Viewpoint | An analysis of the exit dilemma of the legal representative of a limited company

Published:

2023-03-29

[Brief]] Although the legal person has an independent subject status, as an abstract organization, the will of the legal person must be expressed externally by a specific natural person. In the design of China's legal person system, the legal representative naturally enjoys the power to carry out civil legal acts in the name of a legal person. Therefore, the "Civil Code", "Company Law", "Regulations on the Registration of Market Entities" and other laws and administrative regulations regulate the legal representative in many aspects. Unfortunately, there are still many difficulties in the withdrawal of the legal representative. Limited company is the most common form of for-profit legal person, this paper takes the legal representative of the limited company as the perspective of the withdrawal of a brief analysis, for the corresponding problem of the practice to provide a little idea. 1. the concept of legal representative The Civil Code stipulates that, in accordance with the law or the articles of association of a legal person, the person in charge of civil activities on behalf of the legal person shall be the legal representative of the legal person. Where a legal representative engages in civil activities in the name of a legal person, the legal consequences thereof shall be borne by the legal person. Legal requirements for the legal representative of a 2. limited company The Civil Code stipulates that if the executive body is the board of directors or the executive director, the chairman, executive director or manager shall serve as the legal representative in accordance with the provisions of the articles of association of the legal person; if there is no board of directors or executive director, the main person in charge as stipulated in the articles of association of the legal person shall be its executive body and legal representative. The Company Law stipulates that the legal representative of the company shall be the chairman, executive director or manager in accordance with the provisions of the articles of association of the company, and shall be registered in accordance with the law. If the legal representative of the company changes, the change registration shall be carried out. From the aforementioned provisions, it is not difficult to see that the legal representative of a limited company belongs to the matters determined by the articles of association and is the registration of the legal person of the company. In terms of scope, the legal representative shall have the position of chairman, executive director or manager. Chairman, Executive Director, Manager and Qualification of 3. Limited Prohibited 1. Chairman, Executive Director The Company Law stipulates that a limited liability company shall have a board of directors with three to 13 members; the board of directors shall have one chairman and may have a vice-chairman. The method for the election of the chairman and vice-chairman shall be stipulated in the articles of association of the company, and the chairman and vice-chairman of a wholly state-owned company shall be designated by the state-owned assets supervision and administration institution from among the members of the board of directors; a limited liability company with a small number of shareholders or a small scale may have an executive director and no board of directors. The statutory powers of the chairman and executive director include presiding over the meeting of the shareholders, convening and presiding over the meeting of the board of directors, etc. 2. Manager The Company Law provides that a limited liability company may have a manager, who shall be appointed or dismissed by the Board of Directors. The executive director may concurrently serve as the manager of the company. Among them, a wholly state-owned company has a manager, who is appointed or dismissed by the board of directors. With the consent of the state-owned assets supervision and administration institution, members of the board of directors may concurrently serve as managers. 3. Qualification prohibition According to the Company Law, senior management refers to the manager, deputy manager, financial officer, secretary of the board of directors of a listed company and other personnel specified in the articles of association of the company. Therefore, the company law fully restricts the qualifications and obligations of directors, supervisors and senior managers of a limited company, that is, the legal representative of a limited company. The company law's prohibition on the qualifications of company directors, supervisors, and senior managers specifically includes: no capacity for civil conduct or limited capacity for civil conduct; for corruption, bribery, embezzlement of property, misappropriation of property, or disruption of the order of the socialist market economy, they are sentenced to criminal punishment, and the execution period is not more than five years, or they are deprived of political rights due to crimes, and the execution period is not more than five years; if a director, factory director or manager of a company or enterprise that has been liquidated in bankruptcy is personally responsible for the bankruptcy of the company or enterprise, and it has not been more than three years since the date of the completion of the bankruptcy liquidation of the company or enterprise; if he is the legal representative of a company or enterprise whose business license has been revoked or ordered to close down due to violation of the law, it has not been more than three years since the date of the revocation of the business license of the company or enterprise; the large amount of debt incurred by the individual has not been paid off when it is due. The effective requirements of the change of the legal representative of the 4.. The legal requirements and qualification prohibitions of the legal representative have been discussed in detail in the previous article. We inevitably have doubts. If the legal representative is prohibited from qualification or loses the status of chairman, executive director or manager during his duties, does the legal representative Of course to withdraw? In order to solve the related problems, we need to clarify the effective elements of the change of legal representative, this view