Viewpoint | Practical analysis of the way shareholders exercise their right to know

Article 33 Shareholders shall have the right to consult and copy the articles of association, the minutes of the shareholders' meeting, the resolutions of the meetings of the board of directors, the resolutions of the meetings of the board of supervisors and the financial and accounting reports.

Shareholders may request access to the accounting books of the company. If a shareholder requests to consult the company's accounting books, he shall submit a written request to the company stating the purpose. If the company has reasonable grounds to believe that the shareholders' access to the accounting books has an improper purpose and may damage the legitimate interests of the company, it may refuse to provide access, and shall reply to the shareholders in writing within 15 days from the date of the written request of the shareholders and explain the reasons. If the company refuses to provide inspection, the shareholder may request the people's court to require the company to provide inspection.

Article 97 Shareholders shall have the right to consult the articles of association, the register of shareholders, the stubs of corporate bonds, the minutes of the general meeting of shareholders, the resolutions of the meetings of the board of directors, the resolutions of the meetings of the board of supervisors and the financial and accounting reports, and to make suggestions or inquiries about the operation of the company.

Article 10 If the people's court hears a case in which a shareholder requests to consult or copy the company's specific documents and materials, and supports the plaintiff's claim, it shall clearly specify in its judgment the time and place of consulting or copying the company's specific documents and materials and the directory of the specific documents and materials.

If a shareholder consults the company's documents and materials in accordance with the effective judgment of the people's court, in the presence of the shareholder, it may be assisted by accountants, lawyers and other intermediary practitioners who have the obligation of confidentiality in accordance with the law or in accordance with the code of practice.

Article 17 The shareholders of a limited liability company may entrust lawyers and certified public accountants to exercise the right of access to the company's accounting books on their behalf.

According to Articles 33 and 97 of the Company Law, there are two main ways to exercise shareholders' right to know, one is "inspection and copy" and the other is "inspection only". The way for the shareholders of a limited liability company to exercise the right to know about the articles of association, the minutes of the shareholders' meeting, the resolutions of the board of directors, the resolutions of the meeting of the board of supervisors, and the financial and accounting reports is "inspection and copying"; the way for the shareholders of a limited liability company to exercise the right to know about the "accounting books of the company" is "inspection only", and they have no right to copy, and should submit a written request to the company, the right to know can be exercised through litigation only when the company refuses to consult or overdue reply; shareholders of a joint stock limited company exercise the right to know about "articles of association, register of shareholders, corporate bond stubs, minutes of shareholders' meeting, resolutions of board of directors, resolutions of board of supervisors, financial and accounting reports" in a way "only for inspection" and have no right to copy.

[Case 1] Li Shujun, Wu Xiang, Sun Jie, Wang Guoxing and Jiangsu Jiade Real Estate Development Co., Ltd. Shareholder's Right to Know Dispute (in Supreme People's Court Bulletin, No. 8, 2011, Case No.:(2009) Suzhong Min Er Zhong Zi No. 319, Trial Court: Suqian Intermediate People's Court, Jiangsu Province)

The court held that the company law gives shareholders the right to be informed of the company's operating conditions and business information, but it also stipulates the scope of the shareholders' right to exercise the right to know. The first paragraph of Article 34 of the Company Law limits the documents that shareholders have the right to copy to the articles of association, the minutes of the shareholders' meeting, the resolutions of the meetings of the board of directors, the resolutions of the meetings of the board of supervisors and the financial and accounting reports. The second paragraph only stipulates that shareholders can request to consult the company's financial and accounting books, but it does not stipulate that they can be copied, and there are no relevant provisions in the articles of association of Jiade. Therefore, the fourth appellant's claim for copying Jiade's accounting books and other company information is neither legally required nor beyond the agreement of the articles of association, so it is not supported.

[Case 2] Dispute over Sichuan Tianjian Optoelectronic Technology Co., Ltd. and He Jin Shareholders' Right to Know (Case No.:(2021) Sichuan 01 Minzong No. 23387, Trial Court: Chengdu Intermediate People's Court of Sichuan Province)

The court held that Article 97 of the the People's Republic of China Company Law clearly stipulates that shareholders of a joint stock limited company only have the right to access relevant information, not the right to copy. Therefore, the court of first instance did not support He Jin's request to 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 accounting report.

