Partnership Guide | Author: Li Li
This is the 916th text of Li Li's blog and partnership guide public account
Court: Allowing shareholders to consult original documents and accounting documents is in line with the mainstream opinion of judicial practice
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Regarding the shareholders' right to know, another case is excerpted today.
This topic, in many notes and articles written before, basically covers the controversial points that may be encountered in this practical issue.
In those notes and texts, I sometimes see comments that point out to me that the judgment of a certain district court does not allow shareholders to consult the original documents and accounting documents, and some fellow lawyers tell me that different court lines in Shanghai may have different understandings. The information provided by these reviews is informative.
However, in fact, my notes and articles are not intended to explore the validity of the different views of the court's practice, or to explore this is not my main purpose.
Uncertainty, the word in the actual use of law, is an iron law, especially in the field of civil and commercial law. A young lawyer, after entering the legal profession, through a lot of practical experience, sooner or later will eventually find that the real legal world and the world of legal books are completely two worlds, even if the two worlds have traffic overlap. Only by accepting and understanding this will we not blindly make any assertions.
It is precisely because of this uncertainty that some people, when dealing with legal practice, adopt a method of discussing the facts and finding specific reference cases for specific cases. I do not agree with this approach, because in my cognition, in the chaotic uncertainty, there are still some deterministic things, including logic, the most basic experience, the necessary framework, the current mainstream, and so on.
Does the shareholder's right to know include allowing shareholders to consult the original documents and accounting documents? This issue of legal practice is an example. From the perspective of uncertainty, the views of courts at all levels in various places are not uniform. However, from the perspective of certainty, at least in the cases decided by the courts in Shanghai, it is clear that the support of shareholders' requests to consult the accounting books include original documents and accounting vouchers, which is clearly the mainstream view.
In the case excerpted today, the parties (the company) even took the cases decided by the Supreme People's Court as a reference when appealing, holding that the shareholders' access to the accounting books should not include accounting vouchers and accounting vouchers, but the Shanghai Second Intermediate People's Court still supported the shareholders' litigation request to consult the accounting books, including accounting vouchers and accounting vouchers, and also admitted in the judgment that there was disagreement in judicial practice.
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Plaintiff A, Company A, was one of the shareholders of Defendant A.
In the first instance of this case, plaintiff A's claims were:
Ordered Defendant A to provide Company A with all board meeting resolutions, financial and accounting reports (including balance sheets, income statements, cash flow statements, statements of changes in financial positions, and profit distribution proposals) for Company A to review and reproduce from 1 January 2015 to the effective date of the judgment;
Ordered Company A to provide Company A with all accounting books and their original documents from 1 January 2015 to the effective date of the Judgment for reference by Company A;
Ordered Company A to cooperate with the accountants engaged by Company A in auditing all financial accounting reports, accounting books and original documents of Company A from 1 January 2015 to the effective date of the judgment.
The first-instance judgment basically supported the claims of the first two items, but did not support the third claim, that is, the claim for audit.
After the first-instance judgment was rendered, both the plaintiff and the defendant were dissatisfied and appealed.
The reason for plaintiff Company A's dissatisfaction was that the first instance did not support its own claim for the audit of the relevant financial accounting reports, accounting books and original documents.
Defendant A was dissatisfied because it held that the shareholder's right to know the company's accounting books did not include access to the original documents.
Here, let's focus on the reasons given by the defendant (Company A) in the first instance on appeal:
Company A's appeal request is to request the revocation of the first-instance judgment, the revision of the judgment in accordance with the law to reject all the litigation claims of the plaintiff in the first instance, or to remand for retrial
The defendant at first instance appealed that:
Regarding the review and reproduction of board resolutions, financial accounting reports, etc. Board resolutions, financial accounting reports, etc. are placed in the company's office space, and the inspection and reproduction advocated by company A should also be carried out in the company's office. However, Company A unreasonably requested Company A to provide relevant documents to Company A in the form of express registered courier and mail. In fact, Company A has never prevented Company A from exercising the right to know of a certain 2 shareholders, and Company A only rejects Company A's unreasonable and unrealistic demands. Company A has never made a request to consult and copy the relevant documents at Company A's premises, and the court of first instance should not support Company A's claim. In addition, the financial accounting report only includes the balance sheet, income statement, cash flow statement and statement of changes in owners' equity. Company A's claim in the claim for a statement of changes in financial conditions and a proposal for profit distribution is not based on law and Company A has no right to view it.
