve the system of the right to know. In the scope of the right to know exercised by shareholders of a limited liability company, "shareholder register" and "accounting vouchers" have been added (see Article 57). In addition, the "wholly-owned subsidiary" is included in the object of the exercise of the right to know. and expressly grants shareholders of a company limited by shares the right to know (Article 110).
7. A company with only one shareholder
"One-person company" is replaced by "company with only one shareholder" (see article 23); Extend the application of the denial of corporate personality to all forms of single-shareholder companies, including joint-stock companies with only one shareholder. A company with only one shareholder does not have a shareholders' meeting (see section 60).
8. Company limited by shares
1. It is expressly prohibited to illegally hold shares of listed companies on behalf of others (see Article 140) (Note: However, the validity of the agreement on behalf of the shares of listed companies is not directly clarified, and we also note that there are relevant adjudication rules in Article 17 of the Judicial Interpretation of the Contract Section).
2. New class shares system (see Articles 144-146) (a company limited by shares may issue preferred shares, inferior shares, special voting shares, transfer restricted shares and other class shares).
3. The new board of directors has the right to issue new shares (see Article 152), allowing the articles of association or the shareholders' meeting to authorize the board of directors to issue shares, and at the same time requiring the promoters to pay the shares in full (Article 98).
4. For the first time, "non-par shares" (see Articles 142, 151 and 213) were introduced, allowing the company to freely choose to use par shares or non-par shares. Previously, a company limited by shares could only issue par shares. The bearer shares of a company limited by shares are abolished (the actual situation of bearer shares basically does not exist in mainland commercial practice), and a company limited by shares is allowed to issue shares without par value.
9. Organizational structure of state-funded companies
A special chapter has been added
A special chapter on "Special Provisions on the Organization of State-Funded Companies" was added (see Sections 168-177)
The scope of application is expanded from a wholly state-owned limited liability company to a limited liability company and a company limited by shares controlled by state-owned capital (see Article 168).
Requiring a majority of outside directors on the board of directors of a wholly state-owned company (see Article 173, Note: Further response to some problems in the supervision of state-owned assets in recent years); if a wholly state-owned company appoints an audit committee composed of directors to exercise the functions and powers of the board of supervisors, it shall not have a board of supervisors or supervisors (see Article 176); and adds a provision that a state-funded company shall establish and improve its internal supervision and management and risk control system in accordance with the law (see Article 177, see also the Law on State-owned Assets of Enterprises) Article 17).
10. The company's capital and financial system
1. The capital reserve may conditionally make up for losses (see Article 214, Paragraph 2), and compared with Article 168 of the current Company Law, the new Company Law deletes the previous restriction that "the capital reserve shall not be used to make up for the company's losses".
2. Prohibition of financial assistance system and exceptions (see Article 163), and in case of violation of such provisions, directors, supervisors and senior executives shall be liable for compensation.
11. Improve the company's liquidation system
1. It is clarified that the liquidation obligor is the director, and the liquidation group is composed of directors (see Article 232).
2. Simplified cancellation (see Article 240) and compulsory cancellation (see Article 241) are added.
If a company is revoked of its business license, ordered to close down or revoked, and fails to apply to the company registration authority for cancellation of the company registration for three years, the company registration authority may make an announcement through the national enterprise credit information publicity system, and the announcement period shall not be less than 60 days. After the expiration of the announcement period, if there is no objection, the company registration authority may cancel the company registration. If the company registration is cancelled in accordance with the provisions of the preceding paragraph, the liability of the shareholders and liquidation obligors of the original company shall not be affected.
3. In the case of voluntary dissolution of "the expiration of the business period specified in the articles of association of the company or the occurrence of other reasons for dissolution specified in the articles of association, as well as the resolution of the shareholders' meeting to dissolve", in the case of "and the property has not been distributed to the shareholders", it can survive by amending the articles of association or by resolution of the shareholders' meeting (see Article 230).