In judicial practice, it is generally accepted that shareholders of a limited liability company have no right to copy the company's accounting books, and there are two main different judicial views as to whether the contents of the accounting books can be extracted:

Viewpoint 1: Article 33 of the Company Law only provides for the exercise of the right to information of "inspection" and "copying", and excerpts are more similar to copying and should not support requests for excerpts from shareholders of limited liability companies.

[Case 1] Dispute between Shandong Zhongting Network Technology Co., Ltd. and Liu Chunping over shareholders' right to know (Case No.:(2021) Lu 03 Minzong No. 4328, Trial Court: Zibo Intermediate People's Court of Shandong Province)

The court held that shareholders only have the right to consult the company's accounting books, not the right to copy or extract accounting books, nor the right to consult, copy or extract accounting vouchers. Liu Chunping also did not provide evidence to prove that the company's articles of association or the company's shareholders have other agreements on extracting the company's accounting books and consulting, copying and extracting accounting vouchers. Therefore, Liu Chunping's claims on copying and extracting accounting books and consulting, copying and extracting accounting vouchers, the law is unfounded and will not be supported.

Viewpoint 2: For the "access" to the accounting books expressed in the main text of the civil judgment, the civil enforcement should allow the right holder to implement it to include "viewing and excerpting".The main reasons are as follows:

1. Excerpts are an auxiliary means for shareholders to access accounting books.The company's accounting books generally include a large number of professional data information, in the case of shareholders can not fully understand the professional data information, can not be considered that only shareholders to consult the accounting books to achieve the right to know, excerpts are also to assist shareholders to consult the company's documents and materials, understand the company's information methods.

2. Excerpts are not equivalent to copying.Excerpts and copies have different legal meanings. "Excerpts" can be understood as "selecting a part of the content to be copied", "copy" can be understood as "making the same according to the original", excerpts do not belong to copying in essence.

3. If the shareholders divulge the company's trade secrets in the process of exercising the right to know by extracting the accounting books, resulting in damage to the legitimate interests of the company, they can be remedied in accordance with the law.

[Case 2] Dispute over Shareholders' Right to Know between Beijing Beiaikang Biotechnology Co., Ltd. and Dongfeng Enterprise Co., Ltd. (Case No.:(2020) Supreme Law Enforcement Supervision No. 97, Trial Court: Supreme People's Court)

The court held that the focus of the case was whether the shareholders' access to the company's accounting books contained extracts in the exercise of their right to information.

First, excerpts are an auxiliary means for shareholders to exercise their right to know and access accounting books. The shareholders' right to know is the right of the shareholders of the company to know the information of the company and the affairs of the company, and it is the legal right and inherent right of the shareholders. Access to accounting books is the way to realize the shareholders' right to know. Article 33 of the Company Law stipulates that "shareholders shall have the right to consult and copy the articles of association of the company, the minutes of the shareholders' meeting, the resolutions of the meetings of the board of directors, the resolutions of the meetings of the board of supervisors and the financial and accounting reports. Shareholders may request to consult the accounting books of the company". The company's accounting books generally include a large number of professional data information, in the case of shareholders can not fully understand the professional data information, can not be considered that only shareholders to consult the accounting books on their own to achieve the right to know. In this regard, Article 10 of the (IV) for interpretation of the Company Law stipulates that if a shareholder consults the company's documents and materials in accordance with the effective judgment of the people's court, in the presence of the shareholder, it may be assisted by accountants, lawyers and other intermediary practitioners who have the obligation of confidentiality in accordance with the law or in accordance with the code of practice. The provision makes it clear that the exercise of shareholders' right to information can be assisted by professionally competent personnel, the purpose of which is to help shareholders understand the company's information. Similarly, excerpts are also a way to assist shareholders in accessing company documents and materials and understanding company information. Whether it is to hire professionals, or excerpts, is to assist shareholders to realize their right to know the means.

Second, in general, excerpts are not equivalent to copying. Article 70 of the "the People's Republic of China Civil Procedure Law" stipulates that the original shall be submitted for documentary evidence, and the original shall be submitted for material evidence. If it is really difficult to submit the original or the original, copies, photos, copies, or excerpts may be submitted. Article 44 of the "Several Provisions of the Supreme People's Court on Evidence in Civil Litigation" stipulates that when extracting documents and materials related to the facts of the case produced by the relevant unit, the source shall be indicated and the seal of the production unit or the custody unit shall be affixed. With reference to the spirit of the relevant provisions of the law and judicial interpretation on evidence, excerpts and copies have different legal meanings. From the meaning of the word, "extract" and "extract" have similar meanings, which can be understood as "select a part of the content to transcribe it", and "copy" can be understood as "make the same according to the original". It can be seen that excerpts, excerpts and copies have different meanings and cannot produce the effect of "making the same", and it cannot be considered that excerpts are essentially copies. The shareholders' excerpts from the accounting books do not violate the provisions of the Company Law, and Beiaikang's claim that "excerpts" are essentially "copies" cannot be established.

