Study on Company Litigation | Does the lawsuit confirming the validity of the company's resolution fall within the scope of acceptance of the case?

Article 22 of the the People's Republic of China Company Law stipulates that "the invalidity of the resolutions of the shareholders' meeting or the general meeting of shareholders or the board of directors in violation of laws and administrative regulations" is the basic legal provision of the cause of the "dispute over the confirmation of the validity of the company's resolutions". The basic legal provisions give the qualified plaintiff the direct legal basis for confirming the invalidity of the company's resolutions. However, in practice, the implementation of resolutions made by the shareholders' meeting, the general meeting of shareholders or the board of directors often requires the cooperation of a third party, and in the case of a third party refusing to cooperate, the plaintiff will need to file a lawsuit to confirm the validity of the resolution to request the court to decide that the third party enforce the content of the resolution. Admittedly, there is no direct legal basis for confirming the validity of the resolution, and the lawsuit confirming the validity of the company's resolution is not included in the scope of civil cases accepted by the people's court. However, whether confirming the validity of the company's resolution belongs to the scope of acceptance of the case? Who has the right to initiate the confirmation of the validity of the resolution as the plaintiff? In the trial practice, the local courts have different opinions on this.

Case Guide]

Case 1: Shanghai Baizhen Biotechnology Co., Ltd. v. Shanghai Kawasaki Food Co., Ltd. (Case No.:(2014) Shanghai No.1 Zhongmin 4 (Shang) Final Zi No. 125; Trial Court: Shanghai No.1 Intermediate People's Court)

The Shanghai First Intermediate People's Court held that: my country's current company law or civil procedure law did not effectively exclude the confirmation of the resolution of the shareholders meeting from the court's scope of acceptance. Because Baizheng Company failed to handle the corresponding industrial and commercial changes in accordance with the content of the resolution of the shareholders meeting Registration procedures have harmed the interests of Kawasaki Company, therefore, the original trial court accepted Kawasaki's lawsuit to confirm the validity of the resolution of the shareholders' meeting, and the claim that the company confirmed the validity of the resolution of the shareholders' meeting did not fall within the scope of the court's acceptance was unfounded, and the court did not accept it.

Case 2: Dispute over Confirmation of Effectiveness of Resolutions between Yang Guoquan, Wei Yirui and Jinan Xinhengjin Technology Co., Ltd. (Case No.:(2015) Jishang Final Zi No. 60; Trial Court: Jinan Intermediate People's Court)

Jinan Intermediate People's Court held that: First of all, the confirmation of the validity of the resolution of the shareholders' meeting is a confirmation lawsuit. As a specific way of judicial judgment, judicial confirmation itself is caused by disputes or disputes between the parties over the existence and establishment of the subject matter of litigation or a certain legal relationship. Therefore, disputes and disputes between the parties are the reasons for litigation and judgment, and judicial judgment is the settlement of disputes and disputes, judicial confirmation is not required if the parties have no dispute over a legal relationship. Secondly, a legal relationship is valid after its establishment, and its effect is statutory and does not need to be confirmed until it is declared invalid without a judicial decision. Furthermore, Article 22 of the Company Law stipulates that if a shareholder who refuses to accept a company's resolution files a lawsuit against the company as a defendant for invalidity or revocation, if the parties have the right to confirm the invalidity of the resolution of the shareholders' meeting, there is a statutory relief channel that does not need to be realized through the confirmation of a valid action. From the principle of company law, corporate autonomy is a basic principle, and judicial intervention and intervention should be minimized within the scope of corporate autonomy. In addition, according to Yang Guoquan and Wei Yirui's appeal request, their request to confirm the right to the company's seal, financial accounts and other business procedures is actually an act of performance of delivery, not a confirmation of the lawsuit, and their change of litigation request in the original court is an act of disposing of their own rights, and it is not improper for the original trial to grant permission.

Case 3: Wang Huaxuan and Fu Hongyu's Third Party Revoked the Civil Retrial Ruling (Case No.:(2019) Supreme Law Min Re -335; Trial court: Supreme People's Court)

The Supreme People's Court held that: First of all, having the interest of litigation is an essential element for the parties to exercise their litigation rights, and it is also a prerequisite for the court to make a civil substantive judgment. In this case, the shareholders of the building materials company did not file a corresponding lawsuit. It should be regarded that the resolution involved in the case is not controversial, and it does not have the necessity and effectiveness of relief through civil litigation. Therefore, the building materials company does not need to request the court for the validity of the resolution. Make a confirmation. Secondly, the building materials company disqualified Fu Hongyu as a shareholder through a resolution of the shareholders' meeting. It is an autonomous act within the company. The resolution made in accordance with the law or the company's articles of association and voting procedures will take effect when it is made. Only when there is a reason for its effectiveness to hinder it can it lead to effectiveness defects. According to the provisions of China's current company law and relevant judicial interpretations, the reasons for the effect of blocking include the lawsuit filed by shareholders, directors and supervisors that "the company's resolution is invalid, revocable or not established", but the lawsuit confirming the validity of the company's resolution is not included in the scope of acceptance of civil cases in the people's court. Finally, the Supreme People's Court on the application of<中华人民共和国公司法>The first paragraph of Article 3 of the (IV) on Certain Issues stipulates: "The plaintiff requests to confirm that the resolution of the shareholders' meeting or the general meeting of shareholders or the board of directors is not established, invalid or revoked, the company shall be listed as the defendant", so the case involving the validity of the company's resolution Only the company is the eligible defendant, and in this case the building materials company sued as the plaintiff, its litigation status does not conform to the provisions of the above judicial interpretation, therefore, the building materials company does not have the subject qualification to file the lawsuit, and the lawsuit filed by the building materials company to confirm the validity of the company's resolution is not within the scope of the people's court. The Henan Provincial Higher People's Court (2018) Yuminzhong Civil Ruling No. 645 that the lawsuit filed by the Building Materials Company to confirm the validity of the company resolution falls within the scope of the people's court's trial is improper, and the court corrects it.

