Viewpoint... The legal analysis of the partnership's de-listing and withdrawal system.

Published:

2022-09-19

According to the the People's Republic of China Partnership Law (hereinafter referred to as the "Partnership Law"), the main ways for partnership partners to withdraw from the partnership are: withdrawal with an agreed partnership period, withdrawal without an agreed partnership period, withdrawal of course, withdrawal from the partnership, and withdrawal from the partnership. This paper attempts to combine the legal provisions, case analysis, from a practical point of view of the partnership de-listing withdrawal system. 1. concepts and legal provisions Withdrawal is a legal fact or legal act in which a partner withdraws from the partnership and loses his or her partnership during the life of the partnership. According to the Partnership Law, at present, the main ways for partners to withdraw from the partnership are the withdrawal of the agreed partnership period, the withdrawal of the partnership without the agreed partnership period, the withdrawal of course, the withdrawal of the partnership. Expulsion means that during the life of the partnership, when a partner has a legal cause or a cause agreed upon in the partnership agreement, the other partners unanimously agree to expel the partner from the partnership and disqualify him from the partnership. Under the statutory circumstances of delisting and withdrawing from partnership as stipulated in Article 49 of the Partnership Law, if a partner has one of the following circumstances, he may be removed by resolution with the unanimous consent of the other partners: The (I) fails to fulfill its capital contribution obligations; (II) losses to the partnership are caused intentionally or by gross negligence; The (III) has acted improperly in the execution of the partnership affairs; (IV) the cause agreed upon in the partnership agreement occurs. The resolution to remove the partner shall be notified in writing to the removed person. The date on which the removed celebrity receives the notice of removal, the removal takes effect and the removed celebrity withdraws from the partnership. If the removed celebrity disagrees with the resolution of delisting, he may, within 30 days from the date of receiving the notice of delisting, bring a suit in a people's court. Circumstances of 2. delisting and withdrawing from partnership 1. Failure of partners to meet their capital contribution obligations A partnership is jointly funded by all partners, and if one partner fails to meet his or her capital contribution obligations, the other partners agree to expel the partner from the partnership, which is permitted by law. However, in judicial practice, failure to fully fulfill the obligation of capital contribution is not a delisting matter. Case 1. (2019) No. 14, Min Zhong, Shan 10 The Court is of the view that the Resolution of the Partners of the Shiquan Gold Selection Factory in Zhen'an County is based on the provisions of Article 49, paragraph 1, paragraph 1, of the the People's Republic of China Partnership Law, "failure to fulfill the obligation of capital contribution" and Article 16 of the Partnership Agreement of the Shiquan Gold Selection Factory in Zhen'an County. The so-called "failure to fulfill the capital contribution obligation" of the partner refers to the situation in which the partner refuses or fails to fulfill the capital contribution obligation, and if the partner fulfills part of the capital contribution obligation, it does not belong to the situation of failure to fulfill the capital contribution obligation. In this case, the appellee Wang Ming'an has fulfilled part of the capital contribution obligation in accordance with the partnership agreement, so it does not meet the circumstances of removal due to non-capital contribution. Article 16 of the Partnership Agreement of Shiquan Gold Selection Factory in Zhen'an County stipulates the liability for breach of contract and is not the basis for delisting. Therefore, the decision made by the appellants Liu Baomin and Liu Yuying to remove Wang Mingan from the list does not conform to the law. Therefore, Liu Baomin and Liu Yuying's request to confirm the valid appeal request of "Resolution of Partners of Shiquan Gold Selection Factory in Zhen'an County" and "Notice of Removal of Partners of Shiquan Gold Selection Factory in Zhen'an County" was not supported by this court. Case 2. (2018) Beijing 0105 Minchu No. 61438 In this case, first of all, although LeEco has not fulfilled its capital contribution obligations as of April 24, 2018, but at this time it is still 8 years from the date of its capital contribution, Tao Yun Company claims that LeEco has not fulfilled its capital contribution obligations without factual basis, and this court will not accept it. Similar cases in which support for failure to fully fulfill the obligation of capital contribution are not a delisting matter include (2016) Jin 0116 Min Chu 44 and (2014) Bin Min Chu Zi No. 1030. In addition, the reasons for delisting stipulated in Article 49 of the Partnership Law also include "the occurrence of the reasons agreed upon in the partnership agreement". If the partnership agreement stipulates that the situation of "failure to fully fulfill the capital contribution obligation" is the reason for delisting the partner, the provisions may be applied to delisting the partner who has not fully fulfilled the capital contribution obligation. 