Third, Article 20 of the Company Law stipulates that the shareholders of a company shall abide by the laws, administrative regulations and the articles of association of the company, exercise the rights of shareholders in accordance with the law, and shall not abuse the rights of shareholders to harm the interests of the company or other shareholders, and if the shareholders of the company abuse the rights of shareholders to cause losses to the company or other shareholders, they shall be liable for compensation in accordance with the law. Article 11 of the (IV) for interpretation of the Company Law stipulates that the disclosure of the company's trade secrets after shareholders exercise their right to know leads to damage to the legitimate interests of the company, and the disclosure of the company's trade secrets by accountants and lawyers who assist shareholders in consulting the company's documents and materials leads to damage to the legitimate interests of the company, and the people's court shall support the company's request for compensation for relevant losses. The above-mentioned laws and judicial interpretations have clearly stipulated that shareholders have the obligation to keep the company's secrets, as well as the remedies when the company's interests are damaged as a result. If Beiaikang Company believes that Dongfeng Company has leaked the company's trade secrets in the process of exercising shareholders' right to know, resulting in damage to the company's legitimate interests, it can provide relief in accordance with the law.

[Case 3] Dispute between Lai Junwei and Lai Wanglong and Foshan Wuyecaoyun Service Co., Ltd. and Lai Xiaobo over Shareholders' Right to Know (Case No.:(2021) No. 28388 of Guangdong 0605 Minchu, Trial Court: Nanhai District People's Court of Foshan City)

The court held that: regarding the way to exercise the shareholders' right to know... the two plaintiffs also claimed to make necessary excerpts and extracts when consulting the accounting books and accounting vouchers, as mentioned above, the accounting books and accounting vouchers should be limited to inspection, excluding copying, but the excerpts here are not equivalent to copying, and the excerpts are the auxiliary means for the shareholders to exercise the right to know and consult the accounting books and accounting vouchers, so the two plaintiffs can make necessary excerpts.

About the exercise time of shareholders' right to know:Based on the consideration of not affecting the operation of the company, in order to avoid endless and unlimited access to the company's documents by shareholders, the general court will respect the autonomy of the parties and make a judgment according to the time when the shareholders and the company agree to exercise the shareholders' right to know. If the shareholders and the company disagree, the court will reasonably determine a fixed time frame, usually between 5 days (or working days) and 30 days (working days), within the company's daily business hours.

About the exercise place of shareholders' right to know:If the shareholders and the company can negotiate to determine the location, the court will generally confirm it in the judgment. If the shareholder and the company are unable to agree on the place of inspection, the court will generally consider the place of storage of the materials to determine the location of the company (e. g. domicile, actual place of business, actual office space, etc.) as the place of exercise of the shareholder's right to know. At the same time, considering the contradiction between shareholders and the company, and the impact of shareholders' exercise of the right to know on the company's daily operation, some judgments determine the place where the shareholders' right to know is exercised in the people's court.

[Case 1] Dispute over Shareholders' Right to Know between Shanghai Fenbo Electronic Commerce Co., Ltd. and Liu Zhenmin (Case No.:(2022) Hu 01 Min Zhong No. 1491, Trial Court: Shanghai No.1 Intermediate People's Court)

The court held that the first paragraph of Article 10 of the (IV) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Company Law stipulates: "The people's court hears a case in which a shareholder requests to consult or copy the company's specific documents and materials, and supports the plaintiff's litigation request Yes, the time, place and specific documents of the company's specific documents and materials shall be clearly consulted or copied in the judgment". In order to protect Liu Zhenmin's right to know shareholders, according to the wishes of both parties, the court has determined the location at Beijing Yingke (Shanghai) Law Firm (XX Road, Jing 'an District, Shanghai).