See below for a detailed breakdown of some of the above changes
12. Term of capital contribution and accelerated expiration
(1) Capital contribution
Legal Terms:
Article 47 The registered capital of a limited liability company shall be the amount of capital contribution subscribed by all shareholders registered with the company registration authority. The amount of capital contribution subscribed by all shareholders shall be paid in full by the shareholders within five years from the date of establishment of the company in accordance with the provisions of the articles of association.
Article 98 The promoter shall be in the company. The capital contribution of the promoter shall be governed by the provisions of Article 48 and the second paragraph of Article 49 of this Law on the capital contribution of shareholders of a limited liability company.
Legal Terms:
Article 266:This Law takes effect on July 1, 2024.
If a company registered and established before the implementation of this Law has exceeded the time limit specified in this Law, it shall be gradually adjusted to within the time limit specified in this Law, unless otherwise provided by laws, administrative regulations or the State Council; The specific implementation measures are to be formulated by the State Council.
In the public information issued by the State Administration for Market Regulation on December 30, 2023, regarding the application of the five-year subscription period stipulated in the Company Law, it believes that in order to avoid inconsistencies in the application of the legal system of registered capital between newly established companies and existing companies, strengthen the uniformity of the application of the law, and reduce the impact on the vast majority of existing companies in normal operation, fully consider complex situations such as the type of business entity and industry field, and study the setting of a relatively sufficient transition period for existing companies for a certain number of years, in accordance with the new Company Law It is required to adjust the capital contribution period of the stock company in a step-by-step, prudent and orderly manner to within the time limit stipulated in the new Company Law. If the company has special circumstances otherwise provided for by laws, administrative regulations or decisions of the State Council, the five-year subscription period may not be applied.
For companies whose capital contribution period and amount are obviously abnormal, the company registration authority may require them to adjust them in a timely manner in accordance with the law. For the definition of "obvious abnormality", scientific provisions will be made based on the objective analysis of the company's registration data and the actual work situation, and the affected will be a very small number of companies that obviously violate the principle of authenticity and contradict objective common sense... In particular, when judging that the term and amount of capital contribution to the registered capital of the stock company are obviously abnormal, the company registration authority should fully listen to the explanation of the parties, make comprehensive research and judgment, avoid one-size-fits-all, and guide the company to perform its capital contribution obligations in good faith in a scientific and orderly manner.
(2) Accelerated expiration
The issue of accelerated maturity of capital contributions is a difficult point in judicial practice and has been a controversy for a long time.
| New Corporate Law | Minutes of the Nine Peoples |
| Article 54 If the company is unable to pay off the debts due, the company or the creditors of the due creditors have the right to require the shareholders who have subscribed for the capital contribution but have not yet completed the capital contribution period to pay the capital contribution in advance. | 6. [Whether the maturity of shareholders' capital contributions should be accelerated] Under the registered capital subscription system, shareholders enjoy term benefits in accordance with the law. Where a creditor requests a shareholder who has not yet completed the capital contribution period to bear supplementary liability for the company's unpaid debts within the scope of the unpaid capital contribution on the grounds that the company is unable to pay off its debts due to the company's inability to pay off its debts, the people's court will not support it. However, the following circumstances are excepted: (1) in the case where the company is the person subject to enforcement, the people's court has exhausted the enforcement measures and has no property to enforce, and has the cause of bankruptcy, but does not apply for bankruptcy; |
Compared with the minutes of the Ninth People's Congress, the Company Law stipulates that the subject of the exercise of rights is "the company or the creditor of the due creditor's rights". If the company exercises its rights as the main body, can it be "equity representative lawsuit" when the company neglects to exercise its rights? and whether the defective shareholders who have not paid themselves are subject to the restrictions of the "clean hands principle"?
At the same time, the condition for accelerated maturity is that "the company is unable to pay off the debts due", which is a normal provision. The restriction on "bankruptcy proceedings", which is looser than the minutes of the Ninth People's Congress, also breaks through the previously prevailing principle of protecting the interests of the period to a certain extent. However, it remains to be seen how the "company is unable to pay off its due debts" in judicial practice.
