Translator：Wang Qiyu

On May 9, 2019, to assist corporate legal professionals and practitioners in keeping abreast of the latest amendments to the Company Law, ensuring standardized corporate operations, and protecting the rights of minority shareholders, Shanghai Landing Law Offices hosted a seminar on the Judicial Interpretation (V) of Company Law. Three senior partners from Shanghai Landing Law Offices delivered keynote speeches based on their years of practical experience. The seminar was presided over by Lawyer Gao Qing, a senior partner at Shanghai Landing Law Offices, and attended by numerous corporate legal professionals and lawyers.

Theme Sharing

Theme 1: Judicial Practice and Theoretical Exploration of Shareholder Representative Lawsuits

1. Overview of New Laws

Starting with Article 1 and Article 2 of the Supreme People's Court's provisions on the application of the Company Law of the People's Republic of China (V), Lawyer Zhang provided an overview of the relevant laws on shareholder representative lawsuits. He explained in detail the concept of shareholder representative lawsuits, the qualification of shareholders to initiate lawsuits, and the fulfillment of pre-litigation procedures. Subsequently, he raised the following questions for consideration: (1) When both directors and supervisors of a company harm the company's interests, is it necessary to fulfill pre-litigation procedures? (2) If directors and supervisors respond to shareholders' intention to file a lawsuit, does the shareholder have the right to file a lawsuit in urgent situations? (3) If directors or supervisors initiate a lawsuit against the company, does the legal representative have the right to withdraw the lawsuit?

2. Legal Interpretation through Case Analysis

By analyzing the basic facts of ongoing cases, Lawyer Zhang introduced two solutions for safeguarding the interests of the company and individual shareholders in such cases. The twists and turns in the case demonstrate the unresolved issues in the current legislation, such as "what constitutes an emergency situation" and "whether pre-litigation procedures must be carried out," which are of great significance for corporate risk control and protection of shareholder interests.

3. Practical Discussion

Lastly, Lawyer Zhang explained in detail the qualification for shareholder litigation, the fulfillment of pre-litigation procedures, the scope of application of shareholder representative lawsuits, the causes of action for shareholder representative lawsuits, the status of parties, the statute of limitations, jurisdiction, and the judgment results in litigation practice.

Theme 2: Unjustified Termination of Directorship and Resignation Compensation

Regarding the removal of directorship and resignation compensation, Lawyer Tian Jie delved into the fundamental theories of the Company Law, starting from the basic theory of the Company Law, the path from partnership enterprises to corporate development, the concept of corporate legal persons, the rights and actions of corporations, and limited liability. He emphasized that the relationship between shareholders and the company is a special agency legal relationship (a legal relationship subject to the constraints of fiduciary duty and diligence obligation).

Based on this legal relationship, the relationship between shareholders and directors is a trust relationship based on trust. According to the general principles of agency contracts, a company can terminate the directorship at any time without giving reasons. However, from the perspective of directors, as the trustee being removed without cause, the trustor should compensate the trustee to comply with Article 410 of the Contract Law. As for the relationship between directors and the company, Lawyer Tian believed that it falls more into the scope of civil law, mainly governed by contract law, and there is no employment legal relationship between the parties.

Finally, Lawyer Tian shared a practical case on whether a shareholder who appoints a director needs to assume joint liability if the director infringes on the company's rights. The content shared by Lawyer Tian proposed new perspectives on analyzing corporate legal issues, though it deviates from mainstream viewpoints, it provides fresh insights and offers new approaches to analyzing company law problems.

Theme 3: Handling Principles for Shareholder Disputes and Related-Party Transactions in Practice

1. Overview of the Company Law

Lawyer Zhan summarized the features of the Company Law and its provisions, emphasizing that the company's articles of association serve as the foundation of corporate governance and the main basis for resolving corporate disputes. He listed 25 types of litigation related to the Company Law and classified them into four categories. He pointed out that the system of protecting the interests of minority shareholders in judicial interpretations has mostly been established from the perspective of safeguarding the interests of minority shareholders.

2. Detailed Explanation of Some Core Issues

Judicial Interpretation (V) mainly addresses the following issues: 1. Performance of legal procedures does not exempt liability for related-party transactions; 2. Invalidity and revocation of related-party transaction contracts; 3. Unjustified termination of directorship and resignation compensation; 4. Time limit for profit distribution in companies; 5. Dispute resolution mechanism for significant disagreements among shareholders of limited liability companies, etc. Regarding the effectiveness of company resolutions and the types of litigation caused by resolutions, the right to be informed of shareholders, the right to request profit distribution, and related-party transactions, Lawyer Zhan raised numerous questions and provided answers based on practical experience.

3. Litigation Trends

Regarding Article 5 of Judicial Interpretation (V), Lawyer Zhan reminded us to pay attention to expressions such as "significant disagreement," "mediation," and "not violating laws and regulations," and believed that this interpretation did not address the most significant and contentious issue of shareholder disputes, which is the pricing of equity. Although his opinions are unconventional and may differ from mainstream views, they offer new insights for analyzing corporate legal problems.

Finally, Lawyer Zhan summarized the requirements that judicial practice poses on lawyers, especially the essential requirements for commercial lawyers' qualifications.