On the issue of access to accounting books. First, according to the facts ascertained by the court of first instance, Company A never asked for access to the accounting books before filing a lawsuit. Article 33 of the Company Law of the People's Republic of China clearly stipulates that shareholders must perform the corresponding preliminary procedures before exercising the right to know a certain accounting book. In the case that the shareholder has not performed the corresponding preliminary procedures, and in the case of not exhausting the company's remedies, the court shall reject his request for access to the accounting books in strict accordance with the provisions of the law. Second, in the case of the Right to Know dispute similar to this case, the Supreme People's Court held that the first paragraph of Article 13 of the Accounting Law of the People's Republic of China stipulates: "Accounting vouchers, accounting books, financial accounting reports and other accounting materials must comply with the provisions of the unified accounting system of the State." The first paragraph of Article 14 stipulates: "Accounting documents include original documents and accounting documents. "In accordance with the aforementioned legal provisions, the accounting books do not include original documents and accounting documents. The protection of the shareholders' right to know and the company's interests needs to be balanced, so it should not be arbitrarily extended beyond the provisions of the law to interpret the scope of the shareholders' right to know. The Company Law of the People's Republic of China only limits the scope of financial and accounting materials that shareholders can access to financial and accounting reports and accounting books, and does not involve original documents. Therefore, even if the court of first instance upheld Company A's claim to have access to the accounting books, Company A would not be entitled to access the original accounting documents.
Among the above-mentioned views of the defendants of the first instance, the contents that I have boldly marked here are, in fact, true and grounded. The definition of "accounting books" in the Accounting Law of the People's Republic of China does not include vouchers, and the provisions of the Company Law of the People's Republic of China on shareholders' right to know only mention "accounting books" and do not mention "accounting vouchers".
With regard to this view of the defendants at first instance, the views of the courts at both levels in the judgment are as follows:
The court of first instance held that:
...... The Company Law and relevant judicial interpretations do not clearly stipulate whether the scope of shareholders' exercise of the right to know extends to accounting documents. According to the Accounting Law, the registration of accounting books must be based on audited accounting vouchers, accounting vouchers include original vouchers and accounting vouchers, and accounting vouchers shall be prepared on the basis of audited original vouchers and relevant materials. It can be seen that the original voucher is the basis for the preparation of the accounting books, and also the basis for verifying the authenticity of the contents of the accounting books, and the reference to the original vouchers helps shareholders to truly and accurately understand the company's operating conditions and financial status. Therefore, Company A's claim to consult the original documents corresponding to the accounting books is not contrary to the law and may be supported by this Court. ......
The Court of Second Instance held that:
……
The Court held that this case is a dispute over the shareholders' right to know and should be handled in accordance with the Company Law of the People's Republic of China and relevant financial laws and regulations. At present, the dispute between the two parties is more than two points. 1. Whether it is possible to consult the original financial documents and accounting vouchers. In this regard, this court held that although there is currently no clear view of whether the original documents and accounting vouchers can be consulted in the section on whether the Company Law and the judicial interpretation can be included in the scope of the exercise of the shareholders' right to know, there are also different views in judicial practice. However, looking at the current situation of corporate governance in China, there are situations in corporate governance practice that are contrary to the principle of good faith, and if all the original documents are not allowed to be consulted, the protection of the shareholders' right to know will be greatly weakened. Therefore, it is appropriate for shareholders to request access to original documents and accounting documents, which is also in line with the mainstream opinion of current judicial practice. ......
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Looking back at the view put forward by the defendant at first instance, that is, strictly based on the definition of "accounting books" in the Accounting Law, then it is true that accounting vouchers are not included, so is it considered that there is no legal basis for the people's court's judgment to support shareholders to consult accounting books and at the same time consult accounting vouchers?
Drilling deeper into this question becomes an academic problem. Let's return for a moment to some superficial logic and experience.
First, in the process of trying a case, the people's court's interpretation of the law is not limited to the interpretation of the law from a legal point of view, but there are a variety of reasonable interpretation methods, plus the Company Law and the Accounting Law are two separate laws, and it is not necessary that the concepts used in one of the laws must be exactly the same as the definitions of the concepts used in the other law, which is also common in legal practice.
Second, only look at the accounting books, do not show the accounting vouchers, this accounting is to see a lonely. This may be the basic business common sense that anyone with experience in company management can understand. What's more, in general, anyone who files a lawsuit against the shareholders' right to know is either already suspicious of the company's operating conditions or has already contradicted the actual controller of the company, and is in a state of having lost basic trust. In this context, allowing shareholders to consult accounting books but not allowing shareholders to consult accounting vouchers to verify the authenticity and accuracy of accounting books is obviously not conducive to the achievement of the goal of "fixing points and stopping disputes" in civil and commercial trials of the people's courts. From this point of view, I personally believe that the Shanghai court's understanding in this regard is more reasonable.
In addition, from practical experience, the actual controller of the company prevents other shareholders from consulting accounting books and accounting vouchers, usually with two considerations: one is worried about the leakage of trade secrets, and the other is worried about violating the law or breaking the law and being found and caught. Judging from the effect of forcing companies to comply with operational compliance, it may be more advantageous to support shareholders in consulting accounting books, including accounting documents.