13. The call obligation of the board of directors and the system of loss of equity rights
Directors' Reminders
Article 51 After the establishment of a limited liability company, the board of directors shall verify the capital contribution of the shareholder, and if it is found that the shareholder has failed to pay the capital contribution stipulated in the articles of association on time and in full, the company shall issue a written reminder to the shareholder to demand the capital contribution.
If the company fails to perform the obligations specified in the preceding paragraph in a timely manner and causes losses to the company, the responsible director shall be liable for compensation.
This clause implements the right and obligation of the board of directors to verify the capital contribution and call for payment. However, the current legal provisions do not explicitly confer on the board of directors the right to inspect the accounting books (although the shareholders' right to know is extended).
Question: Is it necessary to specify in the articles of association the directors' access to relevant accounting information? In particular, if the directors appointed by minority shareholders do not specify their verification rights in the transaction documents and other major materials, if they cannot effectively exercise the obligations under this clause, is it easy to constitute "liability"?
It is recommended to pay attention to the judicial interpretation of the general rules of contracts, and the compensation liability of duty agents. At the same time, consideration may be given to purchasing appropriate liability insurance for directors. Combined with Article 193 of the New Company Law, a company may take out liability insurance for the liability of directors for the performance of their duties as a company during their tenure of office.
Loss of rights system
Article 52 Where a shareholder fails to pay the capital contribution on the date of capital contribution stipulated in the articles of association, and the company issues a written reminder to call for the capital contribution in accordance with the provisions of the first paragraph of the preceding article, the grace period for the payment of capital contribution may be specified, and the grace period shall not be less than 60 days from the date on which the company issues the reminder. If the grace period expires and the shareholder still fails to fulfill the obligation to make capital contributions, the company may, by resolution of the board of directors, issue a notice of loss of rights to the shareholder, and the notice shall be issued in writing. From the date of issuance of the notice, the shareholder loses his equity in the unpaid capital contribution.
If the equity is not transferred or cancelled within six months, the other shareholders of the company shall pay the corresponding capital contribution in full according to the proportion of their capital contributions.
If a shareholder has any objection to the loss of rights, he or she shall file a lawsuit with the people's court within 30 days from the date of receipt of the notice of loss of rights.
The shareholder loss system strengthens the statutory responsibilities of the board of directors.
Article 17 of the current Interpretation (III) of the Company Law provides that a limited liability company shall, by resolution of the shareholders' meeting, disqualify as a shareholder of "a shareholder who has not fulfilled its capital contribution obligation or withdrawn all its capital contribution" under the prescribed conditions.
The new Company Law adds a new system for shareholders to lose their rights, which does not require a resolution of the shareholders' meeting, and has a wide scope of application and is easy to implement, and at the same time, it provides a relief period of 30 days for shareholders who have lost their rights.
Considering the limited period of cancellation or transfer after the loss of rights (6 months), it is recommended to stipulate the cooperation obligations of the shareholders who have lost their rights in the articles of association and other relevant documents, and to consider the preparation of capital reduction or the search for a transferee when issuing a notice of loss of rights.
14. De facto directors and shadow directors
Article 180:Directors, supervisors, and senior managers have a duty of loyalty to the company, and shall take measures to avoid conflicts between their own interests and the interests of the company, and must not abuse their authority to seek improper benefits.
Directors, supervisors and senior management have a duty of diligence to the company, and shall exercise reasonable care in the best interests of the company in the performance of their duties.
Where the controlling shareholder or actual controller of a company does not serve as a director of the company but actually performs the company's affairs, the provisions of the preceding two paragraphs apply.
It has been suggested that the inclusion of the "deemed director" (or "de facto director") system in the new Company Law is conducive to strengthening the responsibilities of controlling shareholders, actual controllers, directors, supervisors and senior management.