2. The partner caused damage to the partnership by intentional or gross negligence. The reason for this delisting contains two elements: first, the subjective element, I .e. the partner's intentional or gross negligence, and the objective element, I .e. the loss of the partnership due to the partner's intentional or gross negligence. The Partnership Act does not clearly define the criteria for determining intentional or gross negligence and the criteria for determining loss. It is proposed to analyze the criteria for the identification of judicial practice through the following cases. Case 1. (2017) Joan 96 Min Zhong No. 340 The Court believes that the key to the legality and validity of the resolution of the Lingshui Zhongtong Shareholders' Meeting made by Pang Jianping and Huang Xiaojie lies in whether the resolution meets the substantive and procedural requirements. According to the relevant provisions of my country's Partnership Law, if a partner causes losses to the partnership due to intentional or gross negligence, he can be removed by resolution with the unanimous consent of the other partners; the removed celebrity will take effect from the date when the removed celebrity receives the notice of removal. The removed celebrity withdraws from the partnership; if the removed celebrity has objections to the removal resolution, he may file a lawsuit in the people's court within 30 days from the date of receiving the removal notice. As far as the substantive elements of the resolution are concerned, as mentioned above, Pang Haichuan's self-replacement of Zhang Sheng-xian and arrangement of Zhang Daping to take over the Yingzhou site are the fundamental reasons why Zongtong Lingshui Branch was fined. Pang Haichuan should bear the main responsibility for this. Therefore, it can be determined that Pang Haichuan's gross negligence has caused losses to the partnership and Pang Haichuan meets the conditions for being removed. As far as procedural elements are concerned, the partnership is a three-person partnership, with Pang Jianping and Huang Xiaojie accounting for a 54.55 per cent majority share, and the resolution was made with the unanimous consent of Pang Jianping and Huang Xiaojie, so it also meets the procedural requirements. To sum up, it can be confirmed that the resolution is legal and effective, and the delisting will take effect from the date when Pang Haichuan receives the notice. Case 2. (2020) Xiang 01 Min Zhong No. 9348 The Court believes that the focus of the dispute in this case is the legality and validity of the Partner Resolution. Article 49 of the the People's Republic of China Partnership Law stipulates: "If a partner has one of the following circumstances, he may be removed by resolution with the unanimous consent of the other partners: The (I) fails to fulfill its capital contribution obligations; (II) losses to the partnership are caused intentionally or by gross negligence; The (III) has acted improperly in the execution of the affairs of the partnership; (IV) the cause agreed upon in the partnership agreement occurs. In this case, the agreement on the removal of the partner in the partnership agreement is consistent with the above provisions. During the duration of the partnership, Zhong Zhiguo personally collected 3293100 yuan from the quarry. Although it did not exceed the scope of the priority borrowing right stipulated in the Resolution of the First Shareholders' Meeting of Kiln Quarry, Zhong Zhiguo did not return the relevant funds within the agreed time limit after the priority borrowing was used, affecting the normal production and operation of the quarry. The quarry was forced to stop work around the Spring Festival in 2016 due to arrears with migrant workers' wages. Zhong Zhiguo did not come out coordination during this period, there is a major fault in this. In addition, Zhong Zhiguo borrowed money or guaranteed personal debts in the name of the quarry, but did not actively deal with them after Ren Ping and Ouyang Xi joined the quarry. As a result, creditors Tang Jianhui and Zhu Zhuqing sued the quarry respectively. During this period, the quarry paid Tang Jianhui all the case money 4 million yuan, which caused difficulties to the operation and management of the quarry. Zhong Zhiguo's behavior should also be regarded as gross negligence. On September 18, 2016, Zhong Zhiguo drove the vehicle to the quarry feed port for a few days, on the grounds that the financial statements were rejected, and his behavior was also improper