Case 4: Quanhua and Zhou Zekang v. Shenzhen Wutong Investment Development Co., Ltd. and Miao Science Company (Case No.:(2018) Yue 03 Min Zhong No. 11880; Trial Court: Shenzhen Intermediate People's Court)

The Shenzhen Intermediate People's Court held that the lawsuit confirming the invalidity or non-establishment of the company's resolution in the Company Law is a special type of lawsuit generally confirmed in the Civil Procedure Law, and it does not exclude the parties from filing a lawsuit for general confirmation in the Civil Procedure Law when the conditions are met, the the People's Republic of China Company Law and the (IV) of the Supreme People's Court on Certain Issues Concerning the Application of the the People's Republic of China Company Law only provide for the confirmation of the invalidity or non-establishment of the company's resolution and the revocation of the company's resolution, so as to deny the validity of the company's resolution. Resolutions of shareholders' meetings fall within the scope of corporate autonomy, and under normal circumstances, resolutions made by shareholders' meetings are binding on all shareholders and their validity does not need to be determined through judicial confirmation. To examine whether it is necessary for the judiciary to intervene in corporate governance, we should mainly consider whether the shareholders' request to confirm the validity of the resolution of the shareholders' meeting in the case is justiciable, whether it is necessary to give the parties relief in the form of judicial decisions, that is, whether the shareholders have an interest in litigation. In this case, the resolution of the shareholders' meeting on the change of executive directors of Wutong meeting company formed on February 16, 2017 stated that: the executive director of Wutong meeting company of Miao science was removed; Quanhua served as the executive director of Wutong meeting company, and served as the legal representative according to the articles of association of the company. Due to the dispute between Quanhua, Zhou Zekang and Miao Science over the validity of the resolution of the shareholders' meeting, it was impossible to change the registration of the executive director and legal representative of the company, and the resolution of the shareholders' meeting was not implemented in a timely and effective manner. Therefore, Quanhua and Zhou Zekang, who approved the resolution of the shareholders' meeting on February 16, 2017, requested Wutong Club and Miao Science to assist in fulfilling their obligations to handle the registration procedures for industrial and commercial changes in accordance with the resolution of the shareholders' meeting, on the premise of requesting confirmation that the resolution of the shareholders' meeting is valid. In view of this, Quanhua and Zhou Zekang have the interest to sue for the request to confirm the validity of the resolution of the shareholders' meeting on February 16, 2017, and their lawsuit to confirm the validity of the resolution of the shareholders' meeting falls within the scope of the people's court to accept the case. The court of first instance found that the case did not fall within the scope of the people's court to accept the case on the grounds that Quanhua and Zhou ze Kang's application had no legal basis and did not have the interest of litigation, and the court corrected it.

referee rules]

Judging from the above-mentioned local jurisprudence, there is considerable controversy over the views of local courts on this issue:

Point 1: The courts that agree to accept the validity of the confirmation resolution are basically based on the principle of "consent without prohibition by law", the the People's Republic of China Company Law and the the People's Republic of China Civil Procedure Law do not explicitly exclude the right of shareholders to bring a claim to confirm the validity of the company's resolution, and hold that the plaintiff has the right to bring a confirmation resolution;

Point 2: The court that does not agree to accept the validity of the resolution is basically that the resolution, once made, is declared invalid without judicial decision, its effect is statutory, does not need to be confirmed, and in the absence of a shareholder's objection to it, the judiciary does not need to interfere with the scope of corporate autonomy. Article 10 of the "Guiding Opinions of the Beijing Higher People's Court on Several Issues Concerning the Trial of Company Dispute Cases" also expressly stipulates that if a shareholder requests to confirm the validity of the resolutions of the shareholders meeting or the board of directors, the people's court shall rule that it will not accept it.

lawyer's view]

Does the lawsuit for confirming the validity of the company's resolution belong to the scope of acceptance of the case? The author agrees, but at the same time, it needs to consider whether the request for confirming the validity of the resolution of the shareholders' meeting in the case is litigable. First of all, the principle of private law activities is "freedom without prohibition by law". The "negative list" and "non-prohibition or entry" promoted by the State Council are the reflection of this principle. Article 124 of the the People's Republic of China Civil Procedure Law determines the negative list of civil litigation. If the prosecution meets the conditions stipulated in Article 119 of the the People's Republic of China Civil Procedure Law and does not fall under the circumstances stipulated in Article 124, the people's court shall accept it. Secondly, the types of litigation to determine the validity of company resolutions stipulated by existing laws include: the lawsuit of invalidation of company resolutions, the lawsuit of non-establishment of company resolutions and the lawsuit of revocation of company resolutions, which belong to the special type of lawsuit generally confirmed in the civil procedure law, and cannot be stipulated in the the People's Republic of China Company Law and the (IV) of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of the People's Republic of China Company Law, an action to confirm the validity of the resolution brought by the parties is of course denied. Finally, the management and operation of the company is the scope of the company's autonomy, in order to take judicial intervention, it is necessary to consider the litigability of the parties in the case to request confirmation of the validity of the company's resolution, to determine whether the parties have an interest in litigation, and to file a lawsuit to confirm the validity of the company's resolution.