Question: Article 67 gives the board of directors statutory functions and powers to "(6) formulate a plan for the merger, division, dissolution or change of the form of the company"; but if the controlling shareholder exercises the functions and powers of the shareholders' meeting in accordance with Article 59 of "(7) making a resolution on the merger, division, dissolution, liquidation or change of the form of the company", will it be regarded as actually carrying out the company's practice and assuming the responsibility of the deemed directors?
We also note that in Article 192, the controlling shareholder, actual controller, director or senior management of the company engages in acts that harm the interests of the company or its shareholders
It has also been suggested that Article 192 is jointly and severally liable under the "shadow director" regime. What needs to be considered is how the exercise of shareholder representative actions will be properly handled in such circumstances.
15. Functions and powers of the legal representative and resignation
(1) The authority and responsibilities of the legal representative
Article 11 The legal consequences of civil activities engaged in by the legal representative in the name of the company shall be borne by the company.
The company's articles of association or the shareholders' council's restrictions on the authority of the legal representative shall not be used against the bona fide counterpart.
If the legal representative causes damage to others due to the performance of his duties, the company shall bear civil liability. After the company bears civil liability, it may recover compensation from the legal representative at fault in accordance with the provisions of the law or the articles of association.
We also note that in Article 7 of the Interpretation of the Guarantee System of the Civil Code, if the legal representative exceeds his authority to provide security and causes losses to the company, and the company requests the legal representative to bear the liability for compensation, the people's court shall support it.
When applying Article 11 of the Company Law, it should be noted that Article 20 of the Judicial Interpretation of the General Principles of Contract Codification shall be noted.
Article 20 of the Judicial Interpretation of the General Principles of Contract Codification provides that where a legal person or unincorporated organization recovers losses caused by the ultra vires representative or responsible person from the legal representative or responsible person at fault after assuming civil liability, the people's court shall support it in accordance with law. Where laws and judicial interpretations have other provisions on the civil liability of legal representatives or responsible persons, follow those provisions.
However, it should be reminded that, in conjunction with paragraph 2 of Article 62 of the Civil Code, if a legal person refuses to file a lawsuit, other shareholders may file a lawsuit in accordance with the provisions of the Company Law on shareholder representative litigation. However, although there is a dispute over whether a creditor can file a subrogation lawsuit, the Supreme Court, in its interpretation and application of the relevant interpretation, held that the company's claim against the legal representative had not actually occurred when the counterparty claimed compensation from the company, so there was no question of subrogation.
Similarly, in Article 21 of the Judicial Interpretation of the General Principles of Contract, the company has the right to recover from the agent who is intentional or grossly negligent, but the creditor does not have the right of subrogation.
However, it should be noted that, in Article 191 of the Company Law, if a director or senior manager causes damage to others in the performance of his or her duties, the company shall also be liable for compensation if he or she is intentional or grossly negligent.
(2) Procedures for the resignation of legal representatives and directors
With regard to the resignation procedure, the new Company Law now clarifies the relevant issues at the legal level, and settles disputes on common disputes in practice. For details, please refer to Articles 10 and 70, and Article 71 clarifies the rights and responsibilities of "dismissal of directors without justifiable cause".
Article 10 The legal representative of the company shall, in accordance with the provisions of the articles of association, be a director or manager who performs the company's affairs on behalf of the company.
Where a director or manager serving as the legal representative resigns, it is deemed to have resigned as the legal representative at the same time.
If the legal representative resigns, the company shall determine a new legal representative within 30 days from the date of resignation of the legal representative.
Article 70 The term of office of directors shall be stipulated in the articles of association of the company, but each term of office shall not exceed three years. Upon expiration of the term of office, directors may be re-elected.
If a director is not re-elected in a timely manner upon the expiration of his or her term of office, or if a director resigns during his term of office, resulting in a lower than the quorum of the board of directors, the original director shall still perform his or her duties as a director in accordance with the provisions of laws, administrative regulations and the articles of association before the re-elected director takes office.