[Case 2] Li Shujun, Wu Xiang, Sun Jie, Wang Guoxing and Jiangsu Jiade Real Estate Development Co., Ltd. Shareholder's Right to Know Dispute (in Supreme People's Court Bulletin, No. 8, 2011, Case No.:(2009) Suzhong Min Er Zhong Zi No. 319, Trial Court: Suqian Intermediate People's Court, Jiangsu Province)

The court held that: with regard to the time and place of inspection, the purpose and value of the company law to give shareholders the right to know is to ensure the full exercise of shareholders' rights, but the exercise of this right should also be carried out under the mechanism of balance of rights, that is, for the efficiency of operation, business order and other corporate rights and interests have not adversely affected. Therefore, the four appellants should consult materials related to the matters they wish to know, not a comprehensive audit of the company's finances, so the inspection should be within the company's normal business hours and not more than ten working days, and the convenient place for inspection should be in Jiade.

The Supreme People's Court on the application<中华人民共和国公司法>Article 10, paragraph 2, of the (IV) on Certain Issues provides for allowing professional third parties to assist shareholders in exercising their right to information. But need to pay attention to the following matters:

1, should entrust a third party to assist in the exercise of the right to know as a clear claim.Otherwise, even if the court decides that the shareholders have the right to exercise the right to know, but because it is not clear in the effective judgment that "a third party may be entrusted to assist in the exercise of the right to know", the shareholders entrusted to a third party to assist in the exercise of the right to know may still be opposed by the company.

2. Auxiliary personnel shall be practitioners of intermediary institutions who have the obligation of confidentiality in accordance with the law or in accordance with the norms of practice.The Supreme People's Court on the application<中华人民共和国公司法>The second paragraph of Article 10 of the (IV) on certain issues limits auxiliary personnel to "practitioners of intermediary institutions who have the obligation of confidentiality in accordance with the law or in accordance with the norms of practice", while the Audit Law, the Accounting Law and the lawyers Law respectively stipulate the professional ethics, confidentiality obligations and legal responsibilities of auditors, accountants and lawyers. Shareholders entrusting practitioners of these professional institutions to assist in exercising the right to know will be supported by the court. However, if the shareholders entrust the assistance of other professional institutions, they should also prove that these personnel "have the obligation of confidentiality in accordance with the law or in accordance with the code of practice".

The shareholders must be present at the same time.When a shareholder entrusts a practitioner of a professional institution to assist in the exercise of the right to know in accordance with the law, the shareholder himself must be present at the same time, otherwise the company has the right to refuse the auxiliary exercise.

4. Shareholders cannot exercise their right to know by entrusting professional institutions to audit the company's accounts.

[Case 1] Dispute over Zheng Jianhua, Yi Zheng Jianhua and Shareholders' Right to Know of Fuyin Microfinance Co., Ltd., Xiaoting District, Yichang City (Case No.:(2018) E 05 Min Zhong No. 2417, Trial Court: Yichang Intermediate People's Court, Hubei Province)

The court held that whether the plaintiff entrusted the agent has the right to exercise the shareholders' right to know. The Supreme People's Court on the application<中华人民共和国公司法>Article 10, paragraph 2, of the (IV) on Certain Issues stipulates that "if a shareholder consults the company's documents and materials in accordance with the effective judgment of the people's court, in the presence of the shareholder, it may be assisted by accountants, lawyers and other intermediary practitioners who have the obligation of confidentiality in accordance with the law or in accordance with the code of practice." According to the above provisions, the shareholders' right to know is an inherent and statutory basic right granted by the law to the shareholders of the company, which is limited to the exercise of the shareholders themselves and is exclusive, and other personnel can only assist in meeting the conditions prescribed by law. Therefore, the plaintiff may, in his presence, entrust accountants, lawyers and other intermediary practitioners who have the obligation of confidentiality in accordance with the law or in accordance with the norms of practice. In the absence of the plaintiff himself, his agent, whether or not he is an accountant, lawyer or other intermediary practitioner who has the obligation of confidentiality in accordance with the law or in accordance with the code of practice, cannot exercise the shareholders' right to know on behalf of the plaintiff alone.

[Case 2] Dispute between Xu Zhaoning and Yingkou Electric Power Equipment Co., Ltd. Shareholders' Right to Know (Case No.:(2021) Liao Min Shen No. 2294, Trial Court: Liaoning Higher People's Court)

The court held that the focus of the dispute in this case is whether the retrial applicant's claim to audit the respondent's accounts based on Article 165 of the Company Law can be established. The Company Law does not give shareholders of a company the right to exercise their right to know by auditing the company's accounts, so it is not improper for the applicant for a retrial to request the initiation of judicial proceedings to audit the company's accounts to lack a legal basis, and the original 1. court of second instance did not support it.