exists in the registration of the effectiveness of the right to say and registration against the effectiveness of two views, limited to space, this article mainly introduces the mainstream point of view. 1. Internal effect of change of legal representative The Supreme People's Court held that the determination of the legal representative of the company is the result of the company's expression of the common will of all shareholders through the articles of association in the case of the dispute over liability for damage to the company's interests [(2021) Supreme Law No. 2]. The Interpretation of the Civil Procedure Law stipulates that the legal representative of a legal person shall be registered in accordance with the law, unless otherwise provided by law, which does not mean that the legal representative of the company is granted by the company registration authority. The registration of the legal representative of the company is only the confirmation of the intention of the legal representative of all shareholders of the company by the administrative organ. The registration of the legal representative of the company in accordance with the law has the effect of publicity, but does not have the effect of determining the true intention of the company on the issue of the legal representative. Similarly, the Supreme People's Court held in Beihai Rongqin Breeding Co., Ltd. and Beihai Ye Kai Breeding Co., Ltd. in the retrial review and trial supervision of enterprise loan disputes [(2021) Supreme Famin Shen No. 1232] that although the change registration of the company's legal representative has the effect of publicity, failure to register is not an effective requirement for the change of the legal representative. Therefore, the change of the company's legal representative is the result of the company expressing the common will of all shareholders through the articles of association, which is applicable to the validity of civil legal acts. 2. The external effect of the change of legal representative. The Civil Code stipulates that if the actual situation of a legal person is inconsistent with the registered matters, it shall not oppose a bona fide counterpart. The Supreme People's Court Bulletin Case Beijing Gongda Real Estate Co., Ltd. and Beijing Xianghe Three Gorges Real Estate Development Company Real Estate Development Company Real Estate Development Contract Dispute Retrial Case [(2009) Minti Zi No. 76] held that the company's legal representative represented the company in civil affairs in accordance with the law. activity. If the legal representative is changed, the change registration shall be made in the administrative department for industry and commerce. The legal representative of the company has been decided by the superior unit to stop his duties when signing the contract, but has not gone through the change registration. If the company claims that the contract is invalid, the people's court will not support it. The Supreme People's Court Bulletin Case China Environmental Protection Technology Group Co., Ltd. and Thumb Environmental Protection Technology Group (Fujian) Co., Ltd. Shareholder Investment Dispute Appeal Case [(2014) Min Si Zhong Zi No. 20] held that the law stipulates that the change of legal representative The significance of registering is to publicize the basic status of the company's will representation to the public. The legal representative of the industrial and commercial registration has the effect of publicity to the outside world. If an external dispute arises from the company's representation by a third party other than the company, the industrial and commercial registration shall prevail. As for the internal disputes between the company and the shareholders arising from the appointment and removal of the legal representative, the effective resolution of the shareholders' meeting on the appointment and removal shall prevail, and the legal effect of the change of the legal representative shall be produced within the company. Therefore, as the sole shareholder of Thumb Company, Environmental Technology Company, its resolution to appoint the legal representative of Thumb Company is binding on Thumb Company. Therefore, the legal representative, as a registered item of a legal person, has the effect of external registration confrontation. During the term of office, the legal representative is prohibited from qualification or loses the position of chairman, executive director or manager, and the legal representative does not withdraw of course. Complete Exit Process and Dilemma of 5. Legal Representative Taking the articles of association as an example, the manager of a limited company shall be the legal representative. The exit process of the change of the legal representative is that the company shall register the change according to law after changing the manager. The change of the company manager is in principle the authority of the company's board of directors, and the company law stipulates that the board of directors exercises the authority to decide on the appointment or dismissal of the company manager and his remuneration matters. From this, we can see that the change of the company manager as the legal representative is an important prerequisite for the legal entity of the company to exercise its powers in accordance with the law. Similarly, taking the articles of association as an example of the chairman and executive director of a limited company, the change of the legal representative in principle also requires the standardized exercise of the legal person organ of the company as a prerequisite, but at this time, it is necessary to take into account many factors such as the division of authority of the shareholders' meeting and the board of directors, as well as whether the proposed chairman has the status of a director. Obviously, the legal representative's exit dilemma mainly comes from the company's legal person organ's irregular exercise of power, such as in the company deadlock, the company is difficult to form an effective organ resolution, the company has neither the will to change, nor the ability to change. 6. Solution Path In order to solve this dilemma, this paper discusses the following aspects. 