If a director resigns, the company shall be notified in writing, and the resignation shall take effect on the date the company receives the notice, but if there are any circumstances provided for in the preceding paragraph, the director shall continue to perform his duties.
Article 71 The shareholders' meeting may resolve to dismiss the directors, and the dismissal shall take effect on the date of the resolution.
If a director is dismissed before the expiration of his term of office without justifiable reasons, the director may request compensation from the company.
16. Whether the term of capital contribution has expired for equity transfer
Article 88
If a shareholder transfers the equity of the capital contribution that has been subscribed but has not yet expired, the transferee shall bear the obligation to pay the capital contribution, and if the transferee fails to pay the capital contribution in full on time, the transferor shall bear supplementary liability for the capital contribution that the transferee fails to pay on time.
If a shareholder who fails to pay the capital contribution on the date of capital contribution stipulated in the articles of association of the company or whose actual value as a non-monetary property is significantly lower than the amount of the subscribed capital contribution transfers equity, the transferor and the transferee shall be jointly and severally liable to the extent of the insufficient capital contribution;
There has always been a controversy over whether the capital contribution obligation of the original shareholder should be changed to be borne by the transferee with the occurrence of equity transfer.
For the transfer of equity before the expiration of the capital contribution period, the new company law now clarifies that in principle, the transferee shall bear the obligation to pay the capital contribution, but the transferor shall bear supplementary liabilities (if the equity is transferred without paying the capital contribution on the date specified in the articles of association, the transferor shall be jointly and severally liable, and if the transferee is not aware, the transferor shall be liable).
In practice, the equity transferor may pay more attention to the review of the transferee's solvency, asset creditworthiness and other risks, and may adjust the composition and payment terms of the design equity transfer consideration (e.g., increase the transfer price, etc.), and pay attention to the recovery of supplementary liabilities.
17. Year-on-year capital reduction and targeted capital reduction
Article 224... If a company reduces its registered capital, it shall reduce the amount of capital contribution or shares according to the proportion of capital contribution or shares held by shareholders.
According to the outflow of the company's net assets, the capital reduction is divided into substantive capital reduction and formal capital reduction, each of which is reasonable. There are also payment and non-payment capital reductions.
From another perspective, the company's capital reduction is divided into proportional capital reduction and targeted capital reduction. Some courts have held that, based on the principle of equal shares and equal rights, each shareholder has equal opportunities to reduce capital, and the capital reduction in different ratios should be unanimously approved by all shareholders. That is, only more than 2/3 of the voting rights approve the resolution of the different ratio of capital reduction is not valid or invalid.
Article 224 of the third draft of the Company Law prohibits targeted (non-year-on-year) capital reductions. The official draft stipulates that, in principle, the year-on-year capital reduction may be non-year-on-year under special agreement. That is, the withdrawal of capital or the adjustment of the shareholding structure by the major shareholder may still be through the way of "otherwise stipulated and agreed".
It may be subject to the issuance of supporting guidelines or review standards by the Market Regulation Bureau and/or the judicial authorities for targeted capital reduction.
18. Dual Shareholder Representative Actions
Compared with the Judicial Interpretation (IV) of the Company Law to the official draft, the Supreme Court deleted the "dual shareholder representative litigation" clause embodied in Article 35, Paragraph 2 of the Consultation Draft. Article 189 of the New Company Law adds a new system, that is, shareholders of the parent company may sue the directors, supervisors and senior executives of the wholly-owned subsidiary on behalf of the wholly-owned subsidiary.
Article 189:.....Where the directors, supervisors, or senior managers of a wholly-owned subsidiary of a company have any of the circumstances provided for in the preceding paragraph, or where others infringe upon the lawful rights and interests of the wholly-owned subsidiary of the company and cause losses, the shareholders of a limited liability company or a shareholder of a company limited by shares, individually or in aggregate, holding more than 1 percent of the company's shares for more than 180 consecutive days may, in accordance with the provisions of the preceding three paragraphs, request in writing that the board of supervisors or the board of directors of the wholly-owned subsidiary file a lawsuit in the people's court or directly file a lawsuit in their own name.