in the execution of the partnership. Therefore, Ren Ping, Ouyang Xi and Dong Zhengwu formed the "Partner Resolution" on September 19, 2016, taking Zhu Tingting and Zhong Zhiguo's illegal acts such as embezzlement, embezzlement of quarry production funds and payment for goods, which have caused significant impact and serious losses to the partnership enterprise, and removed Zhu Tingting and Zhong Zhiguo, which has legal reasons and conforms to the agreement of the partnership agreement. The "Partner Resolution" has been unanimously agreed by the other partners, and has been sent to Zhu Tingting and Zhong Zhiguo by legal and reasonable means, and the form and procedure are legal and effective. Zhu Tingting and Zhong Zhiguo appealed that the resolution was invalid, and that the first-instance judgment was beyond the scope of the trial and had no factual and legal basis, and the court did not support it. Case 3. Shanghai No.1 Intermediate People's Court (2018) Shanghai 01 Min Zhong No. 6077 The delisting resolution in this case is based on the provisions of Article 27 of the Limited Partnership Agreement and the provisions of Article 49, paragraph 1, items 2 and 3 of the the People's Republic of China Partnership Law. Based on the basic facts ascertained in the case, it can be determined that as a general partner, Lize Company does have many irregularities, non-compliance with the agreement, and non-compliance with the law in the execution of affairs and duties, which are mainly manifested in: As a domestic entity approved by a government agency and jointly implementing equity investment with overseas investment entities, the status quo of its direct investment project ownership is seriously inconsistent with the records in the approval certificate, and all the shares are registered in the name of Lize's overseas affiliates; there is a pledge guarantee on the shares of the overseas project; Lize failed to disclose the basic information of the project to the limited partners immediately, fully and completely. There is no evidence that Litzer has obtained the unanimous consent or approval of the limited partners as a result of the above circumstances and conduct. Although there is no final conclusion on whether the above-mentioned negligence of Lize Company has caused losses to Leehom Partnership, it is an objective fact that there are major defects in the ownership registration of overseas investment projects. There are uncertainties in how to dispose of Leehom Partnership and its new executive partners, how to withdraw and how to make profits, and the inevitable cost expenditure during the period is also inevitable. It is true that Lize Company has contributed to the realization of income from overseas investment of Leehom Partnership and has also paid diligent labor services. However, it is also an objective fact that only by eliminating the current obstacles can all the investment income from overseas smoothly. Zhongheng Zhi Company, Liqin Yecheng and Hao Xin Xiangsheng removed Lize Company from the list at this critical moment, which seems to be a helpless move under balance. In judicial practice, partners in the execution of affairs, the performance of duties is not standardized, does not conform to the partnership agreement, does not conform to the provisions of the law, easy to be identified as the existence of intentional or gross negligence. There is no specific monetary criterion for the size of the loss, and the nature of the loss is in addition to the loss that has actually occurred or includes the loss that will occur in the future. 3. The partner has acted improperly in the execution of the partnership affairs. The Partnership Act does not specify how to define improper conduct. According to the interpretation of this provision by the Working Group on the Drafting and Revision of the Partnership Law, improper conduct refers to the act of a partner infringing on the rights and interests of the partnership or other partners and seeking personal gain in the course of carrying out the partnership affairs. Such as disposing of the real estate and intellectual property rights of the partnership without the unanimous consent of the partners; reducing or reducing the liabilities of others without authorization, or canceling the pledge guarantee or mortgage guarantee provided by others under the creditor's rights of the partnership, privately engaging in business activities that compete with the enterprise, and Collusion with others to transfer the property of the partnership has caused heavy losses to the partnership. The author also believes that improper behavior needs to have the objective element of causing damage to the rights and interests of the partnership and other partners, as well as the subjective element of seeking personal gain. Specifically, it can be subdivided into (1) the act of failing to fulfill the obligation of capital contribution (2) the unauthorized handling of partnership affairs, for example, the limited