1. Legal relationship between the legal representative and the company At present, there are no clear legal provisions on the relationship between the legal representative and the company, and there are many different understandings in practice, among which the mainstream view is that the legal representative and the company belong to the principal relationship. The Supreme People's Court Wei Tongbing, Xinjiang Baota Real Estate Development Co., Ltd. and others requested to change the company registration dispute civil retrial case [(2022) Supreme Famin No. 94] held that the legal representative is the person in charge of the company engaged in civil activities on behalf of the company, and the registration of the legal representative has the effect of publicity in accordance with the law. As far as the company is concerned, the legal relationship between the company and the legal representative is entrusted, and the representation of the legal representative is based on the authorization of the company, which is obtained from the time of appointment to the time of removal of the appointment. After the authority of the company removes the legal representative from his post in accordance with the provisions of the articles of association, the representation of the legal representative shall be terminated. Where the shareholders' meeting of a limited liability company dismisses the legal representative of the company in accordance with the provisions of the articles of association, the executive organ of the company shall implement the resolution of the company and handle the industrial and commercial change registration of the legal representative of the company in accordance with the law. 2. Whether the legal representative's arbitrary removal has legal effect According to the theory of entrustment of the legal representative, the legal representative, as a party to the entrustment relationship, has the right to terminate arbitrarily in principle, but limited to the requirement of the company law on the resignation of a director to continue to perform his duties until the successor arrives, the legal representative's right to terminate arbitrarily may be restricted by the commercial organization law. The Supreme People's Court Beijing Zhongzheng Wanrong Pharmaceutical Investment Group Co., Ltd. and Cao Fengjun Company's Resolution Dispute Re-examination Case [(2017) Supreme Law Minzai No. 172] held that the relationship between the company and the directors belongs to the appointment relationship. In the absence of contrary provisions in the law and the articles of association, the resignation of the directors of the company shall generally have legal effect when the resignation of the directors is delivered to the board of the company. Jin Enshu and Cai Mengjie submitted their resignation letters to Century Shengkang Company on October 31 and November 11, 2011 respectively. At that time, Zhao Bingxian was the legal representative of Century Shengkang Company and could represent Century Shengkang Company in accordance with the law. Because he recognized that he had received the two resignations, the resignations of Jin Enshu and Cai Mengjie had taken effect. Beijing Haidian District People's Court Fu Haiyang and Beijing North Aerospace China Times Technology Co., Ltd. requested to change the company registration dispute in the first instance [(2021) Beijing 0108 Minchu No. 58333] held that according to the provisions of the Company Law, if the directors are not re-elected in time at the expiration of their term of office, or if the members of the board of directors fall below the quorum due to their resignation during their term of office, the original directors shall still perform their duties before re-election. Even if Fu Haiyang resigns as a director, he should still perform his duties as a director before he is re-elected, not to mention that the shareholders' meeting has not made a resolution on the appointment of his directors. Regardless of whether Fu Haiyang leaves Tianhua, the dismissal of his manager position must also be decided by the board of directors. Fu Haiyang did not provide evidence to prove that the board of directors had made a decision to dismiss his manager position, so Fu Haiyang remained the manager of Tianhua Company. Fu Haiyang unilaterally requested Tianhua to remove the identity of its directors and managers without the resolution of the shareholders' meeting and the board of directors of Tianhua Company, and to remove the lack of factual and legal basis for the registration of its directors and managers. 3. Obstacles to enforcement after obtaining a successful judgment Even after the successful judgment, the withdrawal of the legal representative still has enforcement obstacles. Huang Qinhu of Renhua County People's Court of Guangdong Province, Jinsheng Industrial Co., Ltd. of Renhua County of Guangdong Province and other disputes related to the company for the first time [(2022) Yue 0224 Zhi No. 387] held that in the process of execution, because both the applicant and the person subject to execution said that they could not elect a new legal representative, the court sent a letter to Renhua County Market Supervision Administration Bureau to ask whether Huang Qinhu could clean up the legal representative of Jinsheng Industrial Co., Ltd. of Guangdong Renhua, renhua County Market Supervision Bureau replied that only in terms of its functions and current relevant laws and regulations, its system does not remove the operating specifications of the legal representative of the limited company. Due to the inability to clear the identity of Huang Qinhu's legal representative in Guangdong Renhua County Jinsheng Industrial Co., Ltd., the execution of this case cannot be carried out. In accordance with the provisions of item 6 of article 264 of the the People's Republic of China civil procedure law, the ruling is as follows: end the execution of case no 387 of Guangdong 0224 (2022). In summary, the withdrawal of the legal representative is a systemic problem, this article hangs a leak, briefly from the above six aspects of the discussion. In practice, we also need to make a specific analysis from at least three angles: the legal representative itself, creditors and minority shareholders. In the part of legal liability, in addition to civil liability, we also need to comprehensively sort out the relevant judicial liability, administrative liability, and even criminal liability, so as to solve the specific problems encountered in the work.

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