In practice, it cannot be ruled out that there may be acts such as the transfer of excellent assets or core business by the controlling shareholder or actual controller to its related parties, thereby harming the interests of the wholly-owned subsidiary. In such a case, if the shareholders of the parent company have the right to file a shareholder representative lawsuit against a related party on behalf of the wholly-owned subsidiary, it may have the effect of checks and balances with the controlling shareholder and actual controller. In judicial practice, there have been relevant judicial cases before.
19. Increase in the scope of the right to information
Article 57 of the New Company Law adds "register of shareholders" and "accounting vouchers" to the scope of the exercise of the right to know by shareholders of a limited liability company. In addition, the "wholly-owned subsidiary" is included in the object of the exercise of the right to know.
It should also be noted that Article 56 provides that a shareholder recorded in the register of shareholders may claim to exercise shareholder rights in accordance with the register of shareholders. In addition, Article 189 provides that a shareholder representative action may be brought on behalf of a wholly-owned subsidiary. The addition of the scope of the right to know also provides a legal channel for data collection for the exercise of the right to the relevant provisions.
It should be noted that the right of shareholders of a company limited by shares to inspect the "accounting books" and "accounting vouchers" of the company and its wholly-owned subsidiaries under Paragraphs 2 and 3 of Article 110 of the New Company Law is consistent with the rules of Article 57 of a limited liability company. However, at the same time, the main qualification conditions are also set, and shareholders need to meet the requirements of holding more than 3% of the company's shares individually or collectively for more than 180 consecutive days before they have the right to submit a request to inspect the accounting books and accounting vouchers of the company and its subsidiaries.
Shareholders have the right to inspect and copy the articles of association, the register of shareholders, the minutes of the shareholders' meeting, the resolutions of the board of directors, the resolutions of the board of supervisors, and the financial and accounting reports.
Shareholders may request to inspect the company's accounting books and accounting vouchers. If a shareholder requests to inspect the company's accounting books and accounting vouchers, he or she shall submit a written request to the company stating the purpose. If the company has a reasonable basis to believe that the shareholder's inspection of accounting books and accounting vouchers has an improper purpose and may harm the legitimate interests of the company, it may refuse to provide the inspection, and shall reply to the shareholder in writing and explain the reasons within 15 days from the date of the shareholder's written request. If the company refuses to provide inspection, the shareholder may file a lawsuit with the people's court.
Shareholders may entrust an accounting firm, law firm, or other intermediary institution to inspect the materials provided for in the preceding paragraph.
Shareholders and their entrusted accounting firms, law firms and other intermediaries shall comply with the provisions of laws and administrative regulations on the protection of state secrets, commercial secrets, personal privacy, personal information, and other relevant materials when accessing and reproducing relevant materials.
Where shareholders request to inspect or copy the company's relevant materials, the provisions of the preceding four paragraphs shall apply.
20. Optimize the supervisor system - audit committee
Article 69 A limited liability company may be set up in the board of directors in accordance with the provisions of the articles of association
According to Article 69, if the audit committee is composed of directors, if there is no board of supervisors or supervisors in combination with the shareholder representative litigation system, and if a lawsuit is filed against the directors, is it no longer necessary to perform the pre-procedure?
Referring to the Gazette of the Supreme Court: Exceptions to the Pre-Procedure for Shareholder Representative Actions, it is not appropriate to dismiss the lawsuit on the grounds that the shareholder has not fulfilled the pre-procedure provided for in Article 151 of the Company Law (see Article 189) if it can be proved that there is basically no possibility of the company organ having the right to file a lawsuit on behalf of the company in accordance with the law, and that it is meaningless for the plaintiff to perform the pre-procedure.