partner acts on behalf of the limited partnership to the outside world, the partner who does not have the right to execute the affairs of the partnership without authorization, the act of transferring or disposing of the property of the partnership before the liquidation of the partnership, and the partners' handling of the affairs without the unanimous consent of all partners as stipulated in the Partnership Law or the partnership agreement, and so on. Case 1. (2020) Ji 01 Min Zhong No. 736 The Court believes that the delisting decision made by the appellee on January 11, 2019 is valid. Article 49 of the the People's Republic of China Partnership Law stipulates: "If a partner has one of the following circumstances, he may be removed by resolution with the unanimous consent of the other partners, The (I) fails to fulfill its capital contribution obligations; (II) losses to the partnership are caused intentionally or by gross negligence; The (III) has acted improperly in the execution of the partnership affairs; (IV) the cause agreed upon in the partnership agreement occurs ". In this case, Article 26 of the Partnership Agreement has clearly stipulated that "partners shall not engage in business that competes with the partnership on their own or in cooperation with others. A partner may not transact with the partnership without the consent of all partners. Partners are not allowed to engage in activities that harm the interests of the partnership", but Jilin Longyang Building Materials Co., Ltd. run by Li Huarong's family members has the same business scope as the partnership involved in the case. Li Huarong also stated that the technology he developed is also based on Jilin Longyang Building Materials Co., Ltd. The company and the patent applied to relevant departments in the name of Li Moumou. In addition, the partnership has the basic characteristics of human nature, therefore, the original trial found that Li Huarong's aforementioned actions violated the agreement, and then found that the delisting resolution made by Sun Lichao and Zhang Lin on January 11, 2019 was valid and not improper. 4. The causes agreed upon in the partnership agreement occur. In addition to the above three cases of delisting and withdrawal, the partnership agreement may agree on other circumstances of delisting and withdrawal; when a cause of delisting and withdrawal as agreed in the partnership agreement occurs, a partner may be delisted with the unanimous consent of the other partners. Conditions and procedures for 3. delisting and withdrawing from partnership According to Article 49 of the Partnership Law, the removal of a partner requires the following conditions: 1. There are reasons for the removal of a partner as stipulated in the first paragraph of Article 49 of the Partnership Law, or there are reasons for the removal of a partner as stipulated in the partnership agreement. 2. The removal of the partner was unanimously agreed by the other partners and was decided in writing by the other partners. As for the procedure of delisting and withdrawing from partnership, the author thinks that all partners (including the partners to be delisted) should be notified before the partnership meeting and the resolutions of the partnership meeting should be listed, including the delisted partners. The rights of defense and interpretation of the delisted partners cannot be deprived. In addition, the partnership law requires the unanimous consent of other partners. Therefore, from the perspective of the interpretation of the text, the unanimous consent of other partners here does not distinguish the proportion of the investment share, rather, it strictly requires a unanimous resolution of the partners other than the proposed de-listed partner. Legal effect of 4. delisting In accordance with Article 52 of Article 51 of the Partnership Law, the settlement shall be made in accordance with the property status of the partnership at the time of withdrawal, and the share of the property of the withdrawing partner shall be returned. If the withdrawing partner is liable for the losses caused to the partnership, the amount to be compensated shall be deducted accordingly. If there are outstanding partnership affairs at the time of withdrawal, the settlement shall be made after the settlement of the affairs. The method of refunding the withdrawing partner's share of property in the partnership shall be agreed upon in the partnership agreement or decided by all the partners, and may be refunded in currency or in kind. In the internal legal relationship of the partners, the general partner of the withdrawal shall bear unlimited joint and several liability for the debts of the partnership before the receipt of the de-listing resolution, and the withdrawing limited partner shall be liable for the debts of the limited partnership that occurred before the receipt of the de-listing resolution, with the property retrieved from the limited partnership at the time of withdrawal.

Key words: